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2001 Minutes BOWL
141 Preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday,November 27, 2001 The Board of Commissioners met in regular session at 5:30 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman Ronald Callen called the meeting to order. Present: Commissioners Ronald C. Callen, Charles M. Creamer,Nancy W. Duncan, Tim Haggart, Connie Marin, Diane R. Royal, and Nancy A. Wonch—7. Absent: Commissioner Ernest J. Christian—1. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Duncan, seconded by Commissioner Haggart, to approve the minutes of regular session held October 23, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. No persons spoke. COMMUNICATIONS There were no communications. Page 142 Board Minutes November 27,2001 REPORTS OF COMMITTEES No committee reports. GENERAL MANAGER'S RECOMMENDATIONS AND DISCUSSION ITEMS Background materials on items presented are on file in the Office of the Corporate Secretary. esolution #2001-11-1 USE OF SPECIAL COUNSEL—Tabled at October 23'`�meeting RESOLVED, That the General Manager be authorized to retain Rhonda Ross, Esq., and the fine of Warner,Norcross and Judd, at a rate of$240 per hour, as special counsel to draft a rules package to be presented to the Air Quality Division of the Michigan Department of Environmental Quality. The rules package will address start-up, shutdown and malfunction (SSM) issues associated with the operation of electric generating units. The name of Ms. Ross and her firm will be submitted to the City Attorney and, upon his recommendation, to City Council for approval. Use of Special Counsel is subject to the recommendation of the Utility Staff Attorney and the approval of the General Manager. Moved by Commissioner Creamer, seconded by Commissioner Haggart, to take from the table the question on use of special counsel. Action: Carried unanimously. Staff Commentary: This film and lawyer are being jointly retained and paid for on an equal basis by the BWL, Detroit Edison and Consumers Energy. The package of rules would deal with the exemption of excess emissions during periods of unit start-up, shutdown and unanticipated unit malfunction. With the recent (August 20, 2001) rescission of the existing Michigan Rules R336.1913 and R336.1914 covering SSM, the BWL would be greatly impacted without replacement rules. Rhonda Ross, the attorney that will be drafting the rules package, has specific experience dealing with air quality rules and regulations. Ms. Ross has been Director of the Air Quality Management Division of the Wayne County Department of the Environment and is experienced working with both state and federal environmental statutes. It is expected that the total cost for the project would be near$30,000 to be divided equally between the BWL, Detroit Edison and Consumers Energy. Included in the cost would be a study of other state rules addressing SSM, and negotiations with the State of Michigan directly concerned with the acceptance of the proposed rules package. Ms. Ross bills at an hourly rate of $240. Discussion: At the request of the Cormmissioners, a letter from Rhonda Ross--dated October 29, 2001--was sent to the Board on November 2"a addressing questions and concerns raised at the regular session held October 23. Moved by Commissioner Wonch, seconded by Commissioner Duncan that the resolution authorizing the use of special counsel be adopted. Board Meeting Page 143 November 27,2001 Action: Carried unanimously. [Resolution #CONSENT AND AND AGREEMENT (MSCPA, MPPA, AND TRANS-ELECT) RESOLVED, That upon occurrence of all conditions, it is hereby deemed in the best interests of the Lansing Board of Water and Light to consent to and agree to be bound by the provisions of (a) The Agreement Among the Michigan South Central Power Agency, the Michigan Public Power Agency and Trans-Elect; (b) The Partial Novation and Release Agreement between and among Trans-Elect, Consumers Energy Company (Consumers), Michigan South Central Power Agency and the Michigan Public Power Agency when executed by the parties thereto; (c) The stipulation and Settlement Agreement effective August 6, 2001, in Branch County Circuit Court case No. 01-06-405-CK; and (d) The Second Stipulation and Settlement Agreement, effective August 6, 2001 in the same docket in order to resolve issues related to the Midland Anti-Trust Settlement Agreement between Consumers and Lansing Board of Water and Light and to, among other things, resolve other issues that are being litigated in the aforementioned lawsuit, the documents identified in (a), (b), (c) and (d) above having been submitted and considered fully. RESOLVED, That the General Manager and Corporate Secretary be and are hereby authorized and directed to execute this Consent and Agreement. RESOLVED FURTHER, That the Michigan Public Power Agency and its legal counsel be and are hereby authorized to take all such further actions necessary or desirable for the implementation of the agreements referenced in (a), (b), (c), and (d) above. Staff Commentary: On June 4, 2001, the Michigan Public Power Agency (MPPA) and Michigan South Central Power Agency (MSCPA) filed suit against Consumers Energy Company (Consumers) and Michigan Electric Transmission Company (METC). The suit was initiated when Consumers began efforts to transfer its transmission system to its affiliate METC in advance of an anticipated ultimate sale to an independent third party. The basis of the suit arose out of nine (9) agreements between MSCPA and Consumers and eighteen (18) agreements between Consumers and MPPA. The lawsuit has been favorably settled subject to the express provision that the respective Boards (BWL included) review and approve the settlement documents. A Summary of Agreements with Consumers and Affiliate (METC) and a Summary of Agreement with the anticipated independent third party purchaser (Trans-Elect) along with a matrix of claims and requested relief and settlement outcome are attached. Moved by Commissioner Royal, seconded by Commissioner Wonch, that the resolution be approved. Discussion: General Manager Pandy, Assistant General Manager Cook, and MPPA General Manager Gary Zimmer nan reviewed the details of the settlement associated with the sale of the Consumers Energy Transmission System to Trans-Elect. Discussion included the following points: Page 144 Board Minutes November 27,2001 • Consumers Energy stated purpose for selling its transmission system • Consumers Energy activities to prepare for the sale of their transmission system • A map was displayed depicting Consumers Energy's 5,400-mile transmission grid (345 kV system and the 138kV looped system) being sold. • Issues concerning assignment of existing MPPA/BWL rights to the new owners • Settlement activities, provisions and implications of existing agreements listed below: 1. Operating Agreements (BWL/MPPA) 2. Facilities Agreements (BWL) 3. Ownership Agreements (BWL/MPPA) 4. 1979 Antitrust Agreement (BWL/MPPA) Mr. Zimmerman presented an overview of the existing agreements. Following a question and answer period, the Commissioners concurred with staff s recommendation. Action: Carried unanimously. ERICKSON STATION REPAIRS —UPDATE REPORT Coal Reheat Line Failure Update: General Manager Pandy and Production Director Dick Peffley presented an overview of events that led to the coal reheat line failure at Erickson Station during a routine restart on October 17, 2001. Mr. Peffley reported on procedures to be implemented to prevent similar accidents from happening again. Slides were displayed showing the inside of the Erickson plant after the startup accident where the reheat line failed and the disassembled turbine being inspected for internal damage. The cold reheat line is targeted for completion by early February and the turbine overhaul by mid-February, 2002. When the turbine covers are lifted next week, any significant darnage to the turbine could extend the schedule and cost of overhaul. Mr. Pandy reported that early indications of the Erickson repair schedule targeted a completion date of April 2002. After analyzing the conditions in the power market and the BWL's rights and obligations with the power pool, it was decided in a joint meeting between the BWL's Production Process and Bulk Power and Resource P1amling personnel, to move the schedule up six weeks to bring the unit back into service by February 15, 2002. Most of the work will be performed in-house. If the schedule can be met, the BWL would realize capacity payments of approximately $500,000 next year. Mr. Pandy congratulated the employees involved for their ambitious efforts as they strive to meet the April goal. Tornado Damage Update: Production Director Dick Peffley reported on the progress in replacing the Erickson Station cooling tower after a tornado leveled it on September 24. This Board Meeting Page 145 November 27,2001 project is scheduled for completion by mid-January 2002. Slides were displayed showing the Erickson Station after the cooling tower was destroyed by the storm. Discussion: In response to Commissioner Creamer's inquiry, Mr. Peffley responded that approximately 25% of Erickson Station operators can cycle a unit properly. Many employees at Erickson never have the opportunity to see the unit cycle due to employee turnover from retirements and internal transfers. Mr. Peffley noted that Eckert Station operators all know how to cycle a unit because it is a routine procedure at that plant. Unlike Eckert, the Erickson unit is too large to cycle as frequently, which does not make it cost effective. Erickson Station management is investigating the possibility of unit cycling for training purposes (as is done at Eckert). If this is not feasible, especially in the summer months, the operators will be sent to Eckert Station for experience. In response to Commissioner Callen's inquiry, Mr. Peffley reported that there were seven notices of possible disciplinary action issued. Human Resources is investigating the incident to determine the appropriate action. A report is anticipated by the end of the week. This item was presented for information purposes. No action was required. esolution #2001-11-3 LEASING OF RAIL CARS RESOLVED, That the Board of Water and Light(BWL) enter into a Lease Agreement (Agreement) with JAIX Leasing Company of Chicago, Illinois, for the supply of rail cars. The Agreement particulars are as follows: 1) The tern of this Agreement shall be twenty-four (24) months (January 1, 2002— December 31, 2003). 2) JAIX shall provide one (1) train set, totaling 113 steel bottom hopper coal rail cars with the assurance that they will maintain the integrity of the train sets at all times during the term of the lease. 3) The lease rate shall be $265.00 per car per month (full service—inclusive of all normal maintenance expenses). Staff Connnentary: By entering into this lease Agreement with JAIX, BWL will be able to guarantee a rail car supply for the delivery of Colorado Basin(CB) coal from Colorado at substantial savings. These cars will be dedicated to supply Erickson Station. Union Pacific Railroad (UPRR) has given BWL a transportation rate reduction of$1.50 per ton for the use of non-UPRR owned rail cars. The lease rate will provide an estimated savings of$0.49 per ton for the estimated movement of 425,000 tons of CB coal per year. This lease Agreement is projected to yield an annual transportation savings between$200,000 and $210,000. Moved by Commissioner Creamer, seconded by Commissioner Royal, that the resolution be approved. Action: Carried unanimously. Page 146 Board Minutes November 27,2001 esolution #2001-11- FISCAL 2002 CAPITAL BUDGET ADDITIONS/MODIFICATIONS RESOLVED, That the following Capital Budget Projects for fiscal year 2002 be increased and/or added: Original FY 02 New FY 02 Anticipated NET FY 02 Project Budget Budget Insurance Revised Budget w/o Insurance Reimbursement Incl.Insurance Erickson Cooling $ 118,000 $ 4,020,000 $ 3,500,000 $ 520,000* Tower(02-109) Erickson Cold $ 0 $ 2,000,000 $ 1,000,000 $ 1,000,000 Reheat Line (New) Erickson Turbine $ 0 $ 776,000** $ 0** $ 776,000* Overhaul FY'03 TOTAL $ 118,000 $ 6,796,000 $ 4,500,000 $ 2,296,000* Note: * Tlie tta•bine overhaul mid Erickson cooling tower replacement were budgeted for FY2003. As such, the FY2003 budget will be reduced accordingly. **Assumes no turbine dmnage or insurance reimbursement as a result of the Erickson Cold Reheat Line failure Staff Comrnentary_: This resolution is being submitted in accordance with Board Policy regarding additions to the capital budget, and Board Policy 15-02 adopted January 25, 2000 and amended June 26, 2001, for the reporting and approval of any budgeted capital project exceeding 15% or$200,000 of estimated cost. The following report was submitted surnmarizing the need for the additions/modifications: is included below: Erickson Cooling Tower Replacement: On September 9, 2001 the cooling tower at the Erickson Station was damaged beyond repair. Erickson Unit#1 cannot be operated without a cooling tower in service. The total cost to rebuild the tower now is estimated to be $4,020,000. Given the FY 2002 Capital Budget included $118,000 for this project, it was requested that the FY 2002 Capital Budget for this project be adjusted by an additional $3,902,000. The BWL is currently working with its insurance carrier on recovery and is anticipating approximately $3,500,000 in reimbursement. If the insurance reimbursement is $3,500,000, the net impact on cash flow in FY 2002 is $402,000. The difference between the $4,020,000 estimate and the anticipated$3,500,000 insurance reimbursement is related to the insurance deductible ($250,000) and the additional BWL requested features on the new tower relating to plume abatement and needed capacity increases. The timing of the reimbursement from the insurance company is also uncertain. As a final note, it should be noted that the FY 2003 budget would be reduced as a result of replacing the cooling tower in FY 2002. Board Meeting Page 147 November 27,2001 Erickson Cold Reheat Line Repair: On October 17, 2001 while returning to service from a minor forced outage, Erickson Station Unit#1 experienced an extensive failure of the cold reheat line. The cold reheat line supplies steam from the boiler to the intermediate portion of the turbine The repair/replacement costs associated with this project are tentatively estimated at$2,000,000, with the unit expected to be available for service in late February. Further detailed inspections are currently in progress on the cold reheat line, boiler, and turbine to more clearly determine the full extent of damage and necessary repairs. It is anticipated that the BWL's insurance provider will reimburse $1,000,000 of the necessary repair costs. The timing of the reimbursement is, however, uncertain. Once reimbursement is received, the net impact on the FY 2002 Capital Budget is $1,000,000. The difference between the $2,000,000 project cost and the $1,000,000 expected insurance reimbursement is the insurance deductible. In the event that the damage is determined to be more extensive, and added costs experienced, it is anticipated that the BWL net exposure will remain at the $1,000,000 insurance deductible. Erickson Station Turbine Overhaul: The Erickson turbine/generator was originally scheduled for overhaul in the FY 2003 Capital Budget. Erickson's last overhaul was in 1991. Since the recent cold reheat line failure described above will require removal and reinstallation of the turbine cover to inspect the turbine internals for damage, overhauling the turbine during the existing cold reheat line repair outage will reduce the costs over a separate overhaul and outage in FY 2003. Completing the turbine overhaul in FY 2002 versus FY 2003 will also provide added savings due to improved turbine performance and reduced production costs. Coordinating the turbine overhaul outage with the cold reheat line repair outage will eliminate the need for an extended FY 2003 Erickson outage and subsequent purchase power and production cost impacts. Added purchase power costs expected for the combined turbine overhaul and cold reheat line repair outage are anticipated to be on the order of$1,000,000. The Erickson Station turbine overhaul being done in FY 2002 will increase the FY 2002 capital budget by$776,000. An additional $700,000 in operation and maintenance expenses will also be required to complete the overhaul. A$776,000 reduction in the FY 2003 capital budget will be realized. Moved by Commissioner Haggart, seconded by Commissioner Wonch, that the resolution on FY 2002 Capital Budget Additions/Modifications be approved. Discussion: Chief Financial Officer Dana Tousley presented a preliminary overview of FY 2002 Capital Budget changes. In response to Commissioner Duncan's question, he clarified that the three capital projects in the increased amounts are necessary for FY 2002. Staff is currently reviewing all projects contained in the capital budgets for FY's 2002 and 2003, looking for projects that may be shifted from 2002. For instance, the cooling tower project was scheduled in the long-range capital forecast. These recent incidents are expected to have an impact on both the operating and capital budgets for this fiscal year. Commissioner Duncan stated that she understands the necessity for the Board to authorize the repair projects at this time. She Page 148 Board Minutes November 27,2001 expressed her hope that alternatives to the mid-year budget would be presented in January to return back in the aggregate to the original amount of the capital budget. Action: Carried unanimously. FISCAL YEAR 2001-02 O&M BUDGET UPDATE General Manager Pandy reviewed the preliminary fiscal year 2002 budget revisions, which included items that prompted staff to suggest a mid-year review of the budget. Chief Financial Officer Tousley presented a table summarizing the impact on the current operating budget. He noted that insurance reimbursements are anticipated for most of the damage at Erickson Station. Other changes required in the Capital Budget for FY's 2002 and 2003 are not reflected on this table. All of the Capital and O&M changes will be reflected in the six-year cash flow to be presented in January. $ X 1000 Approved FY 2002 Operating Expense Budget $170,183 Erickson Cooling Tower—not reimbursed by insurance 570 Erickson Turbine Overhaul—because station is down, scheduled this FY 700 Air Quality Fees—increased by legislature 240 Fuel—because Erickson is not running, includes the price increase 1/l/02 -950 Purchased Power—because Erickson is not running 1,000 Non-Bargaining Compensation—perfonmance $ over 5% increase budgeted 752 VEBA Contribution—budget anticipated over-fiinding, no contribution 431 Property and Boiler Insurance—price increase from renewal 9/30/01 425 Corporate Miscellaneous—housekeeping, credit for paid time off not needed -985 Total Changes 2,183 Preliminary Revised FY 2002 Operating Expense Budget $172,366 Commissioner Creamer inquired about the Non-Bargaining Compensation for performance dollars over the 5 percent increase that was budgeted. General Manager Pandy responded that salary increases are reflected in the current fiscal year 2001-02. Chief Financial Officer Tousley interjected that in addition to performance increases for non-bargaining employees, this amount also includes Share the Success (STS) payouts. Mr. Tousley responded that a forecast of approximately 5 percent was projected and the amount came in higher than anticipated. He stated that all BWL employees (bargaining and non-bargaining) can earn corporate bonuses ranging from 0 to 2.5 percent of annual pay for reaching corporate STS perfonmance targets. Board Meeting Page 149 November 27,2001 Non-bargaining employees can earn additional Process STS bonuses ranging from 0 to 5 percent for reaching performance targets in the Processes where they work. Commissioner Duncan stated that she was under the impression there was an organizational cap with respect to performance pay and that an aggregate amount was budgeted for the increases. The Budgetary parameters for performance increases was summarized by General Manager Pandy which involved increases in the range of 0 to 7.5%, based on performance appraisals. Commissioner Callen commented that the budgeting process by which projections are based would be of interest to the Finance Committee in the upcoming budget review. In response to Commissioner Marin's inquiry, General Manager Pandy explained that Share the Success (STS) is a pay for performance plan that the BWL has had for approximately 15 years. The corporate STS ties annual bonuses to the performance of the BWL, for all employees. The process-related portion of STS applies to non-bargaining employees, which differentiates bonuses for each of four major process areas based on the results of their process (Production, Delivery, Process Support and Business Support processes). The program is similar to a gain- sharing program. Mr. Pandy reviewed the cumulative net income for the electric, water and steam utilities graphically displayed over the last ten years. The consolidated financial statements for water, electric, steam and general properties through October 2001 indicate: Oct.'01 vs. Oct.'00 YTD Last Year Total Operating Revenue +11.4% +7.2% Net Income +37.8% +21.8% This item was presented for information purposes. No action was required. The Finance Committee will be reviewing this item in January. RETURN ON EQUITY General Manager Pandy discussed the City Attorney's letter, dated November 13, 2001, advocating that the agreement reached regarding Return on Equity payments to the City from the Board of Water and Light be modified to reflect its previous title of Return on Equity rather than Payment in Lieu of Taxes. A letter sent to the City Attorney by Mr. Pandy, dated November 21, 2001 indicated that the BWL desires to have its financial statements on a comparable basis with other public power systems. Staff Attorney Larry Wilhite stated that he has been in discussion with the City Attorney on this matter, but that a conclusion has not been reached. Mr. Pandy asked the Commissioners for their guidance on this issue. Following discussion, the Commissioners concurred that it is more important to have an agreement rather than to debate over the name. Page 150 Board Minutes November 27,2001 GENERAL MANAGER'S REMARKS Annual, Planned and Bonded Capital Projects. General Manager Pandy handed out a suminary status report of Annual, Planned, and Bonded Capital Projects through October 31, 2001. The following Total Projects Estimated Cost $283,510,000 Total Expended and Committed to Date $180,698,000 Current Projected Total Projects Cost $184,529,000 Projected Overrun $1,019,000 Percent Overrun 0.36% Commissioner Callen noted that approximately two years ago the Board emphasized the fact that there were a number of projects that were coming in at 10% to 30% over budget. This year the number is lower. He asked what changes have been made in estimating projects that caused the improvements. Assistant General Manager Cook responded that two factors are contributing to the positive number: First, it is still early in the budget year and secondly, the Commissioners passed a resolution in January 2000 and amended it in June 2001 directing staff to notify the Board of projects exceeding 15% or$200,000 of the estimated cost. American Public Power Association (APPA) Legislative Rally. General Manager Pandy reported that the APPA will hold its annual legislative rally in Washington, D. C. on January 27- 30, 2002 focusing on"Public Power—An American Tradition that Works." He urged Board participation in this rally. Commissioner Callen urged the Commissioners to participate in APPA meetings. He indicated that this is an opportunity to get a macro view on what other municipals are doing and what is happening between municipal utilities and federal endeavors,particularly at a time when energy is near the top of the list on administrative and legislative agendas. Update on Competitive Issues. General Manager Pandy reported that competition continues all around the BWL service area. He reported on a project that was recently awarded to Consumers Energy. Water Customer Choice. General Manager Pandy reported that he has met with IBEW Local 352 President Joe Davis and Business Agent Curt Gates to share with them information on the Water Customer Choice program. Future meetings will be held to talk about ways to snake the program more effective and address the union's concerns over job security. Rules and Regulations for Water Service. Commissioner Creamer remarked that he recently reviewed the section on the Water Customer Choice Program in the Rules and Regulations for Water Service, and noticed it indicates the BWL will accept and permit customer installation of customer water service and on-site water mains, provided the installation of customer water services and/or on-site water mains has been inspected and approved by the Board of Water and Board Meeting Page 151 November 27,2001 Light. He opined that either the BWL should not contract with somebody outside of the BWL or the guideline should be changed. He requested a clarification with Rules and Regulation item 9 (Water Customer Choice Program), Section 1.(7), which states: "Where the Customer is not subject to the codified ordinances of the City of Lansing." He noted that it suggests to the reader that if the customer is governed by the codified ordinance of the City of Lansing that Customer Choice is not available in that jurisdiction. General Manager Pandy reported that the old Building and Housing Code of the City of Lansing, Section 1422.17 stated that all water service pipes installed between city water mains and City water meters would be installed, inspected and maintained by the BWL in accordance with all applicable City codes. The City adopted Ordinance No. 1040 on October 15, 2001, which in part repealed section 1422.17 and implemented the State-approved Plumbing Code within the City's jurisdictional boundaries. Mr. Pandy indicated that the City went from its own code to the State's Code, however the State Code language had no reference to the previous language. Commissioner Creamer expressed concern over the inconsistency between the BWL Rules and Regulations and what is actually being practiced. He requested that the Water Customer Choice Program as defined in the Rules and Regulations be reviewed for consistency. He also noted that City Councilmembers are interested in understanding how the Customer Choice program will be available for the installation of separate meters for lawn sprinkling. General Manger Pandy agreed to review the concerns relevant to the Rules and Regulations. Staff will also work with the union to develop a strategy for dealing with the code change. Mr. Pandy emphasized that management's position with regard to inspections is for this work to be done by BWL employees. Due to the increased workload, it became necessary to recruit competent BWL retirees to do the inspections. Tetra Tech employees were later contracted to handle the work overflow during peals times. Commissioner Haggart clarified that the City had to snake the change to Ordinance No. 1422.17 in order to comply with the state law. COMMISSIONERS' REMARKS Human Resources Committee Meeting. Commissioner Royal stated that she would like to call a Human Resources Committee meeting in December. She will be sending out a memo asking for Commissioner input on FY 2002 goals for the General Manager. Wolverine Gas Pipeline Update. Commissioner Duncan asked if the alternate route for the Wolverine Pipeline addresses management's concerns relative to the proposed route being too close to BWL facilities. General Manager Pandy responded that staff has met with Wolverine Pipeline representatives to discuss this issue. The original route of which the BWL objected was proposed to run parallel along I-96 through south Lansing along the Consumers Energy and BWL 138kV transmission right of way. The pipeline would also have come within 200 feet off the BWL's Wise Road Water Conditioning Plant. The alternate route is in the right-of-way of I-96 on the south side of the City in the area between the shoulder of the road and the fenced perimeter, which is the Page 152 Board Minutes November 27,2001 highway right of way. The new route places the pipeline away from the BWL facilities. Staff plans to meet with the City soon to discuss their position on this matter. GreenWise Power Update. Commissioner Creamer requested an update on the GreenWise Electric Power program and asked if bill board advertising has made an impact on participation. Communications Director John Strickler reported that participation in the GreenWise Electric Power program has not yet reached its full potential. Enrollments are at approximately 750 blocks of 250 kilowatt-hours out of a total available 2700 blocks. Efforts are underway to develop plans to attract more commercial customers. The possibility of franchising with Michigan Public Power Agency members is being investigated. With regard to billboard advertising, the impact on brand imaging should be known soon after Customer Attitude Survey results are compiled. Included in that information will be input to determine the impact the GreenWise campaign has made on the BWL's image with respect to perceptions of environmental responsibility and to what extent customers are looking at other advertising messages relating to the BWL's brand image. Commissioner Creamer questioned at what point should it be determined when is the right time to stop allocating marketing dollars into a project that may not be viable. Mr. Strickler responded that if the GreenWise Electric Power program is not fully subscribed and there is an indication that there is still not sufficient demand, additional blocks would not be added to the portfolio. He noted that the survey data from an image standpoint should be carefully scrutinized to determine what the GreenWise program is doing in areas other than just enrollments. Welcome to Commissioner Marin. Commissioner Haggart welcomed Commissioner Marin to the Board. He also commended Production Director Dick Peffley for his efforts in attempting to bring the Erickson Station back on line ahead of schedule. Commissioner Marin commented that she is pleased to be a member of the Board of Commissioners and looks forward to working with the Board and management. Chairman Callen welcomed Commissioner Marin, and reported that he has assigned her to serve on the Human Resources (HR) Committee, replacing Commissioner Christian. This assignment will relieve Commissioner Christian who was temporarily serving on both the Human Resources and the Finance Committees until the HR Committee vacancy was filled. Commissioner Callen also welcomed City Councilmember Harold Leeman who was present in the audience. New Approach in Setting the Meeting Agenda. Chairman Callen reported that at the Board's last retreat held November 2000, the Commissioners agreed to shift monthly meetings to quarterly regular meetings and place more emphasis on the Board's two major committees— Finance and Human Resources. Commissioner Callen stated that in the last month he has made a special effort to try to move the Board more in the direction of convening committee meetings to thoroughly study topics of importance. He reported that he has met with Commissioners Duncan and Royal, chair of the Finance and Human Resources Committees, respectively, to discuss approaches and suggest agenda items. In addition to that change, he expressed his preference to shift the approach in the way the agenda is put together. Chainnan Callen invited Page 153 Board Meeting November 27,2001 input from the Commissioners and committee chairs and said he looks forward to their suggestions for agenda topics for both Board and committee meetings. The Corporate Secretary will send out a memo to the Commissioners prior to the next meeting for suggestions for agenda topics. Commissioner Callen will work with General Manager Pandy in finalizing the agenda. EXCUSED ABSENCE On motion by Commissioner Duncan and seconded by Cornmissioner Haggart, that the absence of Commissioner Christian be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED T�MEMBERS OF THE BOARD OF WATERPUBLIC AND LIGHT SUBJECT. TO SPEAK TO THE BOARD ON No persons spoke. ADJOURNMENT There being no objection, the meeting adjourned by unanimous consent at 7:03 p.m. Is/Mary E. Sova, Secretary Filed with Lansing City Clerk December 4, 2001. DEC-05-2001 07:42 BD OF WRTER LIGHT 1 517 7026B55 P.01i14 Nd4T BOARD OF WATER AND LIGHT 1232 Ha co D#V,e P.O. Box 13007 Lansing, M[ 48901-3007 Fax: 517-702-6855 DATE: /-2O `- COVER SHEET+_/�FAGE(S) RECIPIENT(S) FAX NO. 2. 3. 4. 5. 6. TRANSMITTED-E Your Approval Your Information Your Comments Your Revisions Your Records Per Your Request Additions Other NAME OF SENDER: 4�� IF PROBLEMS RECEIVING, CONTACT: COMIV=S: ,L od.D O `� 1v y DEC-05-2001 07:42 HD OF WRTER LIGHT 1 517 7026855 P.02i14 141 preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday,November 27, 2001 The Board of Commissioners met in regular session at 5:30 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman. Ronald Callen called the meeting to order. Present: Commissioners Ronald C. Callen, Charles M. Creamer, Nancy W. Duncan, Tim Haggart, Connie Mann, Diane R. Royal, and Nancy A. Wonch—7. Absent: Commissioner Ernest J. Christian—1. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Duncan, seconded by Commissioner Haggart, to approve the minutes of regular session held October 23, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. No persons spoke. COMMUNICATIONS There were no communications. DEC-05-2001 07:42 BD OF WATER LIGHT 1 517 7026655 P.03i14 Page 142 Board Minutes November 27,2001 REPORTS OF COMMITTEES No committee reports. GENERAL MANAGER'S RECOMMENDATIONS AND DISCUSSION ITEMS Background materials on items presented are on file in the Office of the Corporate Secretary. esolution #2001-11-1 USE OF SPECIAL COUNSEL—Tabled at October 23r`�meeting RESOLVED, That the General Manager be authorized to retain Rhonda Ross, Esq., and the firm of Warner,Norcross and Judd, at a rate of$240 per hour, as special counsel to draft a rules package to be presented to the Air Quality Division of the Michigan Department of Environmental Quality. The rules package will address start-up, shutdown and malfunction (SSM) issues associated with the operation of electric generating units. The name of Ms. Ross and her firm will be submitted to the City Attorney and, upon his recommendation, to City Council for approval. Use of Special Counsel is subject to the recommendation of the Utility Staff Attorney and the approval of the General Manager. Moved by Commissioner Creamer, seconded by Commissioner Haggart, to take from the table the question on use of special counsel. Action: Carried unanimously. Staff Commentary: This firm and lawyer are being jointly retained and paid for on an equal basis by the BWL, Detroit Edison and Consumers Energy. The package of rules would deal with the exemption of excess emissions during periods of unit start-up, shutdown and unanticipated unit malfunction. With the recent (August 20, 2001) rescission of the existing Michigan Rules R336.1913 and R336.1914 covering SSM, the BWL would be greatly impacted without replacement rules. Rhonda Ross, the attorney that will be drafting the rules package, has specific experience dealing with air quality rules and regulations. Ms. Ross has been Director of the Air Quality Management Division of the Wayne County Department of the Environment and is experienced working with both state and federal environmental statutes. It is expected that the total cost for the project would be near$30,000 to be divided equally between the BWL, Detroit Edison and Consumers Energy. Included in the cost would be a study of other state rules addressing SSM, and negotiations with the State of Michigan directly concerned with the acceptance of the proposed rules package. Ms. Ross bills at an hourly rate of $240. Discussion: At the request of the Commissioners, a letter from Rhonda Ross--dated October 29, 2001--was sent to the Board on November 2°d addressing questions and concerns raised at the regular session held October 23. Moved by Commissioner Wonch, seconded by Commissioner Duncan that the resolution authorizing the use of special counsel be adopted. DEC-05-2001 07:42 BD OF WATER LIGHT 1 517 702se55 P.04i14 Board Meeting Page 143 Novcmber 27,2001 Action: Carved unanimously. esolution #2001-11- CONSENT AND AGREEMENT (MSCPA, MPPA,AND TRANS-ELECT) RESOLVED, That upon occurrence of all conditions, it is hereby deemed in the best interests of the Lansing Board of Water and Light to consent to and agree to be bound by the provisions of (a) The Agreement Among the Michigan South Central Power Agency, the Michigan Public Power Agency and Trans-Elect; (b) The Partial Novation and Release Agreement between and among Trans-Elect, Consumers Energy Company (Consumers), Michigan South Central Power Agency and the Michigan Public Power Agency when executed by the parties thereto; (c) The stipulation and Settlement Agreement effective August 6, 2001, in Branch County Circuit Court case No. 01-06-405-CK; and (d) The Second Stipulation and Settlement Agreement, effective August 6, 2001 in the same docket in order to resolve issues related to the Midland Anti-Trust Settlement Agreement between Consumers and Lansing Board of Water and Light and to, among other things, resolve other issues that are being litigated in the aforementioned lawsuit, the documents identified in (a), (b), (c) and (d) above having been submitted and considered fully. RESOLVED, That the General Manager and Corporate Secretary be and are hereby authorized and directed to execute this Consent and Agreement. RESOLVED FURTHER, That the Michigan Public Power Agency and its legal counsel be and are hereby authorized to take all such further actions necessary or desirable for the implementation of the agreements referenced in (a), (b), (c), and (d) above. Staff Commentary: On June 4, 2001, the Michigan Public Power Agency(MPPA) and Michigan South Central Power Agency (MSCPA) filed suit against Consumers Energy Company (Consumers) and Michigan Electric Transmission Company(METC). The suit was initiated when Consumers began efforts to transfer its transmission system to its affiliate METC in advance of an anticipated ultimate sale to an independent third party. The basis of the suit arose out of nine (9) agreements between MSCPA and Consumers and eighteen(18) agreements between Consumers and MPPA. The lawsuit has been favorably settled subject to the express provision that the respective Boards (BWL included)review and approve the settlement documents. A Summary of Agreements with Consumers and Affiliate (METC) and a Summary of Agreement with the anticipated independent third party purchaser(Trans-Elect) along with a matrix of claims and requested relief and settlement outcome are attached. Moved by Commissioner Royal, seconded by Commissioner Wonch, that the resolution be approved. Discussion: General Manager Pandy, Assistant General Manager Cook, and MPPA General Manager Gary Zimmerman reviewed the details of the settlement associated with the sale of the Consumers Energy Transmission System to Trans-Elect. Discussion included the following points: DEC-05-2001 07:43 BD OF WRTER LIGHT 1 517 7026655 P.05i14 Page 144 Board Minutes ,.-,/ember 27,2001 • Consumers Energy stated purpose for selling its transmission system • Consumers Energy activities to prepare for the sale of their transmission system • A map was displayed depicting Consumers Energy's 5,400-mile transmission grid (345 kV system and the 138kV looped system)being sold. • Issues concerning assignment of existing MPPABWL rights to the new owners • Settlement activities,provisions and implications of existing agreements listed below: 1. Operating Agreements (BWL/MPPA) 2. Facilities Agreements (BWL) 3. Ownership Agreements (BWL/MPPA) 4. 1979 Antitrust Agreement (BWL/MPPA) Mr. Zimmerman presented an overview of the existing agreements. Following a question and answer period, the Commissioners concurred with staff s recommendation. Action: Carried unanimously. ERICKSON STATION REPAIRS—UPDATE REPORT Coal Rebeat Lime Failure Update: General Manager Pandy and Production Director Dick Peffley presented an overview of events that led to the coal reheat line failure at Erickson Station during a routine restart on October 17, 2001. Mr. Peffley reported on procedures to be implemented to prevent similar accidents from happening again. Slides were displayed showing the inside of the Erickson plant after the startup accident where the reheat line failed and the disassembled turbine being inspected for internal damage. The cold reheat line is targeted for completion by early February and the turbine overhaul by mid-February, 2002. When the turbine covers are lifted next week, any significant damage to the turbine could extend the schedule and cost of overhaul. Mr. Pandy reported that early indications of the Erickson repair schedule targeted a completion date of April 2002. After analyzing the conditions in the power market and the BWL's rights and obligations with the power pool, it was decided in a joint meeting between the BWL's Production Process and Bulk Power and Resource Planning personnel, to move the schedule up six weeks to bring the unit back into service by February 15, 2002. Most of the work will be performed in-house. If the schedule can be met, the BWL would realize capacity payments of approximately $500,000 next year. Mr. Pandy congratulated the employees involved for their ambitious efforts as they strive to meet the April goal. Tornado Damage Update: Production Director Dick Peffley reported on the progress in replacing the Erickson Station cooling tower after a tornado leveled it on September 24, This DEC-05-2001 07:43 BD OF WRTER LIGHT 1 517 7026655 P.06i14 Board Meeting Page 145 November27,2001 project is scheduled for completion by mid-January 2002. Slides were displayed showing the Erickson Station after the cooling tower was destroyed by the storm. Discussion: In response to Commissioner Creamer's inquiry, Mr. Peffley responded that approximately 25% of Erickson Station operators can cycle a unit properly. Many employees at Erickson never have the opportunity to see the unit cycle due to employee turnover from retirements and internal transfers. Mr. Peffley noted that Eckert Station operators all know how to cycle a unit because it is a routine procedure at that plant. Unlike Eckert, the Erickson unit is too large to cycle as frequently, which does not make it cost effective. Erickson Station management is investigating the possibility of unit cycling for training purposes (as is done at Eckert). If this is not feasible, especially in the summer months, the operators will be sent to Eckert Station for experience. In response to Commissioner Callen's inquiry,Mr. Peffley reported that there were seven notices of possible disciplinary action issued. Human Resources is investigating the incident to determine the appropriate action. A report is anticipated by the end of the week. This item was presented for information purposes. No action was required. esolution #2001-11-3 LEASING OF RAIL CARS RESOLVED, That the Board of Water and Light (BWL) enter into a Lease Agreement (Agreement) with JAIX Leasing Company of Chicago, Illinois, for the supply of rail cars. The Agreement particulars are as follows: 1) The term of this Agreement shall be twenty-four(24) months (January 1, 2002— December 31, 2003). 2) JA1X shall provide one(1) train set, totaling 113 steel bottom hopper coal rail cars with the assurance that they will maintain the integrity of the train sets at all times during the term of the lease. 3) The lease rate shall be S26S.00 per car per month (full service—inclusive of all normal maintenance expenses). Sta,ECommentary: By entering into this lease Agreement with JAIX, BWL will be able to guarantee a rail car supply for the delivery of Colorado Basin (CB) coal from Colorado at substantial savings. These cars will be dedicated to supply Erickson Station. Union Pacific Railroad (UPRR) has given BWL a transportation rate reduction of$1.50 per ton for the use of non-UPRR owned rail cars. The lease rate will provide an estimated savings of$0.49 per ton for the estimated movement of 425,000 tons of CB coal per year. This lease Agreement is projected to yield an annual transportation savings between $200,000 and$210,000. Moved by Commissioner Creamer, seconded by Commissioner Royal, that the resolution be approved. Action: Carried unanimously. DEC-05-2001 07:43 BD OF DATER LIGHT 1 517 7026655 P.07i14 Pagc 146 Board Minutes November 27,2001 esolution #2001-117- FISCAL 2002 CAPITAL BUDGET ADDITIIONS/MODIFICATIONS RESOLVED, That the following Capital Budget Projects for fiscal year 2002 be increased and/or added: Original FY 02 New FY 02 Anticipated NET FY 02 Project Budget Budget Insurance Revised Budget w/o Insurance Reimbursement incl.Insurance Erickson Cooling $ 118,000 $ 4,020,000 $ 3,500,000 $ 520,000* Tower 02-109 Erickson Cold $ 0 $ 2,000,000 $ 1,000,000 $ 1,000,000 Reheat Line (New) Erickson Turbine $ 0 $ 776,000** $ 0** $ 776,000* Overhaul FY'03 TOTAL $ 118,000 $ 6,796,000 $ 4,500,000 $2,296,000* Note: * The turbine overhaul and Erickson cooling tower replacement were budgeted for FY2003. As such, the FY2003 budget will be reduced accordingly. **Assumes no turbine damage or insurance reimbursement as a result of the Erickson Cold Reheat Line failure Staff Commentary: This resolution is being submitted in accordance with Board Policy regarding additions to the capital budget, and Board Policy 15-02 adopted January 25, 2000 and amended June 26, 2001, for the reporting and approval of any budgeted capital project exceeding 15% or$200,000 of estimated cost. The following report was submitted summarizing the need for the additions/modifications: is included below: Erickson Cooling Tower Replacement: On September 9, 2001 the cooling tower at the Erickson Station was damaged beyond repair. Erickson Unit#1 cannot be operated without a cooling tower in service. The total cost to rebuild the tower now is estimated to be $4,020,000. Given the FY 2002 Capital Budget included$118,000 for this project, it was requested that the FY 2002 Capital Budget for this project be adjusted by an additional $3,902,000. The BWL is currently working with its insurance carver on recovery and is anticipating approximately $3,500,000 in reimbursement. If the insurance reimbursement is $3,500,000, the net impact on cash flow in FY 2002 is$402,000. The difference between the$4,020,000 estimate and the anticipated$3,500,000 insurance reimbursement is related to the insurance deductible ($250,000) and the additional BWL requested features on the new tower relating to plume abatement and needed capacity increases. The timing of the reimbursement from the insurance company is also uncertain. As a final note, it should be noted that the FY 2003 budget would be reduced as a result of replacing the cooling tower in FY 2002. DEC-05-2001 07:44 BD OF WATER LIGHT 1 517 702BB55 P.08i14 Board Meeting Page 147 Novcmbcr 27,2001 Erickson Cold Reheat Line Repair: On October 17, 2001 while returning to service from a minor forced outage, Erickson Station Unit 41 experienced an extensive failure of the cold reheat line. The cold reheat line supplies steam from the boiler to the intermediate portion of the turbine The repair/replacement costs associated with this project are tentatively estimated at$2,000,000, with the unit expected to be available for service in late February. Further detailed inspections are currently in progress on the cold reheat line, boiler, and turbine to more clearly determine the full extent of damage and necessary repairs. It is anticipated that the BWL's insurance provider will reimburse$1,000,000 of the necessary repair costs. The timing of the reimbursement is, however,uncertain. Once reimbursement is received, the net impact on the FY 2002 Capital Budget is$1,000,000. The difference between the $2,000,000 project cost and the $1,000,000 expected insurance reimbursement is the insurance deductible. In the event that the damage is determined to be more extensive, and added costs experienced, it is anticipated that the BWL net exposure will remain at the $1,000,000 insurance deductible. Erickson Station Turbine Overhaul: The Erickson turbine/generator was originally scheduled for overhaul in the FY 2003 Capital Budget. Erickson's last overhaul was in 1991. Since the recent cold reheat line failure described above will require removal and reinstallation of the turbine cover to inspect the turbine internals for damage, overhauling the turbine during the existing cold reheat line repair outage will reduce the costs over a separate overhaul and outage in FY 2003. Completing the turbine overhaul in FY 2002 versus FY 2003 will also provide added savings due to improved turbine performance and reduced production costs. Coordinating the turbine overhaul outage with the cold reheat line repair outage will eliminate the need for an extended FY 2003 Erickson outage and subsequent purchase power and production cost impacts. Added purchase power costs expected for the combined turbine overhaul and cold reheat line repair outage are anticipated to be on the order of$1,000,000. The Erickson Station turbine overhaul being done in FY 2002 will increase the FY 2002 capital budget by$776,000. An additional $700,000 in operation and maintenance expenses will also be required to complete the overhaul. A$776,000 reduction in the FY 2003 capital budget will be realized. Moved by Commissioner Haggart, seconded by Commissioner Wonch, that the resolution on FY 2002 Capital Budget Additions/Modifications be approved. Discussion: Chief Financial Officer Dana Tousley presented a preliminary overview of FY 2002 Capital Budget changes. In response to Commissioner Duncan's question, he clarified that the three capital projects in the increased amounts are necessary for FY 2002. Staff is currently reviewing all projects contained in the capital budgets for FY's 2002 and 2003, looking for projects that may be shifted from 2002. For instance, the cooling tower project was scheduled in the long-range capital forecast. These recent incidents are expected io have an impact on both the operating and capital budgets for this fiscal year. Commissioner Duncan stated that she understands the necessity for the Board to authorize the repair projects at this time. She DEC-05-2001 07:44 BD OF WRTER LIGHT 1 517 7026655 P.09i14 Pagc 148 Board Minutes jwvember 27,2001 expressed her hope that alternatives to the mid-year budget would be presented in January to return back in the aggregate to the original amount of the capital budget. Action: Carried unanimously. FISCAY. YEAR 2001-02 O&M BUDGET UPDATE General Manager Pandy reviewed the preliminary fiscal year 2002 budget revisions, which included items that prompted staff to suggest a mid-year review of the budget. Chief Financial Officer Tousley presented a table summarizing the impact on the current operating budget. He noted that insurance reimbursements are anticipated for most of the damage at Erickson Station. Other changes required in the Capital Budget for FY's 2002 and 2003 are not reflected on this table. All of the Capital and O&M changes will be reflected in the six-year cash flow to be presented in January. $ X 1000 Approved FY 2002 Operating Expense Budget $170,183 Erickson Cooling Tower—not reimbursed by insurance 570 Erickson Turbine Overhaul—because station is down, scheduled this FY 700 Air Quality Fees—increased by legislature 240 Fuel—because Erickson is not running, includes the price increase 1/1/02 -950 Purchased Power—because Erickson is not running 1,000 Non-Bargaining Compensation—performance$ over 5% increase budgeted 752 VEBA Contribution—budget anticipated over-funding, no contribution 431 Property and Boiler Insurance—price increase from renewal 9/30/01 425 Corporate Miscellaneous—housekeeping, credit for paid time off not needed -985 Total Changes 2,183 Preliminary Revised FY 2002 Operating Expense Budget $172,366 Commissioner Creamer inquired about the Non-Bargaining Compensation for performance dollars over the 5 percent increase that was budgeted. General Manager Pandy responded that salary increases are reflected in the current fiscal year 2001-02. Chief Financial Officer Tousley interjected that in addition to performance increases for non-bargaining employees, this amount also includes Share the Success (STS) payouts. Mr. Tousley responded that a forecast of approximately 5 percent was projected and the amount came in higher than anticipated. He stated that all BWL employees (bargaining and non-bargaining) can earn corporate bonuses ranging from 0 to 2.5 percent of annual pay for reaching corporate STS performance targets. DEC-05-2001 07:44 BD OF WRTER LIGHT 1 517 7026855 P. 10i14 Board Mwing Page 149 November 27,2001 Non-bargaining employees can earn additional Process STS bonuses ranging from 0 to 5 percent for reaching performance targets in the Processes where they work. Commissioner Duncan stated that she was under the impression there was an organizational cap with respect to performance pay and that an aggregate amount was budgeted for the increases. The Budgetary parameters for performance increases was summarized by General Manager Pandy which involved increases in the range of 0 to 7.5%, based on performance appraisals. Commissioner Callen commented that the budgeting process by which projections are based would be of interest to the Finance Committee in the upcoming budget review. In response to Commissioner Marin's inquiry, General Manager Pandy explained that Share the Success (STS) is a pay for performance plan that the BWL has had for approximately 15 years. The corporate STS ties annual bonuses to the performance of the BWL, for all employees. The process-related portion of STS applies to non-bargaining employees, which differentiates bonuses for each of four major process areas based on the results of their process (Production, Delivery, Process Support and Business Support processes). The program is similar to a gain- sharing program. Mr. Pandy reviewed the cumulative net income for the electric, water and steam utilities graphically displayed over the last ten years. The consolidated financial statements for water, electric, steam and general properties through October 2001 indicate: Oct.'01 vs. Oct.'00 YTD Last Year Total Operating Revenue +11.4% +7.2% Net Income +37.8% +21.8% This item was presented for information purposes. No action was required. The Finance Committee will be reviewing this item in January. RETURN ON EQUITY General Manager Pandy discussed the City Attorney's letter, dated November 13, 2001, advocating that the agreement reached regarding Return on Equity payments to the City from the Board of Water and Light be modified to reflect its previous title of Return on Equity rather than Payment in Lieu of Taxes. A letter sent to the City Attorney by Mr. Pandy, dated November 21, 2001 indicated that the BWL desires to have its financial statements on a comparable basis with other public power systems. Staff Attorney Larry Wilhite stated that he has been in discussion with the City Attorney on this matter, but that a conclusion has not been reached. Mr. Pandy asked the Commissioners for their guidance on this issue. Following discussion, the Commissioners concurred that it is more important to have an agreement rather than to debate over the name. DEC-05-2001 07:45 BD OF WRTER LIGHT 1 517 7026855 P. 11i14 Page 150 Board Minutes ,vcmbcr 27,2001 GENERAL MANAGER'S REMARKS Annual, Planned and Bonded Capital Projects. General Manager Pandy handed out a summary status report of Annual, Planned, and Bonded Capital Projects through October 31, 2001. The following Total Projects Estimated Cost $283,510,000 Total Expended and Committed to Date $180,698,000 Current Projected Total Projects Cost $184,529,000 Projected Overrun $1,019,000 Percent Overrun 0.36% Commissioner Callen noted that approximately two years ago the Board emphasized the fact that there were a number of projects that were coming in at 10% to 30% over budget. This year the number is lower. He asked what changes have been made in estimating projects that caused the improvements. Assistant General Manager Cook responded that two factors are contributing to the positive number: First, it is still early in the budget year and secondly, the Commissioners passed a resolution in January 2000 and amended it in June 2001 directing staff to notify the Board of projects exceeding 15% or$200,000 of the estimated cost. American Public Power Association (APPA) Legislative Rally. General Manager Pandy reported that the APPA will hold its annual legislative rally in Washington, D. C. on January 27- 30, 2002 focusing on "Public Power—An American Tradition that Works." He urged Board participation in this rally. Commissioner Callen urged the Commissioners to participate in APPA meetings. He indicated that this is an opportunity to get a macro view on what other municipals are doing and what is happening between municipal utilities and federal endeavors,particularly at a time when energy is near the top of the list on administrative and legislative agendas. Update on Competitive Issues. General Manager Pandy reported that competition continues all around the BWL service area. He reported on a project that was recently awarded to Consumers Energy. Water Customer Choice. General Manager Pandy reported that he has met with IBEW Local 352 President Joe Davis and Business Agent Curt Gates to share with them information on the Water Customer Choice program. Future meetings will be held to talk about ways to make the program more effective and address the union's concerns over job security. Rules and Regulations for Water Service. Commissioner Creamer remarked that he recently reviewed the section on the Water Customer Choice Program in the Rules and Regulations for Water Service, and noticed it indicates the BWL will accept and permit customer installation of customer water service and on-site water mains, provided the installation of customer water services and/or on-site water mains has been inspected and approved by the Board of Water and DEC-05-2001 07:45 BD OF WRTER LIGHT 1 517 7026855 P. 12i14 Board Meeting Page 151 November 27,2001 Light. He opined that either the BWL should not contract with somebody outside of the BWL or the guideline should be changed. He requested a clarification with Rules and Regulation item 9 (Water Customer Choice Program), Section 1.(7), which states: "Where the Customer is not subject to the codified ordinances of the City of Lansing." He noted that it suggests to the reader that if the customer is governed by the codified ordinance of the City of Lansing that Customer Choice is not available in that jurisdiction. General Manager Pandy reported that the old Building and Housing Code of the City of Lansing, Section 1422.17 stated that all water service pipes installed between city water mains and City water meters would be installed, inspected and maintained by the BWL in accordance with all applicable City codes. The City adopted Ordinance No. 1040 on October 15, 2001, which in part repealed section 1422.17 and implemented the State-approved Plumbing Code within the City's jurisdictional boundaries. Mr. Pandy indicated that the City went from its own code to the State's Code, however the State Code language had no reference to the previous language. Commissioner Creamer expressed concern over the inconsistency between the BWL Rules and Regulations and what is actually being practiced. He requested that the Water Customer Choice Program as defined in the Rules and Regulations be reviewed for consistency. He also noted that City Councilmembers are interested in understanding how the Customer Choice program will be available for the installation of separate meters for lawn sprinkling. General Manger Pandy agreed to review the concerns relevant to the Rules and Regulations. Staff will also work with the union to develop a strategy for dealing with the code change. Mr. Pandy emphasized that management's position with regard to inspections is for this work to be done by BWL employees. Due to the increased workload, it became necessary to recruit competent BWL retirees to do the inspections. Tetra Tech employees were later contracted to handle the work overflow during peak times. Commissioner Haggart clarified that the City had to make the change to Ordinance No. 1422.17 in order to comply with the state law. COMMISSIONERS' REMARKS Human Resources Committee Meeting. Commissioner Royal stated that she would like to call a Human Resources Committee meeting in December. She will be sending out a memo asking for Commissioner input on FY 2002 goals for the General Manager. Wolverine Gas Pipeline Update. Commissioner Duncan asked if the alternate route for the Wolverine Pipeline addresses management's concerns relative to the proposed route being too close to BWL facilities. General Manager Pandy responded that staff has met with Wolverine Pipeline representatives to discuss this issue. The original route of which the BWL objected was proposed to run parallel along I-96 through south Lansing along the Consumers Energy and BWL 138kV transmission right of way. The pipeline would also have come within 200 feet off the BWL's Wise Road Water Conditioning Plant. The alternate route is in the right-of-way of I-96 on the south side of the City in the area between the shoulder of the road and the fenced perimeter, which is the DEC-05-2001 07:46 BD OF WRTER LIGHT 1 517 7026855 P. 13/14 Pagc 152 Board Minutcs -vember 27,2001 highway right of way. The new route places the pipeline away from the BWL facilities. Staff plans to meet with the City soon to discuss their position on this matter. GreenWise Power Update. Commissioner Creamer requested an update on the GreenWise Electric Power program and asked if bill board advertising has made an impact on participation. Communications Director John Strickler reported that participation in the GreenWise Electric Power program has not yet reached its full potential. Enrollments are at approximately 750 blocks of 250 kilowatt-hours out of a total available 2700 blocks. Efforts are underway to develop plans to attract more commercial customers. The possibility of franchising with Michigan Public Power Agency members is being investigated. With regard to billboard advertising, the impact on brand imaging should be known soon after Customer Attitude Survey results are compiled. Included in that information will be input to determine the impact the GreenWise campaign has made on the BWL's image with respect to perceptions of environmental responsibility and to what extent customers are looking at other advertising messages relating to the BWL's brand image. Commissioner Creamer questioned at what point should it be determined when is the right time to stop allocating marketing dollars into a project that may not be viable. Mr. Strickler responded that if the GreenWise Electric Power program is not fully subscribed and there is an indication that there is still not sufficient demand, additional blocks would not be added to the portfolio. He noted that the survey data from an image standpoint should be carefully scrutinized to determine what the GreenWise program is doing in areas other than just enrollments. Welcome to Commissioner Mario. Commissioner Haggart welcomed Commissioner Marin to the Board. He also commended Production Director Dick Peffley for his efforts in attempting to bring the Erickson Station back on line ahead of schedule. Commissioner Marin commented that she is pleased to be a member of the Board of Commissioners and looks forward to working with the Board and management. Chairman Callen welcomed Commissioner Mann, and reported that he has assigned her to serve on the Human Resources (HR) Committee, replacing Commissioner Christian. This assignment will relieve Commissioner Christian who was temporarily serving on both the Human Resources and the Finance Committees until the HR Committee vacancy was filled. Commissioner Callen also welcomed City Councilmember Harold Leeman who was present in the audience. New Approach in Setting the Meeting Agenda. Chairman Callen reported that at the Board's last retreat held November 2000, the Commissioners agreed to shift monthly meetings to quarterly regular meetings and place more emphasis on the Board's two major committees— Finance and Human Resources. Commissioner Callen stated that in the last month he has made a special effort to try to move the Board more in the direction of convening committee meetings to thoroughly study topics of importance. He reported that he has met with Commissioners Duncan and Royal, chair of the Finance and Human Resources Committees, respectively, to discuss approaches and suggest agenda items. In addition to that change, he expressed his preference to shift the approach in the way the agenda is put together. Chairman Callen invited DEC-05-2001 07:46 BD OF WRTER LIGHT 1 517 702EB55 P. 14/14 Board Meeting Page 153 November 2',2001 input from the Commissioners and committee chairs and said he looks forward to their suggestions for agenda topics for both Board and committee meetings. The Corporate Secretary will send out a memo to the Commissioners prior to the next meeting for suggestions for agenda topics. Commissioner Callen will work with General Manager Pandy in finalizing the agenda. EXCUSED ABSENCE On motion by Commissioner Duncan and seconded by Commissioner Haggart, that the absence of Commissioner Christian be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. No persons spoke. ADJOURNMENT There being no objection, the meeting adjourned by unanimous consent at 7:03 p.m. Is/Mary E. Sova, Secretary Filed with Lansing City Clerk December 4, 2001. 117 Preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, October 23, 2001 The Board of Commissioners met in regular session at 5:30 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman Ronald Callen called the meeting to order. Present: Commissioners Ronald C. Callen; Charles M. Creamer, Ernest J. Christian; Nancy W. Duncan, Tim Haggart, Diane R. Royal, and Nancy A. Wonch - 7. (One Commissioner appointment pending.) Absent: None. _. LJ The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Christian, seconded by Commissioner Royal, to approve the minutes of regular session held July 24, 2001 and special session held October 8, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. BWL employee, Joseph Davis, President of Local Union 352, IBEW, spoke on two issues. The first matter concerned the union's grievance against the BWL's Share the Success program, which is set for arbitration on November 12, 2001. He stated that he would hope management and the union could reach settlement prior to the arbitration date. The second issue pertained to the customer choice program for water service installations. He voiced his objection to contracting inspectors to check BWL water service installations in the City of Lansing. He invited the Commissioners to meet with union leadership to discuss this issue in greater depth and to take a closer look at the customer choice program. Board Minutes Page 118 October 23,2001 General Manager Joseph Pandy, Jr. responded to issues raised with respect to the Share the Success program. He handed out a surmnary of management's position on this controversy. With respect to customer choice, he reported that of the 21 customer choice jobs, BWL employees inspected eight of the jobs, BWL retirees inspected five, and Tetra Tech employees inspected eight in order to meet the seasonal workload schedule. Mr. Pandy urged union employees to meet with him anytime to discuss their issues. To clarify a statement made by Joseph Davis, Mr. Pandy said that there is no reference in the Lansing City Charter that states work in the City is required to be performed by BWL employees. BWL employee Michael George spoke regarding the positive experiences he has had under the leadership of Production Director Richard Peffley. He credited Mr. Peffley and others for facilitating the purchase of a home under the BWL's Home Ownership Program for Employees. He also shared a personal story related to the September 11"' terrorist attack at the World Trade Center. Mr. George was attending a meeting in the BWL's Administration Building and learned of the attack through Mr. Peffley. This was a coincidence because Mr. Peffley was unaware that Mr. George's brother worked on the 14th floor of the World Trade Center. Mr. George was able to see the CNN coverage of the terrorist attack while at work. He expressed his gratitude to those staff members who were present in the BWL conference room for their care and concern during his personal ordeal. He reported that his brother was safe. Mrs. George was also present and expressed her appreciation to all those who assisted with processing the necessary paperwork for the Home Ownership Program and making home ownership a reality. BWL employee Michael Stanley remarked that symptoms of indiscriminate cost cutting include the BWL Share the Success program, bargaining unit employees injured at Eckert Station, catastrophic failure at Erickson Station. He stated that bargaining unit employees are suffering because of this, and asked how long it will be before Lansing customers will suffer because of cost cutting measures. BWL employee Mickey Fountain remarked he has been employed at the BWL for 17 years as a maintenance mechanic. His BWL involvement has included serving on the Mutual Gains Team, Process Safety Advisor, 90/10 Bonus Program participant, bargaining and non-bargaining spokesperson for the Maintenance & Construction Resource Center, and recently appointed to the post of IBEW Local 352 Health and Safety Director. Mr. Fountain stated that Share the Success (STS) is an innovative program, which has benefited the organization, customers, and employees. He has been involved in the STS Performance Measures Committee for three years and found it to work well. He noted that both bargaining and non-bargaining employees have the opportunity to participate as well as the General Manager. Mr. Fountain stated that to date it has been perceived he voted not to participate in the process measures portion of the STS program. He stated for the record that he did not vote not to participate in the process measures portion of the BWL STS program, but rather he voted "no" to not change the program as the IBEW Local 352 contract stated in respect to the STS program. He indicated that this issue could have a long-terns effect on the organization. Greg Starks, 240 Woodlawn Avenue, Lansing, spoke on three different topics. As a political columnist for the CITY PULSE, a local newspaper in Ingham County, he urged the Commissioners to give some consideration to his suggested commentary in a recent article, which proposed turning the Ottawa Power Station into a major art museum. He noted that there are eight major Page 119 Board Meeting October 23,2001 abstract expressionist artists that have flourished in the post-war period. One of them is Clyfford Still (1904-1980) whose collection of 2,000 pieces of artwork lay in abeyance waiting for an American municipality to dedicate a museum to the presentation and preservation of his work all in one space. His second topic pertained to considering alternative providers for cable and telecommunication services. Mr. Starks serves as chairperson of the Lansing Cable and Telecommunications Advisory Board. He suggested that the City of Lansing and the surrounding communities might do well to consider the possibility of alternative providers for cable and telecommunication services. He noted that the BWL is a natural candidate for serving as the franchise holder. The third issue related to noise caused by a steam release valve that went off on the morning of October 23 at Eckert Station at 5:15 a.m., 5:43 a.m., 5:58 a.m., and 6:07 a.m. Mr. Starks indicated the decibel level was somewhere around 150. He noted that between the noise problems and vacuuming out the ashbin, it is a personal irritation when these events happen in hours when most people are sleeping. He suggested performing these procedures at a more suitable time of the day. General Manager Pandy responded that venting of steam when units are brought on or off-line causes the noise. Generally units are brought on to meet weekday load on Sunday evening rather than early morning. Mr. Pandy gave assurance he would investigate and discuss this with staff to work out a schedule that will not disturb the neighborhood. Production Director Richard Peffley commented on the BWL Home Ownership Program for Employees. He stated that in addition to Michael George, there were other BWL employees who encountered obstacles in processing paperwork for the Home Ownership Program for Employees (HOPE). He credited General Manager Pandy, Chief Financial Officer Dana Tousley, Human Resources Director Linda Gardner, and Human Resources Employee Relations Administrator Wendy Bradley for their role in modifying the application process. Mr. Pandy noted that last year the Board approved budgeting $30,000 per year for the HOPE program to provide loans to six employees per year. One more grant is currently in process for fiscal year 2001-02. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES HUMAN RESOURCES COMMITTEE REPORT The Human Resources Committee met on September 4, 2001 to receive a report on the Board of Water and Light Employee Satisfaction Survey, conducted by Market Strategies, Inc., (MSI) and to review performance appraisal results for the three staff positions that report to the Board; namely, the General Manager, Director of Audit and Metrics and Corporate Secretary. Committee members present were Commissioners Callen, Christian, Haggart, and Royal (Chair). Commissioners Creamer (committee alternate) and Duncan were also present. Board Minutes Page 120 October 23,2001 Communications Director John Strickler presented an overview of the employee satisfaction survey results conducted and compiled by Market Strategies, Inc. He reported that a self- administered mail survey was distributed to all 736 BWL employees in late June 2001. The survey was unchanged from the 1999 survey,with the exception of one addition being an open- end question for additional comments. A total of 322 (44%) employees mailed the completed questionnaire directly to MSI as compared to 52% in 1999. The objectives of the survey were to assess the following: • Employee perceptions of the work environment, employee satisfaction and retention • How employees rate the feedback and evaluation, professional development, workload, accountability, and autonomy in their job • Perceptions of the business processes, immediate managers, and senior managers Survey results indicated that the BWL improved significantly on all components, but particularly for job security and issues regarding senior managers. Findings indicated there is still substantial room for improvement on management issues. Feedback and evaluation is still a weaker index and has large impacts on other components in the employee satisfaction model. The workload component saw minimal improvement. Several of the workload issues relate to other components and items that have weak scores. Mr. Strickler reported that management initiated a series of focus group discussions with employees as a follow-up to recent union elections. Lisa Crumley of Pace &Partners was present to give a brief overview of the findings from four distinct employee focus groups held with clerical, teclulical, professional and supervisory employees in April and June 2001. Ms. Crumley emphasized that Pace &Partners was very cognizant of protecting the employees' confidentiality and anonymity. The purpose of the focus groups was to: • Understand recent organizing efforts • Seek input about how to improve relationships and working conditions at the BWL • Explore issues of importance • Discuss ideas of how management can improve its relations with employees The fundamental,universal concerns identified across all four groups included the following issues: Strategic Direction • Perceived lack of strategic direction or plan • Lack of succession planning • Conflicting priorities across process areas Page 121 Board Meeting October 23,2001 Organizational Structure/Process • Procedures impede service to customers • Paperwork bogs down productivity • Structure sometimes breeds competition Workload/Resources • Employees report strain of downsizing • Required to do more with less Management Communication • Employees need to hear more from management • Where information and understanding are greater, satisfaction is higher Mr. Strickler recapped management's efforts in response to issues raised over the past year: =:> Planning functions have been consolidated under the Assistant General Manager. => Six-year financial forecast and the Growth and Expansion Task Force work have been communicated to employees. Management is in the process of organizing that information to present to employee in face-to-face meetings. => Share the Success (STS) has been aligned with the strategic Business Plan for consistency. => Strategic plamling documents and non-bargaining job descriptions are to be completed by the end of this calendar year, and progression plans are to be completed by this fiscal year. => A team of managers and directors continue to address issues. One of the objectives of the Business Support Process area is to develop on a monthly basis presentations on corporate topics to share with employees to make them aware of the direction the organization is moving. => Management plans to intensify its communication,particularly with face-to-face meetings. The Commissioners stressed the importance for management to understand how communication techniques will be different from last year. General Manager Pandy stated that management intends to move in the direction of trying to achieve a three-stage type of communication. A recent example of that was sending the results of the focus groups to all non-bargaining employees. The next step will involve soliciting employee feedback to assure a clear understanding of issues raised in order to prioritize them. Commissioner Callen questioned whether the downsizing was appropriate in the sense of having the correct number of people needed to perform the work while maintaining a good safety record. The Commissioners concurred that a current business plan is central to the operation of Board Minutes Page 122 October 23,2001 the BWL. Management was urged to consider fundamental problems in staffing and the replacement of skilled employees. As the company moves forward in developing its cominunications strategy, management was urged to listen more and encourage more employee feedback. Joseph Davis, President of IBEW, Local 352, addressed the committee on customer choice issues and the strain of downsizing the organization,while service to outlying communities continues to expand. On motion by Commissioner Callen, seconded by Cominissioner Christian, the Committee met in closed session to review performance appraisals for the three staff-positions that report to the Board. (6:55 p.m.). The Committee reconvened in open session at 8:07 p.m. Performance appraisals and salary increases for the staff positions reporting to the Board are administered according to the BWL wage and salary plan for non-bargaining administrative employees. Human Resources Director Linda Gardner reviewed the performance rating results completed by the Commissioners for each of the Board-appointed positions. Contract issues of the General Manager and his rating were discussed at length. No final decision was made. The Human Resources Committee recommends the following resolution: esolution #2001-10-1 Resolution on Compensation Increases for Board-Staff Positions -Fiscal Year 2001-02 RESOLVED, That the Director of Metrics and Audits Kellie Willson, and Corporate Secretary Mary Sova are hereby eligible to receive salary adjustments effective as of July 1, 2001. RESOLVED FURTHER, That pay adjustments for the Director of Metrics and Audits and the Corporate Secretary based on their performance evaluations for fiscal year 2000-01 are hereby confirmed, as filed with Human Resources. Pay adjustments are to be awarded in accordance with the fiscal year 2000-01 performance increase matrix under which pay for perfonmance is being administered. On related issues,the committee reached consensus on the following: • The Board-staff-appointed positions are to use the same Managerial Appraisal Form when completing self-appraisals. • For fiscal year 2002, performance evaluations for the Director of Metrics and Audits and the Corporate Secretary are to be based on blended ratings conducted by the General Manager, Assistant General Manager and the Commissioners. Respectfully submitted, /s/Diane Royal, Chair Human Resources Committee Page 123 Board Meeting October 23,2001 Moved by Commissioner Christian, seconded by Commissioner Haggart, that the Human Resources Report be accepted as presented. Action: Carried unanimously, Moved by Commissioner Royal, seconded by Commissioner Duncan, that the Resolution on Compensation Increases for Board-staff Positions—Fiscal Year 2001-02 (Resoluti071#2001-10-1) be adopted. Action: Carried unanimously. FINANCE COMMITTEE REPORT The Finance Committee met on October 23, 2001 to review the fiscal year 2001 audit of the Board of Water and Light Enterprise Fund. Committee members in attendance were Commissioners Ernest Christian (Acting Chair), Charles Creamer, and Nancy Wonch. Absent was Commissioner Nancy Duncan. Also in attendance were Board Chair Ronald Callen and Commissioner Diane Royal. Fiscal Year 2001 Audit External auditors from Plante &Moran, LLP,presented the results of the audit for fiscal year ended June 30, 2001 for the Board of Water and Light Enterprise Fund. External auditors present were Robert Edwards, CPA and Associate; Larry Cooley, CPA and partner; Frank Audia, CPA and partner; and Patricia Easton, CPA. They issued a standard opinion on the financial statements of the Board of Water and Light and answered questions raised by committee members. The auditors reported that they received the full cooperation of management and staff and had unrestricted access to senior management in the performance of their audit. The audits for the Employees' Defined Benefit Pension Plan, Employees Defined Contribution Pension Plan, and Retiree Benefit Plan(VEBA)have been forwarded to the BWL Pension Fund Trustees for review at their annual meeting of October 23, 2001. In the interest of time constraints, Chief Financial Officer Dana Tousley told the Board he would be mailing a written report on selected financial statistics with associated graphs to the Commissioners for information. Quarterly Internal Audit Report Director of Metrics and Audits Kellie Willson reported in her written report the status of the following issues in which she has been involved: 1. Review of Major Water System Extensions 2. Transfers of Funds Between Utilities 3. VEBA Trust for Funding Retiree Health Care Benefits 4. The City Ethics Ordinance Compliance 5. Financial and Management Information Issues Board Minutes Page 124 October 23,2001 6. Sole Source Purchases Over$15,000 Ms. Willson reported that at the Board's Special Meeting held October 8, 2001, R. W. Beck consultants indicated they would be looking at profitability by customer class in geographic areas for water and electric; however, analysis indicates data needed to accomplish this task is not available. Consequently, it will not be feasible to complete that phase of the work at this time. The timeline for R. W. Beck to complete their work by the end of December is on schedule. The Finance Committee recommends the following resolution: esolutio i#2001-10-2 Resolution to Authorize the Filing of the Audits with the City Clerk and the State Treasurer RESOLVED, That the Corporate Secretary be directed to file a copy of the fiscal year 2001 audit report of the Board of Water and Light Enterprise Fund with the Lansing City Clerk, Lansing City Council and the Mayor. RESOLVED FURTHER, That the Corporate Secretary be directed to file copies of the fiscal year 2001 audit reports of the Board of Water and Light Enterprise Fund, the Defined Benefit Pension Plan, Defined Contribution Pension Plan and Retiree Benefit Plan (VEBA), and the reports on auditing procedures with the State Treasurer as required by the Uniform Budgeting and Accounting Act (Public Act 2 of 1968, as amended). Submitted by, Finance Committee Ernest J. Christian, Acting Chair Moved by Commissioner Royal, seconded by Commissioner Wonch, that the Finance Committee Report be accepted as presented. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Royal, that the Resolution to Authorize the Filing of the Audits with the City Clerk and the State Treasurer(Resolution #2001-10- 2) be adopted. Action: Carved unanimously. GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. Page 125 Board Meeting October 23,2001 esolution#2001-10-3 DEFINED BENEFIT PLAN RESOLVED, That the amended and restated Lansing Board of Water and Light Defined Benefit Plan for Employees' Pensions be adopted effective November 1, 2001. Staff Commentary The amended and restated plan includes the amended and restated plan effective 7/l/96 and amendments effective 7/1/97 (1" amendment), 7/l/99 (2"d amendment), 12/17/99 (3rd amendment), 7/1/2000 (4th amendment). This amendment and restatement includes a variety of changes related to compliance with various changes in applicable law and is recommended for approval by staff and drafted by Mr. Steve Juirnu at Foster, Swift, Collins & Smith, P.C., our pension benefits attorney. The attorney's transmittal letter and a redline copy of the plan is attached for your review. The plan document will need to be submitted to the IRS for a determination letter,but this is considered a formality since there are no changes in benefits. Moved by Commissioner Royal, seconded by Commissioner Chrisitan, that the resolution be approved. Action: Carried unanimously. esolution'.#2001=10 DEFINED CONTRIBUTION PLAN RESOLVED, That the amended and restated Lansing Board of Water and Light Employees' Defined Contribution Plan be adopted effective November 1, 2001. Staff Commentary: The amended and restated plan includes the amended and restated plan effective l/l/97 and amendments effective l/l/97 (1st amendment), 7/l/00 (2"d amendment). This amendment and restatement includes a variety of changes related to compliance with various changes in applicable law and is recommended for approval by staff and drafted by Mr. Steve Jurmu at Foster, Swift, Collins & Smith, P.C., our pension benefits attorney. The attorney's transmittal letter and a redline copy of the plan is attached for your review. The plan document will need to be submitted to the IRS for a determination letter, but this is considered a formality since there are no changes in benefits. Moved by Commissioner Royal, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolutior;#2001`-10`' SURPLUS PROPERTY—(Located on and through Wise Road Water Conditioning Plant Property RESOLVED, That the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. Further, that the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel Board Minutes Page 126 October 23,2001 to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. PROPERTY DESCRIPTION: PART OF THE N.E. 1/a OF SECTION 6, T. 3 N., R. 2 W., CITY OF LANSING, INGHAM COUNTY,MICHIGAN, BEING PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE EAST 1/4 CORNER OF SECTION 6, T. 3 N., R. 2 W. (AS RECORDED IN L. 7, P. 133 OF INGHAM COUNTY LAND CORNER RECORDATION CERTIFICATES); THENCE NORTHERLY ALONG THE EAST SECTION LINE 660.81 FT., MORE OR LESS, TO THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTH 1/2 OF THE N.E. 1/4 OF SECTION 6; THENCE WESTERLY ALONG SAID NORTH LINE 98.90 FT. TO THE SOUTHEASTERLY CURVED SIDELINE OF PLEASANT GROVE ROAD (80 FT. WIDE) AND THE POINT OF BEGINNING: THENCE 255.36 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE RIGHT WITH A RADIUS OF 612.96 FT. AND LONG CHORD BEARING S 57014'10"W 253.52 FT. TO THE END OF THE CURVE; THENCE S 69°12'45" W 636.73 FT. TO THE BEGINNING OF A CURVE; THENCE 203.29 FT. ALONG A CURVE TO THE LEFT WITH A RADIUS OF 532.96 FT. AND LONG CHORD BEARING S 58"18'30"W 202.06 FT. TO A POINT THAT IS 190 FT NORTHERLY OF THE EAST-WEST 1/4 LINE OF SECTION 6; THENCE WESTERLY PARALLEL TO THE 1/4 LINE 110.03 FT. TO A POINT ON THE CURVED NORTHWESTERLY SIDELINE OF PLEASANT GROVE ROAD (80 FT. WIDE); THENCE 314.89 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE RIGHT WITH A RADIUS OF 612.96 FT. AND LONG CHORD BEARING N 54031'20"E 311.44 FT. TO THE END OF THE CURVE; THENCE N 69°12'15" E 636.50 FT. TO THE BEGINNING OF A CURVE; THENCE 133.45 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE LEFT WITH A RADIUS OF 532.96 FT. AND LONG CHORD BEARING N 62002'00"E 133.10 FT. TO A POINT ON THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTH 1/2 OF THE N.E. 1/4 OF SECTION 6; THENCE ALONG SAID NORTH LINE N 89°59'46" E 124.23 FT. TO THE POINT OF BEGINNING, CONTAINING 87,400 SQ. FT. OR 2.01 ACRES OF LAND,MORE OR LESS, AND SUBJECT TO EASEMENTS AND RESTRICTIONS OF RECORD, AND SUBJECT TO THE RIGHT OF THE BOARD OF WATER AND LIGHT TO OPERATE ALL EXISTING UTILITY LINES. THIS PARCEL IS SHOWN ON A SURVEY RECORDED IN LIBER 6, PAGES 376-379 OF INGHAM COUNTY CERTIFIED SURVEY MAPS. Staff Coinmentan: This 80 feet wide by 1,090 feet-E long parcel is located on and through the Board of Water and Light Wise Road Water Conditioning Plant/Wise Road 138 KV Substation Property and is currently utilized by the City of Lansing Public Service Department for Pleasant Grove Road. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Christian, seconded by Commissioner Haggart, that the resolution be approved. Action: Carried unanimously. Page 127 Board Meeting October 23,2001 esolution',#2001-10- PURCHASE OF NEW DISK SUBSYSTEM FROM UNISYS/EMC RESOLVED, That the Board of Water and Light enter into agreements with Unisys Leasing Corporation to finance the purchase of a new disk subsystem (Hardware, software, installation and five years pre-paid maintenance) from Unisys/EMC at a cost of$207,015 at an interest rate of 4.944% over 60 months. (See final Unisys pricing attached). RESOLVED FURTHER, That the General Manager and Corporate Secretary are authorized to execute said agreements in such form as approved by the Staff Attorney. Staff Coinmentag: Advances in storage technology have opened the door for BWL to significantly improve the mainframe-computing environment and save money in the process. The BWL's current disk technology(EMC 9760) is about eight years olds, and although it is near maximum capacity(100 Gigabytes), an upgrade is not needed for another year or two. Currently a fee of$3680/month maintenance is being paid on this equipment,with an annual increase cap of 7%. However, the purchase of a new EMC Symmetrix 5630 system will increase storage capacity by 50%, provide significant additional reliability by having every drive "mirrored", improve performance and provide a system that has significant functional improvements to support the organization's IT infrastructure. The equipment would be leased for a five-year period at a monthly cost that will save the BWL $33,047,with savings realized in each of the five years. (See cost comparison.xls—attached). This is new equipment and is only available from the Unisys/EMC partnership. Used equipment is available and quotes were evaluated from two "third party" companies for similar used equipment. Although the price for used equipment was slightly lower, there were serious concerns about hidden costs, maintenance capabilities and technical support from these third party companies. Direct purchase of new equipment from Unisys/EMC is recommended. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Discussion: Commissioner Callen inquired about the operational advantages beyond the expected savings. General Manager Pandy responded that the operational advantages are derived by increasing the storage capacity by approximately 50%, and the system is backloaded and more reliable. Assistant General Manager Cook added that in addition to the performance issue, the economics is an added benefit. Action: Carried unanimously. esolution:#200.1-10' SURPLUS PROPERTY (along Pleasant Grove near Wise Road Conditioning Plant) RESOLVED, That the following parcel, located in the City of Lansing,be declared surplus and not required for Board of Water and Light Operations. Upon completion of a real estate appraisal, staff legal review and negotiation of the sale price of the parcel, the parcel is to be transferred to the City of Lansing. Board Minutes Page 128 October 23,2001 PROPERTY DESCRIPTION: Beginning at the intersection of the northwesterly sideline of Pleasant Grove Road (80 ft. wide) and the north line of the South 1/2 of the South 1/2 of the N.E. 1/4 of Section 6, T. 3 N., R. 2 W., City of Lansing, Ingham County,Michigan; thence westerly along said north line 930 ft.; thence Due South 365 ft.; thence Due East 75 ft., more or less, to the northwesterly sideline of Pleasant Grove Road (80 ft. wide); thence northeasterly along said road sideline 932 ft., more or less, to the Point of Beginning, containing 4 acres of land, more or less, and subject to any and all existing utility uses of the Lansing Board of Water and Light, including maintenance, replacement and upgrades of existing water mains and water lines and associated appurtenances, and subject to all other easements and restrictions of record. StayCommentaly: This 4 acre±parcel is located along the west side of Pleasant Grove Road and easterly of the Wise Road Water Conditioning Plant. The parcel is south of and contiguous to the City of Lansing's Davis Park. The City wishes to construct and operate a skateboard park, softball field,nature trails, and other recreational facilities on this property. The City of Lansing is currently obtaining a professional appraisal of the value of this property. Moved by Commissioner Creamer, seconded by Commissioner Royal, that the resolution be approved. Discussion: Commissioner Creamer requested an update on negotiations with the City with regard to (1) Pleasant Grove near the Wise Road Conditioning Plant and (2) the property known as Comfort Street(a.k.a. Northwest Well Field). General Manager Pandy reported that the parcel along Pleasant Grove adjoins the Benjamin Davis City Park. The City would like to acquire this property to enhance the recreational opportunities at the park. By approving the resolution, the BWL would show good faith to the City by indicating there is no utility need for the parcel. Once a real estate appraisal on the property is completed, negotiations on the price will begin. With regard to the Comfort Street property, Mr. Pandy reported that a decision on the transfer of this property to the Lansing Department of Parks and Recreation is pending. A tour requested by City Councilmembers and Commissioners is to be held. An amended resolution on Comfort Street is being offered as a late item on this agenda to clarify discussion regarding the harvesting of timber held at the joint meeting between the Board and Councilmembers on August 23, 2001. Action: Carried unanimously. esolution #200171.0- GRANTING OF EASEMENT RESOLVED, That the Board authorize the granting of an easement to Ameritech Michigan for the placement and operation of communications facilities, for a consideration of five thousand dollars ($5,000.00), subject to the approval of City Council as required under Article 2, Section Page 129 Board Meeting October 23,2001 5-203.3 of the Lansing City Charter. The Easement area is located on a portion of the north end of the BWL-owned Property (described below) located at 4800 Roscommon Drive: PROPERTY DESCRIPTION: The Property owned by the BWL is located at the southwest corner of the intersection of Roscommon and Woodbridge Drives in the City of Lansing, County of Eaton, State of Michigan and legally described as: A parcel deeded to the Lansing Board of Water and Light by warranty deed recorded in L.627, P.366 of Eaton County, Michigan deeds described as follows: Beginning at the Southwest conger of"Glenbume No. 4", L. 7, PP. 4-5 of Eaton County, Michigan plats; thence Northerly along the west line of Roscommon Drive 175.38 ft. to the south line of Woodbridge Drive; thence Westerly along the south line of Woodbridge Drive and its extension 100 ft.; thence southerly parallel to Roscommon Drive 175.38 ft.; thence Easterly 100 ft. to the Point of Beginning. EASEMENT DESCRIPTION: Beginning at the northeast corner of the property described above; thence west 100 ft.,more or less, along the north line of the property to the northwest corner of the property; thence south along the west line of the property 25 ft.; thence east 17 ft.; thence north 17 ft.; thence east 83 ft., more or less, to the east line of the property; thence north along said east line 8 ft. to the Point of Beginning. Staff Commentary: This easement has been requested by Ameritech Michigan to place and operate remote switching communications equipment. The equipment is designed to provide new digital services for the area and is part of an overall plan for Ameritech to upgrade telephone and data network facilities in the Lansing area. The BWL is not currently using nor has any foreseeable use of this portion of the Roscommon Drive property for utility purposes. Moved by Commissioner Christian, seconded by Commissioner Royal, that the resolution be approved. Action: Carried unanimously. esolution.r#2001.-10 COAL SUPPLY AGREEMENT WITH ARCH COAL SALES RESOLVED, That the Board enter into a Coal Supply Agreement(Agreement)with Arch Coal Sales for the supply of Western Powder River Basin (PRB) coal subject to approval as to form by BWL's Legal Counsel. The Agreement particulars are as follows: 1) The term shall be for two years commencing January 1, 2002 and terminating December 31, 2003. Board Minutes Page 130 October 23,2001 2) The annual quality to be supplied is approximately 1,200,000 tons. 3) The PRB coal will be supplied from Arch's Black Thunder mine with typical coal quality specifications as follows: Size 2"x 0" Moisture 27.30% Ash 5.10% Sulfur 0.35% Btu/lb 8,800 4) The price to be paid under this Agreement will be $9.00/NT for CY 2002 and a market realigned price to be determined for CY 3002. 5) The price for each year of the Agreement shall be held firm. Staff Commentary: BWL received five (5) viable bids for the supply of PRB coal with Arch Coal Sales submitting the best-evaluated bid. The other bidders who participated are as follows: Peabody Coal Company, Triton Coal Company, Enron NA and Aquila Energy Marketing. The pricing submitted by Arch Coal Sales, coupled with the renegotiated rail transportation agreements with the Union Pacific Railroad and the Canadian National Railroad will allow BWL to minimize the increase in the delivered cost of PRB coal in 2002 to 14.7%. Moved by Commissioner Royal, seconded by Commissioner Haggart, that the resolution be approved. Discussion: General Manager Pandy called on Steve Brennan, Manager of Results & Construction, and Ron Ishimoto, Manager of Fuel & Transportation Services, to present a power point update on two proposed coal contracts (pertaining to Resolutions 2001-10-9 and 2001-10-10). [Commissioner Creamer left the meeting at 6:30 p.m.] Mr. Ishimoto presented a history of the types of coal the BWL has burned since 1972 when Erickson Station came online. At that time BWL generating facilities were 100% on Ohio Basin coal with a sulfur content of 2% to 3%. In 1977-1978—through increased concerns over sulfur dioxide emissions—the BWL went from Ohio Basin coal to Central Appalachia coal (CAPP) at 12,500 to 13,000 Btu/lb with a sulfur content of 0.7% to 1%. This continued through the 1970's, 1980's and most of the 1990's. Then in 1997-1998, staff investigated ways to reduce cost per kilowatt-hour, which pointed to coal from the Powder River Basin (PRB) in Wyoming. An overview of delivered coal supply for 2001 was presented for Eckert, Moores Park and Erickson Stations. The total coal burn expected for year 2001 is 1,650,000 tons, which is the most amount of tons burned in one year in the history of the BWL. Mr. Ishimoto reported on 2001 contract activities for coal and rail services and noted that three rail transportation agreements are pending. He gave an overview of(1) published U. S. prices for Powder River Basin coal and Central Appalachia coal for years 2000 and 2001, (2) U. S. coal production and consumption from 1998-2000, and (3) Electric Utility coal stocks for 1999-2000. Mr. Ishimoto stated that staff is in the process of(1) reviewing current coal and transportation procurement practices, (2) Page 131 Board Meeting October 23,2001 developing innovative options, such as exploring market opportunities, alternative coal supply regions and integrating existing agreements, and (3) moving in the direction of timely implementation of an integrated, market driven coal and transportation procurement strategy. Comparisons of delivered coal prices per Btu for the PRB and CAPP coal markets vs. using BWL transportation indicate substantial savings to the BWL for 200land 2002. Action: Following discussion, the resolution was adopted unanimously. esolution#2001-10-I0' COAL SUPPLY AGREEMENT WITH OXBOW CARBON AND MINERAL, INC. RESOLVED, That the Board enter into a Coal Supply Agreement (Agreement) with Oxbow Carbon and Mineral, Inc., for the supply of western bituminous (Uinta Basis) coal from Colorado subject to approval as to form by BWL's Legal Counsel. The Agreement particulars are as follows: 1) The term shall be for two years commencing January 1, 2002 and terminating December 31, 2003. 2) The minimum annual quantity to be supplied is 425,000 tons. 3) The Colorado coal will be supplied from Oxbow's Bowie#2 mine with typical coal quality specifications as follows: Size 2"x 0" Moisture 9.00% Ash 10.00% Sulfur 0.3 8% Btu/lb 12,000 4) The price to be paid under this Agreement will be $22.00/NT for CY 2002 and $23.00/NT for CY 2003. 5) The price for each year of the Agreement shall be held firm. 6) The Agreement is contingent on the ability of Erickson Station to successfully burning the coal. Staff Commentary: BWL received six (6) viable bids for the supply of Western bituminous coal with Oxbow submitting the lowest and best-evaluated bid. The other bidders who participated are as follows: RAG Inc., Luscar (Canada), C.W. Mining,Alley Cassetty Coal, and River Trading Co. The pricing submitted by Oxbow Carbon and Mineral coupled with the renegotiated rail transportation agreements with the Union Pacific Railroad and the Canadian National Railroad will allow BWL to reduce the delivered price for coal in CY 2002 to its Erickson Station by 3.6%. Switching coal supply regions in 2002, from Central Appalachia to Colorado, provides BWL with the opportunity to reduce its delivered price of coal to the Erickson Station. If BWL Board Minutes Page 132 October 23,2001 were to remain in the Central Appalachia coal supply region, the estimated delivered price for coal in 2002 would have increased by 20.2%. Moved by Commissioner Royal, seconded by Commissioner Haggart, that the resolution be approved. Action: Carried unanimously. esotution was'T.4BLE USE OF SPECIAL COUNSEL RESOLVED, That the General Manager be authorized to retain Rhonda Ross, Esq., and the firm of Warner,Norcross and Judd, at a rate of$240 per hour, as special counsel to draft a rules package to be presented to the Air Quality Division of the Michigan Department of Environmental Quality. The rule package will address start-up, shutdown and malfunction (SSM) issues associated with the operation of electric generating units. The name of Ms. Ross and her firm will be submitted to the City Attorney and, upon his recommendation, to City Council for approval. Use of Special Counsel is subject to the recommendation of the Utility Staff Attorney and the approval of the General Manager. Staff Commentary: This firm and lawyer are being jointly retained and paid for on an equal basis by the BWL, Detroit Edison and Consumers Energy. The package of rules would deal with the exemption of excess emissions during periods of unit start-up, shutdown and unanticipated unit malfunction. With the recent (August 20, 2001) rescission of the existing Michigan Rules R336.1913 and R336.1914 covering SSM, the BWL would be greatly impacted without replacement rules. Rhonda Ross, the attorney that will be drafting the rules package, has specific experience dealing with air quality rules and regulations. Ms. Ross has been Director of the Air Quality Management Division of the Wayne County Department of the Environment and is experienced working with both state and federal environmental statutes. It is expected that the total cost for the project would be near$30,000 to be divided equally between the BWL, Detroit Edison and Consumers Energy. Included in the cost would be a study of other state rules addressing SSM, and negotiations with the State of Michigan directly concerned with the acceptance of the proposed rules package. Ms. Ross bills at an hourly rate of $240. Moved by Commissioner Royal, seconded by Commissioner Christian, that the resolution be approved. Discussion: Commissioner Duncan requested clarification as to why the BWL is paying to draft rules for the State to adopt. She asked whether there is reason to believe that the Department of Environment Quality is receptive to utility companies drafting the rules. Staff Attorney Wilhite responded that special counsel would be drafting the rules for the Michigan Department of Environmental Quality (DEQ) to expedite the review process at the state level. DEQ suggested special counsel Rhonda Ross to draft the rules because of her expertise in air quality rules and regulations. The cost is being equally shared with Detroit Page 133 Board Meeting October 23,2001 Edison and Consumers Energy. The rules would benefit the BWL if adopted. General Manager Pandy interjected that the rules would be standard for the large utilities and the BWL; consequently, the BWL as a smaller utility would have a level playing field with regard to meeting the air quality standards. Commissioner Haggart inquired if the BWL will have input on the drafting of the rules. Staff Attorney Wilhite responded that one of the reasons the BWL is agreeing to participate with Detroit Edison and Consumers Energy is for the opportunity to make input. Commissioner Royal stated that from her legal experience in this area, often times small utility companies do not have an opportunity to help draft rules, and that could be detrimental. Commissioner Wonch asked about the possibility of a conflict of interest on the part of special counsel Rhonda Ross. Staff Attorney Wilhite responded that he would not be able to answer that question. He stated that presumably all three utilities would want the same outcome, but noted that this is a technical issue that would be best answered by the BWL environmental group. Commissioner Royal stated that she would prefer to have a statement from Ms. Ross as to what she would do in the event of a conflict of interest to assure there is adequate protection to the BWL. Commissioner Royal indicated that she would like to have that question answered before she could commit to the resolution. She asked if there is an immediate need for an approved resolution. Staff Attorney Wilhite stated that he could not respond to its urgency but that it would be helpful if the resolution could be passed at this time. Moved by Commissioner Royal, seconded by Commissioner Christian to TABLE the motion regarding the use of special counsel until the next meeting. Action: The motion to table the resolution was carried unanimously. es.olution.#2001-10-1I INTERGOVERNMENTAL AGREEMENTS FOR RADIO FREQUENCIES RESOLVED, That the Board of Water and Light enter into Intergovernmental Agreements with the City of Lansing Police Department and the Lansing School District for the development of a community radio system consisting of ten (10) 800 MHZ radio frequencies and appurtenant fixed-end equipment. Staff Commentary: The Lansing School District(LSD) and Police Department(LPD) each possess a license for five (5) 800 MHZ public safety radio frequency channels,which would be transferred to BWL for operation and maintenance of the Community System. The trunked radio system would have a capacity of 1200-1500 radios and would serve the present and future requirements of LSD, LPD and BWL. In consideration of the transfer of these frequencies, BWL would purchase 210 Motorola radios for LSD and 31 radios for LPD. Each entity would Board Minutes Page 134 October 23,2001 pay monthly costs per radio for operation and maintenance of the system (current cost is $8.25/radio per month). Moved by Commissioner Christian, seconded by Commissioner Royal, that the resolution be approved. Action: Carried unanimously. esolution #2001404 BOARD MEETING SCHEDULE RESOLVED, That pursuant to the provisions in Article II, Section 2.1 of the Board's Rules of Administrative Procedure, the Board of Commissioners will meet on the following dates for the calendar year of 2002 unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2002 Tuesday January 22 Tuesday April 23 Tuesday July 23 Tuesday October 22 Meetings will be held in the Board Room located in the Board of Water and Light Customer Service Center, 1232 Haco Drive, Lansing, and begin at 5:30 p.m. RESOLVED FURTHER, That a notice of the meeting schedule be published in the Lansing State Journal the week of January 5, 2002. Moved by Commissioner Christian, seconded by Commissioner Haggart that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS Nominating Committee Chair Christian announced that votes cast for nominations to the Executive Committee resulted in a three-way tie. He requested one more vote to break the tie. Ballots were handed out and the Chair announced the results. Page 135 Board Meeting October 23,2001 esolutim#200140-13 EXECUTIVE COMMITTEE ALTERNATE Commissioner Duncan was elected to serve as the Alternate member to the Executive Committee for fiscal year 2001-02. Action: Carried unanimously. COMFORT STREET PROPERTY—Northwest Well Field Commissioner Duncan noted that at the last regular meeting, the Board adopted Resolution #2001-7-13 to authorize the conveyance of the property known as the Comfort Street property to the City of Lansing. The conveyance was silent on the City's use of the land,but the intent was for parkland. Subsequent to the BWL's adoption of the resolution, two things happened: (1) the General Manager brought to the Board's attention the fact that there were potentially valuable trees on the property and (2) at the joint Commissioner/City Council meeting held August 23ra, there was a lack of clarity as to whether or not the City wanted the property. There was also extensive discussion over neighborhood concerns about cutting down the trees. At that meeting it was agreed a site visit to Comfort Street would be held, which has not yet taken place. Commissioner Duncan indicated that based on discussion with the City Council, it appears that Resolution 2001-7-13 might be premature. She further indicated that if the Board proceeds with the conveyance, the resolution needs to be amended to specifically say that proceeds from harvesting of timber will be shared with the BWL. Commissioner Callen stated it was his understanding the City needed the property to offset property they had relinquished. General Manager Pandy interjected that City property along Grand River Avenue and Turner Street was relinquished for the Ferguson condominium development in Old Town. The City has indicated similar property is needed as a replacement for a riverwalk. esolution #2001-10-1 MOTION TO RECONSIDER VOTE Moved by Commissioner Duncan, seconded by Commissioner Christian to reconsider the vote on the conveyance of property known as the Comfort Street property(Resolution#2001-7-13) to the City of Lansing. Carried unanimously. The Chair called for a motion to reconsider the following resolution: eso..lution.#2001-7-1 Moved by Commissioner Wonch, seconded by Commissioner Duncan to reconsider original Resolution#2001-7-3 known as COMFORT STREET PROPERTY—Northwest Well Field RESOLVED, That the 2-2-.9 31.3 acres+ acres of land at Sunset Street(Comfort Street Property),which is under the jurisdiction of the BWL but no longer required in its entirety for BWL purposes,be transferred to the Department of Parks and Recreation or such other City Board Minutes Page 136 October 23,2001 department as the Mayor may determine appropriate, in consideration of the payment of$39,350 to the BWL and subject to the City assuming all environmental liability associated with the parcels, and indemnifying the BWL against the same. RESOLVED FURTHER that this transfer shall be subject to a"use agreement" for BWL purposes and any easements or restrictions of record. Failed by the following vote: Aye: None Nay: Commissioners Callen, Christian, Duncan, Haggart, Royal, Wonch Absent: Commissioner Creamer RESOLUTIONS None GENERAL MANAGER'S REMARKS General Manager Pandy reported on the Erickson Station cold reheat failure that occurred on October 17th. This incident forced Erickson Station off-line when a 24-inch diameter steam line between the turbine and boiler failed. The line failure occurred as the plant was being brought back on line following a brief outage earlier that day. One operator reported a sore ankle and was treated and released. Major damage has been suffered by the plant resulting in a multi-million dollar loss. He called on Production Director Richard Peffley to provide an overview on the abatement, inspection, repair and reinsulation program to restore the cold reheat line. Mr. Peffley displayed the Erickson repair schedule. The first project in process involves the cooling towers destroyed in the September 9th stone, which is targeted for completion by mid- January, 2002 at an estimated cost of$4 million. That failure occurred when the BWL's deductible was still at $250,000. In addition, a$100,000 cooling tower upgrade will not be covered by insurance. The upgrade is necessary to address future needs from increased traffic due to the new General Motors facility. The second project involves the repair of the cold reheat line scheduled for completion by January 31, 2002 at an estimated cost of$3 million. The third project involves the turbine overhaul, targeted for completion by March 31, 2002 at an estimated cost of$2 million. The turbine was scheduled for inspection next fall, however, the schedule was moved up due to the extensive damage caused by the cold reheat failure. A portion of the cost for the turbine rebuild was included in the capital budget. The$3 million (cold reheat line) and $2 million (ha-bine overhaul) damages totaling $5 million will be a second claim against the insurance company, with an exposure of$1 million to the BWL. Mr. Peffley noted that the $3 million cost is assuming the cold reheat line can be repaired; otherwise the expense to replace the line could be $5 million. He further reported that the line failure occurred as the plant was being brought back on line following a brief outage earlier in the day. The line failure was due to an operations error. A leaky valve problem allowed water to enter the line, and a misinterpretation Page 137 Board Meeting October 23,2001 of the readings by the operating staff and the failure to drain the water subsequently caused the cold reheat failure. BWL Bulk Power and Resource staff has been investigating replacement bulk power needs. Assistant General Manager Bill Cook noted that the BWL might take a revenue hit on wholesale power. Presently, the BWL is working to mitigate any potential negative impact. Commissioner Haggart inquired if layoffs are planned while the Erickson Station is off-line. Mr. Peffley responded that at this time, layoffs are not anticipated. The workforce at Erickson is at approximately 30 out of 320 production employees. The incident continues to be under investigation to determine how the operation error happened. Extensive training for the operations group will be held to ensure it does not happen again. The maintenance group at the plant will be busy with turbine#3 at Eckert Station to step up the process of bringing the Eckert unit back on line, ahead of the previous timeline of December lst. General Manager Pandy noted that seven notices of possible disciplinary action have been issued to the employees who were on duty that day--three are non-bargaining unit and four are bargaining unit employees. He noted that an investigation is ongoing and that there may be employees who suffer disciplinary time off—not a layoff—but time off without pay if they were negligent in their duties. General Manager Pandy stated that a revised mid-year budget will be brought to the Board in January as a result of consequences from the Erickson repair, coal contracts, and other factors affecting sales due to the weakening economy. At the request of Commissioner Callen, an interim report will be prepared by staff for presentation to the Board by the end of November. Security Measures Heightened. General Manager Pandy reported that since the September 11 terrorist attacks, the BWL has been in a heightened state of security. Effective October 1, employees have started wearing pictured identification badges and essentially all production facilities have gone to a lock-down state. Security Administrator Jerry Mills presented an overview of the current security status of BWL water production facilities. Mr. Mills reported that the BWL remains vigilant and prepared for security encroachments. He reported that Environmental Protection Agency(EPA) Administrator Christine Whitman held a news conference on October 18 to talk about the fitness of the nation's water supply and the steps the industry is taking to protect the water supply from attack. Ms. Whitman announced that the EPA believes the possibility of a successful contamination of the nation's water system is small. It would take enormous quantities of harmful chemical agents to successfully compromise a water system. She also stated that water is not a good delivery vehicle for Anthrax. Systems already in place for treating drinking water before it comes out of the tap will, in many cases, remove the immediate threat to public health. Mr. Mills will be reporting on the security status of BWL electric facilities at the next meeting. Corporate Diversity. General Manager Pandy reported that directors and managers attended a session on diversity as a business advantage, conducted by Reginald Williams of Procurement Resources, Inc. The premise of this initiative as a business strategy is that the organization needs to be sensitive to the diversity of customers, employees and suppliers. The organization needs to Board Minutes Page 138 October 23,2001 demonstrate leadership to drive staff initiatives that will support diversity in hiring, promotion practices and developing diverse suppliers in the procurement process. Mr. Pandy stated that management plans to develop a policy statement on diversity for Board review and consideration. A report will be presented to the Board in the near future on BWL organizational measures and strategy to ensure diversity in BWL operations. REMARKS BY COMMISSIONERS Commissioner Christian suggested reducing the number of meetings held on the same day of the regular Board meeting to no more than one meeting. He urged staff and the Commissioners to make an effort to limit the number of meetings to allow sufficient time to study the materials provided. Chairperson Callen supported Commissioner Christian's remarks concerning stacking meetings all in one day. He noted that holding Board meetings on a quarterly basis should make it more convenient to schedule special meetings and committee meetings on different days. Commissioner Haggart inquired about the status of the Ottawa Power Station redevelopment project and asked how much money was invested to prepare the structure for development. General Manager Pandy responded that there has been no activity since Convergency Centers advised the Board on June 26t1' that they are not going to proceed with their proposal due to obstacles they are facing in the technology sector. Mr. Pandy indicated he has had discussions with the City on other possible options. Over$5 million has been spent to decommission the Ottawa Power Station involving equipment removal and salvage. Commissioner Royal asked if it would be possible to determine how much money has been spent to date on the Convergency proposal taking into consideration personnel time and other expenditures. Chief Financial Officer Tousley responded that he would attempt to gather information with respect to engineering costs, although overhead costs for staff time might be more difficult to collect. A report on this issue will be sent to the Commissioners. Commissioner Royal emphasized that even if staff time were estimated, it would be good information to have. Chairperson Callen asked whether the Delayed Payment Charge of 5%required by the BWL is both reasonable and comparable in terms of the length and period allowed for a ratepayer. General Manager Pandy responded that both Consumers Energy and Detroit Edison use 2%of the unpaid balance for their Delayed Payment Charge (DPC). Mr. Pandy stated that a memo prepared by Chief Financial Officer Dana Tousley with facts on this issue would be sent to the Commissioners. Mr. Tousley reported that the 5%DPC barely covers the BWL's costs on an annual basis to collect from customers who do not pay on time. For the 12 months ended September 30, 2001, the BWL collected$1.6 in delayed payment charges. BWL collection costs for the same period were approximately$1.5 million. He indicated that a ruling from a court Page 139 Board Meeting October 23,2001 case stated the charges must reasonably approximate the additional costs charged for the DPC. Mr. Tousley further reported that the collection cycle is structured so that no one should go beyond sixty days or be charged a DPC more than twice. Approximately 90% of our customers pay their bills on time, 9.5% are paid late and incur the DPC, and 0.5% is written off as uncollectible. Commissioner Callen inquired about the status of the letter sent by Bruce McCrea, President of the Pepper Tree Condominium Association requesting the removal of storm-damaged trees overhanging the east boundary fence of the BWL's Lake Lansing Road disposal site. General Manager Pandy responded that a couple attempts have been made to schedule a meeting with representatives of Pepper Tree Condominium Association, but they cancelled due to schedule conflicts. Staff intends to follow-up with the Association. EXCUSED ABSENCE None. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. BWL employee Tracy Tolbert of Customer Service told the Board that comments she would be making are not intended to be negative. She stated that she has been employed by BWL since December 23, 1980. She has enjoyed many of the BWL's benefits such as the Home Ownership Program for Employees, the tuition reimbursement program as well as other BWL perks. Ms. Tolbert has held different positions at the BWL and considers Customer Service to be the voice of the BWL because it is usually the first point of contact for the customer when requesting service or paying a bill. She commented that when the Share the Success (STS) program was last restructured, bargaining employees did not have the opportunity to get the full benefits of the program as it was set up originally. She expressed her opinion that "if it had remained as it was, the way it was set prior to the change, everybody would have benefited and been pleased with the way the STS program was originally developed." BWL employee Joseph Davis thanked General Manager Pandy for the numbers he presented relative to the customer choice program relative to the total cost for Tetra Tech inspections. Mr. Davis stated that he is not opposed to contractors, but is concerned with what customer choice will involve in the future. With respect to Share the Success, he commented that as president of IBEW Local 352 he cannot speak to open grievances, but stated it is his hope differences between IBEW members and management could be solved at the first- line or manager level. Board Minutes Page 140 October 23,2001 ADJOURNMENT On motion by Commissioner Royal, and seconded by Commissioner Christian, the meeting adjourned by unanimous consent at 7:55 p.m. /s/Mary E. Sova, Secretary Filed with Lansing City Clerk October 30, 2001. 16:40 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91602 PAGE: 1/25 BOARD OF WATER AND LIGHT PO Boa 13007, Lansing,MI 48901 . P WATER&LIGHT FAXDate: Tuesday, Oct 30, 2001 4 o Number of pages including 25 cover sheet: To: City Clerk's Office From: Mary Sova Phone: Phone: Fag: 377-0068 Fax phone: (517)702-6203 CC: REMARKS: ❑ Urgent ❑ For your review ❑ Reply ASAP ❑ Please comment Attached for filing with your office is a "faxed" set of minutes of the regular Board of Water and Light Commissioners'meeting, held October 23, 2001. An original was mailed to your office today. --, '� r 16:40 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 2/25 117 Preliminary Minutes—Subject to Board Approi,al MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, October 23, 2001 The Board of Commissioners met in regular session at 5:30 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman Ronald Callen called the meeting to order. Present: Commissioners Ronald C. Callen, Charles M. Creamer, Ernest J. Christian, Nancy W. Duncan, Tim Haggart, Diane R. Royal, and Nancy A. Wonch- 7 (One Commissioner appointment pending.) Absent: None. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Christian, seconded by Commissioner Royal, to approve the minutes of regular session held July 24, 2001 and special session held October 8, 2001. Carved unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. BWL employee, Joseph Davis, President of Local Union 352, IBEW, spoke on two issues. The first matter concerned the union's grievance against the BWL's Share the Success program, which is set for arbitration on November 12, 2001. He stated that lie would hope management and the union could reach settlement prior to the arbitration date. The second issue pertained to the customer choice program for water service installations. He voiced his objection to contracting inspectors to check BWL water service installations in the City of Lansing. He invited the Commissioners to meet with union leadership to discuss this issue in greater depth and to take a closer look at the customer choice program. r-� -`-� �� � � 1 16:58 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 25/25 Board Minutes Page 140 October 23,2001 ADJOURNMENT On motion by Commissioner Royal, and seconded by Commissioner Cluistian, the meeting adjourned by unanimous consent at 7:55 p.m. /sl Adary E. Sova, Secretary Filed with Lansing City Clerk- October 30, 2001. 16:57 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91e02 PAGE: 24/25 Page 139 :d Meeting Octooer 23,2001 case stated the charges must reasonably approximate the additional costs charged for the DPC. Mr. Tousley further reported that the collection cycle is structured so that no one should go beyond sixty days or be charged a DPC more than twice. Approximately 90% of our customers pay their bills on time, 9.5% are paid late and incur the DPC, and 0.5%is written off as uncollectible. Commissioner Callen inquired about the status of the letter sent by Bruce McCrea, President of the Pepper Tree Condominium Association requesting the removal of storm-damaged trees overhanging the east boundary fence of the BWL's Lake Lansing Road disposal site. General Manager Pandy responded that a couple attempts have been made to schedule a meeting with representatives of Pepper Tree Condomiiuum Association, but they cancelled due to schedule conflicts. Staff intends to follow-up with the Association. EXCUSED ABSENCE None. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. BWL employee Tracy Tolbert of Customer Service told the Board that comments she would be making are not intended to be negative. She stated that she has been employed by BWL since December 23, 1980. She has enjoyed many of the BWL's benefits such as the Home Ownership Program for Employees, the tuition reimbursement program as well as other BWL perks. Ms. Tolbert has held different positions at the BWL and considers Customer Service to be the voice of the BWL because it is usually the first point of contact for the customer when requesting service or paying a bill. She commented that when the Share the Success (STS) program was last restructured, bargaining employees did not have the opportunity to get the full benefits of the program as it was set up originally. She expressed her opinion that"if it had remained as it was, the way it was set prior to the change, everybody would have benefited and been pleased with the way the STS program was originally developed." BWL employee Joseph Davis thanked General Manager Pandy for the numbers he presented relative to the customer choice program relative to the total cost for Tetra Tech inspections. Mr. Davis stated that he is not opposed to contractors, but is concerned with what customer choice will involve in the future. With respect to Share the Success, he commented that as president of IBEW Local 352 lie cannot speak to open grievances, but stated it is his hope differences between IBEW members and management could be solved at the first- line or manager level. ,r-�� � `} 16:56 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 23/25 Board Minutes Page 138 October 23,2001 demonstrate leadership to drive staff initiatives that will support diversity in hiring, promotion practices and developing diverse suppliers in the procurement process. Mr. Pandy stated that management plans to develop a policy statement on diversity for Board review and consideration. A report will be presented to the Board in the near future on BWL organizational measures and strategy to ensure diversity in BWL operations. REMARKS BY COMMISSIONERS Commissioner Christian suggested reducing the number of meetings held on the same day of the regular Board meeting to no more than one meeting. He urged staff and the Commissioners to make an effort to limit the number of meetings to allow sufficient time to study the materials provided. Chairperson Callen supported Commissioner Christian's remarks concerning stacking meetings all in one day. He noted that holding Board meetings on a quarterly basis should make it more convenient to schedule special meetings and committee meetings on different days. Commissioner Haggart inquired about the status of the Ottawa Power Station redevelopment project and asked how much money was invested to prepare the structure for development. General Manager Pandy responded that there has been no activity since Convergency Centers advised the Board on June 26t`that they are not going to proceed with their proposal due to obstacles they are facing in the technology sector. Mr. Pandy indicated he has had discussions with the City on other possible options. Over $5 million has been spent to decommission the Ottawa Power Station involving equipment removal and salvage. Commissioner Royal asked if it would be possible to determine how much money has been spent to date on the Convergency proposal taking into consideration personnel time and other expenditures. Chief Financial Officer Tousley responded that lie would attempt to gather information with respect to engineering costs, although overhead costs for staff time might be more difficult to collect. A report on this issue will be sent to the Commissioners. Commissioner Royal emphasized that even if staff tune were estimated, it would be good information to have. Chairperson Callen asked whether the Delayed Payment Charge of 5% required by the BWL is both reasonable and comparable in terms of the length and period allowed for a ratepayer. General Manager Pandy responded that both Consumers Energy and Detroit Edison use 2% of the unpaid balance for their Delayed Payment Charge (DPC). Mr. Pandy stated that a memo prepared by Chief Financial Officer Dana Tousley with facts on this issue would be sent to the Commissioners. Mr. Tousley reported that the 5% DPC barely covers the BWL's costs on an annual basis to collect from customers who do not pay on time. For the 12 months ended September 30, 2001, the BWL collected $1.6 in delayed payment charges. BWL collection costs for the same period were approximately S1.5 million. He uidicated that a ruling from a court . r, �, _, �.1 16:56 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 22/25 Page g :d 137 Meeting Octooer 23,2001 of the readings by the operating staff and the failure to drain the water subsequently caused the cold reheat failure. BWL Bulk Power and Resource staff has been investigating replacement bulk power needs. Assistant General Manager Bill Cook noted that the BWL might take a revenue hit on wholesale power. Presently, the BWL is working to mitigate any potential negative impact. Commissioner Haggart inquired if layoffs are planned while the Erickson Station is off-line. Mr. Peffley responded that at this time, layoffs are not anticipated. The workforce at Erickson is at approximately 30 out of 320 production employees. The incident continues to be under investigation to determine how the operation error happened. Extensive training for the operations group will be held to ensure it does not happen again. The maintenance group at the plant will be busy with turbine #3 at Eckert Station to step up the process of bringing the Eckert unit back on line, ahead of the previous timeline of December 1 General Manager Pandy noted that seven notices of possible disciplinary action have been issued to the employees who were on duty that day--three are non-bargaining unit and four are bargaining unit employees. He noted that an investigation is ongoing and that there may be employees who suffer disciplinary time off—not a layoff—but time off without pay if they were negligent in their duties. General Manager Pandy stated that a revised mid-year budget will be brought to the Board in January as a result of consequences from the Erickson repair, coal contracts, and other factors affecting sales due to the weakening economy. At the request of Commissioner Callen, an interim report will be prepared by staff for presentation to the Board by the end of November. Security Measures Heightened. General Manager Pandy reported that since the September 11 terrorist attacks, the BWL has been in a heightened state of security. Effective October 1, employees have started wearing pictured identification badges and essentially all production facilities have gone to a lock-down state. Security Administrator Jerry Mills presented an overview of the current security status of BWL water production facilities. Mr. Mills reported that the BWL remains vigilant and prepared for security encroachments. He reported that Environmental Protection Agency(EPA)Administrator Christine Whitman held a news conference on October 18 to talk about the fitness of the nation's water supply and the steps the industry is taking to protect the water supply from attack. Ms. Whitman announced that the EPA believes the possibility of a successful contamination of the nation's water system is small. It would take enormous quantities of harmful chemical agents to successfully compromise a water system. She also stated that water is not a good delivery vehicle for Anthrax. Systems already in place for treating drinking water before it comes out of the tap will, in many cases, remove the immediate threat to public health. Mr. Mills will be reporting on the security status of BWL electric facilities at the next meeting. Corporate Diversity. General Manager Pandy reported that directors and managers attended a session on diversity as a business advantage, conducted by Reginald Williams of Procurement Resources, Inc. The premise of this initiative as a business strategy is that the organization needs to be sensitive to the diversity of customers, employees and suppliers. The organization needs to �l� �',` C 16:55 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 21/25 Board Minutes Page 136 October 23,2001 department as the Mayor may determine appropriate, in consideration of the payment of$39,350 to the BWL and subject to the City assuming all environmental liability associated with the parcels, and indemnifying the BWL against the same. RESOLVED FURTHER that this transfer shall be subject to a"use agreement"for BWL purposes and any easements or restrictions of record. Failed by the following vote: Aye: None Nay: Commissioners Callen, Christian, Duncan, Haggart, Royal, Wonch Absent: Commissioner Creamer RESOLUTIONS None GENERAL MANAGER'S REMARKS General Manager Pandy reported on the Erickson Station cold reheat failure that occurred on October 17"'. This incident forced Erickson Station off-line when a 24-inch diameter steam line between the turbine and boiler failed. The line failure occurred as the plant was being brought back on line following a brief outage earlier that day. One operator reported a sore ankle and was treated and released. Major damage has been suffered by the plant resulting in a multi-million dollar loss. He called on Production Director Richard Peffley to provide an overview on the abatement, uispection, repair and reinsulation program to restore the cold reheat line. Mr. Peffley displayed the Erickson repair schedule. The first project in process involves the cooling towers destroyed in the September 9"' storm, which is targeted for completion by mid- January, 2002 at an estimated cost of$4 million. That failure occurred when the BWL's deductible was still at$250,000. In addition, a $100,000 cooling tower upgrade will not be covered by insurance. The upgrade is necessary to address future needs from increased traffic due to the new General Motors facility. The second project involves the repair of the cold reheat line scheduled for completion by January 31, 2002 at an estimated cost of$3 million. The third project involves the turbine overhaul, targeted for completion by March 31, 2002 at an estimated cost of$2 million. The turbine was scheduled for inspection next fall, however, the schedule was moved up due to the extensive damage caused by the cold reheat failure. A portion of the cost for the turbine rebuild was included in the capital budget. The $3 million (cold reheat line) and $2 million(turbine overhaul) damages totaling $5 million will be a second claim against the insurance company, with an exposure of$1 million to the BWL. Mr. Peffley noted that the $3 million cost is assuming the cold reheat line can be repaired; otherwise the expense to replace the line could be $5 million. He further reported that the line failure occurred as the plant was being brought back on line following a brief outage earlier in the day. The line failure was due to an operations error. A leaky valve problem allowed water to enter the line, and a misinterpretation 16:54 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91822 PAGE: 20/25 Page 135 rd Meeting Ociober 23,2001 esolutton# 2001 :10-13 EXECUTIVE COMMITTEE ALTERNATE Commissioner Duncan was elected to serve as the Alternate member to the Executive Committee for fiscal year 2001-02. Action: Carried unanimously. COMFORT STREET PROPERTY—Northwest Well Field Commissioner Duncan noted that at the last regular meeting, the Board adopted Resolution 42001-7-13 to authorize the conveyance of the property known as the Comfort Street property to the City of Lansing. The conveyance was silent on the City's use of the land, but the intent was for parkland. Subsequent to the BWL's adoption of the resolution, two things happened: (1)the General Manager brought to the Board's attention the fact that there were potentially valuable trees on the property and (2) at the joint Commissioner/City Council meeting held August 23rd, there was a lack of clarity as to whether or not the City wanted the property. There was also extensive discussion over neighborhood concerns about cutting down the trees. At that meeting it was agreed a site visit to Comfort Street would be held, which has not yet taken place. Commissioner Duncan indicated that based on discussion with the City Council, it appears that Resolution 2001-7-13 might be premature. She further indicated that if the Board proceeds with the conveyance, the resolution needs to be amended to specifically say that proceeds from harvesting of timber will be shared with the BWL. Commissioner Callen stated it was his understanding the City needed the property to offset property they had relinquished. General Manager Pandy interjected that City property along Grand River Avenue and Turner Street was relinquished for the Ferguson condominium development in Old Town. The City has indicated similar property is needed as a replacement for a riverwalk. esolution.# 2001. 10 1.. .... . . . . .. ... MOTION TO RECONSIDER VOTE Moved by Commissioner Duncan, seconded by Commissioner Christian to reconsider the vote on the conveyance of property known as the Comfort Street property(Resolution#2001-7-13)to the City of Lansing. Carried unanimously. The Chair called for a motion to reconsider the following resolution: esolutio�z# 2001-7-.1 Moved by Commissioner Wonch, seconded by Commissioner Duncan to reconsider original Resolution#2001-7-3 known as COMFORT STREET PROPERTY—Northwest Well Field RESOLVED, That the 2-28 31.3 acres+ acres of land at Sunset Street(Comfort Street Property), which is under the jurisdiction of the BWL but no longer required in its entirety for BWL purposes, be transferred to the Department of Parks and Recreation or such other City 16:53 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 19/25 Board Minutes Page 134 October 23,2001 pay monthly costs per radio for operation and maintenance of the system (current cost is $8.25/radio per month). Moved by Commissioner Christian, seconded by Commissioner Royal, that the resolution be approved. Action: Carried unanimously. esoli tion#:2001 10 1° BOARD MEETING SCHEDULE RESOLVED, That pursuant to the provisions in Article II, Section 2.1 of the Board's Rules of Administrative Procedure, the Board of Commissioners will meet on the following dates for the calendar year of 2002 unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2002 Tuesday January 22 Tuesday April 23 Tuesday July 23 Tuesday October 22 Meetings will be held in the Board Room located in the Board of Water and Light Customer Service Center, 1232 Haco Drive, Lansing, and begin at 5:30 p.m. RESOLVED FURTHER, That a notice of the meeting schedule be published in the Lansing State Journal the week of January 5, 2002. Moved by Commissioner Christian, seconded by Commissioner Haggart that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS Nominating Committee Chair Christian announced that votes cast for nominations to the Executive Committee resulted in a three-way tie. He requested one more vote to break the tie. Ballots were handed out and the Chair announced the results. 16:53 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91e32 PAGE: 18/25 Page 133 rd Meeting OctoOer 23,2001 Edison and Consumers Energy. The rules would benefit the BWL if adopted. General Manager Pandy interjected that the rules would be standard for the large utilities and the BWL; consequently, the BWL as a smaller utility would have a level playing field with regard to meeting the air quality standards. Commissioner Haggart inquired if the BWL will have input on the drafting of the rules. Staff Attorney Wilhite responded that one of the reasons the BWL is agreeing to participate with Detroit Edison and Consumers Energy is for the opportunity to make input. Commissioner Royal stated that from her legal experience in this area, often times small utility companies do not have an opportunity to help draft rules, and that could be detrimental. Commissioner Wonch asked about the possibility of a conflict of interest on the part of special counsel Rhonda Ross. Staff Attorney Wilhite responded that he would not be able to answer that question. He stated that presumably all three utilities would want the same outcome, but noted that this is a technical issue that would be best answered by the BWL environmental group. Commissioner Royal stated that she would prefer to have a statement from Ms. Ross as to what she would do in the event of a conflict of interest to assure there is adequate protection to the BWL. Commissioner Royal indicated that she would like to have that question answered before she could commit to the resolution. She asked if there is an immediate need for an approved resolution. Staff Attorney Wilhite stated that he could not respond to its urgency but that it would be helpful if the resolution could be passed at this time. Moved by Commissioner Royal, seconded by Commissioner Christian to TABLE the motion regarding the use of special counsel until the next meeting. Action: The motion to table the resolution was carried unanimously. esoliitian#2001-1041 INTERGOVERNMENTAL AGREEMENTS FOR RADIO FREQUENCIES RESOLVED, That the Board of Water and Light enter into Intergovernmental Agreements with the City of Lansing Police Department and the Lansing School District for the development of a community radio system consisting often (10) 800 MHZ radio frequencies and appurtenant fixed-end equipment. Staf'Commentar : The Lansing School District(LSD) and Police Department(LPD) each possess a license for five (5) 800 MHZ public safety radio frequency channels, which would be transferred to BWL for operation and maintenance of the Community System. The trunked radio system would have a capacity of 1200-1500 radios and would serve the present and future requirements of LSD, LPD and BWL. In consideration of the transfer of these frequencies, BWL would purchase 210 Motorola radios for LSD and 31 radios for LPD. Each entity would 16:52 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 17/25 Board Minutes Page 132 October 23,2001 were to remain in the Central Appalachia coal supply region, the estimated delivered price for coal in 2002 would have increased by 20.2%. Moved by Commissioner Royal, seconded by Commissioner Haggart, that the resolution be approved. Action: Carried unanimously. esolufiOn s TABLE' USE OF SPECI.AL COUNSEL RESOLVED, That the General Manager be authorized to retain Rhonda Ross, Esq., and the firm of Warmer, Norcross and Judd, at a rate of$240 per hour, as special counsel to draft a rules package to be presented to the Air Quality Division of the Michigan Department of Environmental Quality. The rule package will address start-up, shutdown and malfunction (SSM) issues associated with the operation of electric generating units. The name of Ms. Ross and her fine will be submitted to the City Attorney and, upon his recommendation, to City Council for approval. Use of Special Counsel is subject to the recommendation of the Utility Staff Attorney and the approval of the General Manager. Staff Commentary: This firm and lawyer are being jointly retained and paid for on an equal basis by the BWL, Detroit Edison and Consumers Energy. The package of rules would deal with the exemption of excess emissions during periods of unit start-up, shutdown and unanticipated unit malfunction. With the recent(August 20, 2001)rescission of the existing Michigan Rules R336.1913 and R336.1914 covering SSM, the BWL would be greatly impacted without replacement rules. Rhonda Ross, the attorney that will be drafting the rules package, has specific experience dealing with air quality rules and regulations. Ms. Ross has been Director of the Air Quality Management Division of the Wayne County Department of the Environment and is experienced working with both state and federal environmental statutes. It is expected that the total cost for the project would be near $30,000 to be divided equally between the BWL, Detroit Edison and Consumers Energy. Included in the cost would be a study of other state rules addressing SSM, and negotiations with the State of Michigan directly concerned with the acceptance of the proposed rules package. Ms. Ross bills at an hourly rate of $240. Moved by Commissioner Royal, seconded by Commissioner Christian, that the resolution be approved. Discussion: Commissioner Duncan requested clarification as to why the BWL is paying to draft rules for the State to adopt. She asked whether there is reason to believe that the Department of Environment Quality is receptive to utility companies drafting the rules. Staff Attorney Wilhite responded that special counsel would be drafting the rules for the Michigan Department of Environmental Quality (DEQ) to expedite the review process at the state level. DEQ suggested special counsel Rhonda Ross to draft the rules because of her expertise in air quality rules and regulations. The cost is being equally shared with Detroit 16.51 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 16/25 Page 131 :d Meeting Octooer 23,2001 developing innovative options, such as exploring market opportunities, alternative coal supply regions and integrating existing agreements, and (3) moving in the direction of timely implementation of an integrated, market driven coal and transportation procurement strategy. Comparisons of delivered coal prices per Btu for the PRB and CAPP coal markets vs. using BWL transportation indicate substantial savings to the BWL for 200land 2002. Action: Following discussion, the resolution was adopted unanimously. ea0466 #:i 001-1010: COAL SUPPLY AGREEMENT WITH OXBOW CARBON AND MINERAL, INC. RESOLVED, That the Board enter into a Coal Supply Agreement(Agreement) with Oxbow Carbon and Mineral, Inc., for the supply of western bituminous (Uinta Basis) coal from Colorado subject to approval as to form by BWL's Legal Counsel. The Agreement particulars are as follows: 1) The term shall be for two years commencing January 1, 2002 and tenninating December 31, 2003. 2) The minimum annual quantity to be supplied is 425,000 tons. 3) The Colorado coal will be supplied from Oxbow's Bowie #2 mine with typical coal quality specifications as follows: Size 2"x 0" Moisture 9.00% Ash 10.00% Sulfur 0.38% Btu/lb 12,000 4) The price to be paid under tivs Agreement will be $22.00/NT for CY 2002 and $23.00/NT for CY 2003. 5) The price for each year of the Agreement shall be held firm. 6) The Agreement is contingent on the ability of Erickson Station to successfully burning the coal. Staff Commentary: BWL received six(6)viable bids for the supply of Western bituminous coal with Oxbow submitting the lowest and best-evaluated bid. The other bidders who participated are as follows: RAG Inc., Luscar(Canada), C.W. Mining, Alley Cassetty Coal, and River Trading Co. The pricing submitted by Oxbow Carbon and Mineral coupled with the renegotiated rail transportation agreements with the Union Pacific Railroad and the Canadian National Railroad will allow BWL to reduce the delivered price for coal in CY 2002 to its Erickson Station by 3.6%. Switching coal supply regions in 2002, from Central Appalachia to Colorado, provides BWL with the opportunity to reduce its delivered price of coal to the Erickson Station. If BWL 16:50 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 15/25 Board Minutes Page 130 October 23,2001 2) The annual quality to be supplied is approximately 1,200,000 tons. 3) The PRB coal will be supplied from Arch's Black Thunder mine with typical coal quality specifications as follows: Size 2"x 0" Moisture 27.30% Ash 5.10% Sulfur 0.35% Btu/lb 8,800 4) The price to be paid under this Agreement will be $9.00/NT for CY 2002 and a market realigned price to be determined for CY 3002. 5) The price for each year of the Agreement shall be held firm. Staff Commentary: BWL received five (5) viable bids for the supply of PRB coal with Arch Coal Sales submitting the best-evaluated bid. The other bidders who participated are as follows: Peabody Coal Company, Triton Coal Company, Enron NA and Aquila Energy Marketing. The pricing submitted by Arch Coal Sales, coupled with the renegotiated rail transportation agreements with the Union Pacific Railroad and the Canadian National Railroad will allow BWL to minimize the increase in the delivered cost of PRB coal in 2002 to 14.7%. Moved by Commissioner Royal, seconded by Commissioner Haggart, that the resolution be approved. Discussion: General Manager Pandy called on Steve Brennan, Manager of Results & Construction, and Ron Ishimoto, Manager of Fuel & Transportation Services, to present a power point update on two proposed coal contracts (pertaining to Resolutions 2001-10-9 and 2001-10-10). /Commissioner Creamer left the meeting at 6:30 p.m.J Mr. Ishimoto presented a history of the types of coal the BWL has burned since 1972 when Erickson Station came online. At that time BWL generating facilities were 100% on Ohio Basin coal with a sulfur content of 2% to 3%. In 1977-1978—through increased concerns over sulfur dioxide emissions—the BWL went from Ohio Basin coal to Central Appalachia coal (CAPP) at 12,500 to 13,000 Btu/lb with a sulfur content of 0.7%to 1%. This continued through the 1970's, 1980's and most of the 1990's. Then in 1997-1998, staff investigated ways to reduce cost per kilowatt-hour, which pointed to coal from the Powder River Basin (PRB) in Wyoming. An overview of delivered coal supply for 2001 was presented for Eckert, Moores Park and Erickson Stations. The total coal burn expected for year 2001 is 1,650,000 tons, which is the most amount of tons burned in one year in the history of the BWL. Mr. Ishimoto reported on 2001 contract activities for coal and rail services and noted that three rail transportation agreements are pending. He gave an overview of(1) published U. S. prices for Powder River Basin coal and Central Appalachia coal for years 2000 and 2001, (2) U. S. coal production and consumption from 1998-2000, and (3) Electric Utility coal stocks for 1999-2000. Mr. Ishimoto stated that staff is in the process of(1) reviewing current coal and transportation procurement practices, (2) 16:49 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 14/25 Page 129 rd Meeting October 23,2001 5-203.3 of the Lansing City Charter. The Easement area is located on a portion of the north end of the BWL-owned Property(described below) located at 4800 Roscommon Drive: PROPERTY DESCRIPTION: The Property owned by the BWL is located at the southwest corner of the intersection of Roscommon and Woodbridge Drives in the City of Lansing, County of Eaton, State of Michigan and legally described as: A parcel deeded to the Lansing Board of Water and Light by warranty deed recorded in L.627, P.366 of Eaton County, Michigan deeds described as follows: Beginning at the Southwest corner of"Glenbume No. 4", L. 7, PP. 4-5 of Eaton County, Michigan plats; thence Northerly along the west line of Roscommon Drive 175.38 ft. to the south line of Woodbridge Drive;thence Westerly along the south line of Woodbridge Drive and its extension 100 ft.; thence southerly parallel to Roscommon Drive 175.38 ft.; thence Easterly 100 ft. to the Point of Beginning. EASEMENT DESCRIPTION: Beginning at the northeast corner of the property described above;thence west 100 ft., more or less, along the north line of the property to the northwest corner of the property; thence south along the west line of the property 25 ft.; thence east 17 ft.; thence north 17 ft.; thence east 83 ft., more or less, to the east line of the property; thence north along said east line 8 ft. to the Point of Beginning. Staff Commentarv: This easement has been requested by Ameritech Michigan to place and operate remote switching communications equipment. The equipment is designed to provide new digital services for the area and is part of an overall plan for Ameritech to upgrade telephone and data network facilities in the Lansing area. The BWL is not currently using nor has any foreseeable use of this portion of the Roscommon Drive property for utility purposes. Moved by Commissioner Christian, seconded by Commissioner Royal, that the resolution be approved. Action: Carried unanimously. esol aiOn k:2061 :10' COAL SUPPLY AGREEMENT WITH ARCH COAL SALES RESOLVED, That the Board enter into a Coal Supply Agreement(Agreement) with Arch Coal Sales for the supply of Western Powder River Basin (PRB) coal subject to approval as to form by BWL's Legal Counsel. The Agreement particulars are as follows: 1) The term shall be for two years commencing January 1, 2002 and terminating December 31, 2003. 16:49 OCT 30, 2201 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 13/25 Board Minutes Page 128 October 23,2001 PROPERTY DESCRIPTION: Beginning at the intersection of the northwesterly sideline of Pleasant Grove Road (80 ft. wide) and the north line of the South 1/2 of the South 1/2 of the N.E. 1/4 of Section 6, T. 3 N., R. 2 W., City of Lansing, Ingham County, Michigan; thence westerly along said north line 930 ft.; thence Due South 365 ft.;thence Due East 75 ft., more or less, to the northwesterly sideline of Pleasant Grove Road (80 ft. wide), thence northeasterly along said road sideline 932 ft., more or less, to the Point of Beginning, containing 4 acres of land, more or less, and subject to any and all existing utility uses of the Lansing Board of Water and Light, including maintenance, replacement and upgrades of existing water mains and water lines and associated appurtenances, and subject to all other easements and restrictions of record. Staff Conzmentary: This 4 acre± parcel is located along the west side of Pleasant Grove Road and easterly of the Wise Road Water Conditioning Plant. The parcel is south of and contiguous to the City of Lansing's Davis Park. The City wishes to construct and operate a skateboard park, softball field, nature trails, and other recreational facilities on this property. The City of Lansing is currently obtaining a professional appraisal of the value of this property. Moved by Commissioner Creamer, seconded by Commissioner Royal, that the resolution be approved. Discussion: Commissioner Creamer requested an update on negotiations with the City with regard to (1) Pleasant Grove near the Wise Road Conditioning Plant and (2) the property known as Comfort Street(a.k.a. Northwest Well Field). General Manager Pandy reported that the parcel along Pleasant Grove adjoins the Benjamin Davis City Park. The City would like to acquire tllls property to enhance the recreational opportunities at the park. By approving the resolution, the BWL would show good faith to the City by indicating there is no utility need for the parcel. Once a real estate appraisal on the property is completed, negotiations on the price will begin. With regard to the Comfort Street property, Mr. Pandy reported that a decision on the transfer of this property to the Lansing Department of Parks and Recreation is pending. A tour requested by City Councilmembers and Commissioners is to be held. An amended resolution on Comfort Street is being offered as a late item on this agenda to clarify discussion regarding the harvesting of timber held at the joint meeting between the Board and Councilmembers on August 23, 2001. Action: Carried unanimously. esoliartorz # Z001=10=' ................................ GRANTING OF EASEMENT RESOLVED, That the Board authorize the granting of an easement to Ameritech Michigan for the placement and operation of communications facilities, for a consideration of five thousand dollars ($5,000.00), subject to the approval of City Council as required under Article 2, Section 16:48 OCT 30, 2001 ID= BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91822 PAGE: 12/25 Page 127 rd Meeting Our jer 23,2001 eSA...o1z#:'2001-10- PURCHASE OF NEW DISK SUBSYSTEM FROM UNISYS/E117C RESOLVED, That the Board of Water and Light enter into agreements with Unisys Leasing Corporation to finance the purchase of a new disk subsystem (Hardware, software, installation and five years pre-paid maintenance) from Unisys/EMC at a cost of$207,015 at an interest rate of 4.944% over 60 months. (See final Unisys pricing attached). RESOLVED FURTHER, That the General Manager and Corporate Secretary are authorized to execute said agreements in such form as approved by the Staff Attorney. StafrCommewary: Advances in storage technology have opened the door for BWL to significantly improve the mainframe-computing environment and save money in the process. The BWL's current disk technology(EMC 9760) is about eight years olds, and although it is near maximum capacity(100 Gigabytes), an upgrade is not needed for another year or two. Currently a fee of$3680/month maintenance is being paid on this equipment, with an annual increase cap of 7%. However, the purchase of a new EMC Symmetrix 5630 system will increase storage capacity by 50%, provide significant additional reliability by having every drive "mirrored", improve performance and provide a system that has signficant functional improvements to support the organization's IT infrastructure. The equipment would be leased for a five-year period at a monthly cost that will save the BWL$33,047, with savings realized in each of the five years. (See cost companson.xls—attached). This is new equipment and is only available from the Unisys/EMC partnership. Used equipment is available and quotes were evaluated from two "third party" companies for similar used equipment. Although the price for used equipment was slightly lower, there were serious concerns about hidden costs, maintenance capabilities and technical support from these third party companies. Direct purchase of new equipment from Unisys/EMC is recommended. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Discussion: Commissioner Callen inquired about the operational advantages beyond the expected savings. General Manager Pandy responded that the operational advantages are derived by increasing the storage capacity by approximately 50%, and the system is backloaded and more reliable. Assistant General Manager Cook added that in addition to the performance issue, the economics is an added benefit. Action: Carried unanimously. esolunon`#:200140= SURPLUS PROPERTY(along Pleasant Grove near Wise Road Conditioning Plant) RESOLVED, That the following parcel, located in the City of Lansing, be declared surplus and not required for Board of Water and Light Operations. Upon completion of a real estate appraisal, staff legal review and negotiation of the sale price of the parcel, the parcel is to be transferred to the City of Lansing. 16:47 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 11/25 Board Minutes Page 126 October 23,2001 to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. PROPERTY DESCRIPTION: PART OF THE N.E. 1/4 OF SECTION 6, T. 3 N., R. 2 W., CITY OF LANSING, INGHAM COUNTY, MICHIGAN, BEING PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE EAST 1/4 CORNER OF SECTION 6, T. 3 N., R. 2 W. (AS RECORDED IN L. 7, P. 133 OF INGHAM COUNTY LAND CORNER RECORDATION CERTIFICATES); THENCE NORTHERLY ALONG THE EAST SECTION LINE 660.81 FT., MORE OR LESS, TO THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTH 1/2 OF THE N.E. 1/4 OF SECTION 6; THENCE WESTERLY ALONG SAID NORTH LINE 9890 FT. TO THE SOUTHEASTERLY CURVED SIDELINE OF PLEASANT GROVE ROAD (80 FT. WIDE) AND THE POINT OF BEGINNING: THENCE 255.36 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE RIGHT WITH A RADIUS OF 612.96 FT. AND LONG CHORD BEARING S 57014'10"W 253.52 FT. TO THE END OF THE CURVE; THENCE S 69012'45"W 636.73 FT. TO THE BEGINNING OF A CURVE; THENCE 203.29 FT. ALONG A CURVE TO THE LEFT WITH A RADIUS OF 532.96 FT. AND LONG CHORD BEARING S 58018'30"W 202.06 FT. TO A POINT THAT IS 190 FT NORTHERLY OF THE EAST-WEST 1/4 LINE OF SECTION 6; THENCE WESTERLY PARALLEL TO THE 1/4 LINE 110.03 FT. TO A POINT ON THE CURVED NORTHWESTERLY SIDELINE OF PLEASANT GROVE ROAD (80 FT. WIDE); THENCE 314.89 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE RIGHT WITH A RADIUS OF 612.96 FT. AND LONG CHORD BEARING N 54031'20"E 311.44 FT. TO THE END OF THE CURVE; THENCE N 69°12'15" E 636.50 FT. TO THE BEGINNING OF A CURVE; THENCE 133.45 FT. ALONG THE CURVED ROAD SIDELINE ON A CURVE TO THE LEFT WITH A RADIUS OF 532.96 FT. AND LONG CIIORD BEARING N 62002'00" E 133.10 FT. TO A POINT ON THE NORTH LINE OF THE SOUTH 1/2 OF THE SOUTH 1/2 OF THE N.E. 1/4 OF SECTION 6; THENCE ALONG SAID NORTH LINE N 89°59'46" E 124.23 FT. TO TIIE POINT OF BEGINNING, CONTAINING 87,400 SQ. FT. OR 2.01 ACRES OF LAND, MORE OR LESS, AND SUBJECT TO EASEMENTS AND RESTRICTIONS OF RECORD, AND SUBJECT TO THE RIGHT OF TIIE BOARD OF WATER AND LIGHT TO OPERATE ALL EXISTING UTILITY LINES. THIS PARCEL IS SHOWN ON A SURVEY RECORDED IN LIBER 6, PAGES 376-379 OF INGIIAM COUNTY CERTIFIED SURVEY MAPS. StaffCommentary: This 80 feet wide by 1,090 feet± long parcel is located on and through the Board of Water and Light Wise Road Water Conditioning Plant/Wise Road 138 KV Substation Property and is currently utilized by the City of Lansing Public Service Department for Pleasant Grove Road. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Christian, seconded by Commissioner Haggart, that the resolution be approved. Action: Carried unanimously. 16:46 OCT 32, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 10/25 Page 125 rd Meeting OGwoer 23,2001 es6114tton # 2001 10=3 DEFINED BENEFIT PLAN RESOLVED, That the amended and restated Lansing Board of Water and Light Defined Benefit Plan for Employees' Pensions be adopted effective November 1, 2001. Staff commentary: The amended and restated plan includes the amended and restated plan effective 7/l/96 and amendments effective 7/1/97 (1s1 amendment), 7/l/99 (2nd amendment), 12/17/99 (3rd amendment), 7/1/2000 (4h amendment). This amendment and restatement includes a variety of changes related to compliance with various changes in applicable law and is recommended for approval by staff and drafted by Mr. Steve Jurmu at Foster, Swift, Collins & Smith, P.C., our pension benefits attorney. The attorney's transmittal letter and a redline copy of the plan is attached for your review. The plan document will need to be submitted to the IRS for a determination letter, but this is considered a formality since there are no changes in benefits. Moved by Commissioner Royal, seconded by Commissioner Chrisitan, that the resolution be approved. Action: Carried unanimously. esolution# Z©Ol-10 DEFINED CONTRIBUTION PLAN RESOLVED, That the amended and restated Lansing Board of Water and Light Employees' Defined Contribution Plan be adopted effective November 1, 2001. Staff Commentary: The amended and restated plan includes the amended and restated plan effective 1/1/97 and amendments effective 1/l/97 (I" amendment), 7/1/00 (2nd amendment). This amendment and restatement includes a variety of changes related to compliance with various changes in applicable law and is recommended for approval by staff and drafted by Mr. Steve Jurmu at Foster, Swift, Collins & Smith, P.C., our pension benefits attorney. The attorney's transmittal letter and a redline copy of the plan is attached for your review. The plan document will need to be submitted to the IRS for a determination letter, but this is considered a formality since there are no changes in benefits. Moved by Commissioner Royal, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esoli{from #12001-10 SURPLUS PROPERTY—(Located on and through Wise Road Water Conditioning Plant Property RESOLVED, That the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. Further, that the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel 16:45 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 9/25 Board Minutes Page 124 October 23,2001 6. Sole Source Purchases Over $15,000 Ms. Willson reported that at the Board's Special Meeting held October 8, 2001, R. W. Beck consultants indicated they would be looking at profitability by customer class in geographic areas for water and electric; however, analysis indicates data needed to accomplish this task is not available. Consequently, it will not be feasible to complete that phase of the work at this time. The timeline for R. W. Beck to complete their work by the end of December is on schedule. The Finance Committee recommends the following resolution: esoluttoaa#'2001 I Q-2 Resolution to Authorize the Filing of the Audits with the Cio,Clerk and the State Treasurer RESOLVED, That the Corporate Secretary be directed to file a copy of the fiscal year 2001 audit report of the Board of Water and Light Enterprise Fund with the Lansing City Clerk, Lansing City Council and the Mayor. RESOLVED FURTHER, That the Corporate Secretary be directed to file copies of the fiscal year 2001 audit reports of the Board of Water and Light Enterprise Fund, the Defined Benefit Pension Plan, Defined Contribution Pension Plan and Retiree Benefit Plan (VEBA), and the reports on auditing procedures with the State Treasurer as required by the Uniform Budgeting and Accounting Act (Public Act 2 of 1968, as amended). Submitted by, Finance Committee Ernest J. Christian, Acting Chair Moved by Commissioner Royal, seconded by Commissioner Wonch, that the Finance Committee Report be accepted as presented. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Royal, that the Resolution to Authorize the Filing of the Audits with the City Clerk and the State Treasurer(Resolution 4 2001-10- 2) be adopted. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. 16:45 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91e02 PAGE: e/25 Page 123 rd Meeting OC LUoeI 23,2001 Moved by Commissioner Christian, seconded by Commissioner HaggaM that the human Resources Report be accepted as presented. Action: Carried unanimously. Moved by Commissioner Royal, seconded by Commissioner Duncan, that the Resolution on Compensation Increases for Board-staff Positions —Fiscal Year 2001-02 (Resolutio„ 42001-10-1) be adopted. Action: Carried unanimously. FINANCE COMMITTEE REPORT The Finance Committee met on October 23, 2001 to review the fiscal year 2001 audit of the Board of Water and Light Enterprise Fund. Committee members in attendance were Commissioners Ernest Christian(Acting Chair), Charles Creamer, and Nancy Wonch. Absent was Commissioner Nancy Duncan. Also in attendance were Board Chair Ronald Callen and Commissioner Diane Royal. Fiscal Year 2001 Audit External auditors from Plante & Moran, LLP, presented the results of the audit for fiscal year ended June 30, 2001 for the Board of Water and Light Enterprise Fund. External auditors present were Robert Edwards, CPA and Associate; Larry Cooley, CPA and partner; Frank Audia, CPA and partner; and Patricia Easton, CPA. They issued a standard opinion on the financial statements of the Board of Water and Light and answered questions raised by committee members. The auditors reported that they received the full cooperation of management and staff and had unrestricted access to senior management in the performance of their audit. The audits for the Employees' Defined Benefit Pension Plan, Employees Defined Contribution Pension Plan, and Retiree Benefit Plan (VEBA)have been forwarded to the BWL Pension Fund Trustees for review at their annual meeting of October 23, 2001. In the interest of time constraints, Chief Financial Officer Dana Tousley told the Board he would be mailing a written report on selected financial statistics with associated graphs to the Commissioners for information. Quarterly Internal Audit Report Director of Metrics and Audits Kellie Willson reported in her written report the status of the following issues in which she has been involved: 1. Review of Major Water System Extensions 2. Transfers of Funds Between Utilities 3. VEBA Trust for Funding Retiree Health Care Benefits 4. The City Ethics Ordinance Compliance 5. Financial and Management Information Issues 16:44 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 7/25 Board Minutes Page 122 October 23,2001 the BWL. Management was urged to consider fundamental problems in staffing and the replacement of skilled employees. As the company moves forward in developing its communications strategy,management was urged to listen more and encourage more employee feedback. Joseph Davis, President of IBEW, Local 352, addressed the committee on customer choice issues and the strain of downsizing the organization, while service to outlying communities continues to expand. On motion by Commissioner Callen, seconded by Commissioner Christian, the Committee met in closed session to review performance appraisals for the three staff positions that report to the Board. (6:55 p.m.). The Committee reconvened in open session at 8:07 p.m. Perforniance appraisals and salary increases for the staff positions reporting to the Board are administered according to the BWL wage and salary plan for non-bargaining administrative employees. Human Resources Director Linda Gardner reviewed the performance rating results completed by the Commissioners for each of the Board-appointed positions. Contract issues of the General Manager and his rating were discussed at length. No final decision was made. The Human Resources Committee recommends the following resolution: esod�i�o� #:2001 10-1 Resolution on Compensation Increases for Board-Staff Positions - Fiscal Year 2001-02 RESOLVED, That the Director of Metrics and Audits Kellie Willson, and Corporate Secretary Mary Sova are hereby eligible to receive salary adjustments effective as of July 1, 2001. RESOLVED FURTHER, That pay adjustments for the Director of Metrics and Audits and the Corporate Secretary based on their performance evaluations for fiscal year 2000-01 are hereby confirmed, as filed with Human Resources. Pay adjustments are to be awarded in accordance with the fiscal year 2000-01 performance increase matrix under which pay for performance is being administered. On related issues, the committee reached consensus on the following: • The Board-staff-appointed positions are to use the same Managerial Appraisal Form when completing self-appraisals. • For fiscal year 2002, performance evaluations for the Director of Metrics and Audits and the Corporate Secretary are to be based on blended ratings conducted by the General Manager, Assistant General Manager and the Commissioners. Respectfully submitted, Isl Diane Royal, Chair Human Resources Committee 16:43 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91B02 PAGE: 6/25 Page 121 d Meeting Ociuoer 23,2001 Organizational Structure/Process • Procedures impede service to customers • Paperwork bogs down productivity • Structure sometimes breeds competition Workload/Resources • Employees report strain of downsizing • Required to do more with less Management Communication • Employees need to hear more from management • Where information and understanding are greater, satisfaction is higher Mr. Strickler recapped management's efforts in response to issues raised over the past year: =:> Planning functions have been consolidated under the Assistant General Manager. => Six-year financial forecast and the Growth and Expansion Task Force work have been communicated to employees. Management is in the process of organizing that information to present to employee in face-to-face meetings. Share the Success (STS)has been aligned with the strategic Business Plan for consistency. => Strategic planning documents and non-bargaining job descriptions are to be completed by the end of this calendar year, and progression plans are to be completed by this fiscal year. => A team of managers and directors continue to address issues. One of the objectives of the Business Support Process area is to develop on a monthly basis presentations on corporate topics to share with employees to make them aware of the direction the organization is moving. => Management plans to intensify its communication particularly with face-to-face meetings. The Commissioners stressed the importance for management to understand how communication techniques will be different from last year. General Manager Pandy stated that management intends to move in the direction of trying to achieve a three-stage type of communication. A recent example of that was sending the results of the focus groups to all non-bargaining employees. The next step will involve soliciting employee feedback to assure a clear understanding of issues raised in order to prioritize them. Commissioner Callen questioned whether the downsizing was appropriate in the sense of having the correct number of people needed to perform the work while maintaining a good safety record. The Commissioners concurred that a current business plan is central to the operation of 16:43 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 5/25 Board Minutes Page 120 October 23,2001 Communications Director Jolui Strickler presented an overview of the employee satisfaction survey results conducted and compiled by Market Strategies, Inc. He reported that a self- administered mail survey was distributed to all 736 BWL employees in late June 2001. The survey was unchanged from the 1999 survey, with the exception of one addition being an open- end question for additional comments. A total of 322 (44%) employees mailed the completed questionnaire directly to MSI as compared to 52% in 1999. The objectives of the survey were to assess the following: • Employee perceptions of the work environment, employee satisfaction and retention • How employees rate the feedback and evaluation, professional development, workload, accountability, and autonomy in their job • Perceptions of the business processes, immediate managers, and senior managers Survey results indicated that the BWL improved significantly on all components, but particularly for job security and issues regarding senior managers. Findings indicated there is still substantial room for improvement on management issues. Feedback and evaluation is still a weaker index and has large impacts on other components in the employee satisfaction model. The workload component saw minimal improvement. Several of the workload issues relate to other components and items that have weak scores. Mr. Strickler reported that management initiated a series of focus group discussions with employees as a follow-up to recent union elections. Lisa Crumley of Pace & Partners was present to give a brief overview of the findings from four distinct employee focus groups held with clerical, technical, professional and supervisory employees in April and June 2001. Ms. Crumley emphasized that Pace & Partners was very cognizant of protecting the employees' confidentiality and anonymity. The purpose of the focus groups was to: • Understand recent organizing efforts • Seek input about how to improve relationships and working conditions at the BWL • Explore issues of importance • Discuss ideas of how management can improve its relations with employees The fundamental, universal concerns identified across all four groups included the following issues: Strategic Direction • Perceived lack of strategic direction or plan • Lack of succession planning • Conflicting priorities across process areas 16:42 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91802 PAGE: 4/25 Page 119 ad Meeting October 23,2001 abstract expressionist artists that have flourished in the post-war period. One of them is Clyfford Still (1904-1980) whose collection of 2,000 pieces of artwork lay in abeyance waiting for an American municipality to dedicate a museum to the presentation and preservation of his work all in one space. His second topic pertained to considering alternative providers for cable and telecommunication services. Mr. Starks serves as chairperson of the Lansing Cable and Telecommunications Advisory Board. He suggested that the City of Lansing and the surrounding communities might do well to consider the possibility of alternative providers for cable and telecommunication services. He noted that the BWL is a natural candidate for serving as the franchise holder. The third issue related to noise caused by a steam release valve that went off on the morning of October 23 at Eckert Station at 5:15 a.m., 5:43 a.m., 5:58 a.m., and 6:07 a.m. Mr. Starks indicated the decibel level was somewhere around 150. He noted that between the noise problems and vacuuming out the ashbin, it is a personal irritation when these events happen in hours when most people are sleeping. He suggested performing these procedures at a more suitable tinge of the day. General Manager Pandy responded that venting of steam when units are brought on or off-line causes the noise. Generally units are brought on to meet weekday load on Sunday evening rather than early morning. Mr. Pandy gave assurance he would investigate and discuss this with staff to work out a schedule that will not disturb the neighborhood. Production Director Richard Peffley commented on the BWL Home Ownership Program for Employees. He stated that in addition to Michael George, there were other BWL employees who encountered obstacles in processing paperwork for the Home Ownership Program for Employees (HOPE). He credited General Manager Pandy, Chief Financial Officer Dana Tousley, Human Resources Director Linda Gardner, and Human Resources Employee Relations Administrator Wendy Bradley for their role in modifying the application process. Mr. Pandy noted that last year the Board approved budgeting $30,000 per year for the HOPE program to provide loans to six employees per year. One more grant is currently in process for fiscal year 2001-02. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES HUMAN RESOURCES COMMITTEE REPORT The Human Resources Committee met on September 4, 2001 to receive a report on the Board of Water and Light Employee Satisfaction Survey, conducted by Market Strategies, Inc., (MSI) and to review performance appraisal results for the three staff positions that report to the Board; namely, the General Manager, Director of Audit and Metrics and Corporate Secretary. Committee members present were Commissioners Callen,Christian, Haggart, and Royal (Chair). Commissioners Creamer(committee alternate) and Duncan were also present. 16:41 OCT 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91eo2 PAGE: 3/25 Board Minutes Page 118 October 23,2001 General Manager Joseph Pandy, Jr. responded to issues raised with respect to the Share the Success program. He handed out a summary of management's position on this controversy. With respect to customer choice, he reported that of the 21 customer choice jobs, BWL employees inspected eight of the jobs, BWL retirees inspected five, and Tetra Tech employees inspected eight in order to meet the seasonal workload schedule. Mr. Pandy urged union employees to meet with Ifni anytune to discuss their issues. To clarify a statement made by Joseph Davis, Mr. Pandy said that there is no reference in the Lansing City Charter that states work in the City is required to be performed by BWL employees. BWL employee Michael George spoke regarding the positive experiences he has had under the leadership of Production Director Richard Peffley. He credited Mr. Peffley and others for facilitating the purchase of a home under the BWL's Home Ownership Program for Employees. He also shared a personal story related to the September 11th terrorist attack at the World Trade Center. Mr. George was attending a meeting in the BWL's Administration Building and learned of the attack through Mr. Peffley. This was a coincidence because Mr. Peffley was unaware that Mr. George's brother worked on the 14a` floor of the World Trade Center. Mr. George was able to see the CNN coverage of the terrorist attack while at work. He expressed his gratitude to those staff members who were present in the BWL conference room for their care and concern during his personal ordeal. He reported that his brother was safe. Mrs. George was also present and expressed her appreciation to all those who assisted with processing the necessary paperwork for the Home Ownership Program and making home ownership a reality. BWL employee Michael Stanley remarked that symptoms of indiscriminate cost cutting include the BWL Share the Success program, bargaining unit employees injured at Eckert Station, catastrophic failure at Erickson Station. He stated that bargaining unit employees are suffering because of this, and asked how long it will be before Lansing customers will suffer because of cost cutting measures. BWL employee Mickey Fountain remarked he has been employed at the BWL for 17 years as a maintenance mechanic. His BWL involvement has included serving on the Mutual Gains Team, Process Safety Advisor, 90/10 Bonus Program participant, bargaining and non-bargaining spokesperson for the Maintenance & Construction Resource Center, and recently appointed to the post of IBEW Local 352 Health and Safety Director. Mr. Fountain stated that Share the Success (STS) is an innovative program, which has benefited the organization, customers, and employees. He has been involved in the STS Performance Measures Committee for three years and found it to work well. He noted that both bargaining and non-bargaining employees have the opportunity to participate as well as the General Manager. Mr. Fountain stated that to date it has been perceived he voted not to participate in the process measures portion of the STS program. He stated for the record that he did not vote not to participate in the process measures portion of the BWL STS program, but rather he voted "no" to not change the program as the IBEW Local 352 contract stated in respect to the STS program. He indicated that this issue could have a long-teen effect on the organization. Greg Starks, 240 Woodlawn Avenue, Lansing, spoke on three different topics. As a political columnist for the CITY PULSE, a local newspaper in Ingham County, he urged the Commissioners to give some consideration to his suggested commentary in a recent article, wlch proposed turning the Ottawa Power Station into a major art museum. He noted that there are eight major Page 113 Preliminary—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, October 8, 2001 The Board of Commissioners met in Special Session in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing,Miclugan. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Charles M. Creamer, Nancy W. Duncan, Diane R. Royal and Nancy A. Wonch. Absent: Commissioner Tim Haggart(out of town). The Secretary declared a quorum present. Chairperson Callen called the meeting to order at 5:30 p.m. He announced that the purpose of the special meeting was to receive an overview of the planned project approach for the performance audit of the Board of Water and Light's growth and expansion program and performance measurement methods from R. W. Beck. The Board authorized the independent review on June 26, 2001. General Manager Pandy introduced the R. W. Beck team comprised of Lynn Coles - Project Manager; Dalyl Pullin-Benchmarking and Management; Terry Myers—Rates and Accounting; and Ron Bond (not present) —Water Focus. Mr. Pandy reported that in November 2000, he appointed Assistant General Manager Cook to review BWL activities related to utility growth and expansion. His task was to develop and oversee the implementation of an action plan to address issues and concerns outlined in the following two reports: (1) Review of Major Water System Extensions, dated October 30, 2000, prepared by Director of Metrics and Audits Kellie Willson and (2) System Growth and Expansion, dated November 2, 2000, prepared by Assistant General Manager William Cook. Mr. Pandy called on Mr. Cook to brief the Board on staff activities over the past nine months related to utility growth and expansion processes and efforts in identifying systemic problems. Assistant General Manager Cook reviewed corrective actions discussed with the Finance Committee in February 2001 to address key issues identified in his report to the General Manager, dated January 17, 2001 regarding utility growth and expansion. Since that time the following improvements have been made: (1) implementation of new fees and charges for electric, water and steam utilities, (2) revision of the Utility Rules and Regulations, and(3) development of a capital projects justification follow-up process. R. W. Beck representative Lynn Coles provided an overview of R. W. Beck's background and reviewed the performance audit assignment. Special Meeting Minutes Page 114 October 8,2001 Project Approach • Data request and familiarization • Kick-off meeting • Review meetings, status and feedback • Draft report(s) for feedback • Final reports) • Looking forward viewpoint The Scope Phases Include: Phase I Growth&Expansion Program Audit- Water Utility • Review documentation, procedures and protocol • Review Internal Audit of program • Evaluate adequacy of correction action for deficiencies • Review existing wholesale and retail water supply contracts • Review adequacy of BWL's administrative and program policies Phase 2 Performance Measurements Methods Review • Conduct interviews with accounting staff to review cost tracking methods • Primary focus is water, secondary focus is electric and steam • Identify if cross-subsidization occurs • Compare BWL methods with industry practices Phase 3 Customer Profitability Profile • Review customer profitability by geographic area for water and electric • Segregate customer classes by area • Compare existing BWL cost recovery and profitability to industry practices • Benchmark with other utilities Phase 4 General Capital Review—Not being done because Phases I and 2 are similar and should adequately address concerns. Phase 5 BWL Rate and Fee Process Review • Beck will conduct a review of BWL rate and fees and the process of identifying rate changes and practices • Analyze current rates to look for cross-subsidization between utilities • Determine if ancillary services are provided but not charged • Ensure objective of adequate rate recovery, return on investment and profitability Page 115 Special Meeting Minutes October 8,2001 Expected Schedule • Approximate 60-90 day schedule • Kick-off meeting: October 8 • On-site interviews: October 8-9 • October 10-30 -More data requests -Phone interviews -More analysis • November/December timeframe: draft report(s)prepared and results presented for feedback • December: Final Report(s) What Has Been Learned to Date Focused on water system needs. Issues examined included: • The basis for wholesale rates • Wholesale rate equitability • Potential wholesale rate adjustments • Recovery of Investments in retail rate area • Customer growth less than expected Corrective Actions • Beginning to review identified deficiencies and corrective actions • Starting to examine accounting and performance measuring systems • Examining historic customer usage • Significant change of the last five years In response to Commissioner Creamer's question, Assistant General Manager Cook clarified that the purpose for the independent review is to focus on the BWL's policies and procedures with respect to growth and development. The goal is to determine if the right processes are in place in the BWL's capital project program and if the right information is available to move forward with the growth and expansion program. General Manager Pandy noted that while the BWL is examining water systems that were installed--some with lower returns than forecasted-- there are also water system expansion projects that have not been awarded to the BWL due to the competitive environment. Mr. Pandy emphasized that the BWL wants to improve its processes to ensure the right criteria are in place for a return on investment and to protect the Lansing customers. Commissioner Royal stated that she would hope the results of the report will be forthright to assure important issues related to growth and expansion are identified and addressed. She urged the consultants to use a glossary to define"terms of art" for ease in translating technical terms. Commissioner Callen suggested that in addition to the detailed report, an Special Meeting Minutes Page 116 October 8,2001 executive summary that provides more depth than what is normally written would be helpful. The Commissioners were advised that a Confidentiality Agreement between R. W. Beck and the Board of Water and Light has been executed to assure non-disclosure of competitive issues. Following discussion, the Commissioners requested that a verbal presentation be made to the Board at the draft level for feedback. Mr. Coles agreed to report back to the Board soon after the draft report(s) are completed, anticipated by the end of December. ADJOURNMENT On motion by Commissioner Christian, seconded by Commissioner Royal, the meeting adjourned at 6:30 p.m. Is/Mary E. Sova, Secretary Filed: October 15, 2001 Steve Dougan, City Clerk 15:52 OCT 15, 2001 ID: BOARD OF WATER & LIG TEL NO: t517) 702-6203 #91775 PAGE: 2/5 Page 113 Preliminary— Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, October S, 2001 The Board of Commissioners met m Special Session ii the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Charles M. Creamer, Nancy W. Duncan, Diane R. Royal and Nancy A. Wonch. Absent: Commissioner Tim Haggart(out of town). The Secretary declared a quorum present. Chairperson Callen called the meeting to order at 5:30 p.m. He announced that the purpose of the special meeting was to receive an overview of the planned project approach for the performance audit of the Board of Water and Light's growth and expansion program and performance measurement methods from R. W. Beck. The Board authorized the independent review on June 26, 2001. General Manager Pandy introduced the R. W. Beck team comprised of Lynn Coles- Project Manager; Daryl Pullin- Benchmarkiig and Management; Terry Myers— Rates and Accounting; and Ron Bond (not present) —Water Focus. Mr. Pandy reported that in November 2000, he appointed Assistant General Manager Cook to review BWL activities related to utility growth and expansion. His task was to develop and oversee the implementation of an action plan to address issues and concerns outlined in the following two reports: (1) Review of Major Water System Extensions, dated October 30, 2000, prepared by Director of Metrics and Audits Kellie Willson and(2) System Growth and Expansion, dated November 2, 2000, prepared by Assistant General Manager William Cook. Mr. Pandy called on Mr. Cook to brief the Board on staff activities over the past nine months related to utility growth and expansion processes and efforts in identifying systemic problems. Assistant General Manager Cook reviewed corrective actions discussed with the Finance Committee in February 2001 to address key issues identified in his report to the General Manager, dated January 17, 2001 regarding utility growth and expansion. Since that time the following improvements have been made: (1) implementation of new fees and charges for electric, water and steam utilities, (2) revision of the Utility Rules and Regulations, and (3) development of a capital projects justification follow-up process. R. W. Beck representative Lynn Coles provided an overview of R. W. Beck's background and reviewed the performance audit assignment. 15:53 OCT 15, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91775 PAGE: 3/5 Special Meeting Minutes Page 114 October S,2001 Project Approach • Data request and familiarization • Kick-off meeting • Review meetings, status and feedback • Draft report(s) for feedback • Final report(s) • Looking forward viewpoint The Scope Phases Include: Phase 1 Growth & Expansion Program Audit-Water Utility • Review documentatiol-, procedures and protocol • Review Internal Audit of program • Evaluate adequacy of correction action for deficiencies • Review existing wholesale and retail water supply contracts • Review adequacy of BWL's administrative and program policies Phase 2 Performance Measurements Methods Review • Conduct interviews with accounting staff to review cost tracking methods • Primary focus is water, secondary focus is electric and steam • Identify if cross-subsidization occurs • Compare BWL methods with industry practices Phase 3 Customer Profitability Profile • Review customer profitability by geographic area for water and electric • Segregate customer classes by area • Compare existing BWL cost recovery and profitability to industry practices • Benchmark with other utilities Phase 4 General Capital Review—Not being done because Phases I and 2 are similar and should adequately address concerns. Phase 5 BWL Rate and Fee Process Review • Beck will conduct a review of BWL rate and fees and the process of identifying rate changes and practices • Analyze current rates to look for cross-subsidization between utilities • Determine if ancillary services are provided but not charged • Ensure objective of adequate rate recovery, return on investinent and profitability ,,� �' ) i �', 15:53 OCT 15, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91775 PAGE: 4/5 Page 115 ial Meeting Minutes October 8,2001 Expected Schedule • Approximate 60-90 day schedule • Kick-off meeting: October 8 • On-site interviews: October 8-9 • October 10-30 More data requests Phone interviews -More analysis • November/December timeframe: draft report(s) prepared and results presented for feedback • December: Final Report(s) What Has Been Learned to Date Focused on water system needs. Issues examined included: • The basis for wholesale rates • Wholesale rate equitability • Potential wholesale rate adjustments • Recovery of Investments in retail rate area • Customer growth less than expected Corrective Actions • Beginning to review identified deficiencies and corrective actions • Starting to examine accounting and performance measuring systems • Examining historic customer usage • Significant change of the last five years In response to Commissioner Creamer's question, Assistant General Manager Cook clarified that the purpose for the independent review is to focus on the BWL's policies and procedures with respect to growth and development. The goal is to determine if the right processes are in place in the BWL's capital project program and if the right information is available to move forward with the growth and expansion program. General Manager Pandy noted that while the BWL is examining water systems that were installed--some with lower returns than forecasted--there are also water system expansion projects that have not been awarded to the BWL due to the competitive environment. Mr. Pandy emphasized that the BWL wants to improve its processes to ensure the right criteria are in place for a return on investment and to protect the Lansing customers. Commissioner Royal stated that she would hope the results of the report will be forthright to assure important issues related to growth and expansion are identified and addressed. She urged the consultants to use a glossary to define "terms of art" for ease in translating technical terms. Commissioner Callen suggested that in addition to the detailed report, an executive summary that provides more depth than what is normally written would be helpful. 15:54 OCT 15, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6209 #91775 PAGE: 5/5 Special Meeting Minutes Pagc 116 October 3, 2001 The Commissioners were advised that a Confidentiality Agreement between R. W. Beck and the Board of Water and Light has been executed to assure non-disclosure of competitive issues. Following discussion, the Commissioners requested that a verbal presentation be made to the Board at the draft level for feedback. Mr. Coles agreed to report back to the Board soon after the draft report(s) are completed, anticipated by the end of December. ADJOURNMENT On motion by Commissioner Christian, seconded by Commissioner Royal, the meeting adjourned at 6:30 p.m. /s/Mary E. Sova, Secretary Filed: October 15, 2001 Steve Dougan, City Clerk �' _,mil i� � 113 Preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, July 24, 2001 The Board of Commissioners met in regular session at 5:30 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman Ronald Callen called the meeting to order. Present: Commissioners Ronald C. Callen, Charles M. Creamer, Ernest J. Christian, Nancy W. Duncan, Tim Haggart and Nancy A. Wonch - 6 (One Commissioner appointment pending.) Absent: Commissioner Diane R. Royal. The Secretary declared a quorum present. All said the Pledge of Allegiance. Chairman Callen introduced Tim Haggart and Nancy A. Wonch and welcomed them to the Board as they start their four-year term as Commissioners of the Board of Water and Light. APPROVAL OF MINUTES Motion made by Commissioner Christian, seconded by Commissioner Duncan, to approve the minutes of regular session held June 26, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. General Manager Pandy introduced BWL women's water tapping team members Barbara Davis, Bobbi Johnson and Diana Paul. The fourth member, Patricia Clark, was not present. He reported that the BWL women's team, in their first year of competition at the American Water Board Minutes Page 114 July 24,2001 Works Association (AWWA) national conference in Washington, D.C. (June 18-22), brought home a third place national trophy with a time of 2.27.59. The BWL men's team members Leon Flores, Jim Valentine, and Remecho Sanders took second place with a time of 1.23.47. The fourth member, Randy Jones, was not present. Brian McLeod, Manager of Transmission and Distribution, thanked General Manager Pandy and the Commissioners for supporting the teams' involvement in the AWWA water tapping competitions. He stated that both teams worked hard to prepare for the competition, and they are looking forward to taking first place at next year's national event in New Orleans. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES HUMAN RESOURCES COMMITTEE REPORT The Human Resources Committee met on June 26, 2001, at 4:00 p.m. to consider salary adjustments for non-bargaining employees, Corporate Share the Success Incentives for non- bargaining and bargaining employees, and Process Incentives for eligible non-bargaining employees. Committee members present were: Commissioners Ronald Callen, Rosemarie Aquilina, and Diane Royal. Commissioner David O'Leary was also present. Absent was Commissioner Nancy Duncan. Linda Gardner, Director of Human Resources, presented the rationale for the recommended performance pay increase matrix and salary range adjustments for non-bargaining employees. Paul Reagan of Dorey, Reagan &Associates presented the results of the 2000-01 Benchmark Job Market Assessment, comparing salaries paid by the Board of Water and Light (BWL) in eight skill families with salaries for similar jobs in a variety of local, regional and national companies. The analysis indicated that BWL salaries in four of the eight skill families have fallen below competitive market rates and should be adjusted upward in amounts ranging from two percent to four percent. Pay in the other four skill families remains at or above the market. Following review and discussion, the Human Resources Committee concurred with staff s recommendations. The Human Resources Committee recommends approval of the following resolutions: Page 115 Board Meeting July 24,2001 esolution #2001-7-1 Non-Bargaining Salary Recommendations for Fiscal Year 2001-02 RESOLVED, That the Performance Increase Matrix as reviewed with the Human Resources Committee be adopted. RESOLVED FURTHER, That the Non-Bargaining Unit Skill Family Ranges for Fiscal Year 2001-02 be adjusted as follows: (a) That Skill Family Ranges found to be below market be moved by the percentage required to be competitive with the market. (b) That Skill Family Ranges requiring no competitive adjustment be moved upward by 1.75 percent(half the change in the CPI) to partially offset the effects of inflation. Staff noted that the pay range recommendation would have no impact on individual pay increases for non-bargaining employees. That will be determined by the performance matrix recommendation. Conversely, the degree of movement of the pay ranges for certain employees will affect whether the employee's annual performance increase rolls into their base pay or is awarded as a lump sum. [Resolution #2001-7- Corporate Share the Success for Fiscal Year 2001-02 RESOLVED, That from 0 to 2.5% of fiscal year base pay be available for Corporate Share the Success payments to eligible Non-Bargaining and Bargaining Unit employees. RESOLVED FURTHER, That the level of BWL net income will determine the extent to which the Corporate Share the Success incentive will be paid. Net income above the approved budgeted level will be allocated 50-50 between the BWL and the incentive pay plan fund. RESOLVED FURTHER, That payouts be based on BWL's performance on its fiscal year 2002 corporate measures in four areas: 1. Financial Performance 2. Customer Satisfaction 3. Internal Business Processes 4. Employee Learning and Development esolution#2001-7-3 Process Incentive Pay for Fiscal Year 2001-02 RESOLVED, that from 0 to 5.0% of fiscal year base pay be available for Process Incentive payments to eligible Non-Bargaining Unit employees. Board Minutes Page 116 July 24,2001 RESOLVED FURTHER, That payouts will be made if BWL net income and the BWL-wide pool of hard dollar savings reach sufficient levels. RESOLVED FURTHER, That payouts be based on Process performance on their Fiscal Year 2002 Process measures in four areas: 1. Financial Performance 2. Customer Satisfaction 3. Internal Business Processes 4. Employee Learning and Development There being no further business, the meeting adjourned at 5:00 p.m. Respectfully submitted, Ronald C. Callen, Chair Human Resources Committee Moved by Commissioner Christian, seconded by Commissioner Creamer, that the Report of the Human Resources Committee be accepted. (The resolutions incorporated in the report were considered separately.) Action: Carried unanimously. At the request of Chairman Callen, Human Resources Director Linda Gardner briefed the Commissioners on the three compensation-related resolutions included in the committee report. She provided background on how the Performance Increase Matrix and Skill Family Ranges for non-bargaining employees were developed. Non-Bargaining unit employees would be subject to a performance increase in the range of 0 to 7.5 percent, based on the proposed Performance Increase Matrix. The Skill Family Ranges would be moved from 1.75 percent to 4 percent. Moved by Commissioner Christian, seconded by Commissioner Creamer, that the Non- Bargaining Salary Recommendations for Fiscal Year 2001-02 (Resolution#2001-7-1) be adopted. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Creamer, that the Corporate Share the Success payment recommendation for Fiscal Year 2001-02 (Resolution # 2001-7-2) be adopted. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the Process Incentive pay recommendation for Fiscal Year 2001-02 (Resolution #2001-7-3) be adopted. Action: Carried unanimously. Page 117 Board Meeting July 24,2001 GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolution.'#2001-7 FIRE HYDRANT CHARGES RATE NO. 6 RESOLVED, that the attached rate schedule, Fire Hydrant Charges Rate No. 6, be adopted and made effective January 1, 2001. Staff Commentary: This rate schedule was the subject of a public hearing on June 26, 2001 and no comments were received. The proposed rates would be retroactive back to January 1, 2001. Since this is the correction of an error, staff delayed the implementation of the incorrect rates. All customers on this rate have been billed the lower rate since that date. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001-7- STEAM RATES 1, 2 AND 3 RESOLVED, that the attached rate schedules, Steam Rates 1, 2 and 3 be adopted and made effective August 1, 2001. Staff Commentary: These rate schedules were the subject of a public hearing on June 26, 2001 and no comments were received. Implementation effective August 1, 2001 will change the calculation of the steam fuel cost adjustment applied to sales in August 2001. Moved by Commissioner Haggart, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution,#2001=7- RELEASE OF EASEMENT (Corner of Lenawee and Capitol—Recorded 2/21/30) WHEREAS, Frank L. Young and Eva F. Young executed a certain easement conveying and warranting to the Board of Water & Light forever, such rights as recorded in Liber 17 of Miscellaneous Records, Page 485, in the Register of Deeds, Ingham County, Michigan, February 21, 1930; and Board Minutes Page 118 July 24,2001 WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The land on which said right is granted is described as follows: The East forty-four and one half(44-1/2) feet of the North five (5) feet of the South eighteen (18) feet of the West ninety-four(94) feet and, the south eighteen(18) feet of the West five (5) feet of the East seventy-eight (78) feet of Lot Five (5). All of the above described lands being in Block One Hundred and Forty-Eight (148) in the City of Lansing, County of Ingham, State of Michigan. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Water and Light release, discharge and vacate said easement on the above described property and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. Staff Commentary: This easement was for steam lines that probably served residential customers prior to the hotel and restaurant/lounge being constructed at the corner of Lenawee and South Capitol Avenue. The steam lines are abandoned and the easement is no longer required. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001-77 RELEASE OF EASEMENT (Corner of Lenawee and Capitol—Recorded 12/9/81) WHEREAS, Capitol Park Motor Hotel, Inc. executed a certain easement conveying and warranting to the Board of Water&Light forever, such rights as recorded in Liber 1383 of Deeds, Page 585, in the Register of Deeds, Ingham County, Michigan, December 9, 1981; and WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The land on which said right is granted is described as follows: That part of lots 1, 2, 11 and 12 of Block 148, Original Plat of the City of Lansing, Ingham County, Michigan, described as: Beginning on the North line of Block 148 at a point 122.0 feet East of the North West corner of Page 119 Board Meeting July 24,2001 Block 148; thence South 80.5 feet on a line 17.0 feet of the East wall of the six story apartment building; thence East 69.6 feet along an existing building wall; thence North 65.4 feet; thence East 30 feet; thence North 15 feet to the North line of block 148; thence West along the North line of Block 148 to the point of beginning. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Water and Light release, discharge and vacate said easement on the above described property and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. Staff Commentary: This easement was for electric,water, and steam facilities serving the hotel and restaurant/lounge constructed at the corner of Lenawee and South Capitol Avenue. The steam lines are abandoned and the electric and water facilities are being relocated. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. es6lution #2001=7- RELEASE OF EASEMENT (Corner of Lenawee and Capitol—Recorded 1/19/82) WHEREAS, Capitol Park Limited Dividend Housing Association executed a certain easement conveying and warranting to the Board of Water& Light forever, such rights as recorded in Liber 1385 of Deeds, Page 1157, in the Register of Deeds, Ingham County, Michigan, January 19, 1982; and WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The East 17 feet of the North 80.5 feet of that part of lots 8, 9, 10, 11, and 12, Block 148, Original Plat of the City of Lansing Ingham County, Michigan, described as: beginning at the NW corner of Lot 12, Block 148; thence East 122.0 feet on the North line of Block 148; thence South 90.0 feet on a line 17.0 feet East of the East wall of the hotel; thence Southwesterly 7.1 feet; thence South 72.0 feet on a line 12.0 feet East of the East wall of the hotel; thence East 4.0 feet; thence South 163.0 feet to the South line of Lot 8; then West 121.0 feet to the West line of Block 148; thence North 330.0 feet on the West line of Block 148 to the point of Board Minutes Page 120 July 24,2001 beginning. Also, the East 36.0 feet of the West 99.0 feet of Lot 7,Block 148, Original Plat of the City of Lansing, Ingham County, Michigan. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Water and Light release, discharge and vacate said easement on the above described property and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. This easement was for electric, water, and steam facilities serving the hotel and restaurant/lounge constructed at the corner of Lenawee and South Capital Avenue. The steam lines are abandoned and the electric and water facilities are being relocated. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001-7- RELEASE OF EASEMENT (Corner of Lenawee and Capitol—Recorded 12/21/30) WHEREAS, Harry J. Digby executed a certain easement conveying and warranting to the Board of Water&Light forever, such rights as recorded in Liber 17 of Miscellaneous Records, Page 483, in the Register of Deeds, Ingham County, Michigan, February 21, 1930, and WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The land on which said right is granted is described as follows: the East ninety-six (96) feet of the North five (5) feet of the South eighteen(18) feet; also the South thirteen(13) feet of the West five (5) feet of the East sixteen (16) feet; also the South thirteen (13) feet of East five (5) feet of the West sixty-nine (69) feet; and also the North fifty-one(51) feet of the East five (5) feet of Lot eight (8). All of the above described lands being in Block One Hundred and Forty-Eight (148) in the City of Lansing, County of Ingham, State of Michigan. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Water and Light release, discharge and vacate said easement on the above described property Board Meeting Page 121 July 24,2001 and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. Staff Commentary: This easement was for steam lines that probably served residential customers prior to the hotel and restaurant/lounge being constructed at the corner of Lenawee and South Capitol Avenue. The steam lines are abandoned and the easement is no longer required. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001-7-7; WATER SERVICE AGREEMENT—WINDSOR TOWNSHIP WHEREAS, the Charter Township of Windsor(TOWNSHIP) is in need of a water distribution system to service certain designated areas of the TOWNSHIP; and WHEREAS, the TOWNSHIP is authorized to enter into an Agreement with the Board for water service, and WHEREAS, the Board owns and operates a water supply system and distribution system and has determined that its water supply and distribution system is adequate to provide services to the TOWNSHIP subject to the limitations and conditions set forth in the Water Service Agreement; be it RESOLVED, that the Board authorizes the General Manager and Corporate Secretary to enter into a Water Service Agreement and Supplemental Agreements to provide service to Windsor Township within the WATER SERVICE AREA, subject to approval of all documents by the staff attorney. Moved by Commissioner Duncan, seconded by Commissioner Christian, that the resolution be approved. Discussion: General Manager Pandy reported that Windsor is a new township to be served by the BWL. A new residential and commercial development is going into that area, with the developer paying all of the water system extension costs. This will be an expense neutral item for the BWL. General Manager Pandy also reported that with the Board's authorization at the June 26, 2001 meeting, R. W. Beck has been engaged to do a performance audit on growth and expansion, cost accounting methods, customer profitability and rate and fee processes and practices. An independent evaluation will be reviewed with the Board in the near future. Action: Carried unanimously. Board Minutes July 24,2001 Page 122 esolution #2001-7-11 GRANTING OF EASEMENT—CARRIER CREEK DRAIN DRAINAGE (MAIN DRAIN) RESOLVED, that in exchange for a payment of not less than $500.00, the Board authorizes the granting of an easement to the Carrier Creek Drain Drainage District#326 (Main Drain) for the construction, operation, maintenance and improvement of a certain county drain, subject to the approval of City Council as required under Article 2, Section 5-203.3 of the Lansing City Charter. The Easement Area is located on a portion of the east side of the Erickson Station property in Delta Township. Descriptions of both the Board of Water and Light Property and the Easement Area are given below. The Property owned by the BOARD is located at the street address 3725 S. Canal Road, located in Delta Township, County of Eaton, State of Michigan and legally described as: BOARD OF WATER AND LIGHT-OWNED PROPERTY: Beginning at the Center of Section 34, T. 4 N., R. 3 W., Delta Township, Eaton County, Michigan: thence S 89°58'53"E 660.24 ft. along the east-west 1/4 line of Section 34; thence S 27°21'43"E 893.10 ft.; thence N 61'39'11"E 284.86 ft.; thence N 55°36'28"E 1597.68 ft., more or less, to the east line of section 34; thence S 00°03'24"E 36.33 ft. on the section line; thence S 55°36'28" W 3192.57 ft., more or less, to the north-south 1/4 line; thence along the north-south 1/4 line N 00011'34" W 1595.36 ft., more or less, to the point of beginning. EASEMENT AREA DESCRIPTION: An easement over the above described parcel said easement being 100 feet in width being 50 feet on each side of a line described as beginning at the southeast corner of the West 1/2 of the West 1/2 of the West 1/2 of the Northeast 1/4 of Section 34, T4N, R3W, Delta Township, Eaton County, Michigan: thence Southeasterly 1140 feet,more or less, to a point on the northerly right of way line of the CN Railroad lying 1041 feet northeasterly from the intersection of said northerly right of way line and the north and south 1/4 line of said Section 34. The side lines of said easement to be lengthened or shortened to terminate at the northerly and southerly lines of the above described parcel. Staff Commentary: The easement will permit the Eaton County Drain Commission to operate a certain county drain in a location easterly of the existing power plant building and coal supply trackage. The Board of Water and Light currently operates water lines, electrical lines and communications lines on part of the Easement Area and may have the need in the future to install additional facilities within the Easement Area. Immediate access to any of these existing or future additional facilities may be necessary at any time and therefore, as a condition of granting the easement, staff will require provisions allowing the Board immediate access and the ability to install additional facilities. Moved by Commissioner Creamer, seconded by Commissioner Duncan, that the resolution be approved. Board Meeting Page 123 July 24,2001 Action: Carried unanimously. esolution #2001-7-12 GRANTING OF EASEMENT—CARRIER CREEK DRAIN DRAINAGE (BYPASS DRAIN) RESOLVED, That in exchange for a payment of not less than$500.00, the Board authorizes the granting of an easement to the Carrier Creek Drain Drainage District#326 (Bypass Drain) for the construction, operation, maintenance and improvement of a certain county drain, subject to the approval of City Council as required under Article 2, Section 5-203.3 of the Lansing City Charter. The Easement Area is located on a portion of the east side of the Erickson Station property in Delta Township. Descriptions of both the Board of Water and Light Property and the Easement Area are given below. The Property owned by the BOARD is located at the street address 3725 S. Canal Road, located in Delta Township, County of Eaton, State of Michigan and legally described as: BOARD OF WATER AND LIGHT-OWNED PROPERTY: Beginning at the Center of Section 34, T. 4 N.,R. 3 W., Delta Township, Eaton County, Michigan: thence S 89°58'53"E 660.24 ft. along the east-west 1/4 line of Section 34; thence S 27°21'43"E 893.10 ft.; thence N 61°39'11"E 284.86 ft.; thence N 55°36'28" E 1597.68 ft.,more or less, to the east line of section 34; thence S 00°03'24" E 36.33 ft. on the section line; thence S 55036'28" W 3192.57 ft., more or less, to the north-south 1/4 line; thence along the north-south 1/4 line N 00011'34"W 1595.36 ft., more or less, to the point of beginning. EASEMENT AREA DESCRIPTION: An easement over the above described parcel said easement more particularly described as commencing at the center of Section 34, T4N, R3W, Delta Township, Eaton County, Michigan; thence S 89°58'53"E along the east and west 1/4 line of said Section 34 a distance of 660.24 feet; thence S 27°21'43"E 842.7 ft. to the true point of beginning of the easement herein described: thence continuing S 27°21'43"E 50.38 feet; thence S 55°36'28"W parallel with the northerly right of way line of the CN Railroad 266.11 feet; thence S 34°23'32"E 60 feet, more or less,to said right of way line; thence S 5596'28"W along said right of way line 50 feet; thence N 34°23'32"W 110 feet; thence N 55°36'28"E parallel with said northerly right of way line 322.27 feet, more or less, to the Point of Beginning. Staff Commentary: The easement will permit the Eaton County Drain Commission to operate a certain county drain in a location easterly of the existing power plant building and coal supply trackage. The Board of Water and Light currently operates water lines, electrical lines and communications lines on part of the Easement Area and may have the need in the future to install additional facilities within the Easement Area. Immediate access to any of these existing or Board Minutes July 24,2001 Page 124 future additional facilities may be necessary at any time and therefore, as a condition of granting the easement, staff will require provisions allowing the Board immediate access and the ability to install additional facilities. Moved by Commissioner Creamer, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. esolution #2001-7-13 COMFORT STREET/GLENROSE AVENUE PROPERTY RESOLVED, That the 22.8 acres of land at Sunset Street (Comfort Street Property), which is under the jurisdiction of the BWL but no longer required in its entirety for BWL purposes, be transferred to the Department of Parks and Recreation or such other City department as the Mayor may determine appropriate, in consideration of the payment of$39,350 to the BWL and subject to the City assuming all environmental liability associated with the parcels, and indemnifying the BWL against the same. RESOLVED FURTHER that this transfer shall be subject to a"use agreement" for BWL purposes and any easements or restrictions of record. Staff Commentary: This is a substitute resolution from the one provided in the Board meeting packet (Agenda item VII.J). BWL acquired this land in three parcels from 1944 to 1964; total consideration paid by BWL for the land was $39,350. More detailed information on this parcel is outlined in the Board meeting packet. Moved by Commissioner Haggart, seconded by Commissioner Creamer, that the resolution be approved. Discussion: General Manager Pandy reported that the City is acquiring this property at a discounted price due to their willingness to assume potential environment liability connected with the parcels. The City of Lansing needs to acquire riverfront property by an August 2001 timeline to offset land they conveyed for the new condominium development along Turner Sheet at Old Town. The Department of Natural Resources is requiring that sufficient land be acquired to offset land the City relinquished for the Ferguson condominium development. Mr. Pandy noted that the BWL has made some attempt to dispose of the property in the recent past, but street access to the property created an obstacle for development. In response to Commissioner Creamer's question on indemnification, Staff Attorney Wilhite stated that a separate document setting forth the terms of the indemnification is being prepared. General Manager Pandy noted that the City of Lansing and the BWL have another real estate matter to negotiate. This involves a portion of BWL property on Wise Road, which the City would like to acquire for park use. The City is interested in extending Benjamin Davis Park into a skateboard park and nature trails and would like to acquire some of the Wise Road land for that purpose. Board Meeting Page 125 July 24,2001 Action: Carried unanimously. General Manager Pandy presented two additional resolutions for Board consideration: esolution #2001-7-1 BWL TO ENTER INTO POWER SALES CONTRACT WITH MPPA TO PURCHASE 1MW OF GREEN POWER WHEREAS, the Michigan Municipal Power Agency(MPPA) was organized under Act 448 of the Public Acts of Michigan o976 (the of MPPA to'se�providee electric power and energy for tan heirpresent municipalities which are members and future needs; and WHEREAS, MPPA is empowered by the Act, among other things, to purchase, sell, transmit or otherwise use electric power and energy within or without the State of Michigan; and WHEREAS, the Board of Water and Light of the City of Lansing (BWL) has requested MPPA to obtain green power energy on its behalf; and WHEREAS, the BWL is a participant in the MPPA Green Power Project (Project), and WHEREAS, MPPA will enter into an Agreement with Granger Electric Company and Tower Kleber Limited Partnership to obtain 1 MW of green power energy for BWL from the Project, and WHEREAS, MPPA has entered into Agreement with Consumers Energy Company ("Consumers") to provide the necessary transmission to transmit the energy from Granger Electric Company and Tower Kleber Limited Partnership to BWL, NOW, THEREFORE, BE IT RESOLVED, That the BWL will enter into a Power Purchase Agreement with MPPA for the purpose of purchasing green power as follows: 1. Beginning August 1, 2001, and continuing until July 31, 2006 MPPA will purchase from Granger Electric Company and Tower Kleber Limited supplyPartnership the assoc deliver Michigato n on behalf of BWL, the actual annual energy Independent Power Producers Association Tradable Tags. the ate set 2. MPPA will purchase all the net energy and Grangerad from Ele Electric e Project Companyt and rTower forth Kleber the agreements between MPPA Limited Partnership. 3. MPPA will deliver the energy to BWL. 4. BWL will be responsible for capacity and energy losses on the Consumers transmission system. PPA 5. MPPA will bill BWL for the costs d Tower incurred Kleberunder Lthe mit dagreements Partnership, asbetween w�el as an Granger and between MPPA an Board Minutes July 24,2001 Page 126 incremental transmission charges incurred by MPPA in delivering the energy, all on a monthly basis. Staff Commentary: In April 2001, the Board authorized staff to negotiate with green power suppliers for 1Mw of green energy to supply the BWL Green Wise Program. Staff has been working with MPPA to finalize such agreements. Inasmuch as the BWL is a member of the MPPA Power Pool and the MPPA Green Power Project, the direct agreements with the green power suppliers must be with MPPA. The BWL in turn, must contract with MPPA to purchase the green power from MPPA. Formal agreements between MPPA and the suppliers, as well as between the BWL and MPPA, have been developed and are ready to execute. Before MPPA signs the agreements with the suppliers, it must first have a signed contract with the BWL. This resolution authorizes the entering into the contract with MPPA. An update to the recommendation from the April 2001 meeting is outlined below. Copies of proposed agreements between MPPA and the respective suppliers and MPPA and the BWL are available upon request. Green Power Recommendation -July 24, 2001 Update As a result of agreements negotiated with MPPA and the renewable suppliers, staff expects to purchase 1 Mw of renewable power. Staff intends to have a portfolio approach whereas .5 MW is from biomass (landfill gas) located in Lansing and the other .5 MW is from small hydro plants (500 kW each) located in Cheboygan County, Michigan. Suppliers Biomass: Granger Electric Company of Lansing, MI Hydro: Tower Kleber of Midland, MI Energy: The contract will be for a total of 8,760,000 kWhs per year(4,380,000 kWhs from each supplier). This will allow the BWL to sell 2717 blocks of 250 kWh/rnonth to customers who will be willing to pay the existing green power rate of$7.50 per block. Costs: The program's levelized net annual costs will be $207,500. This includes the cost of generation, transmission, and BWL overhead. (This amount does not include brand image advertising associated with the green power program, which is included in the Communication Services' advertising budget.) Revenue: At the $7.50/block rate, the BWL will have after five (5) years a net present value excess cash of$136,000. Also, at this rate the program will break even after the first year assuming full subscription. This excess cash is to be the reserve that the BWL will use to replace suppliers that no longer fit the specification or for adding other renewable energy purchase options (i.e. wind power) to the portfolio. Comments: The negotiated agreement reflects an 11% increase in the anticipated delivered cost of the green sources from the recommendation submitted in April. This is due to higher than Board Meeting Page 127 July 24,2001 expected transmission costs. Even so, at the $7.50/block rate, the program still results in a net present value of excess cash of $136,000 for the five-year period. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. d June 26, Discussion: General Manager Pandy noted that Board R eol n Power Project for thution 2001-6-7 e purpose of 2001) authorized the BWL to participate in the MPPA G determining the economics and feasibility of obtaining energy from the the BWL to partlicipate in p oject Power Project. The proposed resolution above would authorize through MPPA. Commissioner Callen question whether staff was going t an aier Cook nt until the o subscribedrogram is d that it wasst 's before committing to the suppliers. Assistant General M g recommendation that the supply be secured in advance of full subscription, and negotiations have been held under that premise. Assistant General Manager Bill Cook reported that since the launch of the Green000 Wise program ription on June 28`h, 300 customers havepresentin 100 000 elec0tric residential customers. Mr. availability--this represents 3% of the BWL's nearly Cook noted that 3% is typically a number that most utin inserts are being mailed to all BWL lities across the nation who are offering a green power program set as their goal. Green Wise brochure electric customers with their utility bills through the month of July. Mr. Pandy reported that the BWL was recognized for its Green Rlse sectChalrrrlan Calric Power ge and am at the July 16, 2001 City Council meeting by Congressman Mike Rogers. tribute. In response to Commissioner Mr. Pandy were present to receive the Congressional Creamer's inquiry, Communications Director John Striekle�orepaomrte$3 at,000e orbmarketing c sts approximately $130,000 for promoting the green pow p gl and $100,000 for brand image advertisinme green cower advocction with ates have reported teen power.) he BWL is Creamer remarked that contrary to what so gr P clearly allocating a fair amount of time, effort and funds into the green power project. Action: After considerable discussion,the motion was carried unanimously. esolution;#2001-7-1 RESOLVED, That the liabilities related to the SFAS71 deferred exped Workers'ense en e be recognized and ion Program be recorded and a corresponding S 7 p amortized as payments are processed. Staff Commentar�.' The BWL has adopted as partof Financial Accounting Standards (SFAS)No. This Accounting Standards Board(FASB) Statement 71, "Accounting for the Effects of Certain Types oW nRegulatioeffectively recording ean asseworhe BL to defer the recognition of revenues and exp liability,until a later period when these revenues or expenses have been considered by the BWL's ratemaking body(the Board) in its establishment of allowable rates. This is an Board Minutes July 24,2001 Page 128 accounting change recommended by Deloitte & Touche during the last audit, and management concurs. Cambridge Integrated Services Group, Inc. provides the claim management services for the Self-Insured Workers' Compensation Program and provides an actuarial estimate of the future workers' compensation liability. As of June 30, 2001, the estimated uninsured liability is $1,307,475. There is no effect on the income statement, but the balance sheet will show increased liabilities and a deferred expense. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None GENERAL MANAGER'S REMARKS Electric System Nearly Sets a Peak. General Manager Pandy reported that the BWL system nearly set a gross peak today at 509.45 Mw. A sheet depicting historical peak values for the BWL and the Michigan Public Power Agency was distributed. MPPA also nearly set a peak on July 24`h at 732.88 Mw. The BWL system has a peak capacity of 650 Mw, with a 16%reserve requirement. On non-peak days, the BWL maintains an approximately 30%reserve. Mr. Pandy congratulated Dick Peffley, Director of Production, and his staff for their hard work this spring in maintaining all units in good operation and achieving a remarkable output in spite of the very hot weather. Customer Attitude Survey Results Reviewed. Director of Communications, John Strickler, presented an executive summary of the results of the semi-annual residential customer survey electric customer satisfaction level stayed about the same, while others in the conducted in May by Market Strategies, Inc. (MSI). Mr. Strickler reported that the BWL's industry slipped by about 8%. The survey shows a disparity in customer satisfaction betwe have and electric utilities over the last three surveys en the water . This is believed to be due in part to service interruptions from the combined sewer overflow project and the long standing problem of confusion over rates-- the BWL bills for the City of Lansing's sewer services. The survey Board Meeting Page 129 July 24,2001 indicates that the BWL ranked above average in 21 of 22 benchmark comparisons measured by MSI. A copy of the report was provided to each Commissioner with the meeting packet. al Mr. Strickler noted that the overall customer satisfaction resultsresults for o is dential cusdtomers.nal customers were similar to the results of the electric utility Commercial and industrial customers are surveyed every other year. In response to questions raised by Commissioners Duncan and Omer attitude survey resins tlen,Mr. Strickler othat p latest customer staff is in the process of rerunning a model using the better focus advertising and other resource dollars. This information will be shared with the Board. d that the is Emergency Action Plan Exercise Planned. General Managereak.dThe first tabletop rePOrte eBxevr ise going to exercise an emergency action plan simulating a am will be August 15th� A functional exercise involving other city partments is scheduled to take ain condition with high water place on September 12th lating the consequences of a severe simu levels and the failure of the Moores Park Dam. Other homes floodedated . Aers will involve n annual emergency water main breaks, electric line breaks and businesses andomes action plan exercise is required by the City and the Federal cato n between all city y departments and Commission(FERC) to ensure there is good commum that a reliable response plan is in place. REMARKS BY COMMISSIONERS Ottawa Station Update: Conunissioner Duncan requested an update on the Ottawa Station redevelopment project. Peter Berns, Chief Operating Officer of Convergency Center Corporation,eported that at thas present to e the Board on the status of the Ottawa Station redevelopment project. request of his partner,th e name of his local development partnerprice for the Ottawa Station property started, the is due to the fact that since project negotiations "has been a moving target." The shape of the deal for ConvernBerns emphasized Corporation that based on local developer has changed since the onset of negotiations. Mr.the current sale price,the telecom hotel project at Ottawa Station i not fi anciallhas tohe BWL ande noted that he is cognizant of the value and emotional aspects this pro the sale price does not allow the City as it endeavors to redevelop the downtown area,however, his partner to make a firm commitment. Mr. Berns suggested finding a w he would come closer to the original deal. He stated that if the Board chooses to pursue other understand. Commissioner Duncan asked what the time frames are for reaching resolution. Mr. Berns responded that the Ottawa Station redevelopment cosproject would have d'socus comestarted en more open conversation when it comes to the acquisition approximately nine months ago, Convergency Since mesthelly looking at a zero cost of the property has to take control of the property for development. Since Board Minutes July 24,2001 Page 130 dramatically increased. Mr. Berns said that if the original number can be negotiated, he would be very excited about doing the project. There being no further questions, the Commissioners thanked Mr. Berns for his update. Inquiries on Sole Source Report: Commissioner Duncan reported that in reviewing the Quarterly Sole Source Report for the period covering April 1 through June 30, 2001, she noticed a phrase that was repeatedly used for one of the reason clauses, which stated: "compatibility, continuity, standardization." She asked if when agreement is made for a sole source purchase, whether the original purchase with which the BWL is trying to be compatible was competitively procured. One example she pointed to pertained to a clothing item. General Manager Pandy said he would look into the procedure for that particular purchase and report back to the Board. On a related issue in the Quarterly Sole Source Report, Commissioner Christian inquired about a purchase order with the reason clause stating, "only vendor meeting time constraints." He asked if the BWL or the vendor generated the time constraints. He emphasized the importance of long- range planning to assure the best bidding process to ultimately lower the total cost of the job. Director of Production Dick Peffley reported that the example cited, related to onsite stack airflow curve testing, which was scheduled one year in advance. The Environmental Protection Agency(EPA) and the Michigan Department of Environmental Quality(DEQ)require the testing. Mr. Peffley clarified that one of the units failed the first round of testing. After the unit was repaired, it left a short time frame to take a second test to meet the certification deadline. General Manager Pandy reported that staff continuously reviews its planned capital projects related to production and delivery of services. He noted that the capital projects forecast is sometimes modified as the result of schedule requirements from City of Lansing projects or other factors outside of the BWL's nornial parameters. Mr. Pandy emphasized that as part of competitive strategy each Process of the BWL endeavors to perform work efficiently and economically. Barring time constraints,materials and services for all projects are competitively bid. Separate Water Meters for Outside Watering Advocated. Commissioner Creamer requested that the issue of separate water meters for lawn sprinkling be included as an agenda item for the joint dinner meeting with the Lansing City Council scheduled for August 23rd. He expressed concern that Lansing customers are not watering their lawns because the expense has become prohibitive due to outside water usage being tied to the sewer charge. Request to Review Senior Citizen Electric Rate: Commissioner Creamer requested a management review of the Senior Citizen Rate No. 21 for electric service. He noted that during extremely hot weather, the commodity charge threshold for the first 300 kWh is rapidly reached. Chief Financial Officer Dana Tousley responded that the economic crossover point between the standard Residential Electric Service Rate No. 1 and the Senior Citizen Rate No. 21 is reached at 600 kWh per month. After that threshold, a premium rate is charged. Mr. Tousley agreed to prepare a report outlining the parameters of the Senior Citizen Rate that shows the financial Board Meeting July 24,2001 Page 131 the threshold for that rate during peak months. This information will be sent to impact of raising the Commissioners. BWL empl°Yee Calvin Jones on his recent election to the Commissioner Christian congratulated Delta Township School Board. concern Discussed: Commissioner Callen expressed than has Management Policy Concerns policy is more aggressive Tree Manag Management Policy. He asked if the p the BWL's new Tree Manag in recent times' He omtnented that some of the items listed s over Callen noted been adoptunder the Tree Clearing Guidelines seemed harsh. Comm Practices sheet that trees are an enormous resource. Management Policy is more aggressive. The Manger Pandy responded that the Tree Manage a four to five-year cycle. This new General Mang goal is to reduce the number of BWL system will now be scofBlWL Forre ter Pete Baker. The g s Mr Pandy reported that effort is under the direction of o stem outage tree-related outages,which accounts for about 20/o of system s forester to determine the best the BWL's forester works closely with the City of Lansing tree. A presentation on approach in dealing with particula r tree-related situations and homeowners He noted that from Council on July 12th. Mr.Pandy offered to bung an economic standpoint, it is more costly to remove a tree than to m this topic was given to members of the City this matter to the Board for review and input' to a Board subcommittee for review and suggested referring this item Commissioner Creamer sugg lore this. (1)the financial impact of removing trees the City of Lansing is planting on right of ways and their discussion. Other tree-relatedof es to explore tree stumps and(2) the typ growth rate. Commissioner Callen announced that dicated by thealang Committee Assignments Pending: based on committee preferences Board committee assignments shortly, Commissioners. EXCUSED ABSENCE ommissioner Duncan and second On motion by C ed by Commissioner Haggart, that the absence of Commissioner Royal be excused. Carried unanimously. PUBLIC COMMENTS THAT MEMBERS OF THE PUBLIC ARE WELCOME TO THE CHAIR ANNOUNCED O ANY BOARD OF WATER AND LIGHT SUBJECT. SPEAK TO THE BOARD None. Board Minutes July 24,2001 Page 132 ADJOURNMENT On motion by Commission adjourned byer Duncan, unanimous consent � d seconded by Commissioner Wonch, the meeting p.m. lslMary E, Sova, Secretary Filed with Lansing City Clerk July 30, 2001 16:59 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 2/21 113 Preliminary 11finutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, July 24, 2001 The Board of Commissioners met in regular session at 5:30 pall. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairman Ronald Callen called the meeting to order. Present: Commissioners Ronald C. Callen, Charles M. Creamer, Ernest J. Christian, Nancy W. Duncan, Tim Haggart and Nancy A. Wonch- 6 (One Commissioner appointment pending.) Absent: Commissioner Diane R. Royal. The Secretary declared a quorum present. All said the Pledge of Allegiance. Chairman Callen introduced Tim Haggart and Nancy A. Wonch and welcomed tern to the Board as they start their four-year term as Commissioners of the Board of Water and Light. APPROVAL OF MINUTES Motion made by Commissioner Christian, seconded by Commissioner Duncan, to approve the minutes of regular session held June 26, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. General Manager Pandy introduced BWL women's water tapping team members Barbara Davis, Bobbi Johnson and Diana Paul. The fourth member, Patricia Clark, was not present. He reported that the BWL women's team, in their first year of competition at the American Water 16:59 JUL 32, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 3/21 Board Minutes Page 114 July 24,2001 Works Association (AWWA) national conference in Washington, D.C. (June 18-22), brought home a third place national trophy with a time of 2.27.59. The BWL men's team members Leon Flores, Jim Valentine, and Remecho Sanders took second place with a time of 1.23.47. The fourth member, Randy Jones, was not present. Brian McLeod, Manager of Transmission and Distribution, thanked General Manager Pandy and the Commissioners for supporting the teams' involvement in the AWWA water tapping competitions. He stated that both teams worked hard to prepare for the competition, and they are looking forward to taking first place at next year's national event m New Orleans. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES HUMAN RESOURCES COMMITTEE REPORT The Human Resources Committee met on June 26, 2001, at 4:00 p.m. to consider salary adjustments for non-bargaining employees, Corporate Share the Success Incentives for non- bargaining and bargaining employees, and Process Incentives for eligible non-bargaining employees. Committee members present were: Commissioners Ronald Callen, Rosemarie Aquilina, and Diane Royal. Commissioner David O'Leary was also present. Absent was Commissioner Nancy Duncan. Linda Gardner, Director of Human Resources, presented the rationale for the recommended performance pay increase matrix and salary range adjustments for norrbargaining employees. Paul Reagan of Dorey, Reagan & Associates presented the results of the 2000-01 Benchmark Job Market Assessment, comparing salaries paid by the Board of Water and Light(BWL) in eight skill families with salaries for similar jobs in a variety of local, regional and national companies. The analysis indicated that BWL salaries in four of the eight skill families have fallen below competitive market rates and should be adjusted upward in amounts ranging from two percent to four percent. Pay in the other four skill families remains at or above the market. Following review and discussion, the Human Resources Committee concurred with staff's recommendations. The Human Resources Committee recommends approval of the following resolutions: 17:00 JUL 32, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 4/21 Page 115 rd Meeting July 24, 2001 esolution#2001-7-1 Non-Bargaining Salary Recommendations for Fiscal Year 2001-02 RESOLVED, That the Performance Increase Matrix as reviewed with the Human Resources Committee be adopted. RESOLVED FURTHER, That the Non-Bargaining Unit Skill Family Ranges for Fiscal Year 2001-02 be adjusted as follows: (a) That Skill Family Ranges found to be below market be moved by the percentage required to be competitive with the market. (b) That Skill Family Ranges requiring no competitive adjustment be moved upward by 1.75 percent(half the change in the CPI) to partially offset the effects of inflation. Staff noted that the pay range recommendation would have no impact on individual pay increases for non-bargaining employees. That will be determined by the performance matrix recommendation. Conversely, the degree of movement of the pay ranges for certain employees will affect whether the employee's annual performance increase rolls into their base pay or is awarded as a lump sum. esdlutton Corporate Share Share the Success for Fiscal Year 2001-02 RESOLVED, That from 0 to 2.5% of fiscal year base pay be available for Corporate Share the Success payments to eligible Non-Bargaining and Bargaining Unit employees. RESOLVED FURTHER, That the level of BWL net income will determine the extent to which the Corporate Share tine Success incentive will be paid. Net income above the approved budgeted level will be allocated 50-50 between the BWL and the incentive pay plan fund. RESOLVED FURTHER, That payouts be based on BWL's performance on its fiscal year 2002 corporate measures in four areas: 1. Financial Performance 2. Customer Satisfaction 3. Internal Business Processes 4. Employee Learning and Development Resolution W 2001=7-3 ..................... .................................. Process Incentive Pay for Fiscal Year 2001-02 RESOLVED, that from 0 to 5.0% of fiscal year base pay be available for Process Incentive payments to eligible Non-Bargaining Unit employees. 17:00 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 5/21 Board Minutes Page 116 July 24,2001 RESOLVED FURTHER, That payouts will be made if BWL net income and the BWLrwide pool of hard dollar savings reach sufficient levels. RESOLVED FURTHER, That payouts be based on Process performance on their Fiscal Year 2002 Process measures in four areas: 1. Financial Performance 2. Customer Satisfaction 3. Internal Business Processes 4. Employee Learning and Development There being no further business, the meeting adjourned at 5:00 p.m. Respectfully submitted, Ronald C. Callen, Chair Human Resources Committee Moved by Commissioner Christian, seconded by Commissioner Creamer, that the Report of the Human Resources Committee be accepted. (The resolutions incorporated in the report were considered separately.) Action: Carried unanimously. At the request of Chairman Callen, Human Resources Director Linda Gardner briefed the Commissioners on the three compensation-related resolutions included in the committee report. She provided background on how the Performance Increase Matrix and Skill Family Ranges for non-bargaining employees were developed. Non-Bargaining unit employees would be subject to a performance increase in the range of 0 to 7.5 percent, based on the proposed Performance Increase Matrix. The Skill Family Ranges would be moved from 1.75 percent to 4 percent. Moved by Commissioner Christian, seconded by Commissioner Creamer, that the Non- Bargaining Bargaining Salary Recommendations for Fiscal Year 2001-02 (Resolution#2001-7-1) be adopted. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Creamer, that the Corporate Share the Success payment recommendation for Fiscal Year 2001-02 (Resohitlon # 2001-7-2) be adopted. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the Process Incentive pay recommendation for Fiscal Year 2001-02 (Resolution#2001-7-3) be adopted. Action: Carried unanimously. 17:01 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 6/21 Page 117 rd Fleeting July 24,2001 GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolutiorc 4:2001-77. FIRE HYDRANT CHARGES RATE NO. 6 RESOLVED, that the attached rate schedule, Fire Hydrant Charges Rate No. 6, be adopted and made effective January 1, 2001. Sta#-Comme77tary: This rate schedule was the subject of a public hearing on June 26, 2001 and no comments were received. The proposed rates would be retroactive back to January 1, 2001. Since this is the correction of an error, staff delayed the implementation of the incorrect rates. All customers on this rate have been billed the lower rate since that date. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #'2001-7 STEAM RATES 1, 2 AND 3 RESOLVED, that the attached rate schedules, Steam Rates 1, 2 and 3 be adopted and made effective August 1, 2001. StaZf ConznzeTzta_ry: These rate schedules were the subject of a public hearing on June 26, 2001 and no comments were received. Implementation effective August 1, 2001 will change the calculation of the steam fuel cost adjustment applied to sales in August 2001. Moved by Commissioner Haggart, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution.#.mo]71 RELEASE OF EASEMENT (Corner of Lenawee and Capitol— Recorded 2/21/30) WHEREAS, Frank L. Young and Eva F. Young executed a certain easement conveying and warranting to the Board of Water & Light forever, such rights as recorded in Liber 17 of Miscellaneous Records, Page 485, in the Register of Deeds, Ingham County, Michigan, February 21, 1930; and 17:02 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 7/21 Board Minutes Page 118 July 24,2001 WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The land on which said right is granted is described as follows: The East forty-four and one half(44-1/2) feet of the North five (5) feet of the South eighteen (18) feet of the West ninety-four (94) feet and, the south eighteen (18) feet of the West five (5) feet of the East seventy-eight (78) feet of Lot Five (5). All of the above described lands being in Block One Hundred and Forty-Eight(148) in the City of Lansing, County of Ingham, State of Michigan. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Neater and Light release, discharge and vacate said easement on the above described property and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. Staff Commentary: This easement was for steam lines that probably served residential customers prior to the hotel and restaurant/lounge being constructed at the corner of Lenawee and South Capitol Avenue. The steam lines are abandoned and the easement is no longer required. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolu ion# 2001 7 RELEASE OF EASEMENT (Corner of Lenawee and Capitol— Recorded 12/9/81) WHEREAS, Capitol Park Motor Hotel, Inc. executed a certain easement conveying and warranting to the Board of Water& Light forever, such rights as recorded in Liber 1383 of Deeds, Page 585, in the Register of Deeds, Ingham County, Michigan, December 9, 1981; and WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat; City of Lansing, has requested the release of said easement; more specifically described as follows: Easement Description: The land on which said right is granted is described as follows: That part of lots 1, 2, 11 and 12 of Block 148, Original Plat of the City of Lansing, Ingham County, Michigan, described as: Beginning on the North line of Block 148 at a point 122.0 feet East of the North West corner of 17:02 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 8/21 Page 119 rd Meeting July 24, 2001 Block 148; thence South 80.5 feet on a line 17.0 feet of the East wall of the six story apartment building; thence East 69.6 feet along an existing building wall; thence North 65.4 feet; thence East 30 feet; thence North 15 feet to the North line of block 148; thence West along the North line of Block 148 to the point of beginning. WHEREAS, this easement as described above is not needed to contuiue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Water and Light release, discharge and vacate said easement on the above described property and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. Sta#'Commentar: This easement was for electric, water, and steam facilities serving the hotel and restaurant/lounge constructed at the comer of Lenawee and South Capitol Avenue. The steam lines are abandoned and the electric and water facilities are being relocated. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resdution be approved. Action: Carried unanimously. esolutton# 2001-1 RELEASE OF EASEMENT(Corner of Lenawee and Capitol—Recorded 1/19/82) WHEREAS, Capitol Park Limited Dividend Housing Association executed a certain easement conveying and warranting to the Board of Water & Light forever, such rights as recorded in Liber 1385 of Deeds, Page 1157, in the Register of Deeds, Ingham County, Michigan, January 19, 1982; and WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The East 17 feet of the North 80.5 feet of that part of lots 8, 9, 10, 11, and 12, Block 148, Original Plat of the City of Lansing Ingham County, Michigan, described as: beginning at the NW corner of Lot 12, Block 148; thence East 122.0 feet on the North line of Block 148; thence South 90.0 feet on a line 17.0 feet East of the East wall of the hotel; thence Southwesterly 7.1 feet; thence South 72.0 feet on a line 12.0 feet East of the East wall of the hotel; thence East 4.0 feet; thence South 163.0 feet to the South line of Lot 8; then West 121.0 feet to the West line of Block 148; thence North 330.0 feet on the West line of Block 148 to the point of 17:03 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 9/21 Board Minutes Page 120 July 24,2001 beginning. Also, the East 36.0 feet of the West 99.0 feet of Lot 7, Block 148, Original Plat of the City of Lansing, Ingham County, Michigan. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Water and Light release, discharge and vacate said easement on the above described property and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. This easement was for electric, eater, and steam facilities serving the hotel and restaurant/lounge constructed at the corner of Lenawee and South Capital Avenue. The steam lines are abandoned and the electric and water facilities are being relocated. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution RELEASE OF EASEMENT(Corner of Lenawee and Capitol—Recorded 12/21/30) WHEREAS, Harry J. Digby executed a certain easement conveying and warranting to the Board of Water & Light forever, such rights as recorded in Liber 17 of Miscellaneous Records, Page 483, in the Register of Deeds, Ingham County, Michigan; February 21, 1930, and WHEREAS, Tom Marchesano, P.E., representing Michigan Catholic Conference, owner of part of Block 148, Original Plat, City of Lansing, has requested the release of said easement, more specifically described as follows: Easement Description: The land on which said right is granted is described as follows: the East ninety-six(96) feet of the North five (5) feet of the South eighteen (18) feet; also the South thirteen(13) feet of the West five (5) feet of the East sixteen (16) feet; also the South thirteen(13) feet of East five (5) feet of the West sixty-nine (69) feet, and also the North fifty-one (51) feet of the East five (5) feet of Lot eight(8). All of the above described lands being in Block One Hundred and Forty-Eight(148) in the City of Lansing, County of Ingham, State of Michigan. WHEREAS, this easement as described above is not needed to continue the operations of the Board of Water and Light. NOW THEREFORE, BE IT RESOLVED, That the Board of Commissioners of the Board of Neater and Light release, discharge and vacate said easement on the above described property 17:04 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 10121 Page 121 rd Meeting July 24, 2001 and that the General Manager and Corporate Secretary be authorized to execute the release of easement, subject to the requirement of the Lansing City Charter. Further that the Corporate Secretary be directed to record the release of easement with the Ingham County Register of Deeds. StafCommentary: This easement was for steam lines that probably served residential customers prior to the hotel and restaurant/lounge being constructed at the corner of Lenawee and South Capitol Avenue. The steam lines are abandoned and the easement is no longer required. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution -9-2-001-7-T. . ................. ............... . WATER SERVICE AGREEMENT-WINDSOR TOWNSHIP WHEREAS, the Charter Township of Windsor (TOWNSHIP) is in need of a water distribution system to service certain designated areas of the TOWNSHIP; and WHEREAS, the TOWNSHIP is authorized to enter into an Agreement with the Board for water service, and WHEREAS, the Board owns and operates a water supply system and distribution system and has determined that its water supply and distribution system is adequate to provide services to the TOWNSHIP subject to the limitations and conditions set forth in the Water Service Agreement; be it RESOLVED, that the Board authorizes the General Manager and Corporate Secretary to enter into a Water Service Agreement and Supplemental Agreements to provide service to Windsor Township within the WATER SERVICE AREA, subject to approval of all documents by the staff attorney. Moved by Commissioner Duncan, seconded by Commissioner Christian, that the resolution be approved. Discussion: General Manager Pandy reported that Windsor is a new township to be served by the BWL. A new residential and commercial development is going into that area, with the developer paying all of the water system extension costs. This will be an expense neutral item for the BWL. General Manager Pandy also reported that with the Board's authorization at the June 26, 2001 meeting, R. W. Beck has been engaged to do a performance audit on growth and expansion, cost accounting methods, customer profitability and rate and fee processes and practices. An independent evaluation will be reviewed with the Board in the near future. Action: Carried unanimously. 17:05 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 11121 Board Minutes Page 122 July 24, 2001 esolution # 2001-7-11 GRANTING OF EASEMENT— CARRIER CREEK DRAIN DRAINAGE (AMAIN DRAIN) RESOLVED, that in exchange for a payment of not less than $500.00, the Board authorizes the granting of an easement to the Carrier Creek Drain Drainage District#326 (Main Drain) for the construction, operation, maintenance and improvement of a certain county drain, subject to the approval of City Council as required under Article 2, Section 5-203.3 of the Lansing City Charter. The Easement Area is located on a portion of the east side of the Erickson Station property in Delta Township. Descriptions of both the Board of Water and Light Property and the Easement Area are given below. The Property owned by the BOARD is located at the street address 3725 S. Canal Road, located in Delta Township, County of Eaton, State of Michigan and legally described as: BOARD OF WATER AND LIGHT-OWNED PROPERTY: Beginning at the Center of Section 34, T. 4 N., R. 3 W., Delta Township, Eaton County, Michigan: thence S 89°58'53" E 660.24 ft. along the east-west 1/4 line of Section 34; thence S 27°21'43" E 893.10 ft.; thence N 61'39'11" E 284.86 ft.; thence N 55°36'28" E 1597.69 ft., more or less, to the east line of section 34; thence S 00°03'24" E 36.33 ft. on the section line; thence S 55°36'28"W 3192.57 ft., more or less, to the north-south 1/4 line; thence along the north-south 1/4 line N 00011'34"W 1595.36 ft., more or less, to the point of beginning. EASEMENT AREA DESCRIPTION: An easement over the above described parcel said easement being 100 feet in width being 50 feet on each side of a line described as beginning at the southeast corner of the West 1/2 of the West 1/2 of the West 1/2 of the Northeast 1/4 of Section 34, T4N, R3W, Delta Township, Eaton County, Michigan: thence Southeasterly 1140 feet, more or less, to a point on the northerly right of way line of the CN Railroad lying 1041 feet northeasterly from the intersection of said northerly right of way line and the north and south 1/4 line of said Section 34. The side lines of said easement to be lengthened or shortened to terminate at the northerly and southerly lines of the above described parcel. Sta#-Commentary: The easement will permit the Eaton County Drain Commission to operate a certain county drain in a location easterly of the existing power plant building and coal supply trackage. The Board of Water and Light currently operates water lines, electrical lines and communications lines on part of the Easement Area and may have the need in the future to install additional facilities within the Easement Area. Immediate access to any of these existing or future additional facilities may be necessary at any time and therefore, as a condition of granting the easement, staff will require provisions allowing the Board immediate access and the ability to install additional facilities. Moved by Commissioner Creamer, seconded by Commissioner Duncan, that the resolution be approved. 17:06 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 12/21 Page 123 rd Fleeting July 24, 2001 Action: Carried unanimously. esolu ion 1# 2601- 1 GRANTING OF EASEMENT—CARRIER CREEK DRAIN DRAINAGE (BYPASS DRAIN) RESOLVED, That in exchange for a payment of not less than $500.00, the Board authorizes the granting of an easement to the Carrier Creek Drain Drainage District 4326 (Bypass Drain) for the construction, operation, maintenance and improvement of a certain county drain, subject to the approval of City Council as required under Article 2, Section 5-203.3 of the Lansing City Charter. The Easement Area is located on a portion of the east side of the Erickson Station property in Delta Township. Descriptions of both the Board of Water and Light Property and the Easement Area are given below. The Property owned by the BOARD is located at the street address 3725 S. Canal Road, located in Delta Township, County of Eaton, State of Michigan and legally described as: BOARD OF WATER AND LIGHT-OWNED PROPERTY: Beginning at the Center of Section 34, T. 4 N., R. 3 W., Delta Township, Eaton County, Michigan: thence S 89°58'53" E 660.24 ft. along the east-west 1/4 line of Section 34; thence S 27°21'43" E 893.10 ft.; thence N 61'39'11" E 284.86 ft.; thence N 55°36'28" E 1597.68 ft., more or less, to the east line of section 34; thence S 00°03'24" E 36.33 ft. on the section line; thence S 55°36'28"W 3192.57 ft., more or less, to the north-south 1/4 line; thence along the north-south 1/4 line N 00011'34" W 1595.36 ft., more or less, to the point of beginning. EASEMENT AREA DESCRIPTION: An easement over the above described parcel said easement more particularly described as commencing at the center of Section 34, T4N, R3W, Delta Township, Eaton County, Michigan; thence S 89°58'53" E along the east and west 1/4 line of said Section 34 a distance of 660.24 feet; thence S 27°21'43" E 842.7 ft. to the true point of beginning of the easement herein described: thence continuing S 27°21'43" E 50.38 feet, thence S 55°36'28"W parallel with the northerly right of way line of the CN Railroad 266.11 feet, thence S 34°23'32" E 60 feet, more or less, to said right of way line; thence S 55°36'28"W along said right of way line 50 feet; thence N 34°23'32"W 110 feet; thence N 55°36'28" E parallel with said northerly right of way line 322.27 feet, more or less, to the Point of Beginning. Staf-Connnentary: The easement will permit the Eaton County Drain Commission to operate a certain county drain in a location easterly of the existing power plant building and coal supply trackage. The Board of Water and Light currently operates water lines, electrical lines and communications lines on part of the Easement Area and may have the need in the future to install additional facilities within the Easement Area. Immediate access to any of these existing or 17:06 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 13/21 Board Minutes Page 124 July 24,2001 future additional facilities may be necessary at any time and therefore, as a condition of granting the easement, staff will require provisions allowing the Board immediate access and the ability to install additional facilities. Moved by Commissioner Creamer, seconded by Commissioner Duncan, that the resolution be approved. Action: Carved unanimously. esoluhon #'2001 '7 13 COMFORT STREET/GLENROSE AVENUE PROPERTY RESOLVED, That the 22.8 acres of land at Sunset Street(Comfort Street Property), which is under the jurisdiction of the BWL but no longer required in its entirety for BWL purposes, be transferred to the Department of Parks and Recreation or such other City department as the Mayor may determine appropriate, in consideration of the payment of$39,350 to the BWL and subject to the City assuming all environmental liability associated with the parcels, and indemnifying the BWL against the same. RESOLVED FURTHER that this transfer shall be subject to a"use agreement"for BWL purposes and any easements or restrictions of record. Staff Commentary: This is a substitute resolution from the one provided in the Board meeting packet(Agenda item VII.J). BWL acquired this land in three parcels from 1944 to 1964; total consideration paid by BWL for the land was $39,350. More detailed information on this parcel is outlined in the Board meeting packet. Moved by Commissioner Haggart, seconded by Commissioner Creamer, that the resolution be approved. Discussion: General Manager Pandy reported that the City is acquiring this property at a discounted price due to their willingness to assume potential environment liability connected with the parcels. The City of Lansing needs to acquire riverfront property by an August 2001 timeline to offset land they conveyed for the new condominium development along Turner Street at Old Town. The Department of Natural Resources is requiring that sufficient land be acquired- to offset land the City relinquished for the Ferguson condominium development. Mr. Pandy noted that the BWL has made some attempt to dispose of the property in lie recent past, but street access to the property created an obstacle for development. In response to Commissioner Creamer's question on indemnification, Staff Attorney Wilhite stated that a separate document setting forth the terms of the indemnification is being prepared. General Manager Pandy noted that the City of Lansing and the BWL have another real estate matter to negotiate. This involves a portion of BWL property on Wise Road, which the City would like to acquire for park use. The City is interested in extending Benjamin Davis Park into a skateboard park and nature trails and would like to acquire some of the Wise Road land for that purpose. 17:07 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 14/21 Page 125 rd Meeting July 24, 2001 Action: Carried unanimously. General Manager Pandy presented two additional resolutions for Board consideration: esolution #':2001-7-Z' BWL TO ENTER INTO POWER SALES CONTRACT WITH MPPA TO PURCHASE 11%1W OF GREEN POWER WHEREAS, the Michigan Municipal Power Agency(MPPA) was organized under Act 448 of the Public Acts of Michigan of 1976 (the"Act") to provide a means for those Michigan municipalities which are members of MPPA to secure electric power and energy for their present and future needs, and WHEREAS, MPPA is empowered by the Act, among other things, to purchase, sell, transmit or otherwise use electric power and energy within or without the State of Michigan; and WHEREAS, the Board of Water and Light of the City of Lansing (BWL) has requested MPPA to obtain green power energy on its behalf, and WHEREAS, the BWL is a participant in the MPPA Green Power Project(Project), and WHEREAS, MPPA will enter into an Agreement with Granger Electric Company and Tower Kleber Limited Partnership to obtain 1 MW of green power energy for BWL from the Project, and WHEREAS, MPPA has entered into Agreement with Consumers Energy Company ("Consumers") to provide the necessary transmission to transmit the energy from Granger Electric Company and Tower Kleber Limited Partnership to BWL, NOW, THEREFORE, BE IT RESOLVED, That the BWL will enter into a Power Purchase Agreement with MPPA for the purpose of purchasing green power as follows: 1. Beginning August 1, 2001, and continuing until July 31, 2006 MPPA will purchase from Granger Electric Company and Tower Kleber Limited Partnership and deliver to BWL, on behalf of BWL, the actual annual energy supply and the associated Michigan Independent Power Producers Association Tradable Tags. 2. MPPA will purchase all the net energy generated from the Project at the rate set forth m the agreements between MPPA and Granger Electric Company and Tower Kleber Limited Partnership. 3. MPPA will deliver the energy to BWL. 4. BWL will be responsible for capacity and energy losses on the Consumers transmission system. 5. MPPA will bill BWL for the costs incurred under the agreements between MPPA and Granger and between MPPA and Tower Kleber Limited Partnership, as well as any 17:08 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 15/21 Board Minutes Page 126 July 24,2001 incremental transmission charges incurred by MPPA in delivering the energy, all on a monthly basis. Sta{TCommewary: In April 2001, the Board authorized staff to negotiate with green power suppliers for 1Mw of green energy to supply the BWL Green Wise Program. Staff has been working with MPPA to finalize such agreements. Inasmuch as the BWL is a member of the MPPA Power Pool and the MPPA Green Power Project, the direct agreements with tl-r, green power suppliers must be with MPPA. The BWL in turn, must contract with MPPA to purchase the green power from MPPA. Formal agreements between MPPA and the suppliers, as well as between the BWL and MPPA, have been developed and are ready to execute. Before MPPA signs the agreements with the suppliers, it must first have a signed contract with the BWL. This resolution authorizes the entering into the contract with MPPA. An update to the recommendation from the April 2001 meeting is outlined below. Copies of proposed agreements between MPPA and the respective suppliers and MPPA and the BWL are available upon request. Green Power Recommendation -July 24, 2001 Update As a result of agreements negotiated with MPPA and the renewable suppliers, staff expects to purchase 1 Mw of renewable power. Staff intends to have a portfolio approach whereas .5 MW is from biomass (landfill gas) located in Lansing and the other .5 MW is from small hydro plants (500 kW each) located in Cheboygan County, Michigan. Suppliers Biomass: Granger Electric Company of Lansing, MI Hydro: Tower Kleber of Midland, MI Energy: The contract will be for a total of 8,760,000 kWlns per year (4,380,000 kWhs from each supplier). This will allow the BWL to sell 2717 blocks of 250 kWh/nnonth to customers who will be willing to pay the existing green power rate of$7.50 per block. Costs: The program's levelized net annual costs will be $207,500. This includes the cost of generation, transmission, and BWL overhead. (This amount does not include brand image advertising associated with the green power program, which is included in the Communication Services' advertising budget.) Revenue: At the $7.50/block rate, the BWL will have after five (5)years a net present value excess cash of$136,000. Also, at this rate the program will break even after the first year assuming full subscription. This excess cash is to be the reserve that the BWL will use to replace suppliers that no longer fit the specification or for adding other renewable energy purchase options (i.e. wind power) to the portfolio. Comments: The negotiated agreement reflects an 11% increase in the anticipated delivered cost of the green sources from the recommendation submitted in April. This is due to higher than 17:09 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 16/21 Page 127 :d Meeting July 24, 2001 expected transmission costs. Even so, at the $7.50/block rate, the program still results in a net present value of excess cash of $136,000 for the five-year period. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Discussion: General Manager Pandy noted that Board Resolution 2001-6-7 (adopted June 26, 2001) authorized the BWL to participate in the MPPA Green Power Project for the purpose of determining the economics and feasibility of obtaining energy from the MPPA Green Power Project. The proposed resolution above would authorize the BWL to participate in the project through MPPA. Commissioner Callen question whether staff was going to wait until the program is subscribed before committing to the suppliers. Assistant General Manager Cook noted that it was staffs recommendation that the supply be secured in advance of full subscription, and negotiations have been held under that premise. Assistant General Manager Bill Cook reported that since the launch of the Green Wise program on June 28a`, 300 customers have signed up, representing 10% of the 3,000-subscription availability--this represents 3% of the BWL's nearly 100,000 electric residential customers. Mr. Cook noted that 3% is typically a number that most utilities across the nation who are offering a green power program set as their goal. Green Wise brochure inserts are being mailed to all BWL electric customers with their utility bills through the month of July. Mr. Pandy reported that the BWL was recognized for its Green Wise Electric Power Program at the July 16, 2001 City Council meeting by Congressman Mike Rogers. Chairman Callen and Mr. Pandy were present to receive the Congressional tribute. In response to Commissioner Creamer's inquiry, Communications Director John Strickler reported that the BWL has allocated approximately $130,000 for promoting the green power program ($30,000 for marketing costs and S100,000 for brand image advertising in connection with green power.) Commissioner Creamer remarked that contrary to what sonic green power advocates have reported, the BWL is clearly allocating a fair amount of time, effort and funds into the green power project. Action: After considerable discussion, the motion was carried unanimously. esoluti6n # 2001-7-1:_. RESOLVED, That the liabilities related to the BWL's self-insured Workers' Compensation Program be recorded and a corresponding SFAS 71 deferred expense be recognized and amortized as payments are processed. StaffCommentar� The BWL has adopted as part of its accounting policies, Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." This statement allows the BWL to defer the recognition of revenues and expenses, effectively recording an asset or liability, until a later period when these revenues or expenses have been considered by the BWL's ratemaking body(the Board) in its establishment of allowable rates. This is an 17: 10 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 17/21 Board Minutes Page 128 July 24,2001 accounting change recommended by Deloitte & Touche during the last audit, and management concurs. Cambridge Integrated Services Group, Inc. provides the claim management services for the Self-Insured Workers' Compensation Program and provides an actuarial estimate of the future workers' compensation liability. As of June 30, 2001, the estimated uninsured liability is $1,307,475. There is no effect on the income statement, but the balance sheet will show increased liabilities and a deferred expense. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None GENERAL MANAGER'S REMARKS Electric System Nearly Sets a Peak. General Manager Pandy reported that the BWL system nearly set a gross peak today at 509.45 Mw. A sheet depicting historical peak values for the BWL and the Micligan Public Power Agency was distributed. MPPA also nearly set a peak on July 24th at 732.88 Mw. The BWL system has a peak capacity of 650 Mw, with a 16°,o reserve requirement. On non-peak days, the BWL maintains an approximately 30%reserve. Mr. Pandy congratulated Dick Peffley, Director of Production, and his staff for their hard work this spring in maintaining all units in good operation and achieving a remarkable output in spite of the very hot weather. Customer Attitude Survey Results Reviewed. Director of Communications, John Strickler, presented an executive summary of the results of the semi-annual residential customer survey conducted in May by Market Strategies, Inc. (MSI). Mr. Strickler reported that the BWL's electric customer satisfaction level stayed about the same, while others in the industry have slipped by about 8%. The survey shows a disparity in customer satisfaction between the water and electric utilities over the last three surveys. This is believed to be due in part to service interruptions from the combined sewer overflow project and the long standing problem of confusion over rates--the BWL bills for the City of Lansing's sewer services. The survey 17: 10 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 18i21 Page 129 rd Meeting July 24, 2001 indicates that the BWL ranked above average in 21 of 22 benchmark comparisons measured by MSI. A copy of the report was provided to each Commissioner with the meeting packet. Mr. Strickler noted that the overall customer satisfaction results for commercial and industrial customers were similar to the results of the electric utility results for residential customers. Commercial and industrial customers are surveyed every other year. In response to questions raised by Commissioners Duncan and Callen, Mr. Strickler reported that staff is in the process of rerunning a model using the latest customer attitude survey results to better focus advertising and other resource dollars. This information will be shared with the Board. Emergency Action Plan Exercise Planned. General Manager Pandy reported that the BWL is going to exercise an emergency action plan simulating a dam break. The first tabletop exercise will be August 15'`' A functional exercise involving other city departments is scheduled to take place on September I simulating the consequences of a severe rain condition with high water levels and the failure of the Moores Park Dam. Other simulated disasters will involve water main breaks, electric line breaks and businesses and homes flooded. An annual emergency action plan exercise is required by the City and the Federal Energy Environmental Regulatory Commission(FERC) to ensure there is good communication between all city departments and that a reliable response plan is in place. REMARKS BY COMMISSIONERS Ottawa Station Update: Commissioner Duncan requested an update on the Ottawa Station redevelopment project. Peter Berns, Chief Operating Officer of Convergency Center Corporation, was present to brief the Board on the status of the Ottawa Station redevelopment project. He reported that at the request of his partner, the name of his local development partner must remain anonymous. This is due to the fact that since project negotiations started, the price for the Ottawa Station property "has been a moving target." The shape of the deal for Convergency Centers Corporation and the local developer has changed since the onset of negotiations. Mr. Berns emphasized that based on the current sale price, the telecom hotel project at Ottawa Station is not financially feasible. He noted that he is cognizant of the value and emotional aspects this property has to the BWL and the City as it endeavors to redevelop the downtown area, however, the sale price does not allow his partner to make a firm commitment. Mr. Berns suggested finding a way to come closer to the original deal. He stated that if the Board chooses to pursue other options, he would completely understand. Commissioner Duncan asked what the time frames are for reaching resolution. Mr. Berns responded that the Ottawa Station redevelopment project would have to become a more open conversation when it comes to the acquisition cost. Initially, when discussions started approximately nine months ago, Convergency Centers was basically looking at a zero cost to take control of the property for development. Since that time, the cost of the property has 17: 11 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 19/21 Board Minutes Page 130 July 24,2001 dramatically increased. Mr. Berns said that if the original number can be negotiated, he would be very excited about doing the project. There being no further questions, the Commissioners thanked Mr. Berns for his update. Inquiries on Sole Source Report: Commissioner Duncan reported that in reviewing the Quarterly Sole Source Report for the period covering April 1 through June 30, 2001, she noticed a phrase that was repeatedly used for one of the reason clauses, which stated: "compatibility, continuity, standardization." She asked if when agreement is made for a sole source purchase, whether the original purchase with which the BWL is trying to be compatible was competitively procured. One example she pointed to pertained to a clothing item. General Manager Pandy said he would look into the procedure for that particular purchase and report back to the Board. On a related issue in the Quarterly Sole Source Report, Commissioner Christian inquired about a purchase order with the reason clause stating, "only vendor meeting time constraints." He asked if the BWL or the vendor generated the time constraints. He emphasized the importance of long- range planning to assure the best bidding process to ultimately lower the total cost of the job. Director of Production Dick Peffley reported that the example cited, related to onsite stack airflow curve testing, which was scheduled one year in advance. The Environmental Protection Agency(EPA) and the Michigan Department of Environmental Quality(DEQ)require the testing. Mr. Peffley clarified that one of the units failed the first round of testing. After the unit was repaired, it left a short time frame to take a second test to meet the certification deadline. General Manager Pandy reported that staff continuously reviews its planned capital projects related to production and delivery of services. He noted that the capital projects forecast is sometimes modified as the result of schedule requirements from City of Lansing projects or other factors outside of the BWL's normal parameters. Mr. Pandy emphasized that as part of competitive strategy each Process of the BWL endeavors to perform work efficiently and economically. Barring time constraints, materials and services for all projects are competitively bid. Separate Water Meters for Outside Watering Advocated. Commissioner Creamer requested that the issue of separate water meters for lawn sprinkling be included as an agenda item for the joint dinner meeting with the Lansing City Council scheduled for August 23rd. He expressed concern that Lansing customers are not watering their lawns because the expense has become prohibitive due to outside water usage being tied to the sewer charge. Request to Review Senior Citizen Electric Rate: Commissioner Creamer requested a management review of the Senior Citizen Rate No. 21 for electric service. He noted that during extremely hot weather, the commodity charge threshold for the first 300 kWh is rapidly reached. Chief Financial Officer Dana Tousley responded that the economic crossover point between the standard Residential Electric Service Rate No. 1 and the Senior Citizen Rate No. 21 is reached at 600 kWh per month. After that threshold, a premium rate is charged. Mr. Tousley agreed to prepare a report outlining the parameters of the Senior Citizen Rate that shows the financial 17: 12 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 20/21 Page 131 i d Meeting July 24, 2001 impact of raising the threshold for that rate during peak months. This information will be sent to the Commissioners. Commissioner Christian congratulated BWL employee Calvin Jones on his recent election to the Delta Township School Board. Tree Management Policy Concerns Discussed: Commissioner Callen expressed concern with the BWL's new Tree Management Policy. He asked if the policy is more aggressive than has been adopted in recent times. He commented that some of the items listed in the Tree Clearing Practices sheet under the Tree Clearing Guidelines seemed harsh. Commissioner Callen noted that trees are an enormous resource. General Manger Pandy responded that the Tree Management Policy is more aggressive. The BWL system will now be scheduled for tree trimming on a four to five-year cycle. This new effort is under the direction of BWL Forester Pete Baker. The goal is to reduce the number of tree-related outages, which accounts for about 20% of system outages. Mr. Pandy reported that the BWL's forester works closely with the City of Lansing's forester to determine the best approach in dealing with particular tree-related situations and homeowners. He noted that from an economic standpoint, it is more costly to remove a tree than to trim a tree. A presentation on this topic was given to members of the City Council on July 12th. Mr. Pandy offered to bring this matter to the Board for review and input. Commissioner Creamer suggested referring this item to a Board subcommittee for rel%riew and discussion. Other tree-related issues to explore include: (1) the financial impact of removing tree stumps and (2) the types of trees the City of Lansing is planting on right of ways and their growth rate. Committee Assignments Pending Commissioner Callen announced that he will be making Board committee assignments shortly, based on committee preferences indicated by the Commissioners. EXCUSED ABSENCE On motion by Commissioner Duncan and seconded by Commissioner IIaggart, that the absence of Commissioner Royal be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. ADJOURNMENT 17:13 JUL 30, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91645 PAGE: 21/21 Board Minutes Page 132 July 24,2001 On motion by Commissioner Duncan, and seconded by Commissioner Wonch, the meeting adjourned by unanimous consent at 7:08 p.m. /slMary E. Sova, Secretary Filed with Lansing City Clerk July 30, 2001 Page 91 Preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, June 26, 2001 The Board of Commissioners met in regular session at 5:35 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Charles M. Creamer, Ernest J. Christian, David O'Leary, Diane R. Royal, and Mark A. Murray. Absent: Commissioner Nancy W. Duncan. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner O'Leary, seconded by Commissioner Creamer.,...to approve the minutes of regular session held May 22, 2001. Carried unanimously. Motion made by Commissioner O'Leary, seconded by Commissioner Creamer, to approve the minutes of executive session held May 22, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. Peter Berns, Chief Operating Officer of Convergency Center Corporation, updated the Board on his efforts over the past couple of months to put together a model to convert the Ottawa Power Station into a data hub for high-speed internet services. Mr. Berns reported that Convergency has invested time and money into development plans for the Board Minutes Page 92 June 26,2001 Ottawa Power Station. However, a slowdown in the economy and a downturn in the communications arena have caused his company to reassess the marketplace. His goal is to partner with local developers who are integrated with the Lansing marketplace to evaluate alternate uses for the space of the Ottawa Station instead of just "telecom hotel" space. An example would be to create disaster recovery space to maintain backup for large databases and networks that drive the governmental infrastructure. In response to questions raised by the Commissioners, Mr. Berns stated that he wants to start off his relationship with the BWL on the right foot, thus it is important to approach the marketplace at the right time. He noted that if the project reassessment determines that the square footage is right to service the marketplace, Convergency would then finalize the purchase price and execute the joint development agreement with the BWL. The revalidation period is anticipated to take three to four months. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES esolution # 2001-6-1 COMMITTEE COMMITTEE OF THE WHOLE REPORT The Committee of the Whole met on May 22, 2001 to receive updates on the following topics: 1. Six-Year Cash Flow Projection and Potential Rate Implications 2. Electric Rules and Regulations 3. Preliminary Business Plan and Share the Success Performance Objectives — FY'02 Chair Pro Tem Ronald Callen called the meeting to order at 7 p.m. Present were Commissioners Callen, Christian, Duncan, O'Leary and Royal. Absent were Commissioners Aquilina, Murray, and Creamer Cash Flow for Fiscal Years 2002-2007 Chief Financial Officer Dana Tousley reported on the FY 2002 — FY 2007 cash flow forecast for the Electric, Water and Steam Utilities. The forecast was based on current sales and capital expenditure forecasts, existing rate increases, the FY 2002 budget, 3.0% inflation, a 2% per year fuel escalation, and no additional borrowing. The FY 2002 outlook indicates that approved rate increases and available cash are sufficient and no additional bonding will be required during the upcoming fiscal year for each BWL utility. This excludes what may be required for NO, Page 93 Board Minutes June 26,2001 The Electric Utility maintains sufficient cash flow throughout the forecast period. Annual profitability meets the 4.0% return on assets (ROA) target until 2006 at which time it drops to between 2% and 3%. The average ROA for the period is 4.03%. The Water Utility will need additional funds throughout the remainder of the forecast period. The Steam Utility maintains sufficient cash throughout the forecast period. Strategies to address the financial position for the three utilities include: Electric Utility • Finalize NO,compliance plan • No additional rate increases to 2005 • Residential price differential 10%below competition • Commercial/Industrial price differential 5%below competition • No debt, except NO, lower expenses Steam Utility • Complete Cost of Service Study using FY 2001 as base year • Anticipate rate study and recommendations for rate changes by Winter/Spring 2002 • Rate proceeding Summer/Fall 2002 • Work with General Motors regarding retirement of Plants 1 and 6 • No debt, lower expenses Water Utility • Change Water Rules and Regulations to lower BWL cost to expand in the townships • No debt, lower costs • Consider a Water Cost of Service Study using 2001 as the base year • Rate Study and Recommendations by Spring 2003 • If necessary, rate proceeding Summer/Fall 2003, rates effective l/1/2004 The Board will be updated regularly throughout the year concerning progress on this approach. Electric Rules and Regulations An item-by-item comparison of the proposed Electric Rules and Regulations to the current version was provided to the Commissioners in advance for review prior to the meeting. Doug Wood, Manager of System Integrity and Customer Projects,presented an overview of recommended changes to the Electric Rules and Regulations. Changes are being made to the Electric Rules to maintain competitive rates, cover existing commitments and preserve the future bonding capability for environmental and/or other needed requirements. The proposed changes will address specific modifications involving construction standards, customer responsibilities and BWL fees and charges for distribution and service extension. Following discussion, the Committee of the Whole concurred with the proposed changes to the Electric Rules and Regulations. Staff will be submitting proposed changes to the Steam and Water Rules and Regulations for review and comment at the Committee of the Whole meeting in June. The Board will Board Minutes Page 94 June 26,2001 then be requested to approve the new Rules and Regulations for the Electric, Steam and Water Utilities, including Fees and Charges, at the regular meeting on June 26th for implementation on July 1, 2001. Preliminary Business Plan and Share the Success Performance Objectives for FY 2002. Kellie Willson, Director of Metrics and Audits,presented a preliminary framework for Share the Success Corporate Measures for fiscal year 2002. In the coming weeks,the corporate measures will be refined and process measures will be developed. There being no further business, the meeting adjourned at 7:30 p.m. Respectfully submitted, Ronald C. Callen, Chair Pro Tem Committee of the Whole Moved by Commissioner Creamer, seconded by Commissioner O'Leary, that the Committee of the Whole Report be considered as read in full and approved. Action: Carried unanimously. esolution#2001-6-2 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole met on June 26, 2001 to review the proposed update of the Steam and Water Rules and Regulations. Chair Pro Tem Ronald Callen called the meeting to order at 5:00 p.m. Present were Commissioners Aquilina, Callen, Christian, Creamer, O'Leary and Royal. Absent were Commissioners Duncan and Murray. Review of Steam and Water Rules and Regulations Doug Wood, Manager of System Integrity and Customer Projects, reported that the current Rules and Regulations for Steam Service date back to 1988 and in some cases 1972. These Rules and Regulations have undergone a complete review and update to reflect current practices and policies, a change in system extension and service deposits, elimination of construction specifications, and an update in the fees and charges. The most recent update made to the Rules and Regulations for Water Service date back to 1993. The proposed new Rules and Regulations for Water Service reflect current practices and policies, a change in the requirements for system extension, and an update in the fees and charges. The Rules and Regulations for Electric Service were reviewed with the Committee of the Whole on May 22, 2001. Page 95 Board Minutes June 26,2001 Future plans are to review the Rules and Regulations annually and subsequently bring changes to the Board for approval. Following discussion, the Commissioners concurred with the proposed changes. A resolution authorizing the adoption of the updated Rules and Regulations for Electric, Steam and Water is included in the General Manager's Recommendations for consideration at the regular meeting of June 26, 2001. There being no further business,the meeting adjourned at 5: 20 p.m. Respectfully submitted, Ronald C. Callen, Chair Pro Tem Committee of the Whole Moved by Commissioner Callen, seconded by Commissioner O'Leary, that the Committee of the Whole Report be approved. Action: Carried unanimously. esolution A.2001-6-2 REPORT OF THE NOMINATING COMMITTEE The Nominating Committee met on June 12, 2001,to review Commissioner survey responses for consideration of nominations for Board officers. The Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2001-02: Chair: Ronald C. Callen Vice Chair: Diane R. Royal Chair Pro Tem: Charles M. Creamer Respectfully submitted, NOMINATING COMMITTEE Ernest Christian, Chair Nancy Duncan Mark Murray Moved by Commissioner Creamer, seconded by Commissioner Murray, that the Report of the Nominating Committee be adopted as submitted. Action: Carried unanimously. Board Minutes Page 96 June 26,2001 GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolutio.n 4 2001-6=3 AWARD PERFORMANCE AUDIT CONTRACT TO R.W. BECK RESOLVED, that the Board of Water and Light (BWL) enter into a contract with R.W. Beck to conduct a performance audit at a not to exceed price of$123,500. The scope of work shall include only phases 1, 2, 3 and 5 as defined in specifications dated March 30, 2001. The phases are listed below: Phase 1 —Review of Growth&Expansion Phase 2—Review of Cost Accounting Methods Phase 3 —Review Customer Profitability Phase 5 —Review of Rate &Fee Processes & Practices Staff Commentary: In November 2000, the Commissioners received two reports. One from Kellie Willson reviewing major water system extensions and one from Bill Cook on System Growth and Expansion. On November 15, 2000, the General Manager assigned Bill Cook the responsibility of developing and overseeing the implementation of an action plan to address the issues and concerns outlined in the two reports. In January 2001, staff reviewed an action plan with the Board that included developing a request for proposals for a performance audit. In March of 2001 as recommended in the January action plan, we sent a draft request for proposals to the General Manager and the Commissioners. The final request for proposals was sent to ten firms and five proposals were received. The Growth & Expansion Task Force under Bill Cook's direction has evaluated the proposals and recommends R.W. Beck be retained to do this work. The performance audit will help assure BWL that all the important issues related to growth and expansion have been identified and are being addressed appropriately. Moved by Commissioner Murray, seconded by Commissioner O'Leary, that the resolution be approved. Action: Carried unanimously. Page 97 Board Minutes June 26,2001 esolution #2001-& PAYMENT IN LIEU OF TAXES RESOLVED, that the Board of Water and Light enter into an Agreement with the City of Lansing for the next ten years commencing July 1, 2003 to make an annual payment in lieu of taxes. Agreement particulars are as follows: • BWL will pay the City the amount of four percent (4%) of its revenue from retail and wholesale sales of chilled water, electric, steam heat, and water utilities for the preceding 12 month period ending May 3 1" of each year. This amount shall be payable to the city no later than June 301h of each year. • BWL shall additionally pay to the City 4% of its wholesale sales for electricity and water for March-April-May of 2002; such payment will be made before June 30, 2002. • This Agreement shall automatically terminate on June 30, 2013, unless extended in writing by the Commissioners of the Board and the City Council of the City of Lansing. • Conditions or provisions not contained in this Agreement are not binding on either party. • This Agreement, or any of its terms or provisions, shall not be waived, modified or otherwise altered unless in writing and executed by both parties to this Agreement. Staff Commentary By adding the gross billed total sales (retail and wholesale) for chilled water, electricity, steam and water, it will increase the amount by approximately $1 million per year. The additional payment for March-April- May of 2002 on wholesale sales is estimated to yield approximately$230,000 additional for the City in FY 2002, Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolution_#'2601-675 RAIL TRANSPORTATION AGREEMENT WITH UNION PACIFIC RAILROAD RESOLVED, That the Board of Water and Light (BWL) enter into a Rail Transportation Agreement (Agreement) with the Union Pacific Railroad (UPRR) for the transport of Powder River Basin (PRB) coal from the mine to interchange with the Canadian National Railroad in Chicago, IL. The Agreement shall be subject to approval as to form by BWL's Legal Counsel. The Agreement particulars are as follows: Board Minutes Page 98 June 26,2001 1. The term shall be for two years commencing January 1, 2002 and terminating December 31, 2003. 2. The annual quantity to be transported is 95% of BWL requirements. Current estimates indicate that should be around 1.2 to 1.5 million tons. 3. The price to be paid under this Agreement shall be $8.75 per net ton (pnt) for CY 2002 and $8.88 pnt for CY 2003 firm. Prices paid in 2000 and 2001 are $9.50 and $9.64. Commencing January 1, 2002, the BWL will realize a reduction of 9.23% in RPB coal transportation costs. Staff Commentary: BWL also received bids from Burlington Northern Railroad and DTE Transportation Services. A summary of the proposals is attached. A two-year term was selected to coincide with the best rates received for the lease of private railcars. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001-6- LEASE AGREEMENT WITH GENERAL ELECTRIC RAIL CAR SERVICES CORP. RESOLVED, that the Board of Water and Light (BWL) enter into a lease Agreement (Agreement) with General Electric Railcar Services Corporation (GERSC) of Chicago, IL, a unit of General Electric Capital Corporation, for the supply of rail cars. The Agreement particulars are as follows: 1) The term of this Agreement shall be twenty-four (24) months (January 1, 2002 — December 31, 2003). 2) GERSC shall provide four (4) train sets, totaling 470 aluminum fully automatic rapid discharge coal hopper rail cars with the assurance that they will maintain the integrity of the train sets at all times during the term of the lease. 3) The lease rate shall be $349.00 per car per month (full service — inclusive of all normal maintenance expenses). Staff Commentary: By entering into this lease Agreement with GERSC, BWL will be able to guarantee a rail car supply for the delivery of Power River Basis (PRB) coal from Wyoming at a substantial savings. These cars will be dedicated to supply Eckert and Moores Park stations. Union Pacific Railroad (UPRR) has given BWL a transportation rate reduction of$1.90 per ton for the use of non-UPRR owned rail cars. The lease rate will provide an estimated savings of$.041 per ton for the estimated movement of 1.2 to 1.5 million tons of PRB coal per year. This lease Agreement is projected to yield an annual transportation savings between$400,000 and $615,000. Page 99 Board Minutes June 26,2001 Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esolut on #2001.4- BWL PARTICIPATION IN MPPA GREEN POWER WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has an obligation to make its best efforts to assure a reliable and cost effective supply of electricity to its customers; and WHEREAS, national market studies and local experience has shown that certain retail customers are interested in utilizing renewable energy sources for at least a portion of their electric energy supply; and WHEREAS, PA 141 of the Michigan Public Acts of 2000 states that the MPSC shall establish the Michigan renewable energy program, one facet of which shall be designed to promote the use of existing renewable energy sources and encourage the development of new facilities; and WHEREAS, as is required by Section 40 of Act 448, of the Michigan Public Acts of 1976, Michigan Public Power Agency's Power Pool Project authorized the preparation and distribution of a Windpower Study request-for-proposal; and during its September 20, 2000 Board meeting, approved Bay Energy Services, Incorporated to perform the "Wind Power Project analysis;" and WHEREAS, the analysis was completed in December 2000 and analyzed factors such as economics, equipment, and wind availability at several sites; and WHEREAS, this analysis was reviewed by and copies provided to MPPA Commissioners; and WHEREAS, Michigan Public Power Agency at its April 11, 2001 Board meeting created the "Green (Renewable) Power Project," which project shall solicit, analyze and recommend all types of green power, such as wind, biomass, hydro, landfill gas for the project participants consideration; and WHEREAS, it is appropriate and prudent for the Board of Water and Light of the City of Lansing to participate in the renewable energy supply opportunities, such as the MPPA Green Power Project, as a part of its ongoing efforts of exploring options and meeting the electricity supply requirements of its customers. NOW, THEREFORE, BE IT RESOLVED, That the Board of Water and Light of the City of Lansing will participate in the MPPA Green Power Project for the purposes of determining the economics and feasibility of obtaining energy from the MPPA Green Power Project, and to determine the amount of energy it should obtain in the MPPA Board Minutes Page 100 June 26,2001 Green Power Project. If the participation in the project is determined to be in the best interest of the ratepayers, the Board of Water and Light Commissioners of the City of Lansing would consider authorizing such participation and obligation under separate resolution. Staff Commentary. The MPPA Power Pool Agreements do not permit any individual Pool member to "shop" for power on their own. MPPA has accommodated the BWL's request for it's initial phase of Green Power, but has indicated a more permanent MPPA solution is in order. In addition while the BWL did obtain several small Green Energy suppliers for a period of years, depending on BWL Green Power Program success, it is our best interests to investigate some other possible longer-term solutions as well. Finally, given that other MPPA members are also interested in investigating Green or Renewable resources, MPPA has decided to establish a Project Committee to address this issue. The scope of the Committee would be to study the feasibility of undertaking a Green Power Project in which the MPPA would develop Green Power Resources. In order to implement a Project at MPPA, the participating Project Member must submit a resolution of its governing body stating its desire to become a Project Member. Project costs are allocated among participating members and should be minimal (administrative and general type expenses), absent further BWL Board authorization for expanded participation under a separate resolution. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolution #2001-6. SURPLUS PROPERTY—WEST END OF HACO DRIVE RESOLVED, that the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. FURTHER RESOLVED, that the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. Easement Description: A part of the former "Lansing Connecting Railroad" (L.C.R.R.), being land on the N.W. 1/4 of Section 22, T.4 N., R.2 W., City of Lansing, Ingham County, Michigan, particularly described as follows: Beginning at the intersection of the east line of Pennsylvania Avenue (112.5 ft. wide) and the northeasterly sideline of the former L.C.R.R. (60 ft. wide), said P.O.B. being marked by a found concrete plat monument set in "Hato Subdivision", L.24, P.42 of Ingham County Plats, and said P.O. B. being Page 101 Board Minutes June 26,2001 on the south line of Haco Drive (60 ft. wide) as platted in "Haco Subdivision"; thence S 00°35'40" W 12.38 ft. along the east line of S. Pennsylvania Avenue; thence S 75°09'20" E 142.37 ft. the beginning of a non-tangential curve; thence along the curve to the right with a radius of 580 ft., a long chord bearing S 63°39'34" E 242.93 ft., an are distance of 244.74 to a found concrete plat monument set in "Haco Subdivision" and the end of the curve; thence northwesterly 392.31 ft. along the northwesterly sideline of the former L.C.R.R. (the south side of platted Haco Drive) to the point of beginning, containing 2874 sq. ft. or 0.066 acres of land,more or less. Staff Commentary: This resolution shall constitute the Board's written consent to transfer jurisdiction of the subject parcel to the Department of Public Service or to such other City department, division or agency as the Mayor deems appropriate; and the transfer shall be effective upon acceptance by the Mayor. This parcel is located at the west end of Haco Drive at the intersection of Pennsylvania Avenue and is currently utilized by the Lansing Public Service Department for the south entrance lane for Haco Drive. This parcel is a surplus portion of the Lansing Connection Railroad Property purchased by the Board of Water and Light in 1998 (Res. No. 97-11- 4). The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Creamer, seconded by Commissioner Callen, that the resolution be approved. Action: Carried unanimously. esolution #2001=6' SURPLUS PROPERTY—RIVERSIDE PROPERTY RESOLVED, That the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. FURTHER RESOLVED, That the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. Easement Description: Part of the N.W. 114 of Section 23, T. 4 N., R. 2 W., City of Lansing, Ingham County, Michigan, being particularly described as follows: Beginning at the N.W. Corner of Lot 74 of "Avis Subdivision of the west 20 rods of outlot "C" Leslie Park" (L. 9, P. 30, Ingham County Board Minutes Page 102 June 26,2001 Plats); thence southeasterly along the north line of Lot 74 and the extension thereof 131.74 ft.; thence southerly parallel to and 1 foot westerly of a chain link fence that runs along the east side of the off- ramp from north bound Aurelius Road to Main Street, a distance of 743.16 ft. to a point 1 foot west of a deflection point in the chain link fence; thence continuing southerly along a line 1 foot westerly of said chain link fence 820.13 ft. to a point on the north line of Grand Trunk Western Railroad land; thence westerly along said north railroad line 90.84 ft. to the S.W. corner of Lot 39 of"Avis Subdivision" (L.9, P. 30, Ingham County Plats); thence northerly along the east line of Clemens Avenue 1600.04 ft. to the point of beginning, containing 4.27 acres of land, more or less. Staff Commentary: This resolution shall constitute the Board's written consent to transfer jurisdiction of the subject parcel to the Department of Public Service or to such other City department, division or agency as the Mayor deems appropriate; and the transfer shall be effective upon acceptance by the Mayor. This parcel is located on and along the west side of the Board of Water and Light Riverside Property and is currently utilized by the City of Lansing Public Service Department for an extension of Aurelius Road and an off-ramp from Aurelius Road to Main Street. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Callen, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esolution 4 2001-6-1 AUTHORIZATION TO ENTER INTO A USE AGREEMENT WITH CITY OF LANSING WHEREAS, certain real property (known as 312 North Grand Avenue), more particularly described below, is under the jurisdiction of the Board of Water and Light, and WHEREAS, the City of Lansing by its Public Service Department desires a right of way to use a portion of such real property for the purpose of drainage structures, and WHEREAS, pursuant to 5-203.7 of the Lansing City Charter, the Board of Water and Light and other agencies of the City are encouraged to cooperate on projects deemed to be beneficial to the City, and Page 103 Board Minutes June 26,2001 WHEREAS, the right-of-way area is located on a portion of the north end of the North Grand Avenue property and described as follows: Right of Way Description: The northerly 40 ft. of the south 00 ft. of Lot 9 of Block 66, original plat of the town of Michigan, now City of Lansing, as recorded in L. 2, PP. 3 6-3 8 of Ingham County Plats. RESOLVED, That the Board authorize the General Manager and Corporate Secretary to enter into a Use Agreement with the City of Lansing to formalize the City of Lansing Public Service Department's current operation of a drainage outlet facility in the right-of- way area. Staff Commentary: This right of way has been requested by the City Engineer to formalize current operation of a drainage outlet facility in the right-of-way area. The drainage facilities were constructed in 1995 as part of the City of Lansing's replacement of the Shiawassee Street Bridge over the Grand River. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esohdion #2001-6-11 ADOPTION OF NEW STEAM SERVICE POLICY RESOLVED, That the adoption of new Board of Water and Light policy 19-15, Steam Rules and Regulations shall state that: The steam rules and regulations shall govern the steam services and shall be subject to review and modification by the Commissioners. Staff Commentary: This new policy for steam rules and regulations is consistent with policy 19-05, Electric Rules and Regulations, which provides for Commissioner review and modification of services provided. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Creamer, seconded by Commissioner Callen, that the resolution be approved. Action: Carried unanimously. Board Minutes Page 104 June 26,2001 esolution #2001`-6-12 ADOPT RULES AND REGULATIONS FOR STEAM SERVICE RESOLVED, That the adoption of the attached Board of Water and Light Rules and Regulations for Steam Service become effective July 1, 2001 subject to final legal review. Staff Commentary: Rules and Regulations For Steam Service date back to 1988 and in some cases 1972. The Rules and Regulations For Steam Service have undergone a complete review and have been updated to reflect current practices and policies, a change in system extension and service deposits, elimination of construction specifications, and an update in the fees and charges. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner O'Leary, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001=6-13 ADOPTION OF NEW WATER SERVICE POLICY RESOLVED, That Board of Water and Light Water Service Policy 19-13 is hereby rescinded. FURTHER RESOLVED, That the adoption of new Board of Water and Light policy 19- 13, Water Rules and Regulations shall state that: The water rules and regulations shall govern the water services and shall be subject to review and modification by the Commissioners. Staff Commentary: _This new policy for water rules and regulations is consistent with policy 19-05, Electric Rules and Regulations, which provides for Board review and modification of services provided. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Christian, seconded by Commissioner Callen, that the resolution be approved. Page 105 Board Minutes June 26,2001 Action: Carried unanimously. esoNtion #2001-6-1' ADOPTION OF WATER SERVICE RULES AND REGULATIONS RESOLVED, That the adoption of the attached Board of Water and Light Rules and Regulations For Water Service become effective July 1, 2001 subject to final legal review. Staff Commentary: Rules and Regulations For Water Service reflect current practices and policies, a change in the requirements for system extension, and an update in the fees and charges. Board review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution #2001-6-1!' ADOPTION OF ELECTRIC RULES AND REGULATIONS WHEREAS, in accordance with Board policy 19-05, the electric rules and regulations shall be subject to review and modification by the Commissioners. NOW THEREFORE BE IT RESOLVED, That the adoption of the Board of Water and Light Rules and Regulations For Electric Service as submitted to the Board on May 14, 2001 become effective July 1, 2001 subject to final legal review. Staff Commentary: Rules and Regulations For Electric Service date back to 1993 and in many cases 1983. The Rules and Regulations for Electric Service have undergone a complete review and have been updated to reflect current practices and policies, a change in system extension deposits, inclusion of new fees and charges, and updates to other fees and charges. Board review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner O'Leary, seconded by Commissioner Creamer, that the resolution be approved. Board Minutes Page 106 June 26,2001 Action: Carried unanimously. esolution #2001-6-1 CAPITAL PROJECT APPROVAL—POLICY 15-02 LANGUAGE CORRECTION RESOLVED, That Board of Water and Light policy 15-02, Capital Project Approval, be restated as follows: Any project included in the capital budget, but expected to exceed the budgeted amount by the greater of 15% of the budgeted amount or $200,000 must be approved by the Commissioners. This applies to the aggregate for electric, water and steam expenditure forecasts in the Annual Capital Budget and to individual projects in the Planned Capital Budget. The General Manager shall report any anticipated changes in scope or cost overruns to the Commissioners as soon as possible. The General Manager shall establish and implement procedures overseeing Capital project costs consistent with this policy. Staff Commentary: This correction of policy 15-02, Capital Project Approval, will make it consistent with policy 19-08, Line Extensions and Service Territory Expansions. At present, policy 15-02 requires Commissioner approval for the lesser of 15% or $200,000 and does not define how it should be applied. Policy 15-19 requires Commissioner approval for the greater of 15% or $200,000. Moved by Commissioner Murray, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS esolution 4 2001-6-1' RESOLUTION HONORING ROSEMARIE E. AQUILINA WHEREAS, It is with deep appreciation that we offer tribute to Rosemarie Aquilina as she brings to a close her term as Commissioner of the Board of Water and Light. She Page 107 Board Minutes June 26,2001 was appointed as a First Ward Commissioner of the Board of Water and Light on October 6, 1997, and WHEREAS, She was elected Chair Pro Tern in 1998 and served on various committees such as the Personnel Committee 1997 and 2000, the Finance Committee in 1998 and 1999, and chaired the Nominating Committee in 2000, and WHEREAS, As a Board Commissioner, Rosemarie Aquilina contributed leadership over the years in a variety of matters affecting this utility. Her insight and knowledge of the legislative arena greatly contributed in developing the Board of Water and Light's fundamental electric restructuring principles in the protection of both the industry and the consumer. She never lost sight of the goal of assuring that electric, water and steam are reliable and delivered at the lowest price possible, and WHEREAS, Rosemarie Aquilina's passion for the law started early in her life, including pursuance of a law degree at Thomas M. Cooley Law School, from where she graduated. She is an attorney in private practice as well as a military attorney. She is known as a successful litigator due to her fearless pursuit of victory and her remarkable win record, and WHEREAS, Rosemarie Aquilina has demonstrated high ideals of personal endeavor through her many civic involvements and service in the Michigan Army National Guard. She has the distinction of being the first and only female Judge Advocate General officer in the Michigan Army National Guard. In addition to that honor, she also holds the rank of Major. She has touched many lives through her career and community activism. Her professionalism, hard work, and sensitivity to the needs of the public have won for her the respect and admiration of all who have the good fortune of knowing her, and RESOLVED, That the Board of Water and Light Commissioners congratulate and thank Rosemarie Aquilina for her service on this Board. In regular session this 261h day of June, 2001, we wish Rose and her family our best wishes for the future and happiness in their new home in Okemos. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. . esolution #2001-671' . ..... .... RESOLUTION HONORING MARK A. MURRAY WHEREAS, It is with great appreciation that we offer tribute to Mark A. Murray for his dedicated service as a Third Ward Commissioner of the Lansing Board of Water and Light, and WHEREAS, Mark Murray was appointed to the Board of Commissioners on February 15, 1999, and served on the Board with distinction. During his term, he served as a Board Minutes Page 108 June 26,2001 member of the Finance Committee from 1999 to present and was named chair of the committee in 2000. He also served on the Nominating Committee in 2000 and 2001, and WHEREAS, Among his major accomplishments during his tenure on the Board was emphasizing the importance of setting organizational direction by focusing on the strategic goals of the utility and monitoring organizational performance to assure the utility is operating in an efficient manner in order to remain competitive, and WHEREAS, Mark Murray's public service career has taken many forms. His service to the people of the City of Lansing and the State of Michigan began right out of college, working for Governors William Milliken, James Blanchard and John Engler. Though he has spent most of his career in state government, Mark Murray spent a year as Vice President for Finance and Operations at Michigan State University in 1998. He was nained State Treasurer by Governor Engler in 1999. Throughout his career, he has displayed intelligence and diligence in every endeavor. His skills to assess and solve problems and get along with people with a wide range of views uniquely qualified him for the post of special policy adviser to Governor Engler. He has been a tireless advocate and spokesperson in promoting the highest standards of excellence in school quality in the State. His ethics, integrity and honor are unquestioned and provide a model to all those who may follow in his footsteps of public service, and WHEREAS, His professionalism and commitment to public service merit our highest praise. As he steps down from his post of State Treasurer to begin a new chapter in his brilliant career as President of Grand Valley State University effective July 1, 2001, we extend to him our sincere best wishes for continued success. RESOLVED, That the Board of Commissioners congratulate and thank Mark Murray for his outstanding career. In regular session this 26t' day of June, 2001, we wish Mark, his wife Elizabeth, and family the very best and well-deserved happiness and fulfillment. Moved by Commissioner Callen, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolWion #2001-6-1 RESOLUTION HONORING DAVID O'LEARY WHEREAS, It is with respect and appreciation that the members of this Board join in offering highest tribute to David O'Leary as he completes his tenure as an At-Large Commissioner of the Board of Water and Light with over 11 years of service, and WHEREAS, David O'Leary was appointed to the Board on May 21, 1990. He was elected Chair in 1996, Vice Chair in 1998, and he served on the Nominating Committee in 1998 and 1999, Personnel Committee from 1990-2000, Finance Committee in 2000- 01, and ad hoc committees formed to study issues related to development and governmental relations, and Page 109 Board Minutes June 26,2001 WHEREAS, Highlights of his years on the Board include major Board accomplishments in areas such as overturning the potential sale of the BWL to Utilicorp in 1992, relocating the Customer Service Center and Administration Building and realigning employee work locations to renovated facilities at 730 Hazel, 830 Hazel and 1232 Haco Drive (1998), water extensions to serve Alaiedon Township, Bath Township, City of DeWitt/DeWitt Township and East Lansing-Meridian Township (1999-2000), new compensation system for non-bargaining employees (2000), construction of a new central utilities complex to serve the General Motors Grand River Assembly Plant and construction of a chilled water system to serve downtown buildings (2000-2001), and WHEREAS, He has also served on various local and national boards; such as past president of the Rotary Club, active service with Capitol National Bank, Capitol Bancorp, WKAR-TV Corp. Council, Catholic Social Services, and St. Lawrence Hospital Advisory Board, and WHEREAS, His leadership skills guided him wisely throughout his career as President of O'Leary Paint Company. Through hard work, commitment to quality, and genuine love of his work, he has maintained the highest standards of excellence in all capacities, especially in overseeing growth and diversification in his family-owned business. These attributes have won him accolades such as the Hall of Fame Award from the National Art Materials Trade Association and the Businessperson of the Year from the Lansing Chamber of Commerce, and WHEREAS, Many words come to mind to describe Dave and capture his essence -- an avid Notre Dame fan, a community leader, loyal, intelligent, hard working; and possessing a humorous nature. We will miss his quick wit and funny stories! RESOLVED, That the highest tribute be accorded to David O'Leary as he brings to a close his tenure as a Commissioner. May this serve as a testimony of recognition of the high esteem in which he is held by the Board of Water and Light Commissioners and the customers of this utility. In regular session this 261h day of June, 2001, we wish Dave, his wife Janet, and family the very best and well-deserved happiness and fulfillment. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. GENERAL MANAGER'S REMARKS NOx Compliance Update. General Manager Pandy distributed a report dated June 25, 2001 on the status of Nitrogen Oxides (NO,,) emission compliance that Manager of Environmental Services Nick Burwell prepared in response to a letter received from Commissioner Callen. The memo provides a history of the NO,, regulations and a guess at what the future regulations will be in light of the recent court rulings on NO, compliance. Compliance issues and alternatives are also outlined in Mr. Burwell's report. In December, staff plans to report further on alternative compliance strategies and Board Minutes Page 110 June 26,2001 recommend an action plan to comply with NO,, in the future. Mr. Pandy noted that NO,, compliance was omitted from the capital forecast due to the magnitude of the cost, estimated to be on the order of$20-$50 million. GreenWise Electric Program Kick-Off on June 28. General Manager Pandy reported that the BWL plans to launch its "GreenWise Electric Power" program on June 28th. GreenWise electric power is an environmentally friendly energy program that allows customers to buy some or all of their electricity from clean, renewable sources like wind, water and biomass. Customers will be able to purchase blocks of 250 kilowatt-hours per month at a cost of $7.50 per month (or roughly 3 cents per kilowatt-hour premium). There are 2700 blocks available. The Commissioners were invited to come to participate and speak in support of the green power program. Payment in Lieu of Taxes to the City of Lansing. General Manager Pandy distributed a memo prepared by General Accounting Manager David Cluley, dated June 18, 2001, regarding the fiscal 2000-01 payment in lieu of taxes to the City of Lansing. Selected operating revenues were used through May 31, 2001 to calculate the amount. The amount for this fiscal year is $6,618,244, which is approximately 3%more than last year, or approximately $189,000 more. The City of Lansing continues to benefit from the BWL's revenues on the 4% formula. Under the new agreement, adopted by the Board today (Resolution #2001-6-4) going forward beyond fiscal year 2002, the City will enjoy the benefits of the BWL's wholesale revenues, in addition to retail sales), which increases the amount by approximately $1 million per year. The current agreement due to expire June 30, 2002, is based solely on retail revenue. Share the Success Update: General Manager Pandy reported that the Share the Success program is coming to a close this fiscal year with a decent financial year. Corporate measures picked up 33 additional points for a total of 170 points for the fiscal year. If the fiscal year ends that way on June 30, employees would earn performance bonuses equal to 1.70% of annual pay. The process bonuses range from 2.12%up to 3.70%. Mr. Pandy noted that the customer satisfaction survey numbers are coming in very strong. The results of the spring survey will be reported to the Board at a future meeting. BWL Organizational Changes for FY 2002. General Manager Pandy reported that Clyde Dugan and Jack Hill will be taking on new responsibilities effective with the new fiscal year. Jack Hill will assume a new leadership role in the area of safety and environmental compliance. Mr. Hill was commended for his excellent job with special projects. Clyde Dugan will assume a new leadership role in special projects. Mr. Dugan was praised for his outstanding job in Marketing. Both Jack Hill and Clyde Dugan will work as a team as will their respective staffs to make that orderly transition in the new fiscal year. IBEW Elects Officers. General Manager Pandy reported on the results of the recent IBEW election. He congratulated Curt Gates who was re-elected Business Agent and Joe Davis who was re-elected president. Page 111 Board Minutes June 26,2001 Congratulations to BWL Tapping Teams. General Manger Pandy reported that both the men's and the women's tapping teams won the state of Michigan tapping contest. This is the first time the BWL has ever had a female tapping team. Both teams participated in the American Water Works Association national competition. The men won second place for the whole nation at 1:23.47 minutes and the women's team won third place for the whole nation at 2:27.59 minutes. They won a tapping machine, valued at approximately $1,500, which was returned to the BWL. Mr. Pandy congratulated these employees for representing the BWL very admirably against numerous utilities. REMARKS BY COMMISSIONERS Commissioner Creamer congratulated the members of the Special Board Committee formed to negotiate the new relationship with the City of Lansing on the payment in lieu of taxes. The committee was comprised of Commissioners O'Leary, Murray and Royal and General Manager Pandy. Commissioner Callen reported that he had the pleasure of attending the American Public Power Association (APPA) Annual Meeting. He reported on some of the important insights gained at the conference, such as the deregulation situation in California and utility initiatives such as assisting Habitat for Humanity in building energy efficient homes. Commissioner Callen encouraged each Commissioner to avail themselves of the opportunity to attend such a conference to see and hear of the activity and earnestness with which municipal utilities, large and small conduct their business. Commissioner Callen distributed a written report he prepared on the Annual Meeting of the APPA June 18-20, 2001. EXCUSED ABSENCE On motion by Commissioner Christian and seconded by Commissioner Murray, that the absence of Commissioner Duncan be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. Board Minutes Page 112 June 26,2001 ADJOURNMENT On motion by Commissioner Creamer, and seconded by Commissioner Murray, the meeting adjourned by unanimous consent at 6:30 p.m. Is/Mary E. Sova, Secretary Filed with Lansing City Clerk June 29, 2001 JUL-02-2001 13:37 BD OF WRTER LIGHT 1 517 7026855 P.01i23 %WER&.LIGHT f BOARD OF WATER AND LIGHT 1232 Haco Drive P.O. Box 13007 Lansing, DG 48901-3007 Fax: 517-702-6855 DATE: ` a —0 TIME: COVER SHEET+12�\ PAGE(S) RECIP=(S) FAX NO. 2. 3. 4. 5. 6. TRANSMITTED FOR: Your Approval Your Information Your Comments Your Revisions Your Records Per Your Request Additions Other NAME OF SENDER: IF PROBLEMS RECEIVING, CONTACT: �Gl?7 �0 0 3 CONDvEENTS: TI 11 17 1 51 7 7R26255 99/ P.01 JUL-02-2001 13:37 ED OF WRTER LIGHT 1 517 702se55 P.02i23 Page 91 preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, June 26, 2001 The Board of Commissioners met in regular session at 5:35 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Charles M. Creamer, Ernest J. Christian, David O'Leary, Diane R Royal, and Mark A. Murray. Absent: Commissioner Nancy W. Duncan. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner O'Leary, seconded by Commissioner Creamer, to approve the minutes of regular session held May 22, 2001. Carried unanimously. Motion made by Commissioner O'Leary, seconded by Commissioner Creamer, to approve the minutes of executive session held May 22, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. Peter Berns, Chief Operating Officer of Convergency Center Corporation, updated the Board on his efforts over the past couple of months to put together a model to convert the Ottawa Power Station into a data hub for high-speed internet services. Mr. Berns reported that Convergency has invested time and money into development plans for the JUL-02-2001 13:37 BD OF WRTER LIGHT 1 517 7026B55 P.03i23 Board Minutes Pagc 92 June 26,2001 Ottawa Power Station. However, a slowdown in the economy and a downturn in the communications arena have caused his company to reassess the marketplace. His goal is to partner with local developers who are integrated with the Lansing marketplace to evaluate alternate uses for the space of the Ottawa Station instead of just "telecom hotel" space. An example would be to create disaster recovery space to maintain backup for large databases and networks that drive the governmental infrastructure. In response to questions raised by the Commissioners, Mr. Berns stated that he wants to start off his relationship with the BWL on the right foot, thus it is important to approach the marketplace at the right time. He noted that if the project reassessment determines that the square footage is right to service the marketplace, Convergency would then finalize the purchase price and execute the joint development agreement with the BWL. The revalidation period is anticipated to take three to four months. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES esolufion #2001-6=1 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole met on May 22, 2001 to receive updates on the following topics: 1. Six-Year Cash Flow Projection and Potential Rate Implications 2. Electric Rules and Regulations 3. Preliminary Business Plan and Share the Success Performance Objectives — FY'02 Chair Pro Tem Ronald Callen called the meeting to order at 7 p.m. Present were Commissioners Callen, Christian, Duncan, O'Leary and Royal. Absent were Commissioners Aquilina, Murray, and Creamer Cash Flow for Fiscal Years 2002-2007 Chief Financial Officer Dana Tousley reported on the FY 2002 — FY 2007 cash flow forecast for the Electric, Water and Steam Utilities. The forecast was based on current sales and capital expenditure forecasts, existing rate increases, the FY 2002 budget, 3.0% inflation, a 2% per year fuel escalation, and no additional borrowing. The FY 2002 outlook indicates that approved rate increases and available cash are sufficient and no additional bonding will be required during the upcoming fiscal year for each BWL utility. This excludes what may be required for NO, ti a n� nnne 4—�n 1 C1'7 r;-n1)COr.=Z P.03 JUL-02-2001 13:37 BD OF WRTER LIGHT 1 517 7026855 P.04i23 Page 93 Board Minutcs June 26,2001 The Electric Utility maintains sufficient cash flow throughout the forecast period. Annual profitability meets the 4.0% return on assets (ROA) target until 2006 at which time it drops to between 2% and 3%. The average ROA for the period is 4.03%. The Water Utility will need additional funds throughout the remainder of the forecast period. The Steam Utility maintains sufficient cash throughout the forecast period. Strategies to address the financial position for the three utilities include: Electric Utility • Finalize NO,,compliance plan • No additional rate increases to 2005 • Residential price differential 10%below competition • Commercial/Industrial price differential 5%below competition • No debt, except NO,, lower expenses Steam Utility • Complete Cost of Service Study using FY 2001 as base year • Anticipate rate study and recommendations for rate changes by Winter/Spring 2002 • Rate proceeding Summer/Fall 2002 • Work with General Motors regarding retirement of Plants 1 and 6 • No debt, lower expenses Water Utility • Change Water Rules and Regulations to lower BWL cost to expand in the townships • No debt, lower costs • Consider a Water Cost of Service Study using 2001 as the base year • Rate Study and Recommendations by Spring 2003 • If necessary, rate proceeding Summer/Fall 2003, rates effective l/1/2004 The Board will be updated regularly throughout the year concerning progress on this approach. Electric Rules and Regulations An item-by-item comparison of the proposed Electric Rules and Regulations to the current version was provided to the Commissioners in advance for review prior to the meeting. Doug Wood, Manager of System Integrity and Customer Projects,presented an overview of recommended changes to the Electric Rules and Regulations. Changes are being made to the Electric Rules to maintain competitive rates, cover existing commitments and preserve the future bonding capability for environmental and/or other needed requirements. The proposed changes will address specific modifications involving construction standards, customer responsibilities and BWL fees and charges for distribution and service extension. Following discussion, the Committee of the Whole concurred with the proposed changes to the Electric Rules and Regulations. Staff will be submitting proposed changes to the Steam and Water Rules and Regulations for review and comment at the Committee of the Whole meeting in June. The Board will JUL-02-2001 13:38 BD OF WRTER LIGHT 1 517 7026855 P.05i23 Board Minutes Page 94 June 26,2001 then be requested to approve the new Rules and Regulations for the Electric, Steam and Water Utilities, including Fees and Charges, at the regular meeting on June 26th for implementation on July 1, 2001. Preliminary Business Plan and Share the Success Performance Objectives for FY 2002. Kellie Willson, Director of Metrics and Audits, presented a preliminary framework for Share the Success Corporate Measures for fiscal year 2002. In the coming weeks,the corporate measures will be refined and process measures will be developed. There being no further business, the meeting adjourned at 7:30 p.m. Respectfully submitted, Ronald C. Callen, Chair Pro Tem Committee of the Whole Moved by Commissioner Creamer, seconded by Commissioner O'Leary, that the Committee of the Whole Report be considered as read in full and approved. Action: Carried unanimously. esolution#2001-6-2 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole met on June 26, 2001 to review the proposed update of the Steam and Water Rules and Regulations. Chair Pro Tern Ronald Callen called the meeting to order at 5:00 p.m. Present were Commissioners Aquilina, Callen, Christian, Creamer, O'Leary and Royal. Absent were Commissioners Duncan and Murray. Review of Steam and Water Rules and Regulations Doug Wood, Manager of System Integrity and Customer Projects, reported that the current Rules and Regulations for Steam Service date back to 1988 and in some cases 1972. These Rules and Regulations have undergone a complete review and update to reflect current practices and policies, a change in system extension and service deposits, elimination of construction specifications, and an update in the fees and charges. The most recent update made to the Rules and Regulations for Water Service date back to 1993. The proposed new Rules and Regulations for Water Service reflect current practices and policies, a change in the requirements for system extension, and an update in the fees and charges. The Rules and Regulations for Electric Service were reviewed with the Committee of the Whole on May 22, 2001. JUL-02-2001 13:38 BD OF WATER LIGHT 1 517 7026855 P.06/23 Page 95 Board Minutes Junc 26,2001 Future plans are to review the Rules and Regulations annually and subsequently bring changes to the Board for approval. Following discussion, the Commissioners concurred with the proposed changes. A resolution authorizing the adoption of the updated Rules and Regulations for Electric, Steam and Water is included in the General Manager's Recommendations for consideration at the regular meeting of.tune 26,2001. There being no further business, the meeting adjourned at 5: 20 p.m. Respectfully submitted, Ronald C. Callen, Chair Pro Tern Committee of the Whole Moved by Commissioner Callen, seconded by Commissioner O'Leary, that the Committee of the Whole Report be approved. Action: Carried unanimously. esolut.on#2001-6=: REPORT OF THE NOMINATING COMMITTEE The Nominating Committee met on June 12, 2001, to review Commissioner survey responses for consideration of nominations for Board officers. The Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2001-02: Chair: Ronald C. Callen Vice Chair: Diane R. Royal Chair Pro Tem: Charles M. Creamer Respectfully submitted, NOMINATING COMMITTEE Ernest Christian, Chair Nancy Duncan Mark Murray Moved by Commissioner Creamer, seconded by Commissioner Murray, that the Report of the Nominating Committee be adopted as submitted. Action: Carried unanimously. JUL-02-2001 13:38 BD OF DATER LIGHT 1 517 702EB55 P.07i23 Board Minutcs Page 96 June 26,2001 GENERAL MANAGER'S RECOMMENDATIONS ,background materials on items presented are on file in the Office of the Corporate Secretary. esolution*2001-6-3� AWARD PERFORMANCE AUDIT CONTRACT TO R.W. BECK RESOLVED, that the Board of Water and Light (BWL) enter into a contract with R.W. Beck to conduct a performance audit at a not to exceed price of$123,500. The scope of work shall include only phases 1, 2, 3 and 5 as defined in specifications dated March 30, 2001. The phases are listed below: Phase 1 —Review of Growth & Expansion Phase 2—Review of Cost Accounting Methods Phase 3 —Review Customer Profitability Phase 5 —Review of Rate & Fee Processes & Practices Staff Commentary: In November 2000, the Commissioners received two reports. One from Kellie Willson reviewing major water system extensions and one from Bill Cook on System Growth and Expansion. On November 15, 2000, the General Manager assigned Bill Cook the responsibility of developing and overseeing the implementation of an action plan to address the issues and concerns outlined in the two reports. In January 2001, staff reviewed an action plan with the Board that included developing a request for proposals for a performance audit. In March of 2001 as recommended in the January action plan, we sent a draft request for proposals to the General Manager and the Commissioners. The final request for proposals was sent to ten firms and five proposals were received. The Growth & Expansion Task Force under Bill Cook's direction has evaluated the proposals and recommends R.W. Beck be retained to do this work. The performance audit will help assure BWL that all the important issues related to growth and expansion have been identified and are being addressed appropriately. Moved by Commissioner Murray, seconded by Commissioner O'Leary, that the resolution be approved. Action: Carried unanimously. JUL-02-2001 13.36 BD OF IJRTER LIGHT 1 517 7026655 P.08i23 Page 97 Board Minutes June 26,2001 esohaion#20ff=.6- PAYMENT IN LIEU OF TAXES RESOLVED, that the Board of Water and Light enter into an Agreement with the City of Lansing for the next ten years commencing July 1, 2003 to make an annual payment in lieu of taxes. Agreement particulars are as follows: • BWL will pay the City the amount of four percent (4%) of its revenue from retail and wholesale sales of chilled water, electric, steam heat, and water utilities for the preceding 12 month period ending May 315t of each year. This amount shall be payable to the city no later than June 30`h of each year. • BWL shall additionally pay to the City 4% of its wholesale sales for electricity and water for March-April-May of 2002; such payment will be made before June 30, 2002. • This Agreement shall automatically terminate on June 30, 2013, unless extended in writing by the Commissioners of the Board and the City Council of the City of Lansing. • Conditions or provisions not contained in this Agreement are not binding on either party. • This Agreement, or any of its terms or provisions, shall not be waived, modified or otherwise altered unless in writing and executed by both parties to this Agreement. .Sta{f Commentary_ By adding the gross billed total sales (retail and wholesale) for chilled water, electricity, steam and water, it will increase the amount by approximately $1 million per year. The additional payment for March-April- May of 2002 on wholesale sales is estimated to yield approximately $230,000 additional for the City in FY 2002. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolution.#2001.4 RAIL TRANSPORTATION AGREEMENT WITH UNION PACIFIC RAILROAD RESOLVED, That the Board of Water and Light (BWL) enter into a Rail Transportation Agreement (Agreement) with the Union Pacific Railroad (UPRR) for the transport of Powder River Basin (PRB) coal from the mine to interchange with the Canadian National Railroad in Chicago, IL. The Agreement shall be subject to approval as to form by BWL's Legal Counsel. The Agreement particulars areas follows: JUL-02-2001 13:39 BD OF WRTER LIGHT 1 517 702SB55 P.09i23 Board Minutes Page 98 June 26.2001 1. The term shall be for two years commencing January 1, 2002 and terminating December 31, 2003. 2. The annual quantity to be transported is 95% of BWL requirements. Current estimates indicate that should be around 1.2 to 1.5 million tons. 3. The price to be paid under this Agreement shall be $8.75 per net ton (pnt) for CY 2002 and $8.88 pnt for CY 2003 firm. Prices paid in 2000 and 2001 are $9.50 and $9.64. Commencing January 1, 2002, the BWL will realize a reduction of 9.23% in RPB coal transportation costs. Staff Commentary: BWL also received bids from Burlington Northern Railroad and DTE Transportation Services. A summary of the proposals is attached. A two-year term was selected to coincide with the best rates received for the lease of private railcars. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolutian #2001:=6- LEASE AGREEMENT WITH GENERAL ELECTRIC RAIL CAR SERVICES CORP. RESOLVED, that the Board of Water and Light (BWL) enter into a lease Agreement (Agreement) with General Electric Railcar Services Corporation (GERSC) of Chicago, IL, a unit of General Electric Capital Corporation, for the supply of rail cars. The Agreement particulars are as follows: 1) The term of this Agreement shall be twenty-four (24) months (January 1, 2002 — December 31, 2003). 2) GER.SC shall provide four (4) train sets, totaling 470 aluminum fully automatic rapid discharge coal hopper rail cars with the assurance that they will maintain the integrity of the train sets at all times during the term of the lease. 3) The lease rate shall be $349.00 per car per month (full service — inclusive of all normal maintenance expenses). Staff Commentary: By entering into this lease Agreement with GERSC, BWL will be able to guarantee a rail car supply for the delivery of Power River Basis (PRB) coal from Wyoming at a substantial savings. These cars will be dedicated to supply Eckert and Moores Park stations. Union Pacific Railroad (UPRR) has given BWL a transportation rate reduction of$1.90 per ton for the use of non-UPRR owned rail cars. The lease rate will provide an estimated savings of$.041 per ton for the estimated movement of 1.2 to 1.5 million tons of PRB coal per year. This lease Agreement is projected to yield an annual transportation savings between$400,000 and$615,000. JUL-02-2001 13:39 BD OF WRTER LIGHT 1 517 7026B55 P. 10i23 Pagc 99 Board Minutes June 26,2001 Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esolution #2901-6= BWL PARTICIPATION IN MPPA GREEN POWER WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has an obligation to make its best efforts to assure a reliable and cost effective supply of electricity to its customers; and WHEREAS, national market studies and local experience has shown that certain retail customers are interested in utilizing renewable energy sources for at least a portion of their electric energy supply; and WHEREAS, PA 141 of the Michigan Public Acts of 2000 states that the MPSC shall establish the Michigan renewable energy program, one facet of which shall be designed to promote the use of existing renewable energy sources and encourage the development of new facilities; and WHEREAS, as is required by Section 40 of Act 448, of the Michigan Public Acts of 1976, Michigan Public Power Agency's Power Pool Project authorized the preparation and distribution of a Windpower Study request-for-proposal; and during its September 20, 2000 Board meeting, approved Bay Energy Services, Incorporated to perform the "Wind Power Project analysis;" and WHEREAS, the analysis was completed in December 2000 and analyzed factors such as economics,equipment, and wind availability at several sites; and WHEREAS, this analysis was reviewed by and copies provided to MPPA Commissioners; and WHEREAS, Michigan Public Power Agency at its April 11, 2001 Board meeting created the "Green (Renewable) Power Project," which project shall solicit, analyze and recommend all types of green power, such as wind, biomass, hydro, landfill gas for the project participants consideration; and WHEREAS, it is appropriate and prudent for the Board of Water and Light of the City of Lansing to participate in the renewable energy supply opportunities, such as the MPPA Green Power Project, as a part of its ongoing efforts of exploring options and meeting the electricity supply requirements of its customers. NOW, THEREFORE, BE IT RESOLVED, That the Board of Water and Light of the City of Lansing will participate in the MPPA Green Power Project for the purposes of determining the economics and feasibility of obtaining energy from the MPPA Green Power Project, and to determine the amount of energy it should obtain in the MPPA JUL-02-2001 13:39 HD OF WRTER LIGHT 1 517 7026B55 P.11i23 Board Minutes Page 100 Juno 26,2001 Green Power Project. If the participation in the project is determined to be in the best interest of the ratepayers, the Board of Water and Light Commissioners of the City of Lansing would consider authorizing such participation and obligation under separate resolution. Stag Commentary. The MPPA Power Pool Agreements do not permit any individual Pool member to "shop" for power on their own. MPPA has accommodated the BWL's request for it's initial phase of Green Power, but has indicated a more permanent MPPA solution is in order. In addition while the BWL did obtain several small Green Energy suppliers for a period of years, depending on BWL Green Power Program success, it is our best interests to investigate some other possible longer-term solutions as well. Finally, given that other MPPA members are also interested in investigating Green or Renewable resources, MPPA has decided to establish a Project Committee to address this issue. The scope of the Committee would be to study the feasibility of undertaking a Green Power Project in which the MPPA would develop Green Power Resources. In order to implement a Project at MPPA, the participating Project Member must submit a resolution of its governing body stating its desire to become a Project Member. Project costs are allocated among participating members and should be minimal (administrative and general type expenses), absent further BWL Board authorization for expanded participation under a separate resolution. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolution_#2001.64 SURPLUS PROPERTY—WEST END OF HACO DRIVE RESOLVED, that the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. FURTHER RESOLVED, that the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. Easement Description: A part of the former "Lansing Connecting Railroad" (L.C.R.R.), being land on the N.W. t/4 of Section 22, TA N., R.2 W., City of Lansing, Ingham County, Michigan, particularly described as follows: Beginning at the intersection of the east line of Pennsylvania Avenue (112.5 f3. wide) and the northeasterly sideline of the former L.C.R.R. (60 fl. wide), said P.O.B. being marked by a found concrete plat monument set in "Hato Subdivision", L.24, P.42 of Ingham County Plats, and said P.O. B. being JUL-02-2001 13:40 HD OF IJRTER LIGHT 1 517 7026B55 P. 12i23 Board Minutes Pap 101 June 26,2001 on the south line of Haco Drive (60 ft. wide) as platted in "Haco Subdivision"; thence S 00035'40" W 12.38 ft. along the east line of S. Pennsylvania Avenue; thence S 75°09'20" E 142.37 ft. the beginning of a non-tangential curve; thence along the curve to the right with a radius of 580 ft., a long chord bearing S 63°39'34" E 242.93 ft., an arc distance of 244.74 to a found concrete plat monument set in "Haco Subdivision" and the end of the curve; thence northwesterly 392.31 ft. along the northwesterly sideline of the former L.C.R.R (the south side of platted Haco Drive) to the point of beginning, containing 2874 sq. ft. or 0.066 acres of land, more or less. Staff Commewary: This resolution shall constitute the Board's written consent to transfer jurisdiction of the subject parcel to the Department of Public Service or to such other City department, division or agency as the Mayor deems appropriate; and the transfer shall be effective upon acceptance by the Mayor. This parcel is located at the west end of Haco Drive at the intersection of Pennsylvania Avenue and is currently utilized by the Lansing Public Service Department for the south entrance lane for Haco Drive. This parcel is a surplus portion of the Lansing Connection Railroad Property purchased by the Board of Water and Light in 1998 (Res. No. 97-11- 4). The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Creamer, seconded by Commissioner Callen, that the resolution be approved. Action: Carried unanimously. esolution #10014- SURPLUS PROPERTY—RIVERSIDE PROPERTY RESOLVED, That the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. FURTHER RESOLVED, That the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. Easement Description: Part of the N.W. '/4 of Section 23, T. 4 N., R. 2 W., City of Lansing, Ingham County, Michigan, being particularly described as follows: Beginning at the N.W. Corner of Lot 74 of"Avis Subdivision of the west 20 rods of outlot "C" Leslie Park" (L. 9, P. 30, Ingham County JUL-02-2001 13:40 BD OF DATER LIGHT 1 517 7026655 P.13i23 Page102 Board Minutes June 26.2001 Plats); thence southeasterly along the north line of Lot 74 and the extension thereof 131.74 ft.; thence southerly parallel to and 1 foot westerly of a chain link fence that runs along the east side of the off- ramp from north bound Aurelius Road to Main Street, a distance of 743.16 ft. to a point 1 foot west of a deflection point in the chain link fence; thence continuing southerly along a line 1 foot westerly of said chain link fence 820.13 ft. to a point on the north line of Grand Trunk Western Railroad land; thence westerly along said north railroad line 90.84 ft. to the S.W. corner of Lot 39 of"Avis Subdivision" (L.9, P. 30, Ingham County Plats); thence northerly along the east line of Clemens Avenue 1600.04 ft. to the point of beginning, containing 4.27 acres of land,more or less. Staff Commentary: This resolution shall constitute the Board's written consent to transfer jurisdiction of the subject parcel to the Department of Public Service or to such other City department, division or agency as the Mayor deems appropriate; and the transfer shall be effective upon acceptance by the Mayor. This parcel is located on and along the west side of the Board of Water and Light Riverside Property and is currently utilized by the City of Lansing Public Service Department for an extension of Aurelius Road and an off-ramp from Aurelius Road to Main Street. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Callen, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esoWion #2001-b--1 AUTHORIZATION TO ENTER INTO A USE AGREEMENT WITH CITY OF LA.NSING WHEREAS, certain real property (known as 312 North Grand Avenue), more particularly described below, is under the jurisdiction of the Board of Water and Light, and WHEREAS, the City of Lansing by its Public Service Department desires a right of way to use a portion of such real property for the purpose of drainage structures, and WHEREAS, pursuant to 5-203.7 of the Lansing City Charter, the Board of Water and Light and other agencies of the City are encouraged to cooperate on projects deemed to be beneficial to the City, and JUL-02-2001 13:40 BD OF DATER LIGHT 1 517 7026855 P. 14/23 Page 103 Board Minutes June 26,2001 WHEREAS, the right-of-way area is located on a portion of the north end of the North Grand Avenue property and described as follows: Right of Way Description: The northerly 40 ft. of the south 00 ft. of Lot 9 of Block 66, original plat of the town of Michigan, now City of Lansing, as recorded in L. 2, PP. 36-38 of Ingham County Plats. RESOLVED, That the Board authorize the General Manager and Corporate Secretary to enter into a Use Agreement with the City of Larking to formalize the City of Lansing Public Service Department's current operation of a drainage outlet facility in the right-of- way area. Staff Commentary: This right of way has been requested by the City Engineer to formalize current operation of a drainage outlet facility in the right-of-way area. The drainage facilities were constructed in 1995 as part of the City of Lansing's replacement of the Shiawassee Street Bridge over the Grand River. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esolution.#2001-6=11 ADOPTION OF NEW STEAM SERVICE POLICY RESOLVED, That the adoption of new Board of Water and Light policy 19-15, Steam Rules and Regulations shall state that: The steam rules and regulations shall govern the steam services and shall be subject to review and modification by the Commissioners. Staff Commentary: This new policy for steam rules and regulations is consistent with policy 19-05, Electric Rules and Regulations, which provides for Commissioner review and modification of services provided. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Creamer, seconded by Commissioner Callen, that the resolution be approved. Action: Carried unanimously. JUL-02-2001 13:41 BD OF WRTER LIGHT 1 517 7026655 P. 15i23 Board Minutes Page 104 June 26,2001 esolution:#2001-6-1 ADOPT RULES AND REGULATIONS FOR STEAM SERVICE RESOLVED, That the adoption of the attached Board of Water and Light Rules and Regulations for Steam Service become effective July 1, 2001 subject to final legal review. Srq CommenLa: Rules and Regulations For Steam Service date back to 1988 and in some cases 1972. The Rules and Regulations For Steam Service have undergone a complete review and have been updated to reflect current practices and policies, a change in system extension and service deposits, elimination of construction specifications, and an update in the fees and charges. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner O'Leary, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution ##20.07-6=13 ADOPTION OF NEW WATER SERVICE POLICY RESOLVED, That Board of Water and Light Water Service Policy 19-13 is hereby rescinded. FURTHER RESOLVED, That the adoption of new Board of Water and Light policy 19- 13, Water Rules and Regulations shall state that: The water rules and regulations shall govern the water services and shall be subject to review and modification by the Commissioners. Sraff Commentary: This new policy for water rules and regulations is consistent with policy 19-05, Electric Rules and Regulations, which provides for Board review and modification of services provided. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Christian, seconded by Commissioner Callen, that the resolution be approved. JUL-02-2001 13:41 BD OF WRTER LIGHT 1 517 7026655 P. 16i23 Page 105 Board Minutes June 26,2001 Action: Carried unanimously. esolution #2001-6-1 ADOPTION OF WATER SERVICE RULES AND REGULATIONS RESOLVED, That the adoption of the attached Board of Water and Light Rules and Regulations For Water Service become effective July 1, 2001 subject to final legal review. Sta,�`CommentM: Rules and Regulations For Water Service reflect current practices and policies, a change in the requirements for system extension, and an update in the fees and charges. Board review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution.#.2001-6=1 ADOPTION OF ELECTRIC RULES AND REGULATIONS WHEREAS, in accordance with Board policy 19-05, the electric rules and regulations shall be subject to review and modification by the Commissioners. NOW THEREFORE BE IT RESOLVED, That the adoption of the Board of Water and Light Rules and Regulations For Electric Service as submitted to the Board on May 14, 2001 become effective July 1, 2001 subject to final legal review. Staff Commentary: Rules and Regulations For Electric Service date back to 1993 and in many cases 1983. The Rules and Regulations for Electric Service have undergone a complete review and have been updated to reflect current practices and policies, a change in system extension deposits, inclusion of new fees and charges, and updates to other fees and charges. Board review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner O'Leary, seconded by Commissioner Creamer, that the resolution be approved. JUL-02-2001 13:41 BD OF DATER LIGHT 1 517 7026B55 P. 17i23 Board Minutcs Page 106 June 26,2001 Action: Carried unanimously. esolution.#.2001-6-1 . CAPITAL PROJECT APPROVAL—POLICY 15-02 LANGUAGE CORRECTION RESOLVED, That Board of Water and Light policy 15-02, Capital Project Approval, be restated as follows: Any project included in the capital budget, but expected to exceed the budgeted amount by the greater of 15% of the budgeted amount or $200,000 must be approved by the Commissioners. This applies to the aggregate for electric, water and steam expenditure forecasts in the Annual Capital Budget and to individual projects in the Planned Capital Budget. The General Manager shall report any anticipated changes in scope or cost overruns to the Commissioners as soon as possible. The General Manager shall establish and implement procedures overseeing Capital project costs consistent with this policy. Stg{f Commentary: This correction of policy 15-02, Capital Project Approval, will make it consistent with policy 19-08, Line Extensions and Service Territory Expansions. At present, policy 15-02 requires Commissioner approval for the lesser of 15% or $200,000 and does not define how it should be applied. Policy 15-19 requires Commissioner approval for the greater of 15% or$200,000. Moved by Commissioner Murray, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS esolution#2001-6-1. RESOLUTION HONORING ROSEMARIE E.AQUILINA WHEREAS, It is with deep appreciation that we offer tribute to Rosemarie Aquilina as she brings to a close her term as Commissioner of the Board of Water and Light. She JUL-02-2001 13:41 BD OF WRTER LIGHT 1 517 7026655 P. 16/23 Page 107 Board Minutes June 26,2001 was appointed as a First Ward Commissioner of the Board of Water and Light on October 6, 1997,and WHEREAS, She was elected Chair Pro Tern in 1998 and served on various committees such as the Personnel Committee 1997 and 2000, the Finance Committee in 1998 and 1999, and chaired the Nominating Committee in 2000, and WHEREAS, As a Board Commissioner, Rosemarie Aquiline contributed leadership over the years in a variety of matters affecting this utility. Her insight and knowledge of the legislative arena greatly contributed in developing the Board of Water and Light's fundamental electric restructuring principles in the protection of both the industry and the consumer. She never lost sight of the goal of assuring that electric, water and steam are reliable and delivered at the lowest price possible, and WHEREAS, Rosemarie Aquilina's passion for the law started early in her life, including pursuance of a law degree at Thomas M. Cooley Law School, from where she graduated. She is an attorney in private practice as well as a military attorney. She is known as a successful litigator due to her fearless pursuit of victory and her remarkable win record, and WHEREAS, Rosemarie Aquilina has demonstrated high ideals of personal endeavor through her many civic involvements and service in the Michigan Army National Guard. She has the distinction of being the first and only female Judge Advocate General officer in the Michigan Army National Guard. In addition to that honor, she also holds the rank of Major. She has touched many lives through her career and community activism. Her professionalism, hard work, and sensitivity to the needs of the public have won for her the respect and admiration of all who have the good fortune of knowing her, and RESOLVED, That the Board of Water and Light Commissioners congratulate and thank Rosemarie Aquilina for her service on this Board. In regular session this 260' day of June, 2001, we wish Rose and her family our best wishes for the future and happiness in their new home in Okemos. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution#2001-6-1 RESOLUTION HONORING MARK A. MURRAY WHEREAS, It is with great appreciation that we offer tribute to Mark A. Murray for his dedicated service as a Third Ward Commissioner of the Lansing Board of Water and Light, and WHEREAS, Mark Murray was appointed to the Board of Commissioners on February 15, 1999, and served on the Board with distinction. During his term, he served as a JUL-02-2001 13:42 BD OF WRTER LIGHT 1 517 7026655 P. 19i23 Boud Minutes Page 108 June 26,2001 member of the Finance Committee from 1999 to present and was named chair of the committee in 2000. He also served on the Nominating Committee in 2000 and 2001, and WHEREAS, Among his major accomplishments during his tenure on the Board was emphasizing the importance of setting organizational direction by focusing on the strategic goals of the utility and monitoring organizational performance to assure the utility is operating in an efficient manner in order to remain competitive, and WHEREAS, Mark Murray's public service career has taken many forms. His service to the people of the City of Lansing and the State of Michigan began right out of college, working for Governors William Milliken, James Blanchard and John Engler. Though he has spent most of his career in state government, Mark Murray spent a year as Vice President for Finance and Operations at Michigan State University in 1998. He was named State Treasurer by Governor Engler in 1999. Throughout his career, he has displayed intelligence and diligence in every endeavor. His skills to assess and solve problems and get along with people with a wide range of views uniquely qualified him for the post of special policy adviser to Governor Engler. He has been a tireless advocate and spokesperson in promoting the highest standards of excellence in school quality in the State. His ethics, integrity and honor are unquestioned and provide a model to all those who may follow in his footsteps of public service, and WHEREAS, His professionalism and commitment to public service merit our highest praise. As he steps down from his post of State Treasurer to begin a new chapter in his brilliant career as President of Grand Valley State University effective July 1, 2001, we extend to him our sincere best wishes for continued success. RESOLVED, That the Board of Commissioners congratulate and thank Mark Murray for his outstanding career. In regular session this 26 h day of June, 2001, we wish Mark, his wife Elizabeth, and family the very best and well-deserved happiness and fulfillment. Moved by Commissioner Callen, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolution ##2001-6-1 RESOLUTION HONORING DAVID O'LEARY WHEREAS, It is with respect and appreciation that the members of this Board join in offering highest tribute to David O'Leary as he completes his tenure as an At-Large Commissioner of the Board of Water and bight with over 11 years of service, and WHEREAS, David O'Leary was appointed to the Board on May 21, 1990. He was elected Chair in 1996, Vice Chair in 1998, and he served on the Nominating Committee in 1998 and 1999, Personnel Committee from 1990-2000, Finance Committee in 2000- 01, and ad hoc committees formed to study issues related to development and governmental relations, and JUL-02-2001 13:42 BD OF WRTER LIGHT 1 517 7026B55 P.20i23 Page 109 Board Minutes June 26,2001 WHEREAS, Highlights of his years on the Board include major Board accomplishments in areas such as overturning the potential sale of the BWL to Utilicorp in 1992, relocating the Customer Service Center and Administration Building and realigning employee work locations to renovated facilities at 730 Hazel, 830 Hazel and 1232 Haco Drive (1998), water extensions to serve Alaiedon Township, Bath Township, City of DeWitt/DeWitt Township and East Lansing-Meridian Township (1999-2000), new compensation system for non-bargaining employees (2000), construction of a new central utilities complex to serve the General Motors Grand River Assembly Plant and construction of a chilled water system to serve downtown buildings (2000-2001), and WHEREAS, He has also served on various local and national boards; such as past president of the Rotary Club, active service with Capitol National Bank, Capitol Bancorp, WKAR-TV Corp. Council, Catholic Social Services, and St. Lawrence Hospital Advisory Board, and WHEREAS, His leadership skills guided him wisely throughout his career as President of O'Leary Paint Company. Through hard work, commitment to quality, and genuine love of his work, he has maintained the highest standards of excellence in all capacities, especially in overseeing growth and diversification in his family-owned business. These attributes have won him accolades such as the Hall of Fame Award from the National Art Materials Trade Association and the Businessperson of the Year from the Lansing Chamber of Commerce, and WHEREAS, Many words come to mind to describe Dave and capture his essence -- an avid Notre Dame fan, a community leader, loyal, intelligent, hard working; and possessing a humorous nature. We will miss his quick wit and funny stories! RESOLVED, That the highest tribute be accorded to David O'Leary as he brings to a close his tenure as a Commissioner. May this serve as a testimony of recognition of the high esteem in which he is held by the Board of Water and Light Commissioners and the customers of this utility. In regular session this 260' day of June, 2001, we wish Dave, his wife Janet, and family the very best and well-deserved happiness and fulfillment. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. GENERAL MANAGER'S REMARKS NOx Compliance Update. General Manager Pandy distributed a report dated June 25, 2001 on the status of Nitrogen Oxides (NOJ emission compliance that Manager of Environmental Services Nick Burwell prepared in response to a letter received from Commissioner Callen. The memo provides a history of the NO,, regulations and a guess at what the future regulations will be in light of the recent court rulings on NO,; compliance. Compliance issues and alternatives are also outlined in Mr. Burwell's report. In December, staff plans to report further on alternative compliance strategies and JUL-02-2001 13:43 BD OF WRTER LIGHT 1 517 7026655 P.21/23 Board Minutes Page 110 June 26,2001 recommend an action plan to comply with N% in the future. Mr. Pandy noted that NOX compliance was omitted from the capital forecast due to the magnitude of the cost, estimated to be on the order of$20450 million. GreenWise Electric Program Kick-Off on June 28. General Manager Pandy reported that the BWL plans to launch its "GreenWise Electric Power" program on June 28 h. GreenWise electric power is an environmentally friendly energy program that allows customers to buy some or all of their electricity from clean, renewable sources like wind, water and biomass. Customers will be able to purchase blacks of 250 kilowatt-hours per month at a cost of $7.50 per month (or roughly 3 cents per kilowatt-hour premium). There are 2700 blocks available. The Commissioners were invited to come to participate and speak in support of the green power program. Payment in Lieu of Taxes to the City of Lansing. General Manager Pandy distributed a memo prepared by General Accounting Manager David Cluley, dated June 18, 2001, regarding the fiscal 2000-01 payment in lieu of taxes to the City of Lansing. Selected operating revenues were used through May 31, 2001 to calculate the amount. The amount for this fiscal year is $6,618,244, which is approximately 3% more than last year, or approximately $189,000 more. The City of Lansing continues to benefit from the BWL's revenues on the 4% formula. Under the new agreement, adopted by the Board today (Resolution #2001-6-4) going forward beyond fiscal year 2002, the City will enjoy the benefits of the BWL's wholesale revenues, in addition to retail sales), which increases the amount by approximately $1 million per year. The current agreement due to expire June 30, 2002, is based solely on retail revenue. Share the Success Update: General Manager Pandy reported that the Share the Success program is coming to a close this fiscal year with a decent financial year. Corporate measures picked up 33 additional points for a total of 170 points for the fiscal year. If the fiscal year ends that way on June 30, employees would earn performance bonuses equal to 1.70% of annual pay. The process bonuses range from 2.12% up to 3.70%. Mr. Pandy noted that the customer satisfaction survey numbers are coming in very strong. The results of the spring survey will be reported to the Board at a future meeting. BWL Organizational Changes for FY 2002. General Manager Pandy reported that Clyde Dugan and Jack Hill will be taking on new responsibilities effective with the new fiscal year. Jack Hill will assume a new leadership role in the area of safety and environmental compliance. Mr. Hill was commended for his excellent job with special projects. Clyde Dugan will assume a new leadership role in special projects. Mr. Dugan was praised for his outstanding job in Marketing. Both Jack Hill and Clyde Dugan will work as a team as will their respective staffs to make that orderly transition in the new fiscal year. IBEW Elects Officers. General Manager Pandy reported on the results of the recent IBEW election. He congratulated Curt Gates who was re-elected Business Agent and Joe Davis who was re-elected president. JUL-02-2001 13:43 BD OF IJRTER LIGHT 1 517 7026B55 P.22i23 Page I I I Board Minutes June 26,2001 Congratulations to BWL Tapping Teams. General Manger Pandy reported that both the men's and the women's tapping teams won the state of Michigan tapping contest. This is the first time the BWL has ever had a female tapping team. Both teams participated in the American Water Works Association national competition. The men won second place for the whole nation at 1:23.47 minutes and the women's team won third place for the whole nation at 2:27.59 minutes. They won a tapping machine, valued at approximately $1,500, which was returned to the BWL. Mr. Pandy congratulated these employees for representing the BWL very admirably against numerous utilities. REMARKS BY COMMISSIONERS Commissioner Creamer congratulated the members of the Special Board Committee formed to negotiate the new relationship with the City of Lansing on the payment in lieu of taxes. The committee was comprised of Commissioners O'Leary, Murray and Royal and General Manager Pandy. Commissioner Callen reported that he had the pleasure of attending the American Public Power Association (APPA) Annual Meeting. He reported on some of the important insights gained at the conference, such as the deregulation situation in California and utility initiatives such as assisting Habitat for Humanity in building energy efficient homes. Commissioner Callen encouraged each Commissioner to avail themselves of the opportunity to attend such a conference to see and hear of the activity and earnestness with which municipal utilities, large and small conduct their business. Commissioner Callen distributed a written report he prepared on the Annual Meeting of the APPA June 18-20, 2001. EXCUSED ABSENCE On motion by Commissioner Christian and seconded by Commissioner Murray, that the absence of Commissioner Duncan be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. JUL-02-2001 13=43 HD OF IJRTER LIGHT 1 517 7026655 P.23i23 Board Minutes Page 112 June 26,2001 ADJOURNMENT On motion by Commissioner Creamer, and seconded by Commissioner Murray, the meeting adjourned by unanimous consent at 6:30 p.m. /s/Mary E. Sova, Secretary Filed with Lansing Ciry Clerk June 29, 2001 16:46 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 1/23 BOARD OF WATER AND LIGHT PO Box 13007, Lansing,M148901 WATER&LIGHT FAX vale: Friday, Jun 29,2001 4: Number of pages including 23 cover sheet: To: City Clerk From: Mary Sova Phone: Phone: Fax: 377-0068 Fax phone: (5 17)702-6203 CC: REMARKS: ❑ Urgent ❑ For your review ❑ Reply ASAP ❑ Please comment Attached for filing with your office is a"faxed" set of minutes of the regular Board of Water and Light Commissioners'meeting,held June 26, 2001, An original copy is being mailed to your office today. 17:01 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91613 PAGE: 23/23 Board Minutes Page 112 June 26,2001 ADJOURNMENT On motion by Commissioner Creamer, and seconded by Commissioner Murray, the meeting adjourned by unanimous consent at 6:30 p.m. Is/Mary E. Sova, Secretary Filed with Lansing City Clerk Jime 29, 2001 17:01 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 22/23 Page 111 Board Minutes June 26,2001 Congratulations to BWL Tapping Teams. General Manger Pandy reported that both the men's and the women's tapping teams won the state of Michigan tapping contest. This is the first time the BWL has ever had a female tapping team. Both teams participated in the American Water Works Association national competition. The men won second place for the whole nation at 1:23.47 minutes and the women's team won third place for the whole nation at 2:27.59 minutes. They won a tapping machine, valued at approximately $1,500, which was returned to the BWL. Mr. Pandy congratulated these employees for representing the BWL very admirably against numerous utilities. REMARKS BY COMMISSIONERS Commissioner Creamer congratulated the members of the Special Board Committee formed to negotiate the new relationship with the City of Lansing on the payment in lieu of taxes. The committee was comprised of Commissioners O'Leary, Murray and Royal and General Manager Pandy. Commissioner Callen reported that he had the pleasure of attending the American Public Power Association (APPA) Annual Meeting. He reported on some of the important insights gained at the conference, such as the deregulation situation in California and utility initiatives such as assisting Habitat for Humanity in building energy efficient homes. Commissioner Callen encouraged each Commissioner to avail themselves of the opportunity to attend such a conference to see and hear of the activity and earnestness with which municipal utilities, large and small conduct their business. Commissioner Callen distributed a written report he prepared on the Annual Meeting of the APPA June 18-20, 2001. EXCUSED ABSENCE On motion by Commissioner Christian and seconded by Commissioner Murray, that the absence of Commissioner Duncan be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. 17:00 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 tk91613 PAGE 21i23 Page 110 Board Minutes June 26,2001 recommend an action plan to comply with NOX in the future. Mr. Pandy noted that NOX compliance was omitted from the capital forecast due to the magnitude of the cost, estimated to be on the order of$20-$50 million. GreenWise Electric Program Kick-Off on June 28. General Manager Pandy reported that the BWL plans to launch its "GreenWise Electric Power" program on June 2e. GreenWise electric power is an environmentally friendly energy program that allows customers to buy some or all of their electricity from clean, renewable sources like wind, water and biomass. Customers will be able to purchase blocks of 250 kilowatt-hour i s per month at a cost of $7.50 per month (or roughly 3 cents per kilowatt-hour premum). There are 2700 blocks available. The Commissioners were invited to come to participate and speak in support of the green power program. Payment in Lieu of Taxes to the City of Lansing. General Manager Pandy distributed a memo prepared by General Accounting Manager David Cluley, dated June 18, 2001, regarding the fiscal 2000-01 payment in lieu of taxes tothe City of calculate the Lansing. Selected operating revenues were used through May 31, 2001 t amount for this fiscal year is $6,618,244, which is approximately 3% more than last year, or approximately $189,000 more. The City of Lansing continues to benefit from the BWL's revenues on the 4% formula. Under the new agreement, adopted by the Board today (Resolution 42001-6-4) going forward beyond fiscal year 2002, the City will enjoy the benefits of the BWL's wholesale revenues, in addition to retail sales), which increases the amount by approximately $1 million per year. The current agreement due to expire June 30, 2002, is based solely on retail revenue. Share the Success Update: General Manager Pandy reported that the Share the Success program is coming to a close this fiscal year with a decent financial year. Corporate measures picked up 33 additional points for a total of 170 points for the fiscal year. If the fiscal year ends that way on June 30, employees would earn performance bonuses equal to 1.70% of annual pay. The process bonuses range from 2.12%up to 3.70%. Mr. Pai>3y noted that the customer satisfaction survey numbers are coming in very strong. The results of the spring survey will be reported to the Board at a future meeting. BWL Organizational Changes for FY 2002. General Manager Pandy reported that Clyde Dugan and Jack Hill will be taking on new responsibilities effective with the new fiscal year. Jack Hill will assume a new leadership role in the area of safety and environmental compliance. Mr. Hill was commended for his excellent job with special projects. Clyde Dugan will assume a new leadership role in special projects. Mr. Dugan was praised for his outstanding job in Marketing. Both Jack Hill and Clyde Dugan will work as a team as will their respective staffs to make that orderly transition in the new fiscal year. IBEW Elects Officers. General Manager Pandy reported on the results of the recent IBEW election. He congratulated Curt Gates who was re-elected Business Agent and Joe Davis who was re-elected president. 16:59 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE 20/23 Board Minutes Page 109 June 26,2001 WHEREAS, Highlights of his years on the Board include major Board accomplishments in areas such as overturning the potential sale of the BWL to Utilicorp in 1992, relocating the Customer Service Center and Administration Building and realigning employee work locations to renovated facilities at 730 Hazel, 830 Hazel and 1232 Haco Drive (1998), water extensions to serve Alaiedon Township, Bath Township, City of DeWitt/DeWitt Township and East Lansing-Meridian Township (1999-2000), new compensation system for non-bargaining employees (2000), construction of a new central utilities complex to serve the General Motors Grand River Assembly Plant and construction of a chilled water system to serve downtown buildings (2000-2001), and WHEREAS, He has also served on various local and national boards; such as past president of the Rotary Club, active service with Capitol National Bank, Capitol Bancorp, WKAR-TV Corp. Council, Catholic Social Services, and St. Lawrence Hospital Advisory Board, and WHEREAS, His leadership skills guided him wisely throughout his career as President of O'Leary Paint Company. Through hard work, commitment to quality, and genuine love of his work, he has maintained the highest standards of excellence in all capacities, iversification in his family-owned business. These especially in overseeing growth and d attributes have won him accolades such as the Hall of Fame Award from the National Art Materials Trade Association and the Businessperson of the Year from the Lansing Chamber of Commerce, and WHEREAS, Many words come to mind to describe Dave and capture his essence -- an avid Notre Dame fan, a community leader, loyal, intelligent, hard working, and possessing a humorous nature. We will miss his quick wit and funny stories! RESOLVED, That the highest tribute be accorded to David O'Leary as he brings to a close his tenure as a Commissioner. May this serve as a testimony of recognition of the high esteem in which he is held by the Board of Water and Light Commissioners and the customers of this utility. In regular session this 26 h day of June, 2001, we wish Dave, lus wife Janet, and family the very best and well-deserved happiness and fulfillment. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. GENERAL MANAGER'S REMARKS NOx Compliance Update. General Manager Pandy distributed a report dated June 25, 2001 on the status of Nitrogen Oxides (NO,;) emission compliance that Manager of Environmental Services Nick Burwell prepared in response to a letter received from Commissioner Callen. The memo provides a history of the NO,,regulations and a guess at what the future regulations will be in light of the recent court rulings on NOX compliance. Compliance issues and alternatives are also outlined in Mr. Burwell's report. In December, staff plans to report further on alternative compliance strategies and 16:5e JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6223 *91613 PAGE: 19/23 Board Minutes Page 108 June 26, 2001 member of the Finance Committee from 1999 to present and was named chair of the committee in 2000. He also served on the Nominating Committee in 2000 and 2001, and WHEREAS, Among his major accomplishments during his tenure on the Board was emphasizing the importance of setting organizational direction by focusing on the strategic goals of the utility and monitoring organizational performance to assure the utility is operating in an efficient manner in order to remain competitive, and WHEREAS, Mark Murray's public service career has taken many forms. His service to the people of the City of Lansing and the State of Michigan began right out of college, working for Governors William Milliken, James Blanchard and John Engler. Though he has spent most of his career in state government, Mark Murray spent a year as Vice President for Finance and Operations at Michigan State University in 1998. He was named State Treasurer by Governor Engler in 1999. Throughout his career, he has displayed intelligence and diligence in every endeavor. His skills to assess and solve problems and get along with people with a wide range of views uniquely qualified him for the post of special policy adviser to Governor Engler. He has been a tireless advocate and spokesperson in promoting the highest standards of excellence in school quality in the State. His ethics, integrity and honor are unquestioned and provide a model to all those who may follow in his footsteps of public service, and WHEREAS, His professionalism and commitment to public service merit our highest praise. As he steps down from his post of State Treasurer to begin a new chapter in his brilliant career as President of Grand Valley State University effective July 1, 2001, we extend to him our sincere best wishes for continued success. RESOLVED, That the Board of Commissioners congratulate and thank Mark Murray for his outstanding career. In regular session this 26t` day of June, 2001, we wish Mark, his wife Elizabeth, and family the very best and well-deserved happiness and fulfillment. Moved by Commissioner Callen, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolu#lon#:2001,64-11 RESOLUTION HONORINGDAVID O'LEARY WHEREAS, It is with respect and appreciation that the members of this Board join in offering highest tribute to David O'Leary as he completes his tenure as an At-Large Commissioner of the Board of Water and Light with over 11 years of service, and WHEREAS, David O'Leary was appointed to the Board on May 21, 1990. He was elected Chair in 1996, Vice Chair in 1998, and he served on the Nominating Committee in 1998 and 1999, Personnel Committee from 1990-2000, Finance Committee in 2000- 01, and ad hoc committees formed to study issues related to development and governmental relations, and 16:57 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91613 PAGE: 19/23 Page 107 3oard Minutes June 26,2001 was appointed as a First Ward Commissioner of the Board of Water and Light on October 6, 1997, and WHEREAS, She was elected Chair Pro Tern in 1998 and served on various committees such as the Personnel Committee 1997 and 2000, the Finance Committee in 1998 and 1999, and chaired the Nominating Committee in 2000, and WHEREAS, As a Board Commissioner, Rosemarie Aquilina contributed leadership over the years in a variety of matters affecting this utility. Her insight and knowledge of the legislative arena greatly contributed in developing the Board of Water and Light's fundamental electric restructuring principles in the protection of both the industry and the consumer. She never lost sight of the goal of assuring that electric, water and steam are reliable and delivered at the lowest price possible, and WHEREAS, Rosemarie Aquilina's passion for the law started early in her life, including pursuance of a law degree at Thomas M. Cooley Law School, from where she graduated. She is an attorney in private practice as well as a military attorney. She is known as a successful litigator due to her fearless pursuit of victory and her remarkable win record, and WHEREAS, Rosemarie Aquilina has demonstrated high ideals of personal endeavor through her many civic involvements and service in the Michigan Army National Guard. She has the distinction of being the first and only female Judge Advocate General officer in the Michigan Army National Guard. In addition to that honor, she also holds the rank of Major. She has touched many lives through her career and community activism. Her professionalism, hard work, and sensitivity to the needs of the public have won for her the respect and admiration of all who have the good fortune of knowing her, and RESOLVED, That the Board of Water and Light Commissioners congratulate and thank Rosemarie Aquilina for her service on this Board. In regular session this 26th day of June, 2001, we wish Rose and her family our best wishes for the future and happiness in their new home in Okemos. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. es61 tion r# 2001 6 .1 RESOLUTION HONORINGMARK A. MURRAY WHEREAS, It is with great appreciation that we offer tribute to Mark A. Murray for his dedicated service as a Third Ward Commissioner of the Lansing Board of Water and Light, and WHEREAS, Mark Murray was appointed to the Board of Commissioners on February 15, 1999, and served on the Board with distinction. During his tenv, lie served as a 16:57 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 17/23 Board Minutes Page 106 June 26,2001 Action: Carried unanimously. esalurzo z ## Z001 6,h. CAPITAL PROJECT APPROVAL—POLICY 15-02 LANGUAGE CORRECTION RESOLVED, That Board of Water and Light policy 15-02, Capital Project Approval, be restated as follows: Any project included in the capital budget, but expected to exceed the budgeted amount by the greater of 15% of the budgeted amount or $200,000 must be approved by the Commissioners. This applies to the aggregate for electric, water and steani expenditure forecasts in the Annual Capital Budget and to individual projects in the Planned Capital Budget. The General Manager shall report any anticipated changes in scope or cost overruns to the Commissioners as soon as possible. The General Manager shall establish and implement procedures overseeing Capital project costs consistent with this policy. Staff Commewary: This correction of policy 15-02, Capital Project Approval, will make it consistent with policy 19-08, Line Extensions and Service Territory Expansions. At present, policy 15-02 requires Commissioner approval for the lesser of 15% or $200,000 and does not define how it should be applied. Policy 15-19 requires Commissioner approval for the greater of 15% or $200,000. Moved by Commissioner Murray, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS esolution #:2001-61 RESOLUTION HONORING ROSEMARIE E. AQUILINA WHEREAS, It is with deep appreciation that we offer tribute to Rosemarie Aquilina as she brings to a close her term as Commissioner of the Board of Water and Light. She 16:56 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 16/23 Page 105 3oard Minutes June 26,2001 Action: Carried unanimously. esolutzan # 2001 6 1 ADOPTION OF WATER SERVICE RULES AND REGULATIONS RESOLVED, That the adoption of the attached Board of Water and Light Rules and Regulations For Water Service become effective July 1, 2001 subject to final legal review. StaIT Commentary: Rules and Regulations For Water Service reflect current practices and policies, a change in the requirements for system extension, and an update in the fees and charges. Board review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carved unanimously. esolutaon 9 200E 6 'I ADOPTION OF ELECTRIC RULES AND REGULATIONS WHEREAS, in accordance with Board policy 19-05, the electric rules and regulations shall be subject to review and modification by the Commissioners. NOW THEREFORE BE IT RESOLVED, That the adoption of the Board of Water and Light Rules and Regulations For Electric Service as submitted to the Board on May 14, 2001 become effective July 1, 2001 subject to final legal review. StaffCommentary: Rules and Regulations For Electric Service date back to 1993 and in many cases 1983. The Rules and Regulations for Electric Service have undergone a complete review and have been updated to reflect current practices and policies, a change in system extension deposits, inclusion of new fees and charges, and updates to other fees and charges. Board review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner O'Leary, seconded by Commissioner Creamer, that the resolution be approved. 16:56 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 15/23 Board Minutes Page 104 June 26,2001 esolul on#20Q1 & ADOPT RULES AND REGULATIONS FOR STEAM SERVICE RESOLVED, That the adoption of the attached Board of Water and Light Rules and Regulations for Steam Service become effective July 1, 2001 subject to final legal review. StafT Commentary: Rules and Regulations For Steam Service date back to 1988 and in some cases 1972. The Rules and Regulations For Steam Service have undergone a complete review and have been updated to reflect current practices and policies, a change in system extension and service deposits, elimination of construction specifications, and an update in the fees and charges. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner O'Leary, seconded by Commissioner Christian, that the resolution be approved. Action: Carved unanimously. esWW 6n.#.20.1.01 1. 6 1 ADOPTION OF NEW WATER SERVICE POLICY RESOLVED, That Board of Water and Light Water Service Policy 19-13 is hereby rescinded. FURTHER RESOLVED, That the adoption of new Board of Water and Light policy 19- 13, Water Rules and Regulations shall state that: The water rules and regulations shall govern the water services and shall be subject to review and modification by the Commissioners. StalT Commentary: This new policy for water rules and regulations is consistent with policy 19-05, Electric Rules and Regulations, which provides for Board review and modification of services provided. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Christian, seconded by Commissioner Callen, that the resolution be approved. 16:55 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91613 PAGE: 14/23 Page103 3oard Minutes June 26,2001 WHEREAS, the night-of-way area is located on a portion of the north end of the North Grand Avenue property and described as follows: Right of Way Description: The northerly 40 ft. of the south 00 ft. of Lot 9 of Block 66, original plat of the town of Michigan, now City of Lansing, as recorded in L. 2, PP. 36-38 of Ingham County Plats. RESOLVED, That the Board authorize the General Manager and Corporate Secretary to enter into a Use Agreement with the City of Lansing to formalize the City of Lansing Public Service Department's current operation of a drainage outlet facility in the right-of- way area. Staff Commentary: This right of way has been requested by the City Engineer to formalize current operation of a drainage outlet facility in the right-of-way area. The drainage facilities were constructed in 1995 as part of the City of Lansing's replacement of the Shiawassee Street Bridge over the Grand River. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carved unanimously. esolufon # 2001 6 11 ADOPTION OF NEW STEAM SERVICE POLICY RESOLVED, That the adoption of new Board of Water and Light policy 19-15, Steam Rules and Regulations shall state that: The steam rules and regulations shall govern the steam services and shall be subject to review and modification by the Commissioners. Staff Commenta?y: This new policy for steam rules and regulations is consistent with policy 19-05, Electric Rules and Regulations, which provides for Commissioner review and modification of services provided. Commissioner review and modification of the Board of Water and Light rules and regulations for service provides a regulatory review and approval similar to that of other municipal utilities and the Michigan Public Service Commission. Moved by Commissioner Creamer, seconded by Commissioner Callen, that the resolution be approved. Action: Carried unanimously. 16:54 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 13/23 Board Minutes Page 102 June 26, 2001 Plats); thence southeasterly along the north line of Lot 74 and the extension thereof 131.74 ft.; thence southerly parallel to and 1 foot westerly of a chain link fence that runs along the east side of the off- ramp from north bound Aurelius Road to Main Street, a distance of 743.16 ft. to a point 1 foot west of a deflection point in the chain link fence; thence continuing southerly along a line 1 foot westerly of said chain link fence 820.13 ft. to a point on the north line of Grand Trunk Western Railroad land; thence westerly along said north railroad line 90.84 ft. to the S.W. corner of Lot 39 of"Avis Subdivision"(L.9, P. 30, Ingham County Plats); thence northerly along the east line of Clemens Avenue 1600.04 ft. to the point of beginning, containing 4.27 acres of land, more or less. Staf'Commentary: This resolution shall constitute the Board's written consent to transfer jurisdiction of the subject parcel to the Department of Public Service or to such other City department, division or agency as the Mayor deems appropriate; and the transfer shall be effective upon acceptance by the Mayor. This parcel is located on and along the west side of the Board of Water and Light Riverside Property and is currently utilized by the City of Lansing Public Service Department for an extension of Aurelius Road and an off-ramp from Aurelius Road to Main Street. The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Callen, seconded by Commissioner Murray, that the resolution be approved. Action: Carved unanimously. esoluh # 2001 610 AUTHORIZATION TO ENTER INTO A USE AGREEMENT WITH CITY OF LANSING WHEREAS, certain real property (known as 312 North Grand Avenue), more particularly described below, is under the jurisdiction of the Board of Water and Light; and WHEREAS, the City of Lansing by its Public Service Department desires a right of way to use a portion of such real property for the purpose of drainage structures, and WHEREAS, pursuant to 5-203.7 of the Lansing City Charter, the Board of Water and Light and other agencies of the City are encouraged to cooperate on projects deemed to be beneficial to the City, and 16:53 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 12/23 Page 101 3oard Minutes June 26,2001 on the south line of Haco Drive (60 ft. wide) as platted in "Haco Subdivision"; thence S 00°35'40" W 12.38 ft. along the east line of S. Pennsylvania Avenue; thence S 75°09'20" E 142.37 ft. the beginning of a non-tangential curve; thence along the curve to the right with a radius of 580 ft., a long chord bearing S 63°39'34" E 242.93 ft., an arc distance of 244.74 to a found concrete plat monument set in "Haco Subdivision" and the end of the curve; thence northwesterly 392.31 ft. along the northwesterly sideline of the former L.C.R.R. (the south side of platted Haco Drive) to the point of beginning, containing 2874 sq. ft. or 0.066 acres of land, more or less. Staff commentary: This resolution shall constitute the Board's written consent to transfer jurisdiction of the subject parcel to the Department of Public Service or to such other City department, division or agency as the Mayor deems appropriate; and the transfer shall be effective upon acceptance by the Mayor. This parcel is located at the west end of Haco Drive at the intersection of Pennsylvania Avenue and is currently utilized by the Lansing Public Service Department for the south entrance lane for Haco Drive. This parcel is a surplus portion of the Lansing Connection Railroad Property purchased by the Board of Water and Light in 1998 (Res. No. 97-11- 4). The past and current utilization of this parcel by the City of Lansing Public Service Department was approved by the Board of Water and Light without formal documentation. The purpose of this resolution is to formally transfer jurisdiction and liabilities for this parcel to the City of Lansing Public Service Department. Moved by Commissioner Creamer, seconded by Commissioner Calen, that the resolution be approved. Action: Carried unanimously. esolution# 2001 6 SURPLUS PROPERTY—RIVERSIDE PROPERTY RESOLVED, That the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. FURTHER RESOLVED, That the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. Easement Description: Part of the N.W. 1/4 of Section 23, T. 4 N., R. 2 W., City of Lansing, Ingham County, Michigan, being particularly described as follows: Beginning at the N.W. Corner of Lot 74 of "Avis Subdivision of the west 20 rods of outlot "C" Leslie Park" (L. 9, P. 30, Ingham County 16:53 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91613 PAGE: 11/23 Board Minutes Page 100 June 26,2001 Green Power Project. If the participation in the project is deterrnined to be in the best interest of the ratepayers, the Board of Water and Light Commissioners of the City of Lansing would consider authorizing such participation and obligation under separate resolution. Staf Commentary. The MPPA Power Pool Agreements do not permit any individual Pool member to "shop" for power on their own. MPPA has accommodated the BWL's request for it's initial phase of Green Power, but has indicated a more permanent MPPA solution is in order. In addition while the BVVL did obtain several small Green Energy suppliers for a period of years, depending on BWL Green Power Program success, it is our best interests to investigate some other possible longer-terns solutions as well. Finally, given that other MPPA members are also interested in investigating Green or Renewable resources, MPPA has decided to establish a Project Committee to address this issue. The scope of the Committee would be to study the feasibility of undertaking a Green Power Project in which the MPPA would develop Green Power Resources. In order to implement a Project at MPPA, the participating Project Member must submit a resolution of its governing body stating its desire to become a Project Member. Project costs are allocated among participating members and should be minimal (administrative and general type expenses), absent further BWL Board authorization for expanded participation under a separate resolution. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolu2on# 2001 6-,8 .......... ................ SURPLUS PROPERTY—WEST END OF HALO DRIVE RESOLVED, that the following parcel located in the City of Lansing be declared surplus and not required for Board of Water and Light operations. FURTHER RESOLVED, that the General Manager and Corporate Secretary be authorized to enter into an agreement to transfer jurisdiction of this parcel to the City of Lansing Public Service Department subject to the requirements of State Law, the Lansing City Charter and Codified Ordinances. Easement Description: A part of the former "Lansing Connecting Railroad" (L.C.R.R.), being land on the N.W. 1/4 of Section 22, TA N., R.2 W., City of Lansing, Ingham County, Michigan, particularly described as follows: Beginning at the intersection of the east line of Pennsylvania Avenue (112.5 ft. wide) and the northeasterly sideline of the former L.C.R.R. (60 ft. wide), said P.O.B. being marked by a found concrete plat monument set in "Haco Subdivision", L.24, P.42 of Ingham County Plats, and said P.O. B. being 16:52 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 12/23 Board Minutes Page 99 June 26,2001 Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. �solutzorc.� 2Q01 6 '; BWL PARTICIPATION IN MPPA GREEN POWER WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has an obligation to make its best efforts to assure a reliable and cost effective supply of electricity to its customers; and WHEREAS, national market studies and local experience has shown that certain retail customers are interested in utilizing renewable energy sources for at least a portion of their electric energy supply; and WHEREAS, PA 141 of the Michigan Public Acts of 2000 states that the MPSC shall establish the Michigan renewable energy program, one facet of which shall be designed to promote the use of existing renewable energy sources and encourage the development of new facilities; and WHEREAS, as is required by Section 40 of Act 448, of the Michigan Public Acts of 1976, Michigan Public Power Agency's Power Pool Project authorized the preparation and distribution of a Windpower Study request-for-proposal; and during its September 20, 2000 Board meeting, approved Bay Energy Services, Incorporated to perform the "Wind Power Project analysis;" and WHEREAS, the analysis was completed in December 2000 and analyzed factors such as economics, equipment, and wind availability at several sites; and WHEREAS, this analysis was reviewed by and copies provided to MPPA Commissioners; and WHEREAS, Michigan Public Power Agency at its April 11, 2001 Board meeting created the "Green (Renewable) Power Project," which project shall solicit•, analyze and recommend all types of green power, such as wind, biomass, hydro, landfill gas for the project participants consideration; and WHEREAS, it is appropriate and prudent for the Board of Water and Light of the City of Lansing to participate in the renewable energy supply opportunities, such as the MPPA Green Power Project, as a part of its ongoing efforts of exploring options and meeting the electricity supply requirements of its customers. NOW, THEREFORE, BE IT RESOLVED, That the Board of Water and Light of the City of Lansing will participate in the MPPA Green Power Project for the purposes of determining the economics and feasibility of obtaining energy from the MPPA Green Power Project, and to determine the amount of energy it should obtain in the MPPA 16:51 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91613 PAGE: 9/23 Page 98 Board Minutes June 26,2001 1. The term shall be for two years commencing January 1, 2002 and terminating December 31, 2003. 2. The annual quantity to be transported is 95% of BWL requirements. Current estimates indicate that should be around 1.2 to 1.5 million tons. 3. The price to be paid under this Agreement shall be $8.75 per net ton (pnt) for CY 2002 and $8.88 pnt for CY 2003 firm. Prices paid in 2000 and 2001 are $9.50 and $9.64. Commencing January 1, 2002, the BWL will realize a reduction of 9.23% in RPB coal transportation costs. Staff Commentary: BWL also received bids from Burlington Northern Railroad and DTE Transportation Services. A summary of the proposals is attached. A two-year term was selected to coincide with the best rates received for the lease of private railcars. Moved by Commissioner Creamer, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution_# 2001 b.'..: LEASE AGREEMENT WITH GENERAL ELECTRIC RAIL CAR SERVICES CORP. RESOLVED, that the Board of Water and Light (BWL) enter into a lease Agreement (Agreement) with General Electric Railcar Services Corporation (GERSC) of Chicago, IL, a unit of General Electric Capital Corporation, for the supply of rail cars. The Agreement particulars are as follows: 1) The terns of this Agreement shall be twenty-four (24) months (January 1, 2002 — December 31, 2003). 2) GERSC shall provide four (4) train sets, totaling 470 aluminum fully automatic rapid discharge coal hopper rail cars with the assurance that they will maintain the integrity of the train sets at all times during the term of the lease. 3) The lease rate shall be $349.00 per car per month (full service — inclusive of all normal maintenance expenses). Staff Commentary: By entering into this lease Agreement with GERSC, BWL will be able to guarantee a rail car supply for the delivery of Power River Basis (PRB) coal from Wyoming at a substantial savings. These cars will be dedicated to supply Eckert and Moores Park stations. Union Pacific Railroad (UPRR) has given BWL a transportation rate reduction of$1.90 per ton for the use of non-UPRR owned rail cars. The lease rate will provide an estimated savings of $.041 per ton for the estimated movement of 1.2 to 1.5 million tons of PRB coal per year. This lease Agreement is projected to yield an annual transportation savings between $400,000 and $615,000. 16:50 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 8/23 Board Minutes Page 97 June 26,2001 esoluhori #1 20.01 6= : PAYMENT IN LIEU OF TAXES RESOLVED, that the Board of Water and Light enter into an Agreement with the City of Lansing for the next ten years commencing July 1, 2003 to make an annual payment ui lieu of taxes. Agreement particulars are as follows: • BWL will pay the City the amount of four percent (4%) of its revenue from retail and wholesale sales of chilled water, electric, steam heat, and water utilities for the preceding 12 month period ending May 31't of each year. This amount shall be payable to the city no later than June 30th of each year. • BWL shall additionally pay to the City 4% of its wholesale sales for electricity and water for March-April-May of 2002; such payment will be made before June 30, 2002. • This Agreement shall automatically terminate on June 30, 2013, unless extended in writing by the Commissioners of the Board and the City Council of the City of Lansing. • Conditions or provisions not contained in this Agreement are not binding on either party. • This Agreement, or any of its terms or provisions, shall not be waived, modified or otherwise altered unless ui writing and executed by both parties to this Agreement. Staff Commentary: By adding the gross billed total sales (retail and wholesale) for chilled water, electricity, steam and water, it will increase the amount by approximately $1 million per year. The additional payment for March-April- May of 2002 on wholesale sales is estimated to yield approximately $230,000 additional for the City in FY 2002. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Action: Carried unanimously. esolulzon # 2(�D1 6--' RAIL TRANSPORTATION AGREEMENT WITH UNION PACIFIC RAILROAD RESOLVED, That the Board of Water and Light (BWL) enter into a Rail Transportation Agreement (Agreement) with the Union Pacific Railroad (UPRR) for the transport of Powder River Basin (PRB) coal from the mine to interchange with the Canadian National Railroad in Chicago, IL. The Agreement shall be subject to approval as to form by BWL's Legal Counsel. The Agreement particulars are as follows: 16:50 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 7/23 Board Minutes Page 96 June 26, 2001 GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esoluicon# 2�101 6-3 ......... ... .. AWARD PERFORMANCE AUDIT CONTRACT TO R.W. BECK RESOLVED, that the Board of Water and Light (BWL) enter into a contract with R.W. Beck to conduct a performance audit at a not to exceed price of$123,500. The scope of work shall include only phases 1, 2, 3 and 5 as defined in specifications dated March 30, 2001. The phases are listed below: Phase 1 —Review of Growth & Expansion Phase 2—Review of Cost Accounting Methods Phase 3 —Review Customer Profitability Phase 5 —Review of Rate& Fee Processes & Practices Staff Commentary: In November 2000, the Commissioners received two reports. One from Kellie Willson reviewing major water system extensions and one from Bill Cook on System Growth and Expansion. On November 15, 2000, the General Manager assigned Bill Cook the responsibility of developing and overseeing the implementation of an action plan to address the issues and concerns outlined in the two reports. In January 2001, staff reviewed an action plan with the Board that included developing a request for proposals for a performance audit. In March of 2001 as recommended in the January action plan, we sent a draft request for proposals to the General Manager and the Commissioners. The final request for proposals was sent to ten firms and five proposals were received. The Growth & Expansion Task Force under Bill Cook's direction has evaluated the proposals and recommends R.W. Beck be retained to do this work. The performance audit will help assure BWL that all the important issues related to growth and expansion have been identified and are being addressed appropriately. Moved by Commissioner Murray, seconded by Commissioner O'Leary, that the resolution be approved. Action: Carried unanimously. 16:49 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 6/23 Board Minutes Page 95 June 26,2001 Future plans are to review the Rules and Regulations annually and subsequently bring changes to the Board for approval. Following discussion, the Commissioners concurred with the proposed changes. A resolution authorizing the adoption of the updated Rules and Regulations for Electric, Steam and Water is included in the General Manager's Recommendations for consideration at the regular meeting of June 26, 2001. There being no further business, the meeting adjourned at 5: 20 p.m. Respectfully submitted, Ronald C. Callen, Chair Pro Tern Committee of the Whole Moved by Commissioner Callen, seconded by Commissioner O'Leary, that the Committee of the Whole Report be approved. Action: Carried unanimously. e9lu4 # 2Q01 6. REPORT OF THE NOMINATING COMMITTEE The Nominating Committee met on June 12, 2001, to review Commissioner survey responses for consideration of nominations for Board officers. The Nominating Committee recommends fie following slate of officer candidates for Fiscal Year 2001-02: Chair: Ronald C. Callen Vice Chair: Diane R. Royal Chair Pro Tem: Charles M. Creamer Respectfully submitted, NOMINATING COMMITTEE Ernest Christian, Chair Nancy Duncan Mark Murray Moved by Commissioner Creamer, seconded by Commissioner Murray, that the Report of the Nominating Committee be adopted as submitted. Action: Carried unanimously. 16:49 JUN 29, 2001 ID; BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 5/23 Board Minutes Page 94 June 26, 2001 then be requested to approve the new Rules and Regulations for the Electric, Steam and Water Utilities, including Fees and Charges, at the regular meeting on June 26th for implementation on July 1, 2001. Preliminary Business Plan and Share the Success Performance Objectives for FY 2002. Kellie Willson, Director of Metrics and Audits, presented a preliminary framework for Share the Success Corporate Measures for fiscal year 2002. In the coming weeks, the corporate measures will be refined and process measures will be developed. There being no further business, the meeting adjourned at 7:30 p.m. Respectfully submitted, Ronald C. Callen, Chair Pro Tern Committee of the Whole Moved by Commissioner Creamer, seconded by Commissioner O'Leary, that the Committee of the Whole Report be considered as read in full and approved. Action: Carried unanimously. esol1. 0ion# 2001 6-2 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole met on June 26, 2001 to review the proposed update of the Steam and Water Rules and Regulations. Chair Pro Tern Ronald Callen called the meeting to order at 5:00 p.m. Present were Commissioners Aquilina, Callen, Christian, Creamer, O'Leary and Royal. Absent were Commissioners Duncan and Murray. Review of Steam and Water Rules and Regulations Doug Wood, Manager of System Integrity and Customer Projects, reported that the current Rules and Regulations for Steam Service date back to 1988 and in some cases 1972. These Rules and Regulations have undergone a complete review and update to reflect current practices and policies, a change in system extension and service deposits, elimination of construction specifications, and an update in the fees and charges. The most recent update made to the Rules and Regulations for Water Service date back to 1993. The proposed new Rules and Regulations for Water Service reflect current practices and policies, a change in the requirements for system extension, and an update in the fees and charges. The Rules and Regulations for Electric Service were reviewed with the Committee of the Whole on May 22, 2001. 16:48 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91613 PAGE: 4/23 Board Minutes Page 93 June 26,2001 The Electric Utility maintains sufficient cash flow throughout the forecast period. Annual profitability meets the 4.0% return on assets (ROA) target until 2006 at which time it drops to between 2% and 3%. The average ROA for the period is 4.03%. The Water Utility will need additional funds throughout the remainder of the forecast period. The Steam Utility maintains sufficient cash throughout the forecast period. Strategies to address the financial position for the three utilities include: Electric Utility • Finalize NO.,compliance plan • No additional rate increases to 2005 • Residential price differential 10%below competition • Commercial/Industrial price differential 5%below competition • No debt; except NO., lower expenses Steam Utility • Complete Cost of Service Study using FY 2001 as base year • Anticipate rate study and recommendations for rate changes by Winter/Spring 2002 • Rate proceeding Summer/Fall 2002 • Work with General Motors regarding retirement of Plants 1 and 6 • No debt, lower expenses Water Utility • Change Water Rules and Regulations to lower BWL cost to expand in the townships • No debt, lower costs • Consider a Water Cost of Service Study using 2001 as the base year • Rate Study and Recommendations by Spring 2003 • If necessary, rate proceeding Summer/Fall 2003, rates effective l/l/2004 The Board will be updated regularly throughout the year concerning progress on this approach. Electric Rules and Regulations An item-by-item comparison of the proposed Electric Rules and Regulations to the current version was provided to the Commissioners in advance for review prior to the meeting. Doug Wood, Manager of System Integrity and Customer Projects, presented an overview of recommended changes to the Electric Rules and Regulations. Changes are being made to the Electric Rules to maintain competitive rates, cover existing commitments and preserve the future bonding capability for environmental and/or other needed requirements. The proposed changes will address specific modifications involving construction standards, customer responsibilities and BWL fees and charges for distribution and service extension. Following discussion, the Committee of the Whole concurred with the proposed changes to the Electric Rules and Regulations. Staff will be submitting proposed changes to the Steam and Water Rules and Regulations for review and comment at the Committee of the Whole meeting inJune. The Board will 16:47 JUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE: 3/23 Page 92 Board Minutes June 26, 2001 Ottawa Power Station. However, a slowdown in the economy and a downturn in the communications arena have caused his company to reassess the marketplace. His goal is to partner with local developers who are integrated with the Lansing marketplace to evaluate alternate uses for the space of the Ottawa Station instead of just "telecom hotel" space. An example would be to create disaster recovery space to maintain backup for large databases and networks that drive the governmental infrastructure. In response to questions raised by the Commissioners, Mr. Berns stated that he wants to start off his relationship with the BWL on the right foot, thus it is important to approach the marketplace at the right time. He noted that if the project reassessment determines that the square footage is right to service the marketplace, Convergency would then finalize the purchase price and execute the joint development agreement with the BWL. The revalidation period is anticipated to take three to four months. COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES e..oNut # 20Q1 6 l i:i COMMITTEE OF THE WHOLE REPORT The Committee of the Whole met on May 22, 2001 to receive updates on the following topics: 1. Six-Year Cash Flow Projection and Potential Rate Implications 2. Electric Rules and Regulations 3. Preliminary Business Plan and Share the Success Performance Objectives — FY'02 Chair Pro Tern Ronald Callen called the meeting to order at 7 p.m. Present were Commissioners Callen, Christian, Duncan, O'Leary and Royal. Absent were Commissioners Aquilina, Murray, and Creamer Cash Flow for Fiscal Years 2002-2007 Chief Financial Officer Dana Tousley reported on the FY 2002 — FY 2007 cash flow forecast for the Electric, Water and Steam Utilities. The forecast was based on current sales and capital expenditure forecasts, existing rate increases, the FY 2002 budget; 3.0% inflation, a 2% per year fuel escalation, and no additional borrowing. The FY 2002 outlook indicates that approved rate increases and available cash are sufficient and no additional bonding will be required during the upcoming fiscal year for each BWL utility. This excludes what may be required for NO.,. 16:47 .TUN 29, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91613 PAGE 2i23 Page 91 Preliminary 1tilinutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, June 26, 2001 The Board of Commissioners met in regular session at 5.35 p.m. in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Charles M. Creamer, Ernest J. Christian, David O'Leary, Diane R. Royal, and Mark A. Murray. Absent: Commissioner Nancy W. Duncan. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner O'Leary, seconded by Commissioner Creamer, to approve the minutes of regular session held May 22, 2001. Carried unanimously. Motion made by Commissioner O'Leary, seconded by Commissioner Creamer, to approve the minutes of executive session held May 22, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED TO MANY AGENDA SUBJECEMBERS OF THE TT OR ON LIC �ANY OTHER WELCOME TO SPEAK TO THE BOARD SUBJECT NOW, OR AT THE END OF THE MEETING. Peter Berns, Chief Operating Officer of Convergency Center Corporation, updated the Board on his efforts over the past couple of months to put together a model to convert the Ottawa Power Station cy into a data hub for high-speed internet services. Mr. h Berns reported that Convergency as invested time and money into development plans for the Page 78 Preliminary Minutes—Subject to Board Approval MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, May 22, 2001 The Board of Commissioners met in regular session at 6:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Nancy W. Duncan, David O'Leary, and Diane R. Royal. Absent: Commissioners Rosemarie E. Aquilina, Charles M. Creamer, and Mark A. Murray. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner O'Leary, seconded by Commissioner Christian, to approve the minutes of regular session held April 24, 2001. Carried unanimously. Motion made by Commissioner Callen, seconded by Commissioner O'Leary, to approve the minutes of executive session held April 24, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. Page 79 Board Minutes May 22,2001 COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES FINANCE COMMITTEE REPORT The Finance Committee met on April 24, 2001, to receive an update on the following topics: 1. Animal O&M Budget 2. Annual Rate Review 3. Utility Fees and Charges 4. Quarterly Internal Audit Report Chair Mark Murray called the Finance Committee to order at 8:45 p.m. Committee Members in attendance were Commissioners Murray, Creamer, and Royal. Also present were Commissioners Callen and Duncan. Absent were Commissioners Creamer and O'Leary. Annual O&M Budget Chief Financial Officer Dana Tousley presented an overview of the proposed budget by utility for FY 2002. Staff plans to review the six-year cash flow model and capital forecast with the Commissioners in May or June. FY 2002 Budget Assumptions were reviewed: • Chilled Water included in Steam Utility • Central Utility Complex profit for water, electric and steam included in Other Income • Central Utility Complex cash/debt/capital expenditures excluded from presentation • Capital expenditures and bonds for NO, excluded from presentation Proiected Income Statement $(000) • Revenue 216,755 • Expense -194,704 • Net Other Income/Expense 117 Page 80 Board Minutes May 22,2001 22,168 • Return on Assets 3.6% • Operating Ratio 093.2% Projected Cash Flows $(000) • Beginning Cash 46,393 • Sources of Cash (NI+Depr) +46,689 • Uses of Cash -50,093 (Debt+Cap+PILT) • Ending Cash 42,179 FY 2002 Budget vs. FY 2001 $(000) Category FY 2002 FY 2001 Change Labor 50,929 48,149 5.8% Material 8,082 7,862 2.8% Outside Seivice/Other 26,195 25,203 3•9% Chilled Water Expenses 1,408 0 Fuel/Purchased Power 92,568 90,127 2.7% Capital Transfers -9,000 -9,000 Total O&M 170,183 162,341 4•8% The Finance Committee recommends the following resolution for Board approval in May: esolution''#2001-5-1 ANNUAL FY 2002 BUDGET RESOLVED, That the annual budget covering Fiscal Year 2002, appended to this report, be approved as presented. RESOLVED FURTHER, That capital projects are authorized in the amount of the project estimate. Capital expenditures for Fiscal Year 2002 are limited to the amount included in the budget. Annual Rate Review Chief Financial Officer Dana Tousle reported that rate forincreases 2002 over The cash flow model effective as of January 1, 2001, appear to be adequate targeted for review with the Commissioners in May or June will serve two purposes: (1) Page 81 Board Minutes May 22,2001 illustrate what the near tern looks like for rates and (2) provide available options for the anticipated NO,,bond issue. Rate strategies will be discussed at that time. Utility Fees and Charges Staff reviewed proposed fees and charges for electric, water, and steam utilities recommended for implementation on July 1, 2001. The fees and charges are intended to supersede the charges currently in place and are consistent with upcoming rules and regulation modifications as outlined in the February Growth and Expansion Report. Assistant General Manager Cook reviewed plans to effectively communicate the change in the BWL's growth and expansion philosophy to promote better employee and external customer understanding of the policy. Over the course of the next couple of weeks, meetings will be held with employees directly impacted by the proposed changes. Marketing and Delivery plan to meet with townships, major developers, contractors and inspectors, as well as economic development people to explain the charges and get their input prior to implementation. A staff report on customer feedback and outcome of the meetings will be provided to the Commissioners at the May meeting. It was noted that customer feedback could cause a slight adjustment to the proposed FY 2002 budget. Quarterly Internal Audit Report Director of Metrics and Audits Kellie Willson invited questions from the committee regarding her quarterly internal audit report, which was included with the meeting packet. She also distributed a summary of the proposals received from five firms to conduct performance audits. The prices range from $95,000 to $504,000 for all five phases outlined in the request for proposals. The Growth and Expansion Task Force will review and evaluate the proposals and submit a report to the Finance Committee. City Ethics Ordinance Compliance In February 2001, the Finance Committee requested that the Director of Metrics and Audits. Kellie Willson, submit specific recommendation relative to expectations and the level of importance the BWL should attach to ethi recommendation: cs. Ms. Willson presented the following esolutio�a #2001-5- CITY ETHICS ORDINANCE COMPLIANCE RESOLVED, That the Commissioners endorse both the letter and the spirit of the City's Ethics Ordinance. .RESOLVED FURTHER, That the Commissioners encourage management to provide ongoing annual training to all BWL employees about its provisions. With regard to purchasing issues, there was agreement by the committee that an employee should be able to bring input to the procurement process for business reasons. Board Minutes Page 82 May 22,2001 This means that all BWL employees: (a) may provide input to the procurement process for business reasons only and may not derive any income or personal benefit, directly or indirectly, from the selection, (b) should be discouraged from doing business with BWL, and (c) should not accept gifts over $5 0 in value from vendors whether or not they influence a decision or official action. The Committee concurred with the recommendation as clarified. Financial and Management Information Issues Director of Metrics and Audits Kellie Willson reported that the BWL's financial practices and systems must provide timely and useful information to guide the business. Deficiencies in a true accounts payable system and accrual methodology were identified as problematic areas. Chief Financial Officer Tousley reported that he has allocated $30,000 in the proposed FY 2002 budget to explore various platfonns to improve database access by managers. He noted that the BWL utilizes an accrual system that is done on a fiscal year basis. Commissioner Murray suggested that perhaps the question is more a cost issue rather than a philosophical one,particularly since a monthly accrual system is integral to determine the current monthly budget position. Mr. Tousley stated that given the financial constraints of doing more, in terns of accounts payable or accrual, the decision was made that the best use of the $30,000 for now would be to explore available options to provide better database access to managers. The Committee agreed that the BWL should be moving toward a monthly accrual system. The question, however, is at what cost and at what speed. Mr. Tousley noted that if the option involves a major transformation of the BWL's financial reporting system, the cost could be prohibitive. Ms. Willson suggested that the first step to replace the existing accounting system would be to review requirements and purchase an off-the-shelf system that could be modified, only if necessary. She said several vendors offer integrated packages that specialize in utilities. Ms. Willson stated that savings in operational efficiencies would be gained from managers through timely access to budgetary infonmation. Following discussion, the Committee directed the Director of Metrics and Audits to report back with an outline of cost issues with examples of solid accounting systems currently in place. Application of FAS#71 Commissioner Murray acknowledged Internal Audit's written overview of the Board's decision on the continued applicability of FAS #71. He agreed that the specific items deferred and financial implications of the deferral should be revisited by staff and the Commissioners annually. Respectfully submitted, Mark A. Murray, Chair Finance Committee Moved by Commissioner Christian, seconded by Commissioner O'Leary, that the Finance Committee Report be considered as read in full and approved. Action: Carried unanimously. Page 83 Board Minutes May 22,2001 Moved by Commissioner Christian, seconded by Commissioner Duncan, that Resolution 2001- 5-1 (FY 2002 Budget) be approved. Action: Carried unanimously. Moved by Commissioner Duncan, seconded by Commissioner Callen, that Resolution 2001-5-2 (City Ethics Ordinance Compliance) be approved. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolution #'2001-5-3 USE OF SPECIAL COUNSEL RESOLVED, that the General Manager be authorized to retain the law firm of Foster, Swift, Collins & Smith, P.C., on as as-needed basis from May 23, 2001 to February 17, 2003. This firm has advised the BWL in the past on employment, environmental, commercial litigation and pension matters. The City Attorney has recommended this firm to Lansing City Council and Lansing City Council, pursuant to their Resolution No. 130, has authorized the BWL to retain this firm. Staff Commentag: This firm previously responded to the BWL's Request for Qualifications and submitted a proposal. During the process of reviewing these qualifications, it was disclosed that the firm was presently representing a client against the City of Lansing. Both the City Attorney and the BWL's Staff Attorney have separately met with firm representatives to discuss putting into place safeguards to avoid such representation in the future as well as the repercussions of representing clients against the City of Lansing or any of its agencies. The Staff Attorney is comfortable that this situation will not be repeated. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Discussion: Commissioner Royal expressed concern that the firm of Foster, Swift, Collins & Smith was being added to a list approved by the Board in January 2001 (Resolution 2oo1-1-5). She stated that any law firm should have procedures not to take on a new client with adverse positions to a former client without the former client's permission. She noted that all attorneys have rules on ethics relevant to former clients. Commissioner Callen disclosed his intention to recuse himself from voting on this resolution due to his working relationship with Knaggs, Harter, Brake & Schneider, which is one of the law firms retained by the BWL on as-needed basis for the period February 2001 to February 2003. Action: Adopted by the following vote: Board Minutes Page 84 May 22,2001 Yeas: Commmissioners Christian, Duncan, and O'Leary Nays: Commissioner Royal Abstention: Commissioner Callen Absent: Commissioners Aquilina, Creamer, and Murray esolution #2001=5- AMENDMENT TO PENSION PLAN RESOLVED, That the Third Amendment to the Lansing Board of Water and Light Employee's Defined Benefit Plan for Employees Pensions is hereby adopted as indicated therein; and RESOLVED FURTHER, That the Chair of the Board of Commissioners and the Corporate Secretary are authorized to execute the amendment and any other documents necessary to implement the foregoing resolution. Staff Commentary: This amendment is necessary to bring the plan into compliance with changes in legislation. The changes affect our ability to use excess pension assets for the payment of retiree healthcare liabilities. I>i summary, the law extends the expiration date of Section 420 to December 31, 2005, and changes the method used to determine whether retiree healthcare benefits have been maintained for five years following the transfer. In order to take advantage of these changes, Steve Jurmu of Foster, Swift, Collins & Smith prepared the necessary documents and submitted them to the IRS for approval in December of 2000. On April 30, 2001, the IRS issued their approval of this amendment. Moved by Commissioner O'Leary, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution' #200i-5-5 INCREASE IN CAPITAL BUDGET FOR STEAM MAIN REPLACEMENT RESOLVED, That the Board of Commissioners authorize the replacement of the steam main in the 100 N. Washington block, and that the BWL Capital Budget for fiscal year 2001 be increased by$200,000 to accommodate such project. Staff Comnaentarx: The project will replace the steam main in N. Washington Avenue from Michigan Avenue to Ottawa Street. Replacement of this steam main section is recommended due to concerns over the integrity of the existing steam main, which is the primary connection between the north & south low pressure areas, coupled with the benefits of doing this construction with the reopening of this block to traffic. Page 85 Board Minutes May 22,2001 This steam main has been in service since 1906. Project Cost FY 01 Expenditures FY 02 Expenditures 100 N. Washington $801,000 $200,000 $601,000 Block Steam Main Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. esolution ACQUIRE EASEMENT EASEMENT FOR WATER MAIN FACILITIES RESOLVED, That the Board of Commissioners authorize the Manager of System Integrity & Customer Projects to acquire an easement from Looking Glass, Incorporated for water main facilities located on the east side of Airport Road, half way between Clark and Herbison Roads, in exchange of front footage recovery and services rendered by the Board of Water and Light in the amount equivalent to $0.80/Sq. Ft. or $30,510.00. Easement Description: 40' Easement along Airport Road - Part of the Northwest 1/4 of the Southwest 1/4 of Section 18, T5N R2W, DeWitt Township, Clinton County, Michigan particularly described as follows: beginning at a point on the East-West 1/4 line of Section 18 that is 33 ft. Easterly of the West 1/4 corner of Section 18; thence Easterly along the 1/4 line 40 ft.; thence Southerly parallel to the West line of Section 18 a distance of 950 ft.; thence Westerly 40 ft.; thence Northerly on a line 33 ft. Easterly of the West section line parallel to the West section line 950 ft. to the point of begimning. Property Description: Part of the fractional West 1/2 Section 18, T5N R2W, DeWitt Township, Clinton County, Michigan more particularly described as follows: beginning at the West 1/4 corner of said Section; thence along the East-West 1/4 line, S89°29'46"E, 528.00 feet; thence parallel with the West line of said section S00°23'05"W, 1321.32 feet; thence N89°31'56"W, 528.00 feet to said West line of said Section; thence along said West line, N00°23'-05"E, 1321.65 feet to the point of beginning, containing 16.02 acres, more or less. Subject however to easements, agreements, covenants, conditions, restrictions and/or reservations of record, if any. Staff Commentary: The easement will permit the operation of a north—south 16" feeder main to supply potable water to several DeWitt and Watertown subdivisions and is essential to the overall water master plan for the area. Easement is needed due to Clinton County Road Commission requirement to construct the water main outside of the road right-of-way in this area. Board Minutes Page 86 May 22,2001 Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. esolution #2001-5 CERTIFICATE OF EXTENSION OF RETAIL WATER SYSTEM AGREEMENT WHEREAS, the Board of Water and Light and the City of DeWitt (a municipal corporation) have entered into a Water System Agreement, with an effective date of September 1, 2000, and a term of thirty(30) years; and WHEREAS, the Water System Agreement allows the contract to be extended by one (1) additional year, if amended in writing on or before June lst of each year, and such that the term shall never exceed thirty(30) years; and WHEREAS, the Board of Water and Light desires to extend the Water System Agreement, now and in future years. RESOLVED, That the Board of Commissioners authorize the General Manager and Corporate Secretary to sign a Certificate of Extension to the Water System Agreement by June 1st, now and in each year hereafter, in such form as approved by the Staff Attorney and substantially in the fonn included as Exhibit D in the Water System Agreement. Staff Comnientaa: The City of DeWitt has approved the extension of the Water System Agreement by one (1) year to 2031, by action of the DeWitt City Council on May 7, 2001. Moved by Commissioner O'Leary, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. esolution>#2001-5- WATER SERVICE AGREEMENT BETWEEN THE BOARD OF WATER AND LIGHT AND LANSING TOWNSHIP WHEREAS, the Landel Metropolitan District ("District"), comprising certain portions of the Townships of Lansing and Delhi, was created pursuant to 312 PA 1929, and became effective on November 12, 1946, pursuant to a vote of the electors at which time a charter was also adopted; and WHEREAS, the District was authorized, among other things, to acquire and succeed to any or all the rights, obligations and property of any city, village or township, or any parties thereof, to supply water and furnish water services to properties within or without its limits ("District System"); and Page 87 Board Minutes May 22,2001 WHEREAS, on October 17, 1955, the City of Lansing ("City") entered into an agreement with the District ("District Agreement"), after approval by their respective electors, for the sale, assignment and transfer of the District's System to the City, together with all the rights and property respecting or connected with the District System, to supply water to those areas of the Charter Township of Lansing ("Township") previously served by the District. This District Agreement included the right to transact a local business in the Township and the right to lay, maintain and operate water mains in the public highways, in certain areas of the Township; and WHEREAS, as part of the District Agreement, the City assumed the obligations of the District including the outstanding Water Supply and Sewage Disposal System No. 1 Revenue Bonds, dated August 1, 1947, which were subsequently retired and whereupon the District organization was dissolved; and WHEREAS, the City then incorporated the District System into its own water supply system, operated by the Board of Water and Light; and WHEREAS, the Board of Water and Light and the Township acknowledge the mutual benefits resulting from the District Agreement and desire to continue the Board of Water and Light water service in the Township as well as to extend the Board of Water and Light's water service to other areas in the Township not covered under the District Agreement, with all the areas being served designated as the "Water Service Area." RESOLVED, That the Board of Commissioners authorize the General Manager and Corporate Secretary to enter into a Water Service Agreement and Supplemental Agreements to provide service to Lansing Township within the Water Service Area, subject to approval of all documents by the Staff Attorney. Staff Commentary: The Water Service Agreement shall be in substantially the form as the draft filed in the Corporate Secretary's Office. Moved by Commissioner O'Leary, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. EXECUTIVE SESSION Moved by Commissioner Christian, seconded by Commissioner Duncan, that the Board convene in Executive Session to discuss settlement of a litigation claim. (5:56 p.m.) Yeas: Commissioners Callen, Christian, Duncan, O'Leary, Royal Nays: None Abstentions: None Absent: Commissioners Aquilina, Creamer, Murray Action: Carried unanimously. The Board returned to open session at 6:10 p.m. Board Minutes Page 88 May 22,2001 Resolution #2001-5- SETTLEMENT OF LITIGATION CLAIM WHEREAS, the Board of Commissioners is authorized by Charter to approve settlement of litigation; and WHEREAS, the Staff Attorney, with concurrence of the Assistant General Manager and upon request of its Special Counsel, recommends that the Board of Commissioners authorize William J. Cook, the Assistant General Manger, to negotiate a settlement in the litigation it has filed against its insurer in the Federal District Court, Western Division, Docket No. 5:00-CV-131 and titled as Lansing Board of Water and Light v. Deerfield Insurance Co. WHEREAS, the Board of Commissioners has been advised as to the merits of the case, the costs associated with this matter through trial, and all known risks. The Board of Commissioners has been advised that a Rule 16 Scheduling Conference concerning this litigation has been ordered by the Magistrate Judge that requires the attendance of an executive officer with complete and unrestricted authority to negotiate a settlement. RESOLVED, That the Board of Commissioners authorize the Assistant General Manager to negotiate the terms and conditions for settlement of this litigation. RESOLVED FURTHER, That the General Manager is authorized to execute all documents related to the settlement of these claims. Moved by Commissioner Callen, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None Page 89 Board Minutes May 22,2001 GENERAL MANAGER'S REMARKS Sale Date for Revenue Bonds, Series 2001A- May 30, 2001. General Manager Pandy handed out a letter from Standard &Poor's, dated May 15, 2001, regarding the $11,780,000 BWL Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2001A, due July 1, 2015. Standard &Poor's assigned a rating of`AA' to the obligations. S&P views the outlook for this rating over the intermediate to longer term as stable. The date of the bond sale is set for Tuesday, May 30, 2001, at 10:30 a.m., and settlement should be within two weeks of the sale. BWL Supports Michigan Renewable Energy Program Proposal. General Manager Pandy handed out a BWL letter of support, dated March 16, 2001, to the Michigan Public Service Commission Case No. U-12915 regarding recommendations outlined in the Michigan Renewable Energy Program Proposal. General Manager Pandy updated the Board on the Environmental Protection Agency's (EPA) right to set strong air quality standards. He reported that the Midwest states and others sued EPA over the Section 126 petition. This section allows a state that has a compliance problem because of another state to petition EPA to force the other state to reduce emissions that are blown into their state. EPA has been sent back to the drawing board to come up with new numbers. Staff is working with a consultant on compliance strategies that would help the BWL meet the tough new No,,standards. Overview of Tree Management Program. General Manager Pandy reported on the BWL's standards for tree trimming of primary voltage lines throughout the service area. The program is designed to achieve a complete trimming of the BWL's entire electric system within a four to five year cycle. It is aimed at reducing power outages caused by contact with tree limbs, which cause 20%of the outages on the system. REMARKS BY COMMISSIONERS Commissioner Duncan asked how the BWL's potential green power supplier would be selected. General Manager Pandy stated that renewable energy bidders would be selected by competitive proposals. Mr. Pandy reported that local environmental groups and interested citizens were invited to a meeting for inforination sharing on a plan to launch GreenWise, the new green power electric energy alternative. Commissioner Callen congratulated staff for a successful 25-Year Dinner held May 171n EXCUSED ABSENCES On motion by Commissioner Christian and seconded by Commissioner Duncan, that the absences of Commissioners Aquilina, Creamer, and Murray be excused. Carried unanimously. Board Minutes Page 90 May 22,2001 PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. ADJOURNMENT On motion by Commissioner Duncan, and seconded by Commissioner Christian, the meeting adjourned by unanimous consent at 7:30 p.m. Is/Mary E. Sova, Secretory Filed with Lansing City Clerk May 31, 2001 (See Fiscal Year 2002 Budget Attachments) Regarding Resolution #2001-5-1 BOARD OF WATER AND LIGHT- LANSING, MICHIGAN Attachment 1 - to Resolution #2001-5-1 BUDGET FISCAL YEAR ENDING JUNE 30, 2002 WATER ELECTRIC STEAM TOTAL PROJECTED INCOME STATEMENT$(000) FISCAL YEAR 2002 Chilled Water included in steam utility; Central Utilities Complex(CUC)profit in other income Excludes CUC in Cash/Debt/Capital; Excludes NOx in Bond/Capital ;SALES ccf/kwh/mlb 10,568,000 3,218,876,000 2,895,000 'OPERATING REVENUE 19,749 170,612 26,394 216,755 Operation and Maintenance Expense 14,778 139,709 15,696 170,183 Depreciation Expense 3,688 17,731 3,102 24,521 YTOTAL OPERATING EXPENSE 18,466 157,440 18,798 194,704 OPERATING INCOME 1,283 13,172 7,596 22,051 k Other Income 1,314 2,481 343 4,138 Other Expense (ex CUC) 920 1,508 1,593 4,021 z 'NET INCOME 1,677 14,145 6,346 22,168 ;NET INCOME AFTER PILT 990 8,471 5,307 14,768 -ROA (3/31/01) (ex CUC) 0.8% 3.8% 8.6% 3.6%1 OPERATING RATIO 97.0% 95 6% 75 2% 93.2% PROJECTED CASH FLOW $(000) FISCAL YEAR 2002 Restricted Operating Cash 2,195 17,603 1,861 21,659 Restricted General Cash 4,079 7,361 860 12,300 Special Project/Construction Cash (ex CUC) 0 7,632 4,802 12,434 :BEGINNING CASH 7-1-2001 6,274 32,596 7,523 46,393 Sources of Cash j Net Income 1,677 14,145 6,346 22,168 Bond Proceeds 0 0 0 0 Depreciation 3,688 17,731 3,102 24,521 ;TOTAL SOURCES OF CASH 5,365 31,876 9,448 46,689 SOURCES OF CASH + BEGINNING CASH 11,639 64,472 16,971 93,082 4 Uses of Cash ; Debt Principal (ex CUC) 1,116 1,807 2,476 5,399 Transfer Repayment 778 (1,214) 436 0 Capital Expenditures (ex CUC) 5,412 25,153 7,457 38,022 I Payment In Lieu of Tax (PILT) 686 5,674 1,039 7,400 TOTAL USES OF CASH 7,992 31,420 11,408 50,821 Restricted Operating Cash 1,847 17,464 1,962 21,273 Restricted General Cash 4,283 7,729 903 12,915 Special Project/Construction Cash (2,484) 7,859 2,698 8,073 ENDING CASH 6-30 2002 3,646 33,052 5,563 42,261 F Attachment 2 to Resolution#2001-5-1 BOARD OF WATER AND LIGHT,CITY OF LANSING,MICHIGAN BUDGET FOR FISCAL YEAR ENDING JUNE 30,2002 PROCESS SUMMARY-OPERATIONS AND MAINTENANCE EXPENSE Production Restated for Budget Comparison Net Labor Fuels/Chemicals Outside Plus Burden Material& &Purchased Services Expenses to Number of on Labor Supplies Power &Other Total Water Electric Steam be Distributed Total Employees Ill [2] MARKETING&CUSTOMER SERVICE PROCESS 1,465,750 21,400 229,833 1,716,983 419,035 1,165,143 111,076 21,729 1,716,983 16 DELIVERY PROCESS 11,865,795 1,425,888 - 2,607,300 15,898,983 2,912,409 10.921.533 728,102 1,336,939 15,898,983 200 PRODUCTION PROCESS 23,314.534 6.022,840 48,671,183 9,414,373 87,422,930 7,699.604 64,009,799 13,229,580 2.483,947 87,422,930 3 PROCESS SUPPORT SERVICES 3,982,599 512,700 42,912,302 2,054,002 49,461,603 - 43,564,777 - 5,896,826 49,461,603 93 FINANCIAL SERVICES PROCESS 6,716,909 242.006 - 1,970,117 8,929.032 2,411,761 4,860,063 36,542 1,620,666 8,929,032 100 BUSINESS SUPPORT 2,522,850 165,825 - 1,820,024 4,508,699 - - - 4.508,699 4,508,699 36 INSURANCES,PAID TIME-OFF&OTHER (9,477,254) - - 20,721,784 11,244,530 56,592 382,336 81,228 10,724,374 11,244,530 - GRAND TOTAL 40,391,183 8,390,659 91,583,485 38,817,433 179,182,760 13,499,401 124,903,651 14,186,528 26,593,180 179,182,760 755 Distributed Expenses: Spread to Water,Electric&Steam[3] 1,278,815 14,804,918 1.509,447 (17.593,180) - Indirect Costs Spread to Capital Budget[4] (9,000,000) (9,000,000) NET BWL BUDGET BY UTILITY 14,778,216 139,708,569 15,695,975 - 170,182,760 Attachment 3 —to Resolution #2001-5-1 BOARD OF WATER AND LIGHT—PROCESS SUMMARY FOOTNOTES FISCAL YEAR 2002 1) Net Labor refers to the dollar amount of labor charged to operations and maintenance expense accounts. Burden on Labor applies a rate of 60% to all straight-time labor charges on operations and maintenance expense accounts. The 60% burden rate allocates employees' paid time off and supplements to pay to the proper operations and maintenance expense accounts. 2) Outside Services and Other include such items as insurances, pension funding, FICA, maintenance contractors, consultants, mileage reimbursements, travel and conference. 3) Administrative, general, and engineering expenses are allocated to Water, Electric and Steam Utilities based on such factors as personnel, labor charges, fuel costs and meters in service. 4) Indirect costs applied to capital budget represents overhead charged to capital expenditures and credited to expenses. 5) The Central Utility Complex expenses are excluded. I'Il•'I I-J1-CCJCJl 1'-1•'-/Y 1J it JI wn i Lip �t ui i i i . i .-+-��.�.+ �+ + i WATM8UGHT M E M O R A N D U M DATE: May 31, 2001 " TO: Steve Dougan, City Clerk City of Lansing FROM: Mary Sova, Corporate Secretary RE: Minutes of May 22, 2001 Board Meeting Attached for filing with your office is a faxed set of minutes of the regular Board of Water and Light Commissioners'meeting, held May 22, 2001. An original copy is being mailed to your office today. MAY-31-2001 14: 19 1 517 702Ge55 99% P.01 1'IHT'Jl-GUUl 114•'4.4 ou ui wn1-11 -auiii - --' ------ -- - Page 78 MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, May 22, 2001 The Board of Commissioners met in regular session at 6:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Nancy W. Duncan, David O'Leary, and Diane R. Royal. Absent: Commissioners Rosemarie E. Aquilina, Charles M. Creamer, and Mark A. Murray. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner O'Leary, seconded by Commissioner Christian, to approve the minutes of regular session held April 24, 2001. Carried unanimously. Motion made by Commissioner Callen, seconded by Commissioner O'Leary, to approve the minutes of executive session held April 24, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. MAY-31-2001 14: 19 1 517 7026e55 P.02 rIHY-1.)i_e 61 14.44 DU Ur WM I am L 1 on I 1 Jl 1 VGU JJJ VJ 1 Page 79 doard Minutes May 22,2001 COMMUNICATIONS There were no communications. REPORTS OF COMMITTEES FINANCE COMMITTEE REPORT The Finance Committee met on April 24, 2001, to receive an update on the following topics: 1. Annual O&M Budget 2. Annual Rate Review 3. Utility Fees and Charges 4. Quarterly Internal Audit Report Chair Mark Murray called the Finance Committee to order at 8:45 p.m. Committee Members in attendance were Commissioners Murray, Creamer, and Royal. Also present were Commissioners Callen and Duncan. Absent were Commissioners Creamer and O'Leary. Annual O&M Budget Chief Financial Officer Dana Tousley presented an overview of the proposed budget by utility for FY 2002. Staff plans to review the six-year cash flow model and capital forecast with the Commissioners in May or June. FY 2002 Budget Assumptions were reviewed: • Chilled Water included in Steam Utility • Central Utility Complex profit for water, electric and steam included in Other Income • Central Utility Complex cash/debt/capital expenditures excluded from presentation • Capital expenditures and bonds for NO, excluded from presentation Protected Income Statement S(000) • Revenue 216,755 • Expense -194,704 • Net Other Income/Expense 117 MAY-31-2001 14: 19 1 517 7026e55 P.03 MRY-31-2001 14:45 BD OF WRTER LIGHT 1 51r re�bd�� r.e4�lr Board Minutes Page 80 May 22,2001 22,168 • Return on Assets 3.6% • Operating Ratio 093.2% Proiecied Cash Flows $(000) • Beginning Cash 46,393 • Sources of Cash(NI+Deer) +46,689 • Uses of Cash (Debt+Cap+PILT) -50,093 • Ending Cash 42,179 FY 2002 Budget vs. FY 2001 $(000) Category FY 2002 FY 2001 Change Labor 50,929 48,149 5.8% Material 8,082 7,862 2.8% Outside Service/Other 26,195 25,203 3.9% Chilled Water Expenses 1,408 0 Fuel/Purchased Power 92,568 90,127 2.7% Capital Transfers -9,000 -9.000 Total O&M 170,193 162,341 4.8% The Finance Committee recommends the following resolution for Board approval in May: esolution #2001-5-1 ANNUAL FY2002 BUDGET RESOLVED, That the annual budget covering Fiscal Year 2002, appended to this report, be approved as presented. RESOLVED FURTHER, That capital projects are authorized in the amount of the project estimate. Capital expenditures for Fiscal Year 2002 are limited to the amount included in the budget. Annual Rate Review Chief Financial Officer Dana Tousley reported that rate increases over the next three years, effective as of January 1, 2001, appear to be adequate for FY 2002. The cash flow model targeted for review with the Commissioners in May or June will serve two purposes: (1) MAY-31-2001 14:20 1 517 7026955 P.04 MHY—.S1-2UUI 14:45 BD OF WRTER LIGHT 1 517 7026655 P.05i17 Page 81 Board Minutcs May 22,2001 illustrate what the near term looks like for rates and (2) provide available options for the anticipated NO,, bond issue. Rate strategies will be discussed at that time. Utility Fees and Charges Staff reviewed proposed fees and charges for electric, water, and steam utilities recommended for implementation on July 1, 2001. The fees and charges are intended to supersede the charges currently in place and are consistent with upcoming rules and regulation modifications as outlined in the February Growth and Expansion Report. Assistant General Manager Cook reviewed plans to effectively communicate the change in the BWL's growth and expansion philosophy to promote better employee and extemal customer understanding of the policy. Over the course of the next couple of weeks, meetings will be held with employees directly impacted by the proposed changes. Marketing and Delivery plan to meet with townships, major developers, contractors and inspectors, as well as economic development people to explain the charges and get their input prior to implementation. A staff report on customer feedback and outcome of the meetings will be provided to the Commissioners at the May meeting. It was noted that customer feedback could cause a slight adjustment to the proposed FY 2002 budget. Quarterly Internal Audit Report Director of Metrics and Audits Kellie Willson invited questions from the committee regarding her quarterly internal audit report, which was included with the meeting packet. She also distributed a summary of the proposals received from five firms to conduct performance audits. The prices range from $95,000 to $504,000 for all five phases outlined in the request for proposals. The Growth and Expansion Task Force will review and evaluate the proposals and submit a report to the Finance Committee. City Ethics Ordinance Compliance In February 2001, the Finance Committee requested that the Director of Metrics and Audits. Kellie Willson, submit specific recommendation relative to expectations and the level of importance the BWL should attach to ethics. Ms. Willson presented the following recommendation: esolution #2001-5- CITYETHICS ORDINANCE COMPLIANCE RESOLVED, That the Commissioners endorse both the letter and the spirit of the City's Ethics Ordinance. RESOLVED FURTHER, That the Commissioners encourage management to provide ongoing annual training to all BWL employees about its provisions. With regard to purchasing issues, there was agreement by the committee that an employee should be able to bring input to the procurement process for business reasons. MAY-31-2001 14:20 1 517 7026e55 P.05 MAY-31-2001 14:45 HD OF WRTER LIGHT 1 517 7026B55 P.06i17 Board Minutes Page 82 May 22,2001 This means that all BWL employees: (a) may provide input to the procurement process for business reasons only and may not derive any income or personal benefit, directly or indirectly, from the selection, (b) should be discouraged from doing business with BWL, and (c) should not accept gifts over$50 in value from vendors whether or not they influence a decision or official action. The Committee concurred with the recommendation as clarified. Financial and Management Information Issues Director of Metrics and Audits Kellie Willson reported that the BWL's financial practices and systems must provide timely and useful information to guide the business. Deficiencies in a true accounts payable system and accrual methodology were identified as problematic areas. Chief Financial Officer Tousley reported that he has allocated$30,000 in the proposed FY 2002 budget to explore various platforms to improve database access by managers. He noted that the BWL utilizes an accrual system that is done on a fiscal year basis. Commissioner Murray suggested that perhaps the question is more a cost issue rather than a philosophical one, particularly since a monthly accrual system is integral to determine the current monthly budget position. Mr. Tousley stated that given the financial constraints of doing more, in terms of accounts payable or accrual, the decision was made that the best use of the $30,000 for now would be to explore available options to provide better database access to managers. The Committee agreed that the BWL should be moving toward a monthly accrual system. The question, however, is at what cost and at what speed. Mr. Tousley noted that if the option involves a major transformation of the BWL's financial reporting system, the cost could be prohibitive. Ms. Willson suggested that the first step to replace the existing accounting system would be to review requirements and purchase an off-the-shelf system that could be modified, only if necessary. She said several vendors offer integrated packages that specialize in utilities. Ms. Willson stated that savings in operational efficiencies would be gained from managers through timely access to budgetary information. Following discussion, the Committee directed the Director of Metrics and Audits to report back with an outline of cost issues with examples of solid accounting systems currently in place. Application ofFAS#71 Commissioner Murray acknowledged Internal Audit's written overview of the Board's decision on the continued applicability ofFAS 471. He agreed that the specific items deferred and financial implications of the deferral should be revisited by staff and the Commissioners annually. Respectfully submitted, Mark A.Murray, Chair Finance Committee Moved by Commissioner Christian, seconded by Commissioner O'Leary, that the Finance Committee Report be considered as read in full and approved. Action: Carried unanimously. MAY-31-2001 14:20 1 517 7026855 99% P.06 MRY-31-2001 14:45 BD OF WRTER LIGHT 1 517 7026855 P.07i17 Page 83 Board Minutes May 22,2001 Moved by Commissioner Christian, seconded by Commissioner Duncan, that Resolution 2001- 5-1 (FY 2002 Budget)be approved. Action: Carried unanimously. Moved by Commissioner Duncan, seconded by Commissioner Callen, that Resolution 2001-5-2 (City Ethics Ordinance Compliance)be approved. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolulion #2001-5-3 USE OF SPECIAL COUNSEL RESOLVED, that the General Manager be authorized to retain the law firm of Foster, Swift, Collins & Smith, P.C., on as as-needed basis from May 23, 2001 to February 17, 2003. This firm has advised the BWL in the past on employment, environmental, commercial litigation and pension matters. The City Attorney has recommended this firm to Lansing City Council and Lansing City Council, pursuant to their Resolution No. 130, has authorized the BWL to retain this firm. Staff Commentary: This firm previously responded to the BWL's Request for Qualifications and submitted a proposal. During the process of reviewing these qualifications, it was disclosed that the firm was presently representing a client against the City of Lansing. Both the City Attorney and the BWL's Staff'Attorney have separately met with firm representatives to discuss putting into place safeguards to avoid such representation in the future as well as the repercussions of representing clients against the City of Lansing or any of its agencies. The Staff Attorney is comfortable that this situation will not be repeated. Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Discussion: Commissioner Royal expressed concern that the firm of Foster, Swift, Collins & Smith was being added to a list approved by the Board in January 2001 (Resolution 2001-1-5). She stated that any law firm should have procedures not to take on a new client with adverse positions to a former client without the former client's permission. She noted that all attorneys have rules on ethics relevant to former clients. Commissioner Callen disclosed his intention to recuse himself from voting on this resolution due to his working relationship with Knaggs, Harter, Brake & Schneider, which is one of the law firms retained by the BWL on as-needed basis for the period February 2001 to February 2003. Action: Adopted by the following vote: MAY-31-2001 14:21 1 517 702se55 P.07 MAY-31-2001 14:46 BD OF WATER LIGHT 1 517 7026855 P.06/17 Board Minutes Page 84 May 22,2001 Yeas: Commissioners Christian, Duncan, and O'Leary Nays: Commissioner Royal Abstention: Commissioner Callen Absent: Commissioners Aquilina, Creamer, and Murray esolution #2001.-5- AMENDMENT TO PENSION PLAN RESOLVED, That the Third Amendment to the Lansing Board of Water and Light Employee's Defined Benefit Plan for Employees Pensions is hereby adopted as indicated therein; and RESOLVED FURTHER, That the Chair of the Board of Commissioners and the Corporate Secretary are authorized to execute the amendment and any other documents necessary to implement the foregoing resolution. Staff Commentary: This amendment is necessary to bring the plan into compliance with changes in legislation. The changes affect our ability to use excess pension assets for the payment of retiree healthcare liabilities. In summary, the law extends the expiration date of Section 420 to December 31, 2005, and changes the method used to determine whether retiree healthcare benefits have been maintained for five years following the transfer. In order to take advantage of these changes, Steve Jurmu of Foster, Swift, Collins & Smith prepared the necessary documents and submitted them to the IRS for approval in December of 2000. On April 30, 2001, the IRS issued their approval of this amendment. Moved by Commissioner O'Leary, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. esolution INCREASE IN IN CAPITAL BUDGET FOR STEAM MAIN REPLACEMENT RESOLVED, That the Board of Commissioners authorize the replacement of the steam main in the 100 N. Washington block, and that the BWL Capital Budget for fiscal year 2001 be increased by$200,000 to accommodate such project. Staff Commentan: The project will replace the steam main in N. Washington Avenue from Michigan Avenue to Ottawa Street. Replacement of this steam main section is recommended due to concerns over the integrity of the existing steam main, which is the primary connection between the north & south low pressure areas, coupled with the benefits of doing this construction with the reopening of this block to traffic. MAY-31-2001 14:21 1 517 7026e55 P.09 MAY-31-2001 14:46 HD OF WATER LIGHT 1 517 702EB55 P.09i17 Page 85 Board Minutcs May 22,2001 This steam main has been in service since 1906. Proiect Cost FY 01 Expenditures FY 02 Expenditures 100 N. Washington $801,000 $200,000 $601,000 Block Steam Main Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. olution#2001-5- ACQUIRE EASEMENT FOR WATER MAIN FACILITIES RESOLVED, That the Board of Commissioners authorize the Manager of System Integrity & Customer Projects to acquire an easement from Looking Glass, Incorporated for water main facilities located on the east side of Airport Road, half way between Clark and Herbison Roads, in exchange of front footage recovery and services rendered by the Board of Water and Light in the amount equivalent to $0.80/Sq. Ft. or$30,510,00. Easement Description: 40' Easement along Airport Road- Part of the Northwest 1/4 of the Southwest 1/4 of Section 18, T5N R2W, DeWitt Township, Clinton County, Michigan particularly described as follows: beginning at a point on the East-West 1/4 line of Section 18 that is 33 ft. Easterly of the West 1/4 comer of Section 18; thence Easterly along the 1/4 line 40 ft.; thence Southerly parallel to the West line of Section 18 a distance of 950 ft.; thence Westerly 40 ft.; thence Northerly on a line 33 ft. Easterly of the West section line parallel to the West section line 950 ft. to the point of beginning. Property Description: Part of the fractional West 1./2 Section 18, T5N R2W, DeWitt Township, Clinton County, Michigan more particularly described as follows: beginning at the West 1/4 corner of said Section; thence along the East-West 1/4 line, S89°2946"E, 528.00 feet; thence parallel with the West line of said section S00°23'05"W, 1321.32 feet; thence N89131'56"W, 528.00 feet to said West line of said Section; thence along said West line, N00°23'-05"E, 1321.65 feet to the point of beginning, containing 16.02 acres, more or less. Subject however to easements, agreements, covenants, conditions,restrictions and/or reservations of record, if any. Staff Commentarx: The easement will permit the operation of a north— south 16" feeder main to supply potable water to several DeWitt and Watertown subdivisions and is essential to the overall water master plan for the area. Easement is needed due to Clinton County Road Commission requirement to construct the water main outside of the road right-of-way in this area. MAY-31-2001 14:21 1 517 7026e55 P.09 MH'r--51-2bb1 14;4b dU Ur WH I LK LIUN I 1 51'( '(02btlb5 I1. lb/l'r Board Minu[es Page 86 May 22,2001 Moved by Commissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. esolution #2001-5- CERTIFICATE OF EXTENSION OF RETAIL WATER SYSTEM AGREEMENT WHEREAS, the Board of Water and Light and the City of DeWitt (a municipal corporation) have entered into a Water System Agreement, with an effective date of September 1, 2000, and a term of thirty(30) years; and WHEREAS, the Water System Agreement allows the contract to be extended by one (1) additional year, if amended in writing on or before June I" of each year, and such that the term shall never exceed thirty(30)years; and WHEREAS, the Board of Water and Light desires to extend the Water System Agreement, now and in future years. RESOLVED, That the Board of Commissioners authorize the General Manager and Corporate Secretary to sign a Certificate of Extension to the Water System Agreement by June 1", now and in each year hereafter, in such form as approved by the Staff Attorney and substantially in the form included as Exhibit D in the Water System Agreement. Staff Commentary: The City of DeWitt has approved the extension of the Water System Agreement by one (1) year to 2031, by action of the DeWitt City Council on May 7, 2001. Moved by Commissioner O'Leary, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. esolution #2001-5- WATER SERVICE AGREEMENT BETWEEN THE BOARD OF WATER AND LIGHT AND LANSING TOWNSHIP WHEREAS, the Landel Metropolitan District ("District"), comprising certain portions of the Townships of Lansing and Delhi, was created pursuant to 312 PA 1929, and became effective on November 12, 1946, pursuant to a vote of the electors at which time a charter was also adopted; and WHEREAS, the District was authorized, among other things, to acquire and succeed to any or all the rights, obligations and property of any city, village or township, or any parties thereof, to supply water and furnish water services to properties within or without its limits ("District System'); and MAY-31-2001 14:21 1 517 702se55 99% P. 10 MRY-31-2001 14:47 HD OF WRTER LIGHT 1 517 7026e55 H. 11117 page 87 Board Minutes May 22,2001 WHEREAS, on October 17, 1955, the City of Lansing ("City") entered into an agreement with the District ("District Agreement"), after approval by their respective electors, for the sale, assignment and transfer of the District's System to the City, together with all the rights and property respecting or connected with the District System, to supply water to those areas of the Charter Township of Lansing ("Township") previously served by the District. This District Agreement included the right to transact a local business in the Township and the right to lay, maintain and operate water mains in the public highways, in certain areas of the Township; and WHEREAS, as part of the District Agreement, the City assumed the obligations of the District including the outstanding Water Supply and Sewage Disposal System No. 1 Revenue Bonds, dated August 1, 1947, which were subsequently retired and whereupon the District organization was dissolved; and WHEREAS, the City then incorporated the District System into its own water supply system, operated by the Board of Water and Light; and WHEREAS, the Board of Water and Light and the Township acknowledge the mutual benefits resulting from the District Agreement and desire to continue the Board of Water and Light water service in the Township as well as to extend the Board of Water and Light's water service to other areas in the Township not covered under the District Agreement, with all the areas being served designated as the "Water Service Area." RESOLVED, That the Board of Commissioners authorize the General Manager and Corporate Secretary to enter into a Water Service Agreement and Supplemental Agreements to provide service to Lansing Township within the Water Service Area, subject to approval of all documents by the Staff Attorney. Staff CornmentarY: The Water Service Agreement shall be in substantially the form as the draft filed in the Corporate Secretary's Office. Moved by Commissioner O'Leary, seconded by Commissioner Duncan, that the resolution be approved. Action: Carried unanimously. EXECUTIVE SESSION Moved by Commissioner Christian, seconded by Commissioner Duncan, that the Board convene in Executive Session to discuss settlement of a litigation claim. (5:56 p.m.) Yeas: Commissioners Callen, Christian, Duncan, O'Leary, Royal Nays: None Abstentions: None Absent: Commissioners Aquilina, Creamer, Murray Action: Carried unanimously. The Board returned to open session at 6:10 p.m. MAY-31-2001 14:22 1 517 7026855 P. 11 MRY-31-2001 14:47 BD OF WRIEK L1UH1 1 Jl ( re�bd�� r. le�lr board Minutcs Page 88 May 22,2001 [Resolution #2001-5- . SETTLEMENT OF LITIGATION CLAIM WHEREAS, the Board of Commissioners is authorized by Charter to approve settlement of litigation; and WHEREAS, the Staff Attorney, with concurrence of the Assistant General Manager and upon request of its Special Counsel,recommends that the Board of Commissioners authorize William J. Cook, the Assistant General Manger, to negotiate a settlement in the litigation it has filed against its insurer in the Federal District Court, Western Division, Docket No. 5:00-CV-131 and titled as Lansing Board of Water and Light v. Deerfield Insurance Co. WHEREAS, the Board of Commissioners has been advised as to the merits of the case, the costs associated with this matter through trial, and all known risks. The Board of Commissioners has been advised that a Rule 16 Scheduling Conference concerning this litigation has been ordered by the Magistrate Judge that requires the attendance of an executive officer with complete and unrestricted authority to negotiate a settlement. RESOLVED, That the Board of Commissioners authorize the Assistant General Manager to negotiate the terms and conditions for settlement of this litigation. RESOLVED FURTHER, That the General Manager is authorized to execute all documents related to the settlement of these claims. Moved by Commissioner Callen, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None MAY-31-2001 14:22 1 517 7026855 P. 12 MAY-31-2001 14:47 BD OF WRTER LIGHT 1 517 7026955 P. 13i17 Pap 89 Board Minutes May 22,2001 GENERAL MANAGER'S REMARKS Sale Date for Revenue Bonds, Series 2001A-May 30, 2001. General Manager Pandy handed out a letter from Standard&Poor's, dated May 15, 2001, regarding the$11,780,000 BWL Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2001A, due July 1, 2015. Standard &Poor's assigned a rating of`AA' to the obligations. S&P views the outlook for this rating over the intermediate to longer term as stable. The date of the bond sale is set for Tuesday, May 30, 2001, at 10:30 a.m., and settlement should be within two weeks of the sale. BWL Supports Michigan Renewable Energy Program Proposal. General Manager Pandy handed out a BWL letter of support, dated March 16, 2001, to the Michigan Public Service Commission Case No. U-12915 regarding recommendations outlined in the Michigan Renewable Energy Program Proposal. General Manager Pandy updated the Board on the Environmental Protection Agency's (EPA) right to set strong air quality standards. He reported that the Midwest states and others sued EPA over the Section 126 petition. This section allows a state that has a compliance problem because of another state to petition EPA to force the other state to reduce emissions that are blown into their state. EPA has been sent back to the drawing board to come up with new numbers. Staff is working with a consultant on compliance strategies that would help the BWL meet the tough new No,standards. Overview of Tree Management Program. General Manager Pandy reported on the BWL's standards for tree trimming of primary voltage lines throughout the service area. The program is designed to achieve a complete trimming of the BWL's entire electric system within a four to five year cycle. It is aimed at reducing power outages caused by contact with tree limbs,which cause 20% of the outages on the system. REMARKS BY COMMISSIONERS Commissioner Duncan asked how the BWL's potential green power supplier would be selected. General Manager Pandy stated that renewable energy bidders would be selected by competitive proposals. Mr. Pandy reported that local environmental groups and interested citizens were invited to a meeting for information sharing on a plan to launch GreenWise, the new green power electric energy alternative. Commissioner Callen congratulated staff for a successful 25-Year Dinner held May 17`h. EXCUSED ABSENCES On motion by Commissioner Christian and seconded by Commissioner Duncan, that the absences of Commissioners Aquilina, Creamer, and Murray be excused. Carried unanimously. MAY-31-2001 14:22 1 517 7026955 P. 13 MRY-31-2001 14:46 HD OF WRTER LIGHT 1 517 7026855 P. 14i17 Board Minutcs Page 90 May 22,2001 PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. ADJOURNMENT On motion by Commissioner Duncan, and seconded by Commissioner Christian, the meeting adjourned by unanimous consent at 7:30 p.m. Is/Mary E. Sova, Secretary Filed with Lansing City Clerk May 31, 2001 (See Fiscal Year 2002 Budget Attachments) Regarding Resolution #2001-5-1 MRY-31-2001 14:22 1 517 7026855 99% P. 14 MHY-.51-e60i l4.4C nL Ur WHIGR LiUni 1 J1 ! VLVVJJ 1J i BOARD OF WATER AND LIGHT- LANSli.6, MICHIGAN Attachment 1 - to t._.solution#2001-5-1 BUDGET FISCAL YEAR ENDING JUNE 30, 2002 WATER ELECTRIC STEAM TOTAL PROJECTED INCOME STATEMENT$(000) FISCAL YEAR 2002 i I Chilled Water Included In steam utlllty; Central utilities Complex(CUC)profit In other Income (I Excludes CUC In Cash/Oebt/Capltal; Excludes NOx In Bond/Capital V SALES ccf/kwh/mlb 10,568,000 3,218,876,000 2,895,000 i OPERATING REVENUE 19,749 170,612 26,394 216,755 Operation and Maintenance Expense 14,778 139,709 15,696 170,183 Depreciation Expense 3,688 17,731 3.102 24,521 DOTAL OPERATING EXPENSE 18,466 157,440 18,798 194,704 1 EOPERATING INCOME 1,283 13,172 7,596 22,051 f Other Income 1,314 2,481 343 4,1381 Other Expense (ex CUC) 920 1,508 1,593 4,021 NET INCOME 1,677 14,145 6,346 22,168 NET INCOME AFTER PILT 990 8,471 5,307 14,768 ROA (3/31/01) (ex CUC) 0.8% 3.8% 8.6% 3.6% OPERATING RATIO 97.0% 95.6% 75.2% 93.2% !PROJECTED CASH FLOW$(000) FISCAL YEAR 2002 Restricted Operating Cash 2,195 17,603 1,861 21,659 Restricted General Cash 4,079 7,361 860 12,300 Special Project/Construction Cash (ex CUC) 0 7.632 4,802 12,434 BEGINNING CASH 7-1-2001 6,274 32,596 7,523 46,393 Sources of Cash Net Income 1,677 14,145 6,346 22,168 Bond Proceeds 0 0 0 0 Depreciation 3,688 17,731 3,102 24,521 TOTAL SOURCES OF CASH 5,365 31,876 9,448 46,689 SOURCES OF CASH + BEGINNING CASH 11,639 64,472 16,971 93,082 9 Uses of Cash i Debt Principal (ex CUC) 1,116 1,807 2,476 5,399 ! Transfer Repayment 778 (1,214) 436 0 Capital Expenditures (ex CUC) 5,412 25,153 7,457 38,022 Payment In Lieu of Tax (PILT) 686 5.674 1 L039 7.400 TOTAL USES OF CASH 7,992 31,420 11,408 50,821 Restricted Operating Cash 1,847 17,464 1,962 21,273 Restricted General Cash 4.283 7,729 903 12,915 ( Special Project/Construction Cash (2,484) 7,859 2,69$ 8,073 ENDING CASH 6.30.2002 3,646 33,052 5,563 42,261 MAY-31-2001 14:23 1 517 7026855 P. 15 3 � 3 I' ID L-I AHachmml 2 to Resolution#2001-5-1 W N � N m BOARD OF WATER AND LIGHT,CITY OF LANSING.MICWGAN m r BUDGET FOR FISCAL YEAR ENDING JUNE So.2002 A PROCESS SUMMARY•OPERATIONS AND MAINTENANCE EXPENSE N N A f I Production Restated for Buda¢LComporL%w A Net Labor FuelslChemzcals Outside m Plus Burden Material& &Purchased Services Expenses to Number of an Labor Supplies Power &Other Total Water Electric Steam be Distributed Total Employees (1) [2) MARKETING&CUSTOMER SERVICE PROCESS 1,465,750 21,400 - 229,833 1,716,983 419,035 1,165,143 111,076 21,729 1,716.983 18 m CJ DELIVERY PROCESS 11.865,795 1.425,688 - 2,607,300 15,B98,983 2.912.409 10,921,533 728.102 1,336.939 15,898,983 eon a N PRODLICTIONPROCESS 23.314,534 6,022,840 4%671,183 9,414,373 87,422.930 7.699,604 64,009,799 13,229,580 2.483,947 87,422,920 (Il N � �1 PROCESS SUPPORT SERVICES 3,982,699 512,700 42,912,302 2,054,002 49,461,603 - 43,564,777 - 5.896.826 49,461,603 93 ITl iT7 0 N FINANCIAL SERVICES PROCESS 6,716,909 242,006 - 1.970.117 8,929.032 2,411,761 4,860,063 36,542 1.620.666 8,929.032 too r Ql CD vi BUSINESS SUPPORT 2,522,850 165,825 - 1,820.024 4,50B,699 - - - 4,508,699 4.508,699 36 -1 IASUR/WCES,PAID TIME-OFF&OTHER (9,477,254) - - 20.721.784 11,244.530 56,592 382,336 81,228 10,724,374 11.244,530 GRAND TOTAL 40,391,183 8,390AS9 91,583A.85 38,617,431 179,182,760 13,499A01 124.903,651 14.186,529 16,593,180 179,162,760 755 Distributed Expenses: Spread to Water,Electric&Steam(3) 1,278,815 14.804.918 1,509.447 (17,593.160) - Indirect Costs Spread to Capital Budget[4) (9,000,000) (9,000,OOD) NET BAIL BUDGET BY UTILITY 14,T78,216 139,708,569 15,695.975 170,192,760 N N m N Q) m � N r Q) F, I'IHT—Jl—cuci — Attachment 3—to Resolution #2001-5-1 BOARD OF WATER AND LIGHT—PROCESS SUMMARY FOOTNOTES FISCAL YEAR 2002 1) Net Labor refers to the dollar amount of labor charged to operations and maintenance expense accounts. Burden on Labor applies a rate of 60%too all straight-time labor charges on operations and maintenance expense accounts. The 60/o burden sand mailocates ntenancenexlpense'acciounts.time off and supplements to pay to the proper operate 2) Outside Services and Other include such items as insurances, pension funding, FICA, maintenance contractors, consultants, mileage reimbursements, travel and conference. ectric 3) Administrative, general, and engineering P labor charges, fuel costs es are allocated to Water, land meter in Steam Utilities based on such factors as personnel, service. 4) Indirect costs applied to capital budget represents overhead charged to capital expenditures and credited to expenses. 5) The Central Utility Complex expenses are excluded. TOTAL P. 17 P.17 MAY-31-2001 14:23 1 517 7026e55 32 MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, April 24, 2001 The Board of Commissioners met in regular session at 6:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Charles M. Creamer,Nancy W. Duncan, Mark A. Murray, and Diane R. Royal. Absent: Commissioners Ernest J. Christian, and David O'Leary. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Duncan, seconded by Commissioner Murray, to approve the minutes of regular session held February 27, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. Jack Larsen, representing the Grand River Expedition 2000 Awards Committee, presented a Stewardship Award to the Board of Water and Light (BWL) for outstanding contribution to the integrity of the natural resources of the Grand River watershed and for the BWL's sponsorship of the Adopt A River Program. Mr. Larsen told the Board that Grand River Expedition 2000 is a non-profit volunteer organization. This group was involved in a 13-day canoe journey and river study held July 15-27, 2000, initiated to document the values, problems and opportunities of the Grand River and its watershed in an effort to foster awareness and responsibility for the Grand River. Page 33 Board Minutes April 24,2001 Chairperson Royal accepted the award on behalf of the Board of Water and Light. General Manager Pandy noted that the BWL was involved in another successful Adopt A River cleanup effort on April 21. COMMUNICATIONS There were no communications or petitions. REPORTS OF COMMITTEES FINANCE COMMITTEE REPORT The Finance Committee met on February 27, 2001, to discuss the following topics: (1) Preliminary Review of the Purchasing Policy; (2) Preliminary Review of the VEBA Trust Investment Policy; (3)Review of Utility Performance Indicators; (4) Growth and Expansion Status Report; (5) Ottawa Station Redevelopment; (6) Proposed Revenue Bond Issue; and (7) Quarterly Internal Audit Report. Chair Mark Murray called the Finance Committee to order at 6:50 p.m. Committee Members in attendance were Commissioners Murray, Christian, Creamer, O'Leary, and Royal (ex-officio). Also present were Commissioners Callen and Duncan. Preliminary Review of Purchasing Policy The Committee reviewed Page 11 of the Purchasing Policy, dated June 29, 1987, which outlined the authority to award contracts. General Manager-Pandy requested the Committee's guidance in determining which cases would be subject to approval of the Board as opposed to those considered as administrative or managerial in nature. This direction will assist management in finalizing the Purchasing Policy, which will be brought to Board in the near future for approval. The Committee concurred that the following items would require Board approval: • Expenditures not covered by the budget. • Contracts for outside professional services and consultants in excess of $100,000. Purchase of real property or interests in real property, in excess of$15,000 General Manager's discretion(any matter which the General Manager feels should receive Board approval). VEBA Trust Investment Policy A proposed VEBA Trust Investment Policy for the retiree health insurance benefit plan was reviewed. Chief Financial Officer Dana Tousley reported that an actuarial valuation to determine the funding level is to be conducted annually instead of biennially, due to the present Page 34 Board Minutes April 24,2001 that a startup communication issue with the actuaries resulted in a market volatility. He reported Trust b June as re monthly contributions to the fund this fiscal year. He assured that delay with making management intends to contribute oil tll 00 to the VEBA Officer Tousley told Murray commented on the importance for thClBe Financial the employee Commissioner M y organization is funding its obligation confidence that the ors io transfers would begin immediately to fullyfund fundss the Commissioners that monthly-1 by Julie 3this includes amounts Trust at the$6,700,000 Sired from the defi0nad benefit plan on July 1, 2000). above the amount transf The Finance Committee recommends the following: esolution.#2001-4-1 VEBA Trust Investment Policy RESOLVED, That the VEBA Trust Investment Policy, appended to these minutes,be adopted and implemented by staff effective immediately. Review of Utility Performance indicators PRESENTATION BY GENERAL MANAGER PANDY statistics o£the BWL ranging from a hs depicting the operating ,Here the Mr. Pandy showed a series of gr p packet. The following FY's 1991 —2000. The graphs are included with the meeting highpoints of his presentation: Electric Utility Number of customers and sales are up per employee. • even mix from Eckert,Erickson Net generation for FY's 1999 and 2000 has maintained an and Belle River. ° stem to for FY 2000 is: Erickson 26.15%,Belle River 26.13°o, Energy breakdown(/o system Eckert 47.72%• ward trend, and started dropping in FY Cost of production($/Mwh Generated)was on an up 2000,primarily due to cost reductions in fuel. M next five years are anticipated for both Western and Eastern coal- Modest coal costs over the S services Ue Railroad transportationtaff is exploring and scheduling has become an coal deliveries,primarily due to the deregulation of the railroad industry- storage alternatives. capability forecast indicates total peak demand 019.15%reserves (MW Retail load and capa Y roximately 2 does not require additional BWL capacity until pp Minutes FY 2001 to date was 33.38 minutes. 6-2200)was 30.6 minutes. Gains in improving reliability would Electric outage average 199�' 2000 was 30.6 cycle' It is Five-year average (F through a four-year tree trimming y primarily come from the distribution system rare to lose the transmission system, as most substations are double-ended. Page 35 Board Minutes • April 24,2001 Electric revenue/Kwh has been lower than inflation. Ave FY 200cents/Kwh (4.95�Kwh vs. 6.68 /Kwh if rates had risen at the rate of infrate w latio as 4.95 n). Steam Q its, ° Stearn outage average in FY 2000 was 11.11 minutes, FY 2001 to da Five-year average (FY 1996-2000) was 27.69 minutes, to was 17.75 minutes. • Steam rates have been lower than inflation. nflation) Average FY 2000 rate w ($7•27/Mlb vs. $12.52/Mlb if rates had risen at the rate oft as $7.27/Mlb . Water Utilit • Water rates have been lower than inflation. FY 1999 average (1.74�/CCF vs. 2.89�/CCF if rates had risen at rate of inflati Was 1.74 cents/CCF • year average (FY 1996-2000) was 4.05 minutes.Water outage average in FY 2000 was 4.45 minutes; FY'01 to date was 2.5 minutes. Five- Eckert Station and Moores Park Plant Con z uration General Manager Pandy distributed a diagram of the Eckert Station a Plant configuration. He noted that Eckert has six boilers servin six turbines. Moores Park Steam boilers are headered together and also provide steam to General Motors' g turbines. Three of the Downtown Heating District. Moores Park has four boilers headered GM GM, the Central Utility Complex, and the downtown ( to Supply Plant 6 and to the Moores Park/Ottawaltie lines. steam to PRESENTATIONBYDIRECTOR OF METRICS AND A UDITSKEL Director of LIE WILLSON Metrics and Audits Kell' Willson presented an overview of the BW ' Performance. A copy of her broad analytical review is included with t series of a L s overall graphs depicted the following analysis and trends; he meeting packet. A • There was significant improvement in the overall customer satisfaction 2000. BWL is at or approaching "Best in Class " Primarily due to low cost and reliabil ty.r • The measure of restorin surveys. g Power during outages has been improving over the past several • BWL overall performance remained relatively flat. Performance in in 1999,primarily due to cost reductions in fuel costs and in Purchased Power. the conversion to Western coal is being realized. FY was better than ower. The impact of • A total of$56 million was spent in FY 2000 on total compensation -- the prior year. The amount paid for time worked decreas a slight increase from ed sli overtime and a storm-free year. ht1 slightly due to a reduction in Board Minutes Page 36 April 24,2001 • A comparison of how much is paid to the City on return on equity(vs. how much remains as net income) indicates $6.4 million was paid to the City annually for FY's 1999 and 2000. Remaining net income was about $5 million in FY 1999 and $11 million in FY 2000. • Significant changes are depicted for FY 2000 on the Balance Sheet for the BWL as a whole, based on assets, liability and equity. The sharp changes are the result of borrowing about $127 million during the year. In November, 1999, BWL borrowed $78.5 million to finance the General Motors (GM) Central Utilities Complex. GM will pay 105% of the debt service on those bonds. In January, 2000, BWL borrowed an additional $48.23 million to finance the following projects: chilled water district in downtown Lansing ($26.54M), water system expansion($9.4M), a proposed new electric substation ($8.2M), and a replacement of a chemical feeder for the Water Utility($840,000). The remaining $3.25 million was for debt service and legal, financial and administrative costs. • The Electric Utility had a better year than in FY 1999. As a result, the BWL also had a very good year in FY 2000. • The Belle River Power Supply Contract is disclosed as a footnote in the audit report, since technically the BWL does not own the 64.29% share of the Belle River Plant. Belle River is not listed in the BWL books as an asset or as a liability. • Water Utility revenues were fairly flat over the past year. Operating expenses continued to increase, narrowing the amount of operating income for the BWL. The Balance Sheet for the Water Utility indicates Water added more fixed assets in FY 2000 than the Electric Utility, after taking Contributions in Aid into account. • The Steam Utility's financial position deteriorated during FY 2000. Although sales and revenues snowed healthy increases of 3% and 4.6%respectively, operating expenses increased by 9%. This was primarily due to maintenance of both the production facilities and the transmission and distribution systems. The Steam Utility Balance Sheet shows Steam took total assets from about $35 million to about $70 million due to the chilled water plant. On the liability side, it depicts the borrowing associated with providing chilled water. • Utility comparisons indicate the Electric Utility represents about two-thirds of the total assets of the BWL. • Measures of profitability indicate the BWL Operating Income to Revenue in FY 2000 was 4.5 cents for the BWL as a whole (operating revenue for every dollar sold). The Electric Utility kept 5 cents, the Water Utility kept 6 cents and the Steam Utility made no profit. The overall corporate Return on Capital Assets in FY 2000 was about 2% (relation of operating income to production facilities). The Electric Utility earned a 3% return, the Water Utility just under 1%, and the Steam Utility had a zero return. Growth and Expansion Status Assistant General Manager Bill Cook reported that in November 2000, the General Manager assigned him the task of reviewing BWL activities related to Growth and Expansion. In January, Mr. Cook provided a status update to the Finance Committee and was requested to return to the Committee in February with solutions to the issues identified. He reported that this undertaking is a work in progress as staff conducts its analysis to identify systemic problems. Mr. Cook's Page 37 Board Minutes April 24,2001 written report is included with the meeting packet. A highlight of conclusions were presented as follows: Findings to Date: o Growth in capital spending at the BWL has taxed the utility's cash resources and borrowing capacity. Capital spending is being carefully reviewed to minimize the need for additional borrowing. Problems in this area are being addressed. • Left unchecked, added borrowing could affect the BWL bond rating and require rate increases and/or large operations and maintenance cuts. • The return on BWL expansion,particularly in the Water Utility, has been disappointing, and is an extremely long-tern proposition. Water extensions historically across the country are long-tern investments. • Such long-term paybacks may be causing adverse impact on existing BWL customers. A process has been implemented to identify and assure collection of supplemental connection and frontage fees in the future. • Preliminary estimates indicate that there is little room financially for unexpected events/expenses without added revenue. A major potential environmental liability relating to No,, emissions must be considered in future planning. Corrective Actions: o Wholesale water rate increases were initiated on January 1, 2001. s An expanded justification process including training, prioritization, uniform format, standard economic parameters, added quality control, and a follow-up process is being implemented. • Economic return requirements have been developed which are increased based on priority and Board assumed risk. o A process has been implemented to identify and bill appropriate fees and charges in a more timely and accurate manner. • A process has been implemented to ensure the annual updating of fees and charges. o Rules and Regulations are being reviewed for each utility, under the premise of increased levels of customer contribution. The target is to bring the Rules and Regulations to the Board for approval and implementation the start of FY 2002. o Sufficient information has been gathered to define a scope for a performance audit of past BWL performance in the abovementioned areas as well as a review of staffs corrective actions. A draft scope will be provided to the Finance Committee for review by March 13tn Board Minutes Page 38 April 24,2001 • Staff is keenly aware that these actions are a beginning of the needed process improvements for growth and expansion. The Commissioners and staff engaged in lengthy discussion as to whether the water system expansion is a good investment. The Commissioners questioned the information provided to them at the time the individual agreements were approved. General Manager Pandy pointed out that the BWL has been in the water business for 115 years. Although it has never been a profitable business, the strategic vision of the utility has been to supply potable water to the community because it is a municipal public purpose and it creates a greater good in the community. He assured that a process to reimburse inter-utility transfers would be implemented this fiscal year so that each utility is self-supporting. Following discussion, the Committee concurred with the following actions identified in the Growth and Expansion Report, and recommends Board approval: Actions Identified in the Growth and Expansion Report—dated February 21, 2001: (Complete Report included with the Finance Committee Meeting packet.) Page Item Action 100 2C Implement process to collect supplemental connection and frontage fees, including training. 101 3B Use new Capital Project Justification Form and Evaluation Form 103 5D Establish annual return levels. • Mandatory 5.5% • Necessary 8.5% • Discretionary 12.0% 103 6A Direct staff to establish budgets for next 6 years with fixed obligation coverage (i.e., including Belle River) of> 1.7x. 103 8 Report tracking of major projects to Board annually. 104 9A Modify Rules and Regulations. Electric • Invest only 1.5x annual revenue (change from 3x) • Charge for trenches, temporaries, inspections and relocations • Adopt new charges for underground service 104 9B Water: Eliminate BWL funding (50%) for border streets, over sizing; require all main extensions funded by developers. 105 11 Update formal Economic Standards and Parameters (Attachment 6). 105 14 A draft scope of the RFP for consultant to evaluate BWL policies on growth and expansion for Finance Committee member review by March 13t". Page 39 Board Minutes April 24,2001 Action Identified in the Internal Audit Report: PajZe Item Action 500 & 592 2 Reimburse inter-utility transfers from 1985-2001 within 10 years: Water Utility pays Electric Utility$7.8 million Steam Utility pays Electric Utility$4.4 million Steam Utility pays Water Utility$2.6 million Ottawa Station Development Staff Attorney Lary Wilhite updated the Committee on four main areas involving the redevelopment of the Ottawa Station: Convergency Centers - Update e Mr. Wilhite and General Manager Pandy met with representatives of the Building Trades Council (Iron Workers, IBEW Local 352, Plumbers and Fitters), Convergency Center, and the Mayor's Chief of Staff to discuss union concerns regarding Convergency's general contractor, Pioneer Construction. o The local Building Trades Council received word that Pioneer was going to redevelop the Ottawa Station. They expressed concerns over non-Lansing labor, non-union labor, and Pioneer's safety record. e Pioneer's response was that they would allow an open shop and bid out locally. This seemed to appease the union during the meeting, but 'later their response indicated otherwise. o The union offered to help find labor and contractors and they suggested a project labor agreement, similar to the one used for the legislative offices and Oldsmobile Stadium. The main element of the project labor agreement is temporary union membership in exchange for a no-strike clause. Joint Development Agreement A meeting was held with Convergency to discuss so-called cornerstone principles, which the BWL provided to them a couple of months ago. Convergency agreed to provide security in the form of a letter of credit to ensure the BWL recovers its utility infrastructure investment. Ill addition, it was agreed that the BWL could approve contractors and subcontractors. The construction and redevelopment schedule is to be provided by Convergency. To that end, the BWL has prepared a draft Joint Development Agreement (JDA) for internal review only. The JDA is based on the premise of separate condominium units. (a) Floors 1 through 3, (b) Floors 4-10, and (c) Floor 11. Oldsmobile/GM Heritage Center A letter of interest has been received from the Oldsmobile GM Heritage Center. They are looking for a convenient, downtown location for the R.E. Olds and Oldsmobile/GM Heritage Center. They are interested in approximately 55-60,000 square feet of space at the Ottawa Board Minutes Page 40 April 24,2001 Station. The Center will be able to provide its own labor for build out. Mr. Wilhite intends to proceed with discussions regarding a sale price. Clean Michigan Grant General Manager Pandy met with representatives from the Michigan Department of Environmental Quality and the Michigan Economic Development Corporation. They are still interested in funding this effort, but have requested that the City of Lansing resubmit its application based on Convergency Centers and other riverfront development. All other conditions of the grant remain effective; namely, (1)BWL to retain ownership, (2) BWL must obtain a developer, and(3) BWL must remediate the coal pile area. After a question and answer period, there was unanimous consensus for Staff Attorney Wilhite to continue with negotiations. Proposed Revenue Bond Issue General Manager Pandy displayed a business profile published in Standard &Poor's Credit Week Municipal, dated February 5, 2001, which lists the measure of risk for approximately 119 public power systems around the country. The BWL is listed as AA/Stable, which indicates the utility is in the favorable high end of the rating. He noted that while staff first proposed a$17.5 million bond issue, staff has been working to find alternatives to reduce the amount of borrowing. At the January 23, 2001 Finance Committee, staff was asked to look at several alternatives in the method and timing of borrowing. Chief Financial Officer Dana Tousley reviewed the following FY 2001 proposed bond projects and costs: WATER UTILITY Total • Refurbish Controls on Cedar Pump 93 $348,000 • Install Dye High Lift Pump 93 $615,000 • Refurbish Dye Filters #9 and#10 $1,460,000 STEAM UTILITY Total • Chilled Water District, Phase Il $11,084,000 Staff reviewed proposed financing alternatives and associated costs for the above projects. The calendar of events and Bond Resolution details were also discussed. Calendar of Events February 2001 - Review Projects and Costs April 2001 - Resolution Approved May 2001 - Competitive Sale June 2001 - Settlement Page 41 Board Minutes April 24,2001 Bond Resolution Details • Fifth Supplemental to original dated: October 24, 1989 • Same terms as 1989, 1994, 1999 bond issues • Bond Tenn: 15 years • Interest Rate: 4.90%to 5.25% • Levelized Debt Service for all BWL debt • Book Entry Bonds • Redeemable at par after 10 years Following discussion, the Commissioners reaffirmed their preference to minimize the amount of borrowing, given the anticipated magnitude of added borrowing within the next year associated with environmental compliance (No,,), unexpected changes in the competitive market, and other utility revenue requirements. Emphasis was made on using care with future issuances to ensure the BWL's bond rating is not put at risk. Following discussion, the Committee recommended the following resolution for Board consideration: esolution #2001-4- Staff to Draft a Resolution to Issue Revenue Bonds RESOLVED, That staff is hereby authorized to proceed in drafting a resolution to issue revenue bonds to finance the Chilled Water District, Phase II at an estimated cost of$11,084,000 for Board approval in April or May, 2001. Quarterly Internal Audit Report Director of Metrics and Audits Kellie Willson gave an overview of internal audit activities. A copy of her report is included with the meeting packet. Her involvement in the following projects were highlighted: • Review of major water system extensions, which involved working with the Assistant General Manager and Task Force to revise economic evaluation criteria and approval processes for all capital spending. • Followed up with management on compliance concerns related to transfers of funds between utilities. Board policy 16-02, was adopted by the Commissioners in October, 1985,but it has not yet been implemented. • Followed up with management to assure management complies with the funding process approved by the Commissioners to fund the VEBA Trust for retiree health care benefits. • Reviewed compliance issues related to the City Ethics Ordinance and the Commissioners' expectations. The Commissioners directed the Director of Metrics and Audits to prepare a recommended policy on this matter for review and Board consideration. General Manager's Statement of Financial Interests General Manager Pandy handed out a copy of his Statement of Financial Interests, recently filed with the City Clerk. Board Minutes Page 42 April 24,2001 There being no further business, the Finance Committee meeting adjourned at 9:27 p.m. Respectfully submitted, Mark A. Murray, Chair Finance Committee Moved by Commissioner Callen, seconded by Commissioner Murray, that the Finance Committee Report be considered as read in full and approved. Action: Carried unanimously. Moved by Commissioner Callen, seconded by Commissioner Murray, that Resolution 2001-4-1 (VEBA)be approved. Action: Carried unanimously. Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution 2001-4-2 (to draft Revenue Bond Resolution), be approved. Action: Carried unanimously. REPORT OF THE FINANCE COMMITTEE The Finance Committee met on March 27, 2001, at 5:30 p.m., to discuss the following topics: (1) Sales Forecast, (2) Capital Projects and Preliminary Forecast, (3) Steam Fuel Cost Adjustment, (4) Hydrant Rates, (5) Risk Assessment, and(6) to comment on the Request for Proposal and scope of performance audit services. Committee Members in attendance were Commissioners Murray, Christian, Creamer, and O'Leary. Also present were Commissioners Callen and Duncan. Sales Forecast Resource Planning Engineer, Dave Bolan, presented an overview of the BWL's base, high and low load forecasts developed for retail Electric, Steam (including Chilled Water) and Water utilities covering FY 2001 —2012. The forecasts will be used in planning studies, budget development, capital expenditure decisions, load and capability analysis, and revenue forecasts. Base forecasts indicate retail electric and steam sales steadily climbing the next three years as new General Motors (GM) load comes on line, then declining as older GM plants are retired in 2004 or 2005. The water utility has shown significant sales growth in the past few years, credited to wholesale water agreements. With existing plant capacity, new production capability may not be required prior to 2012. However,with recent growth and associated uncertainty regarding water future load, this situation is being monitored to assess capital projects to increase water production and pumping capacity. The forecast Page 43 Board Minutes April 24,2001 for Chilled Water was based on present contracted loads. Assistant General Manager William Cook reported that electric sale for resale net revenues for FY 2002 are expected to reach $6.9 million. This amount reflects known agreements only, and as such, is down $2.4 million from expected FY 2001 levels. Due to an increase in retail sales as a result of expected simultaneous operation of all GM facilities, sale for resale revenues are projected to be reduced during the period from FY 2003 through FY 2005. Wholesale sales to the Michigan Public Power Agency are expected to increase in the next ten years. The BWL projects it will see lower cost per unit at Belle River in 2005 when a larger debt service credit is taken. Capital Projects and Preliminary Forecast General Manager Pandy presented a summary status report of BWL annual,planned and bonded capital projects. A handout detailing the individual projects as of February 28, 2001 showed a projected overrun of$3.6 million (1%). The Commissioners and staff discussed methods used to improve the accuracy of project estimates to eliminate cost overruns. The BWL typically uses a contingency factor of 10% to 15%, depending on the type of project. Staff is in the process of developing procedures to better identify high-risk cost elements of a project. The FY 2002 Capital Budget and Operating and Maintenance Budget will be thoroughly reviewed with the Finance Committee on April 24. 2001. Steam Fuel Cost Adjustment General Manger Pandy presented an overview of the fuel conversion project implemented in January 2001 at the Moores Park Plant. Switching from Eastern to Western coal is projected to lead to lower steam bills for BWL customers. A proposed two-year freeze of the BWL's steam fuel cost adjustment would capture the savings from burning Western coal to pay for the capital investment made at the Moores Park Plant. Chief Financial Officer Dana Tousley presented justification for rebasing the steam fuel cost adjustment for Steam Rates 1, 2 and 3 from 168.3 to 127.1 cents/million BTU from July 1, 2001 to July 1, 2003. The steam fuel cost was last rebased in 1984. Plans are in process to commission a steam cost of service and rate study using FY 2001 as the base year. The study will be used to determine if current steam rates are appropriate for central steam customers and the General Motors (GM) Plant 1/Lansing Grand River Plant. It will also serve as a baseline for the general steam rate review called for in the GM steam contract for Plant 6 in 2003. Staff recommends a sunset provision on the fuel cost adjustment clause in the steam rate schedules to drop and/or change by July 1, 2003. It was pointed out that a recent comparative analysis indicates existing BWL steam prices are 22%-40%below natural gas prices. Board Minutes Page 44 April 24,2001 The Finance Committee recommends the following resolution: esolution#2001-4=3 Public Hearing Set for Steam Rates 1, 2 and 3 RESOLVED, That the attached, proposed Steam Rates 1, 2 and 3 be the subject of a public hearing prior to further consideration by the Board of Commissioners. FURTHER RESOLVED, That a public hearing to solicit public input on this matter be set for Tuesday, June 26, 2001 at 5:30 p.m., in the Board of Water and Light Offices at 1232 Haco Drive. Also that the Corporate Secretary be directed to file with the City Clerk information regarding pending changes in the steam rate structures on or before April 27, 2001. Fire Hydrant Rates Chief Financial Officer Tousley reported that a rate design error has been discovered in the fire hydrant rates approved by the Board on July 25, 2000 and effective January 1, 2001. Water Rate No. 6 inadvertently over-recovers the revenue required from fire hydrants as a class. Mr. Tousley noted that for administrative reasons, the fire service and fire hydrant rate was split into two rate schedules—Rate 4 and Rate 6. Previously the fire service and fire hydrant rate had been included in one rate schedule and considered one rate class. The split of the revenue requirements between the two classes/rates was a complicating factor leading to the error. The rate modification will be retroactive to January 1, 2001. The Commissioners urged staff to maintain personal contact with customers prior to the hearing process to communicate the impact of the proposed change. This relationship brings the rate matter to their attention on a timely basis and provides the customer an opportunity to review the proposed change prior to the hearing for input. The Finance Committee recommends the following resolution: esolution.#2001-4 Public Hearing Set for Fire Hydrant C17arges—Rate No. 6 RESOLVED, That the attached proposed Fire Hydrant Charges - Rate No. 6, as revised, be the subject of a public hearing. FURTHER RESOLVED, That a public hearing to solicit public input on this matter be set for Tuesday, June 26, 2001 at 5:30 p.m., in the Board of Water and Light Offices at 1232 Haco Drive. Also that the Corporate Secretary be directed to file with the City Clerk information regarding pending changes in the fire hydrant charges on or before April 27, 2001. Annual Risk Review Chief Financial Officer Director Tousley reported that the primary reason for conducting a risk assessment is to identify risks associated with the BWL's business and ensures they are being Page 45 Board Minutes April 24,2001 managed or mitigated in some manner. An overview of four types of reviews the external auditors conduct during the annual audit was presented. 1. Potential financial loss due to accident, natural disaster or negligence risks. The primary focus is on property and liability insurance to minimize the financial loss due to these risks. 2. Potential financial loss due to enviromnental risks. The primary focus is on current enviromnental issues and the financial loss of mitigation or removal of an enviromnental problem. 3. Potential financial loss due to legal risks. The primary focus is on current or future litigation and the financial loss associated with large adverse judgments. 4. Potential financial loss due to operational risks. The primary focus is on large dollar transactions and the contractual commitments involved. Examples of the type of contract examined include coal contracts, wholesale power contracts,purchase power contracts, large capital expenditures and associated contracts or bond issues, etc. The following types of insurance policies were summarized: Property Insurance Liability Insurance - General Liability -Fire and Other Perils - Workers' Compensation -Boiler and Machinery -Automobile -Flood -Public Officials and Employees -Pension and Welfare Fund Fiduciary Surety and Bonds Other Insurance -BWL Employee Faithful Performance Bond -Business Travel Accident -Pension Employee Faithful Performance Bond - Special Travel Risk The BWL is self-insured for major storms and any major disruption of the transmission and distribution(T&D) system. Damage claims against contractors who damage the BWL T&D system are billed and collected from the offending party. The BWL is also self-insured up to $400,000 for workers' compensation with a specific excess policy to cover claims over $400,000. The purchasing policy currently has insurance purchases going to the Commissioners for approval. The committee was requested to consider a resolution that authorizes the General Manager or designee to purchase insurance as is appropriate. In light of the variability of market conditions for insurance and surety bonds, staff should follow the basic parameters listed below: PROPERTY INSURANCE 1. Maintain fire and boiler and machinery insurance on the major real property assets preferably on a replacement cost basis. Personal property may be insured on an actual cash value basis. Board Minutes Page 46 April 24,2001 LIABILITY INSURANCE 1. Maintain general liability insurance for bodily injury and property damage liability at a minimum level of 10% of the annual gross revenue. 2. Maintain Automobile Liability Insurance that complies with the Michigan No-Fault Insurance laws. 3. Maintain excess liability insurance for the self-insured workers' compensation program. 4. Maintain wrongful acts insurance for Commissioners and Employees. SURETY BONDING 1. Maintain faithful performance bonding on employees with a limit of$100,000 per loss. 2. Require dishonesty bonding with similar limits on outside service workers and independent contractors. Mr. Tousley reported that regular updates would be provided to the Finance Committee on each of the four areas of risk assessment. The Finance Committee recommends the following resolution: esolution #2001-4- General Manager to Acquire and Maintain Insurance Coverage or Surety Bonding RESOLVED, That the General Manager or designee shall acquire and maintain insurance coverage and surety bonding to finance various risks of loss on such terms and conditions, limits, deductibles or retentions and premiums as may in his judgment provide the best value for the Board of Water and Light. Coverage or surety bonding may be bid or negotiated with agents or insurers. RESOLVED FURTHER, That additional insurance coverage and bonding may be acquired whenever it is appropriate in the judgment of the General Manager. RESOLVED FURTHER, That a report on the current coverage shall be provided annually to the Commissioners. Growth and Expansion The Commissioners were asked for their comments on the performance audit specification on growth and expansion. Commissioner Murray suggested that Phases I and V be prioritized and itemized for separate bid, by virtue of their significance. Assistant General Manager Cook clarified that the Request for Proposal (RFP) was structured to receive bids for each of the five phases. Page 47 Board Minutes April 24,2001 Other Matters Habitat for Humanity: General Manger Pandy reported that Habitat for Humanity has approached the BWL on the possibility of teaming up with Meijer's in Lansing to build a Habitat for Humanity house this summer. Meijer's has made a commitment of approximately$30,000 toward the project. Habitat is asking for BWL support in the form of a$20,000 sponsorship level, which would help purchase materials for the project. BWL volunteers to perform labor is also being requested. Mr. Pandy asked for the Committee's guidance on the appropriate amount of funds to support this project. WFMK Radio is considering a sponsorship in the form of advertisement in lieu of cash. The Committee supports employee involvement in the Habitat project through volunteer labor, but is concerned with the $20,000 level of cash contribution requested. General Manger Pandy told the Committee that the BWL has a community involvement fiinding committee that meets periodically to review community requests. Mr. Pandy said he has authority of up to $15,000 for that purpose. Following discussion, there was consensus among the Commissioners to delegate the General Manager the authority to involve the BWL in the Habitat project with appropriate discretion on the amount of monetary sponsorship. There being no further business, the Finance Committee meeting adjourned at 7:15 p.m. Respectfully submitted, Mark A. Murray, Chair Finance Committee Moved by Commissioner Duncan, seconded by Commissioner Murray, that the Finance Committee Report be received as presented. Action: Carried unanimously. Moved by Commissioner Creamer, seconded by Commissioner Murray, that Resolution# 2001- 4-3 (Public Hearing— Steam Rates) be approved. Action: Carried unanimously. Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution#2001-4- 4 (Public Hearing—Fire Hydrant Charges) be approved. Action: Carried unanimously. Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution#2001-4- 5 (hisurance Coverage/Surety Bonding) be approved. Action: Carried unanimously. Board Minutes Page 48 April 24,2001 GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolution#2001-4 APPROVAL OF FIFTH SUPPLEMENT REVENUE BOND RESOLUTION RESOLVED, that the Fifth Supplemental Revenue Bond Resolution Authorizing Water Supply, Steam and Electric Utility System Revenue Bonds of the City of Lansing, Michigan, as appended to these minutes,be approved. Staff Comnientarv: The latest bond sizing (attached) from Speer Financial is $11,780,000 for the Chilled Water Phase II plus issuance costs. The bond sale date is tentatively set for May 17, 2001. The bond resolution has a new provision, Section 10, which allows the Board Chair or a Commissioner and either the General Manager or the Chief Financial Officer to accept competitive bids on May 17, 2001 in lieu of a special board meeting to award the bonds. The BWL's bond counsel, Kester So from Dickinson Wright, drafted the resolution with input from staff and Speer Financial and will perform the final legal review. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Discussion: General Manager Pandy commented that when staff first talked to the Board about borrowing money, a$20 million issue was in the original financial forecast. After receiving input from the Finance Committee and Commissioners, staff moved toward conservative borrowing and trimmed the bond issue down to about $11.8 million. Interest rates for the sale are expected to be in the range of 5%. Action: Carried unanimously. esoluti'on PURCHASE OF WATER TREATMENT CHEMICALS RESOLVED, That the Board of Water and Light (BWL) enter into a purchase agreement with Nalco Chemical Company(NALCO) of Naperville, Illinois, for the supply of Water Treatment Chemicals for Electric, Steam and Chilled Water facilities. The purchase agreement particulars are as follows: 1) The term of this agreement shall be thirty-six (36) months (July 1, 2001 —June 30, 2004). 2) NALCO shall become the sole supplier of proprietary water treatment chemicals for Erickson Station, Eckert Station, Moores Park Station and the Ottawa Chilled Water Plant. 3) The estimated cost of the proprietary water treatment chemicals for the duration of the agreement is $1,300,000. Page 49 Board Minutes April 24,2001 Staff Commentary: By entering into agreement with NALCO, the BWL will be provided with analytical services,proprietary water treatment commodities and consulting services for Erickson Station, Eckert Station, Moores Park Station and the Ottawa Chilled Water Plant. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Discussion: Commissioner Callen indicated that in reviewing backup information submitted with the meeting packet, he could understand the difference between the alternate bids submitted by Nalco Chemical Company and BetzDearborn,but he asked for a clarification on the difference between the original bids submitted by Nalco and Betz. General Manager Pandy responded that he would look into the particulars of it and report back with the details. Action: Carried unanimously. OVERVIEW OF OTTAWA STATION DEVELOPMENT DOCUMENTS Staff Attorney Larry Wilhite presented an overview of the general framework of the Joint Development Agreement (JDA) between the BWL and Convergency Centers Corporation and the Purchase and Development Agreement. Mr. Wilhite introduced Tom Maier, a senior attorney with Clark Hill and Associates. Mr. Maier drafted both documents and is a specialist in commercial transactions and utility law. He briefed the Board on the more complex aspects of the contract provisions. Mr. Maier noted the agreement provides that prior to undertaking construction, the developer is to provide plans, drawings, detailed engineering plans, specifications, bidders lists, bid documents, proposals, and all contract documents to the BWL for approval to assure that the developer complies with the terns under the agreement. The three portions of the Ottawa Station redevelopment project involve the following: 1. Convergency Centers Corporation development for a telecommunications Carrier Hotel. This project will utilize the middle seven floors. The JDA authorizes the sale of a portion of Ottawa Station to Convergency Centers Corporation. 2. Oldsmobile/General Motors Heritage Center for a combination of the R.E. Olds Transportation Museum on Museum Drive and the GM Heritage Center on Michigan Avenue. This project needs about 58,000 square feet, and will take up the first, second and third levels of the Ottawa Station. The Purchase and Development Agreement is designed as a companion document to the Joint Development Agreement. 3. H&H Development for office space. This project involves the top floor(llth level). The Purchase and Development Agreement is designed as a companion document to the Joint Development Agreement. A preliminary architectural exhibit attached to the JDA was reviewed. Mr. Wilhite noted that approval of a resolution to declare the Ottawa Station as surplus and no longer needed for the utility's operation, would be subject to a condominium survey and the creation of a master deed to comply with the Michigan Condominium Act. The closing of the property itself is subject to a Board Minutes Page 50 April 24,2001 resolution by the BWL Board of Commissioners and a resolution by the Lansing City Council, approving the sale. The Board engaged in lengthy discussion on the business case for the project. EXECUTIVE SESSION Moved by Commissioner Creamer, seconded by Commissioner Murray, that the Board convene in Executive Session to discuss purchase price parameters for Convergency Centers Corporation and other interested buyers. (7:20 p.m.) Yeas: Commissioners Aquilina, Callen, Creamer, Duncan, Murray, Royal Nays: None Abstentions: None Absent: Commissioners Christian and O'Leary Action: Carried unanimously. The Board returned to open session at 8:27 p.m. Due to some uncertainty on the implications of declaring BWL property as surplus, and the consequences if the deal falls through, the Commissioners agreed to modify the General Manager's recommendation--to declare a portion of Ottawa Station as surplus--by including language to the effect that subject to reaching agreement on a purchase price and wording of the Joint Development Agreement, the Board indicates it will declare those portions of the Ottawa Station to be surplus. This contemplates that the Joint Development Agreement and Purchase Agreement are conditioned upon a resolution from the Board to include a declaration that the property is surplus. This would provide the necessary assurance that the Board is prepared to complete this transaction. esolution #2001-4- OTTAWA STATION TO BE DECLARED SURPLUS RESOLVED, That subject to reaching successfiil negotiations with Convergency Centers, the Board will declare those portions of the Ottawa Station as reviewed with the Board on April 24, 2001 (as set forth on Exhibit A, filed in the Corporate Secretary's Office), to be surplus property and no longer needed for the utility's operation. Further, this action is subject to a condominium survey to be performed after execution of the Joint Development Agreement. Staff Commentary: The Exhibit A schematic is a skeletal version of the manner in which the BWL plans to condominiumize the Ottawa Station. To create a legal condominium description, the BWL will have to perform a condominium survey. Upon completion of the survey, the legal description of each condominium unit will be finalized. A copy of Exhibit A is filed in the Corporate Secretary's Office and appended to the Official Board minutes. Moved by Commissioner Duncan, seconded by Commissioner Murray, that the resolution be approved. Page 51 Board Minutes April 24,2001 Action: Carried unanimously. esolutioli#2001-4- JOINT DEVELOPMENT AGREEMENT RESOLVED, That the General Manager and Corporate Secretary be authorized to sign the Joint Development Agreement, in substantially such form as reviewed with the Board and filed in the Corporate Secretary's Office (Exhibit B), between Convergency Centers Corporation and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001. Staff Commentary: The Joint Development Agreement (JDA) authorizes the sale of a portion of Ottawa Station to Convergency Centers Corp. The JDA also requires Convergency to sign a Project Labor Agreement with the Southeastern Michigan Building and Trades Council. Convergency is also required to accept the terms of the BWL utility proposal and the BWL is granted approval rights for all contractors and subcontractors. A copy of the JDA is filed in the Corporate Secretary's Office and appended to the official Board minutes. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. esolution #2001-4-1 AGREEMENTS WITH OLDSMOBILE/GM HERITAGE CENTER AND H&H, INC. RESOLVED, That the General Manager and Corporate Secretary be authorized to sign the Purchase and Development Agreement, in substantially such form as reviewed with the Board and filed in the Corporate Secretary's Office (Exhibit C), between the Oldsmobile/GM Heritage Center and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001. RESOLVED FURTHER, That the General Manager and Corporate Secretary be authorized to sign the Purchase and Development Agreement, in substantially such form reviewed with the Board(Exhibit C), between H&H, Inc. and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001. Staff Commentary: This document is designed as a companion document to the Joint Development Agreement. It will be utilized for sale of condominium units to Oldsmobile/GM Heritage Center and H&H, Inc., both of which have expressed an interest in floors 1-3 and the 11t" floor of the Ottawa Station, respectively. A copy of the Purchase and Development Agreement is filed in the Corporate Secretary's Office and appended to the official Board minutes. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Board Minutes Page 52 April 24,2001 Discussion: Commissioner Duncan stated for the record that it is her understanding there will be information coming back to the Board as the negotiations progress with Convergency Centers Corporation, the Oldsmobile/GM Heritage Center and H&H, Inc. General Manager Pandy confirmed that information would be provided to the Board as negotiations move forward and prior to completing the transaction. Staff Attorney Wilhite commented that final approval would be dependent upon the nature of the arrangement presented to the Board at that time and consummated by a Board resolution. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None GENERAL MANAGER'S REMARKS IBEW Files Unfair Labor Charge. General Manager Pandy handed out a response letter from the Michigan Employment Relations Commission(MERC - dated April 19, 2001) to the unfair labor charge that was filed by the IBEW, Local 352. The essence of the letter is that the election results have been certified. The Administrative Law Judge states in the letter"I assume that both parties understand that if the Commission were to find a violation of Section 10(1)(a) of PERA based on this charge, the remedy would not include an order to rerun the March 29 election in Case..." MERC directed IBEW to show cause in writing as to why the allegations have been filed. Status of Green Power. Staff has been working diligently to find green power to include in the BWL's power supply portfolio. Two suppliers have been found from which the BWL can purchase a total of 1 MW of renewable power. Fifty percent of that will be from biomass (landfill gas) from the Granger Landfill in Lansing, and the remaining fifty percent will be from small hydro plants (500 kW each) located in Cheboygan County, Michigan. This would be power on a 100%basis, totaling 8,760 MWhs. Staff proposes to sell this to BWL customers who would be willing to pay the existing green power rate of$7.50 per block for 250kWh/month. This represents about a 3 cent per kWh premium on the current BWL electric rate,which is slightly below 6 cents. Customers will be notified of the availability of green power through a marketing campaign to be sent to all customers. Commissioner Callen commended staff for efforts put forth into making renewable energy an option for BWL customers. Page 53 Board Minutes April 24,2001 REMARKS BY COMMISSIONERS Commissioner Creamer commented that as a new Rotarian,he recently heard an excellent presentation on electric deregulation delivered to the Lansing Rotary Club by General Manager Pandy. There was a great deal of interest on this topic and it was extremely well received by the members. Commissioner Callen commented that in reviewing the cost estimation for the Chilled Water District, he noted there were unanticipated environmental demolition costs. He asked if more are anticipated. He asked if the project is projected to come in as estimated. General Manager Pandy responded that staff believes all the environmental problems have been encountered, since the project is essentially completed, except for system controls checkout, which is taking place this week and next. The project is anticipated to come in within the estimates. Special Projects Director Jack Hill told the Board that the Chilled Water project is approximately 95% complete. The electric chiller was started earlier in the day for 40 minutes. All the systems are in place and are ready to serve and meet the May 1 startup date. In response to Commissioner Callen's question on contingency, General Manager Pandy reported that a contingency was included in the initial estimate and it has been spent. Commissioner Callen asked for a clarification on Air Fees negotiated with the Michigan Manufacturers Association. Assistant General Manager Cook reported that the Michigan Manufacturers Association, in conjunction with the Michigan Department of Enviromnental Quality, has developed a new set of Air Permit Fees. The original proposal would have increased BWL fees from $40,000 per year to $352,500. The BWL was able to negotiate a 43%reduction from the proposed fees, but the new fees will still represent an increase of 467%. General Manager Pandy reminded the Commissioners that there is a legislative reception on Wednesday, May 9, 2001, from 5:30 p.m. to 7:30 p.m. at the Lansing Center. The reception is co-sponsored by the City of Lansing, BWL, Lansing Regional Chamber of Commerce, and Lansing Convention Visitors Bureau. Commissioners were invited to attend this function. EXCUSED ABSENCES On motion by Commissioner Murray and seconded by Commissioner Duncan, that the absences of Commissioners Christian and O'Leary be excused. Carried unanimously. Board Minutes Page 54 April 24,2001 PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. None. ADJOURNMENT There being no objection, the meeting adjourned by unanimous consent at 8:45 p.m. Is/Mary E. Sova, Secretary Filed with Lansing City Clerk May 1 ,2001 Page 55 Board Minutes April 24,2001 (Attachment to Resolution #2001-4-1) Lansing Board of Water and Light VEBA Trust Investment Policy Section 1. DEFINITIONS: A. The Plan is the LBWL Retiree Benefit Plan and Trust Agreement, as amended, effective July 1, 1999. B. The Trust is the trust fund established by the above agreement. C. The Board is the appointed Commissioners of the Board of Water and Light. D. The Trustees of the retiree benefit Plan and Trust are all the Commissioners of the Board of Water and Light. E. The Personnel Committee is a subcommittee of both the Board and the Trustees charged with oversight responsibility of the Plan and Trust and thus the VEBA Trust Fund. F. The VEBA Trust Fund receives contributions made by the Board. The Fund pays any benefits enumerated in the Plan. These funds are invested in various financial assets. This document articulates the investment goals and investment risk and return guidelines established for those investments. These funds are subject to the Public Retirement System Investment Act (MCL 38.1132 et seq.) as amended. This act restricts the type of investments and the amount of the total portfolio that can be invested in equity versus fixed income. G. The Asset Manager for the investments in the VEBA Trust Fund is the Chief Financial Officer of the Board of Water and Light. This policy also describes the administrative procedures to be followed by the Asset Manager in investing the assets of the VEBA Trust Fund. The General Manager, Director of Human Resources and Chief Financial Officer of the Board of Water and Light are jointly responsible for the administration of the Plan and Trust. Section 2. FUNDING POLICY AND ASSUMPTIONS A. The Board of Water and Light's funding policy is to have Plan assets exceed the best estimate of Plan liabilities by a modest margin. This goal can best be achieved by annual actuarial valuations using the following actuarial assumptions. B. Investment Returns 7.5% Pay Projections 5.0% Mortality Table 1983 Group Annuity UAAL Amortization 15 years Funding Target 100% Rates of Inflation Probability Range as determined by actuary Board Minutes Page 56 April 24,2001 Active Group Size Constant or declining as determined by actuary Section 3. PLAN INVESTMENT GOALS A. The Board recognizes that benefit costs arising under the Post-Retirement Benefit Plan for Eligible Employees of the Lansing Board of Water and Light will likely be paid from sources other than the Trust for about 10 years after said Post-Retirement Benefit Plan's original effective date. During that time, the Trust will accumulate assets so that it is prepared to begin paying Post-Retirement Benefit Plan benefit costs at the end of said 10 years. The Board also recognizes the need to invest trust assets in a way that provides some current liquidity in the event that the Trust is unexpectedly asked to pay current benefit costs before the end of said 10 years. This Investment Policy is designed to achieve those accumulation and liquidity goals, together with other goals described in this Section 3. B. The primary goal of the Fund is to ensure the solvency of the Plan over time and to meet retiree benefit obligations as required. C. The secondary goal of the Fund is to earn the highest return possible, without taking excess risk and jeopardizing its primary goal or subjecting the Board to an undue amount of contribution rate volatility. Fund returns will be used to help finance Plan obligations, thus reducing the level of contributions into the Fund. D. The third goal of the Fund is to achieve a minimum rate of return of 7.0% and a rate of return 4% greater than inflation. Section 4. GOAL ACHIEVEMENT --ASSET MIX POLICY A. The Board of Water and Light recognizes that the Fund's long-term investment results will be determined by the Fund's long-term asset mix policy. Given its decision to fully fund the Plan, the long-term investment bias in the Fund will be toward a balance of equity and fixed income investments. The Asset Manager will advise the Personnel Committee on the asset mix policy weightings most consistent with Plan and Fund goals. The asset mix policy is as follows and is expressed in terms of these asset classes: Equity- 50% Fixed Income—50% Domestic common stocks 48% Corporate bonds ¬es 35% Foreign stocks 1% Government bonds ¬es 5% Other equity 1% Foreign bonds 3% Preferred stocks 2% Cash 5% B. There will at all times be a Fund asset mix policy expressed in terms of policy weights. The Trustees will review these policy weights at least once per year. The rate of return earned compared to the rate of return on an appropriately weighted portfolio representing the above asset classes. This comparison is a benchmark for evaluating the effectiveness with which the Page 57 Board Minutes April 24,2001 Asset Manager actually implements the Fund's asset mix policy. The benclunarks listed below are used to evaluate the performance of the different asset classes. Equity Fixed Income S&P 500 Index Lehman Brothers Govt/Corporate Index Russell 1000 Index Salomon Brothers Broad Bond Index Wilshire 5000 Index US T-Bills Section 5. GOAL ACHIEVEMENT-ASSET MIX POLICY IMPLEMENTATION A. The Asset Manager shall have the responsibility and the authority to implement the decided asset mix policy. The Asset Manager shall employ prudently the following techniques and outside services. 1. Subject up to 5 percent of the Fund to foreign currency exposure. 2. Engage asset class investment specialists to advise on specific asset classes. 3. Engage one or more master custodian(s) capable of meeting the Fund's custodial and information needs in an accurate and timely fashion. The custodian may have the authority to engage in security lending activities on behalf of the Fund to generate incremental revenues. 4. Engage such other information and/or consulting services as are deemed needed to effectively manage the Fund. Section 6. GOAL ACHIEVEMENT: MEASUREMENT A. Total Fund return means the market return on assets. Total Fund return will be measured regularly and broken down into three basic components; (1) the risk-free rate of return, (2) the asset mix policy return impact, and (3) the asset mix policy implementation return impact. Component 1 will be the one-year Treasury bond rate. Component 2 is the difference between the rate of return on a portfolio exactly like the asset mix percentages and the risk-free rate of return. Component 3 is the difference between the total Fund return and the returns in component 1 and 2 above. B. Fund results will be evaluated from a multi-year and market cycle perspective. Generally, component 1 indicates how much return the capital markets are providing for an investment in risk free government bonds and notes. Component 2 indicates how much of a premium the capital markets are providing for adopting the chosen asset mix policy; and component 3 indicates how effectively the chosen asset mix policy is being implemented. Section 7. FUND GOVERNANCE A. The Plan's financial operations will be bound by all laws governing the behavior of fiduciaries. Board Minutes Page 58 April 24,2001 B. The Personnel Committee will ensure the existence of a Plan conflict of interest policy that will cover Committee members,Plan operations personnel, and third party fiduciaries such as external investment advisors. C. The Asset Manager shall vote the shares held by the Plan. Any voting must be in the best economic interest of the Plan. Section 8. FINANCIAL INFORMATION, COMMUNICATION AND DISCLOSURE A. The Plan and Fund are subject to annual independent audits. B. The Board of Water and Light will disclose the Fund balance sheet annually to plan participants. C. The Asset Manager will send a quarterly report to the Trustees. The report will review the portfolio to ensure compliance with this investment policy and allow the Trustees to perform the following tasks: 1. Compare the asset manager's report with the custodian report to discover and resolve any differences. 2. Review the valuation method for all assets. 3. Review portfolio returns for all asset classes and the total Fund. 4. Review portfolio returns compared to appropriate benchmarks 5. Review the fees paid for administration of the Fund. D. The Trustees will annually review and examine cash management and investment procedures and performance. The review includes,but is not limited to, the following tasks: 1. Examine trading practices, brokerage costs, quality of execution, portfolio turnover, and other procedures used to administer the Fund. 2. Consider proxy voting policies. 3. Evaluate the communications to the participants and the Trustees of the Fund. 4. Examine portfolio performance in depth. 5. Review changes in investment style and brokerage affiliation and practices. 6. Examine the integrity of the investment process and personnel turnover. 7. Review and discuss proposed changes in investment policy and benefit plan policy or procedure. Proposed changes in either the investment policy or the plan documents will be referred to the Board for approval. Page 59 Board Minutes April 24,2001 8. Review the annual audit, actuarial valuation and portfolio performance reports E. The Personnel Committee will meet quarterly to review the items in Paragraph C above. The Trustees will meet annually in October of each year to review the items in Paragraph D above. Board Minutes Page 60 April 24,2001 (Attachment to Resolution #2001-4-3) PROPOSED GENERAL STEAM SERVICE—RATE NO. 1 Availability-This rate is available to any customer receiving service from the Board of Water and Light(BWL)steam distrib system with a maximum gauge pressure of fifteen pounds per square inch(15 psi), Steam services at gauge pressures above 15 not exceeding 100 psi,when available,may be supplied at the option of the BWL or upon request by the customer. Nature of Service-Saturated steam up to a maximum gauge pressure of 15 psi except as indicated above. Monthly Rate 1/1/01 1/1/02 1/1/03 Basic Service Charge $5.00 $6.00 $7.00 per customer per month Commodity Charge Billing Months of June through November $6.55 $6.75 $6.95 per 1000 lbs. for the first 200,000 lbs. $6.90 $7.15 $7.35 per 1000 lbs. for all 1000 lbs. over 200,000 lbs. Billing Months of December through May $6.65 $6.85 $7.05 per 1000 lbs for the first 200,000 lbs. $7.00 $7.25 $7.45 per 1000 lbs. for all 1000 lbs. over 200,000 lbs. Surcharge-A surcharge of ten(10)percent shall be added to the above rates for steam service supplied upon customer's reque service at gauge pressure above 15 psi but not exceeding 100 psi. Fuel Cost Adjustment-The fuel cost adjustment shall consist of an increase or decrease of 0.16($0.0016)cents per thousan pounds of steam billed for each fu110.1 ($0.001)cent or fraction thereof increase or decrease in the average delivered cost off bur-ned monthly above or below '`8z 3) 1127::1 ($1.271)cents per mullion BLa. (A fraction of 0.05 ($0.0005)cents or lies not be considered a full 0.1 ($0.001)cent; a fraction of 0.06($0.0006)cents or greater will be considered a full 0.1 ($0.001) ce The price per million Btu for each billing month shall be the average delivered cost of fuel consumed during the preceding tale month.This fuel costadjustment clause expires on July 1,2003. Amine Treatment Adjustment-The amine treatment adjustment allows for the monthly adjustment of rates to reflect the actu incurred due to amine feed. The factor shall be applied to each 1000 pounds (lbs)billed. The factor shall consist of 1.124 tim weighted average amine cost per 1000 lbs treated during the previous month. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of s to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Minimum Charge-The Basic Service Charge included in the rate except that Special Minimum Charges shall be billed when revenue received does not adequately compensate the BWL for the cost of furnishing service. Delaved Payment Charge-A delayed payment charge of 5%of the unpaid balance, excluding delayed payment charges, shal added to any bill, which is not paid on or before the due date. Reconnect Charge-A reconnect charge of$25.00 shall be added to any account which discontinues and reconnects service at same address within a twelve(12)month period. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Steam Service,which is incorporated herein by this reference. Adopted: Jul,20w Effective: r.,„ -.., 2001 Page 61 Board Minutes April 24,2001 PROPOSED INDUSTRIAL STEAM SERVICE RATE NO.2 Availability:This rate is available to any customer engaged in mining or manufacturing and receiving steam at any BWL plan a minimum gauge pressure of 250 psi. Service will be provided upon customer entering into a steam supply contract with the B Ten ns and conditions of the contract may vary due to customer requirements and the impact on BWL facilities. Monthly Rate: Demand Charge: $0.80 per pound per hour(lb/hr)for all lb/hrs of contract demand. $0.70 per pound per hour(lb/hr)for all lb/lus exceeding contract dema Commodity Charge: $3.88 per thousand pounds (Mlb) Fuel Cost Adjustment: The fuel cost adjustment shall consist of an increase or decrease of 0.16($0.0016) cents per thousand of steam billed for each full 0.1 ($0.001) cent or fraction thereof increase or decrease in the average delivered cost of fuel burn monthly above or below'r�8 127..1 ($1.271)cents per million Btu. [A fraction of 0.05 ($0.0005)cents or less will n considered a full 0.1 ($0.001)cent; a fraction of 0,06 ($0.0006)cents or greater will be considered a full 0.1 ($0.001)cent.] T per million Btu for each billing month shall be the average delivered cost of fuel consumed during the preceding calendar mon fuel cost adjustment clause expires`'on July_l,2003 Minimum Charge: Monthly Demand Charge above. Tax Adjustment: Bills shall be increased within the limits of any governmental authority or political subdivision which levies license fees, or any other charges against the BWL's property or its operation, or the production and/or sale of steam,to offset a such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand: The billing demand is the maximum demand(lb/lu-s) supplied during the 15 minute period of maximum use the month,but not less than the contract demand. Delayed Payment Charge: A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges, shal added to any bill,which is not paid on or before the due date. Rules and Regulations: Service under this rate is subject to the BWL Rules and Regulations for Steam Service,which is incorporated herein by this reference. Adopted:December 20, r°O^ Effective januar-y 13, 1995 Board Minutes Page 62 April 24,2001 PROPOSED GENERAL STEAM SERVICE RATE NO.3 Availability-This rate is available to any customer receiving service from the Board of Water and Light(BWL)steam transm or distribution system with a gauge pressure in excess of 100 psi. Service will be provided upon customer entering into a steam supply contract with the BWL. Terms and conditions of the contract may vary due to customer requirements and the impact on facilities. This service may include both film and curtailable service. Monthly Rate -Per contract terms. Fuel Cost Adjustment-The fuel cost adjustment shall consist of an increase or decrease of 0.16($0.0016) cents per thousan pounds of steam billed for each full 0.1 ($0.001) cent or fraction thereof increase or decrease in the average delivered cost of f burned monthly above or below?4a. 3) 127.1 ($L271)'cents per million Btu. (A fraction of 0.05 ($0.0005) cents or les not be considered a full 0.1 ($0.001)cent;a fraction of 0.06 ($0.0006) cents or greater will be considered a full 0.1 ($0.001) cc The price per million Btu for each billing month shall be the average delivered cost of fuel consumed during the preceding tale month. This fuel cost adjustment clause expires on July 1, 2003 Amine Treatment Adjustment-Per contract terms. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of s to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Minimum Charge-Per contract terms. Delaved Payment Charge-A delayed payment charge of 5%of the unpaid balance, excluding delayed payment charges, shal added to any bill,which is not paid on or before the due date. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Steam Service,which is incorporated herein by this reference,unless superceded by the terns and conditions of the customer contract. Adopted: Taly 30, 1996 Effective:August 15, 1994 Page 63 Board Minutes April 24,2001 (Attachment to Resolution #2001-4-4) PROPOSED FIRE HYDRANT CHARGES RATE NO.6 Annual Fire Hydrant Charge-Water Supply and maintenance of a fire service line to a public or private fire hydrant shall b provided in accordance with the following annual schedule of charges: 1/1/01 1/1/02 1/1/03 All Hydrants $30-5-$245 $322-0 $270 $ -3-6 $295 Tax Adjustment-Bills shall be increased within the limits of any govenunental authority or political subdivision which levies license fees,franchise fees, or any other charges against the Board's property, or its operation,or the production and/or sale of to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Minimum Charge-Billings subject to this rate are not subject to a minimum charge. Delayed Payment Charge-A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shal added to any bill,which is not paid on or before the due date. Rules and Regulations-Service under this rate is subject to the Board of Water and Light Rules and Regulations for Water S which is incorporated herein by this reference. Adopted:���''�y 00 Proposed Effective: January 1,2001 Board Minutes Page 64 April 24,2001 (Attachment to Resolution #2001-4-6) THE FOLLOWING FIFTH SUPPLEMENTAL REVENUE BOND RESOLUTION AUTHORIZING WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM REVENUE BONDS WAS ADOPTED BY THE BOARD OF WATER AND LIGHT COMMISSIONERS OF THE CITY OF LANSING,MICHIGAN, ON APRIL 24, 2001 RESOLVED THAT: Section 1. Supplemental Resolution. This Fifth Supplemental Revenue Bond Resolution is supplemental to, and is adopted in accordance with Section 23(a)(i) of, the Bond Resolution. Section 2. Definitions. Unless the context indicates that another meaning is intended, the following words and terns used in this Fifth Supplemental Revenue Bond Resolution shall have the following meanings, and any other words and terms which are defined in Act 94 or in the Bond Resolution shall have the meanings as therein defined: (i) "Award of Sale of Series 2001A Bonds" means the award of sale of the Series 2001A Bonds, as authorized in Section 10 herein. (ii) 'Bond Resolution" means the Amended And Restated Bond Resolution adopted by the Board on October 24, 1989, as supplemented and amended from time to time. (iii) "Junior Lien Bonds" means the Series 1999B Bonds and any additional junior lien bonds issued pursuant to the Bond Resolution. (iv) "Series 1989A Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1989A issued pursuant to the Bond Resolution. (v) "Series 1989B Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1989B issued pursuant to the Bond Resolution. (vi) "Series 1994A Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1994A issued pursuant to the Bond Resolution. (vii) Series 1994B Bonds" means the Water Supply And Electric Utility System Revenue Bonds, Series 1994B issued pursuant to the Bond Resolution. (viii) "Series 1999A Bonds" means the Water Supply, Steam And Electric Utility System Revenue Bonds, Series 1999A issued pursuant to the Bond Resolution. (ix) "Series 1999B Bonds" means the Water Supply, Steam And Electric Utility System Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) issued pursuant to the Bond Resolution. Page 65 Board Minutes April 24,2001 (x) "Series 2001A Bonds" means the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2001A authorized by Section 4 of this Fifth Supplemental Revenue Bond Resolution. (xi) "2001A Project" means the acquisition, construction and installation of phase II of the chiller plant and related distribution system to serve the downtown chilled water district, together with related costs and expenses. Section 3. Necessity, Estimate of Cost and Useful Life. It is determined to be necessary for the public health, safety and welfare of the City to undertake the 2001A Project, and extend the life of the System by acquiring the 2001A Project. The estimated cost of the 2001A Project is $11,870,000 and the estimated useful life of the 2001A Project is not less than 30 years. Section 4. Authorization of Series 2001A Bonds. To pay a portion of the cost of acquiring, constructing and equipping the 2001A Project, including making a deposit to a reserve fund and payment of legal, financial and other expenses of the issuance of the Series 2001A Bonds, the City,by and through the Board, shall borrow a sum not in excess of Thirteen Million Dollars ($13,000,000), as finally detennined in the Award of Sale of Series 2001A Bonds, which sum is presently estimated to be Eleven Million Eight Hundred Seventy Thousand Dollars ($11,870,000), pursuant to the provisions of Act 94, Public Acts of Michigan, 1933, as amended. Section 5. Bond Details, Parameters and Security. The Series 2001A Bonds shall be designated "Water Supply, Steam And Electric Utility System Revenue Bonds, Series 2001A," shall be of equal standing in priority of lien on the Net Revenues of the System with the Series 1989A Bonds, the Series 1989B Bonds, the Series 1994A Bonds, the Series 1994B Bonds, the Series 1999A Bonds and any other Additional Bonds, shall be senior in priority of lien to any Junior Lien Bonds issued hereunder, including, but not limited to the Series 1999B Bonds, and shall be payable solely out of Net Revenues and any other moneys pledged under the Bond Resolution and shall not be a general obligation of the City. Series 2001A Bonds shall be issued in denominations of$5,000 or any integral multiples of $5,000 not exceeding the amount of the Series 2001A Bonds maturing on the same date and shall be numbered in consecutive order of authentication from 1 upwards. The Series 2001A Bonds shall be issued as fully registered bonds without coupons and shall have an original issuance date of their dated date, or such other date as the Board shall approve in the Award of Sale of Series 2001A Bonds. The Series 2001A Bonds shall bear interest at a rate or rates to be determined in the Award of Sale of Series 2001A Bonds, not exceeding seven percent (7%)per annum, and shall mature no later than July 1, 2017. Interest shall be payable commencing on January 1, 2002 and on each July 1 and January 1 thereafter, or such other dates specified in the Award of Sale of Series 2001A Bonds, by check drawn on the Transfer Agent and mailed to each Registered Owner at the registered address, as shown on the registration books of the City maintained by the Transfer Agent. Interest on the Series 2001A Bonds shall be payable to each Registered Owner as of the 15th day of the month prior to the date on which the interest payment is due. Interest on the Series 2001A Bonds shall be computed on the basis of a 360-day year consisting of twelve 30-day months. The principal of the Series 2001A Bonds shall be payable at the principal office Board Minutes Page 66 April 24,2001 of the Transfer Agent upon presentation and surrender thereof; provided, however, if part of an Outstanding Series 2001A Bond registered in the name of a securities depository company as part of a book-entry system is selected for redemption, the securities depository company may retain the Series 2001A Bond and make an appropriate notation on the Series 2001A Bond indicating the date and amount of the reduction in the principal amount of the Series 2001A Bond resulting from the partial redemption, however, in the case of the final payment of the remaining principal amount of the Series 2001A Bond, the Series 2001A Bond shall be presented and surrendered to the Transfer Agent as a condition of payment. The aggregate principal amount of the Series 2001A Bonds, the amount of each maturity and the designation of serial and term bonds, if any, shall be as finally determined in the Award of Sale of Series 2001A Bonds. The Series 2001A Bonds shall be subject to redemption as provided in the Award of Sale of Series 2001A Bonds. Section 6. Series 2001A Bond Proceeds. From the proceeds of the sale of the Series 2001A Bonds, there shall be immediately deposited in (a) the Redemption Fund an amount equal to the accrued interest and premium, if any, received on delivery of the Series 2001A Bonds and the City shall receive a credit equal to the amount so deposited against the amount required to be deposited in the Redemption Fund for payment of the next maturing interest and (b) the Bond Reserve Account, the amount required by the Bond Resolution. The remaining proceeds of the Series 2001A Bonds shall be used to pay the costs of acquiring, constructing and installing the Series 2001A Project and to pay the costs of issuing the Series 2001A Bonds. Section 7. Book-Entry System - Series 2001A Bonds. Initially, one fully-registered Series 2001A Bond for each maturity, in the aggregate amount of such maturity, will be issued in the name of Cede & Co., as nominee of The Depository Trust Company, for participation in the book-entry transfer system of The Depository Trust Company. In the event the City decides to discontinue participation in the book-entry transfer system of The Depository Trust Company(or a successor securities depository), the City shall notify the Transfer Agent and The Depository Trust Company, in writing, and thereafter the City shall execute and the Transfer Agent shall authenticate and deliver Series 2001A Bonds requested by the bondholders or to a successor securities depository. In the event The Depository Trust Company discontinues providing services as a securities depository for the Series 2001A Bonds and the City does not designate a successor securities depository, the City shall execute and the Transfer Agent shall authenticate and deliver Series 2001A Bonds to the bondholders. Section 8. Bond Form. The Series 2001A Bonds shall be in substantially the following form: Page 67 Board Minutes April 24,2001 [SERIES 2001A BONDS] UNITED STATES OF AMERICA STATE OF MICHIGAN CITY OF LANSING WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM REVENUE BONDS, SERIES 2001A Interest Rate Maturity Date of Per Annum Date Original Issuance CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: The CITY OF LANSING, State of Michigan (the "City"), for value received,promises to pay the Principal Amount to the Registered Owner on the Maturity Date with interest thereon from the Date of Original Issue, or such later date to which interest has been paid, until paid at the Interest Rate Per Annum, payable on January 1, 2002, and on each July 1 and January 1 thereafter until the obligation of the City to pay the Principal Amount is satisfied. Principal of this Bond is payable at the principal office of National City Bank of Michigar/Illinois, or such other transfer agent as the City may hereinafter designate by notice mailed to the registered owner not less than 60 days prior to any interest payment date (the "Transfer Agent"). Interest on this Bond is payable to the registered owner of this Bond as of the 15th day of the month next preceding the payment date as shown on the registration books of the City kept by the Transfer Agent by check or draft mailed to the registered owner at the registered address. The revenues of the facilities of the City for the supply and distribution of water and the generation and distribution of electricity, steam and heat (the "System") after provision has been made for reasonable and necessary expenses of operation, maintenance and administration of the System (the "Net Revenues"), are irrevocably pledged and a statutory lien thereon has been created to secure the payment of the principal of and interest on this Bond, when due; however, the pledge of Net Revenues and the statutory lien are on a parity with the pledge of Net Revenues and statutory lien in favor of the City of Lansing's Water Supply and Electric Utility System Revenue Bonds, Series 1989A, its Water Supply and Electric Utility System Revenue Bonds, Series 1989B, its Water Supply and Electric Utility System Revenue Bonds, Series 1994A, its Water Supply and Electric Utility System Revenue Bonds, Series 1994B, its Water Supply and Electric Utility System Revenue Bonds, Series 1999A and any Additional Bonds (as defined below) which may be issued by the City, and senior in priority of lien to its Water Supply Electric Utility Revenue Bonds, Series 1999B (Taxable Series) and any additional junior lien bonds issued pursuant to the Resolution (defined below). Interest on this Bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months. This Bond is one of a series of bonds of like tenor, except as to denomination, rate of interest, date of maturity and prior redemption, aggregating the principal sum of $ , issued pursuant to a Bond Resolution adopted by the Board of Water and Light Board Minutes Page 68 April 24,2001 of the City(the 'Board") on October 24, 1989, as amended and supplemented from time to time, including by a Fifth Supplemental Revenue Bond Resolution adopted by the Board on April 24, 2001 (collectively, the 'Bond Resolution"), and under and in full compliance with the Constitution and statutes of the State of Michigan, including specifically Act 94, Public Acts of Michigan, 1933, as amended, for the purpose of paying part of the cost of remodeling, updating and extending the life of the System, making a deposit to a bond reserve account and paying the costs of issuing the bonds. For a complete statement of the revenues from which and the conditions under which this Bond is payable, a statement of the conditions under which additional bonds ("Additional Bonds") of equal standing may hereafter be issued,the rights and limitations on the owners of the bonds and the general covenants and provisions pursuant to which this Bond is issued, reference is made to the Bond Resolution. Bonds of this series maturing prior to July 1, , are not subject to redemption prior to their respective dates of maturity. Bonds of this series maturing on and after July 1, , are subject to redemption prior to maturity, at the option of the Board, at any time on and after July 1, , in whole or in part, in the amount selected by the Board, in order of maturities selected by the Board and within a maturity by lot, at the redemption price of par, [without premium,] plus accrued interest to the date of redemption. Notice of the call of Bonds for redemption shall be mailed to the registered owner not less than 30 days prior to the date fixed for redemption at the address shown on the registration books of the City. Failure to receive such notice shall not affect the validity of t he proceedings for redemption. Bonds called for redemption shall not bear interest after the date fixed for redemption, provided funds are on hand with the Transfer Agent to redeem the bonds called for redemption. This Bond is a self-liquidating bond and is not a general obligation of the City or the Board and does not constitute an indebtedness of the City or the Board within any constitutional, statutory or charter limitation, but is payable, both as to principal and interest, solely from the Net Revenues of the System. The Board has covenanted and agreed, and covenants and agrees, to fix and maintain at all times while any bonds payable from the Net Revenues of the System shall be outstanding, such rates for service furnished by the System as shall be sufficient to provide for payment of the principal of and interest on the bonds of this issue and any other bonds payable from the Net Revenues as and when the same shall become due and payable, to provide for the payment of expenses of administration and operation and such expenses for maintenance of the System as are necessary to preserve the same in good repair and working order, and to provide for such other expenditures and funds for the System as are required by the Bond Resolution. This Bond is transferable only upon the registration books of the City kept by the Transfer Agent by the Registered Owner hereof in person, or by his or her attorney duly authorized in writing, with a written instrument of transfer satisfactory to the Transfer Agent duly executed by the Registered Owner or his or her attorney duly authorized in writing, and thereupon a new registered bond or bonds in the same aggregate principal amount and of the Page 69 Board Minutes April 24,2001 same maturity shall be issued to the transferee in exchange therefor as provided in the Bond Resolution and upon the payment of the charges, if any, therein prescribed. The City shall not be required to register the transfer of or exchange any Bond selected for redemption in whole or in part, except the unredeemed portion of bonds being redeemed in part. It is certified and recited that all acts, conditions and things required by law precedent to and in the issuance of this Bond and the series of bonds of which this is one have been done and performed in regular and due time and form as required by law. This Bond is not valid or obligatory for any purpose until the Certificate of Authentication on this Bond has been executed by the Transfer Agent. IN WITNESS WHEREOF, the City of Lansing, State of Michigan, by and through its Board of Water and Light, has caused this Bond to be executed with the facsimile signatures of its Chairman and its Secretary and the corporate seal of the City to be printed on this Bond. CITY OF LANSING, BY AND THROUGH THE BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN By: (FACSIMILE) Chairman By: (FACSIMILE) Secretary (Seal) Certificate of Authentication This Bond is one of the bonds described in the within-mentioned Bond Resolution. NATIONAL CITY BANK OF MICHIGAN/ILLINOIS Transfer Agent By: Authorized Representative Date of Authentication: ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto (Please print or typewrite name and address of transferee) Board Minutes Page 70 April 24,2001 the within bond and all rights thereunder, and irrevocably constitutes and appoints attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises. Dated: Signature Guaranteed: NOTICE: The signature(s) to this assignment must correspond with the name as it appears upon the face of the within bond in every particular, without alteration or enlargement or any change whatsoever. Signature(s) must be guaranteed by an eligible guarantor institution participating in a Securities Transfer Association recognized signature guaranty program. The Transfer Agent will not effect transfer of this Bond unless the infonmation concerning the transferee requested below is provided. Name and Address: PLEASE INSERT SOCIAL SECURITY NUMBER OR OTHER IDENTIFYING NUMBER OF TRANSFEREE. (Include information for all joint owners if the bond is held by joint account) (Insert number for first named transferee if held by joint account) Section 9. Notice of Sale. The Series 2001A Bonds shall be sold at a public sale pursuant to a Notice of Sale published in a publication to be selected by the Chief Financial Officer for the Board in substantially the following form: OFFICIAL NOTICE OF SALE [$11,870,000] CITY OF LANSING, BY AND THROUGH THE BOARD OF WATER AND LIGHT OF THE CITY OF LANSING WATER SUPPLY, STEAM AND ELECTRIC UTILITY SYSTEM REVENUE BONDS, SERIES 2001A Page 71 Board Minutes April 24,2001 SEALED BIDS for the purchase of the above bonds will be received by the undersigned at the Secretary's office, Board of Water and Light of the City of Lansing, 1232 Haco Drive, Lansing, Michigan, on the 17th day of May, 2001, until o'clock, _.m., Eastern Time, at which time and place the bids will be publicly opened and read. IN THE ALTERNATIVE: Sealed bids will also be received on the same date and until the same time by an agent of the undersigned at the office of the Municipal Advisory Council of Michigan, 1445 First National Building, Detroit, Michigan 48226, where they will be publicly opened and read. Bids opened at Detroit, Michigan, will be read first. Bidders may choose either location to present bids and good faith checks, but may not present bids at both locations. BOND DETAILS: The bonds will be fully registered bonds without coupons and, when issued, will be registered in the name of and held by Cede & Co., as nominee for The Depository Trust Company("DTC"),New York, New York. DTC will act as securities depository for the bonds. Purchases of beneficial interests in the bonds will be made in book-entry form, in denominations of$5,000 each or any integral multiple thereof. The bonds will have an original issuance date of May 15, 2001, and will bear interest from the date of original issuance payable on January 1, 2002 and semiannually thereafter. The principal or redemption prices of and interest on the bonds will be paid by National City Bank of Michigan/Illinois, as Transfer Agent. So long as DTC or its nominee, Cede & Co., is the registered owner of the bonds, such payments will be made directly to DTC or such nominee. Disbursement of such payments to the DTC Participants is the responsibility of DTC, and disbursements of such payments to the beneficial owners is the responsibility of the DTC Participants and Indirect Participants. The bonds will mature on the first day of July as follows: Principal Principal Year Amount Year Amount 2002 $130,000 2009 $ 300,000 2003 215,000 2010 310,000 2004 230,000 2011 325,000 2005 240,000 2012 345,000 2006 255,000 2013 365,000 2007 270,000 2014 380,000 2008 280,000 2015 8,135,000 PRIOR REDEMPTION: Bonds maturing on and after July 1, 2011, are subject to redemption prior to maturity, in whole or in part on or after July 1, 2010, in such order as the City shall determine and by lot within a maturity, in integral multiples of$5,000, at par, without premium, plus accrued interest to the redemption date. Not less than thirty days' notice of redemption shall be given by mail to the registered holder at the registered address. Bonds or portions of bonds called for redemption shall not bear interest after the redemption date, provided funds are on hand with the Transfer Agent to redeem the same. Board Minutes Page 72 April 24,2001 INTEREST RATE AND BIDDING DETAILS: The bonds shall bear interest at a rate or rates not exceeding 7%per annum, to be fixed by the bids therefor, expressed in multiples of 1/8 or 1/20 of 1%, or both. The interest on any one bond shall be at one rate only and all bonds maturing in any one year must carry the same interest rate. The difference between the highest and lowest interest rate on the bonds shall not exceed one and one-half(1 1/2) percentage points. No proposal for the purchase of less than all of the bonds or at a price less than 99.2% of their par value will be considered. The rates bid must be in non-descending order. TRANSFER AGENT: The Bonds shall be payable as to principal in lawful money in the United States upon surrender thereof at National City Bank of Michigan/Illinois, the Transfer Agent. Interest shall be paid to the registered owner of each bond as shown on the registration books at the close of business on the 15th day of the calendar month preceding the month in which the interest payment is due. Interest shall be paid when due by check or draft drawn upon and mailed by the Transfer Agent to the registered owner at the registered address. The City of Lansing may from time to time as required designate a successor Transfer Agent. PURPOSE AND SECURITY: The Bonds are issued under the provisions of Act 94, Public Acts of Michigan, 1933, as amended, and a bond resolution adopted by the Board of Water and Light of the City of Lansing (the "Board") on October 24, 1989, as supplemented and amended from time to time (together, the "Bond Resolution"), for the purpose of paying part of the cost of remodeling, updating and extending the water supply, steam and electric utilities of the City of Lansing, Michigan, and to pay issuance costs for the bonds. The bonds except to rile extent payable from bond proceeds, are payable solely ilom the net p 1J y � � y" y revenues of the water supply and distribution and electric, heat and steam generating and distri- bution systems (the "System") of the City of Lansing and any additions thereto, and a statutory first lien on the net revenues of the System has been established by the Bond Resolution. The Board has covenanted and agreed to fix and maintain at all times while any of such bonds shall be outstanding such rates for service furnished by the System as shall be sufficient to provide for payment of the necessary expenses of operation, maintenance and administration of the System, of the principal and interest on all of said bonds when due, and to provide for such other expenditures and funds for the System as are required by the Bond Resolution. Payment of the principal and interest on the bonds from the net revenues of the System and the statutory lien on the Net Revenues of the System to secure payment of the bonds are of equal standing and on a parity with payment of the principal of and interest on its Series 1989A Bonds, Series 1989B Bonds, Series 1994A Bonds, Series 1994B Bonds and Series 1999A Bonds and any other additional bonds issued under the Bond Resolution and is senior in priority of lien to its Series 1999B Bonds and any other junior lien bonds issued under the Bond Resolution. ADDITIONAL BONDS: For the terms and conditions upon which additional bonds of equal standing as to revenues of the System may be issued,reference is made to the Bond Resolution. GOOD FAITH: A certified or cashier's check drawn upon an incorporated bank or trust company or a financial surety bond in the amount of$200,000, payable to the order of the Chief Financial Officer of the Board of Water and Light is required for each bid as a guarantee of good faith on the part of the bidder, to be forfeited as liquidated damages if such bid is accepted and Page 73 Board Minutes April 24,2001 the bidder fails to take up and pay for the bonds. If a check is used, it must accompany the bid. If a financial surety bond is used, it must be from an insurance company licensed to issue such a bond in the State of Michigan and such bond must be submitted to the Chief Financial Officer of the Board of Water and Light or its Financial Advisor prior to the opening of the bids. The financial surety bond inust identify each bidder whose deposit is guaranteed by such financial surety bond. If the bonds are awarded to a bidder utilizing a financial surety bond, then that bidder(the "Purchaser") is required to submit its deposit to the Board of Water and Light or its Financial Consultant in the form of a cashier's check (or wire transfer such amount as instructed by the Chief Financial Officer of the Board of Water and Light or its Financial Consultant) not later than noon, Eastern Time, on the next business day following the award. If such deposit is not received by that time, the financial surety bond may be drawn upon by the Board of Water and Light to satisfy the good faith deposit requirement. The good faith deposit will be applied to the purchase price of the bonds. In the event the Purchaser fails to honor its accepted bid, the good faith deposit will be retained by the Board of Water and Light. No interest shall be allowed on the good faith deposit and checks of the unsuccessful bidders will be returned to each bidder's representative in person or by mail. The good faith check of the successful bidder will be immediately cashed and payment for the balance of the purchase price of the bonds shall be made at the closing. The rights and remedies of the bondholders may be affected by bankruptcy laws or other creditors' rights legislation now existing or hereafter enacted. AWARD OF BONDS: The bonds will be awarded to the bidder whose bid produces the lowest interest cost computed by determining at the rate or rates specified in the bid, the total dollar value of all interest on the bonds from May 15, 2001, to their maturity and deducting therefrom any premium. LEGAL OPINION: Bids shall be conditioned upon the approving opinion of Dickinson Wright PLLC, attorneys of Lansing, Michigan, the original of which will be furnished without expense to the purchaser of the bonds at the delivery thereof. The fees of Dickinson Wright PLLC for services rendered in connection with such approving opinion are expected to be paid from bond proceeds. Except to the extent necessary to issue its approving opinion as to the validity of the bonds, Dickinson Wright PLLC has made no inquiry as to any financial information, statements or material contained in any financial documents, statements or materials that have been or may be furnished in connection with the authorization, issuance or marketing of the bonds, and accordingly will not express any opinion with respect to the accuracy or completeness of any such financial information, statements or materials. TAX MATTERS: The approving opinion of bond counsel will include an opinion to the effect that under existing law, the interest on the bonds (a) is excluded from gross income for federal income tax purposes, (b) is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such opinion will note that certain corporations must take into account interest on the bonds in determining adjusted current earnings for the purpose of computing such alternative minimum tax. The opinion set forth in clause (a) above will be subject to the condition that the City of Lansing comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the bonds in order that interest thereon be (or continue to Board Minutes Page 74 April 24,2001 be) excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements could cause the interest on the bonds to be included in gross income retroactive to the date of issuance of the bonds. The City of Lansing, through its Board of Water and Light, has covenanted to comply with all such requirements. Bond counsel will express no opinion regarding other federal tax consequences arising with respect to the bonds. The City of Lansing has not designated the bonds as "qualified tax-exempt obligations" for purposes of Section 265(b)(3) of the Code. The successful bidder will be required, as a condition of delivery of the bonds, to certify the "issue price" of the bonds within the meaning of Section 1273 of the Code. The form of an acceptable certificate will be provided by bond counsel. In addition, the approving opinion of bond counsel will include an opinion to the effect that under existing law, the bonds and the interest thereon are exempt from all taxation in the State of Michigan except estate and inheritance taxes and taxes on gains realized from the sale, payment or other disposition thereof. CUSIP: CUSIP numbers will be imprinted on all bonds of this issue at the issuer's expense. An improperly printed number will not constitute a basis for the Purchaser to refuse to accept delivery. DELIVERY OF BONDS: The City of Lansing will furnish bonds ready for execution at its expense. Bonds will be delivered without expense to the Purchaser at the offices of DTC in New York, New York. The usual closing documents including a certificate that no litigation is pending affecting the issuance of the bonds, will be delivered at the time of the delivery of the bonds, If the bonds are not tendered for delivery by twelve o'clock noon, Eastern Standard Time, on the 45th day following the day of sale, or the first business day thereafter if the 45th day is not a business day, the successful bidder may on that day, or any time thereafter until delivery of the bonds, withdraw its proposal by serving notice of cancellation, in writing, on the undersigned, in which event the City of Lansing shall promptly return the good faith deposit. Payment for the bonds shall be made in Federal Reserve Funds. Accrued interest to the date of delivery of the bonds shall be paid by the Purchaser at the time of delivery. OFFICIAL STATEMENT: A copy of the Official Statement relating to the bonds may be obtained by contacting the Chief Financial Officer of the Board of Water and Light at the address referred to below. The Official Statement is in a form deemed final by the Issuer for purposes of paragraph (b)(1) of SEC Rule 15c2-12 (the "Rule"), but is subject to revision, amendment and completion in a final Official Statement. After the award of the bonds, the Issuer will provide on a timely basis a sufficient number of copies of a final Official Statement, as that term is defined in paragraph(e)(3) of the Rule, at the expense of the City(and such additional copies of the final Official Statement as reasonably requested by, and at the expense of, the successful bidder or bidders) to enable the successful bidder or bidders to comply with paragraph(b)(4) of the Rule and the rules of the Municipal Securities Rulemaking Board. Requests for such additional copies of the final Official Statement Page 75 Board Minutes April 24,2001 shall be made to the Chief Financial Officer, Board of Water and Light, 1232 Haco Drive, Lansing, Michigan 48901 - telephone: 517-702-6790. FINANCIAL CONSULTANT: Further information with respect to said bonds may be obtained from Speer Financial, Inc., One North LaSalle Street, Suite 4100, Chicago, Illinois 60602 - Telephone: (312) 346-3700. THE RIGHT IS RESERVED TO REJECT ANY OR ALL BIDS. ENVELOPES containing the bids should be plainly marked "Proposal for Bonds." City of Lansing, by and through the Board of Water and Light of the City of Lansing By: Dana W. Tousley, Chief Financial Officer, Board of Water and Light of the City of Lansing Section 10. Public Sale. The Series 2001A Bonds shall be sold at a public sale in accordance with the Notice of Sale described above. The Chief Financial Officer for the Board or the General Manager for the Board is authorized to fix the date, time and place of sale of the Series 2001A Bonds. The Chairperson of the Board or any Commissioner of the Board and the Chief Financial Officer for the Board or the General Manager for the Board are authorized on behalf of the Board to execute an Award of Sale of Series 2001A Bonds to: (a) approve the specific interest rates, dated dates, maturity dates and amounts, redemption dates, amounts and prices and the purchase price for the Series 2001A Bonds, (b) designate which of the Series 2001A Bonds will be serial bonds and term bonds, (c) determine the amounts to be deposited into the specific funds and accounts established under the Bond Resolution, and (d) award the Series 2001A Bonds to the bidder whose bid produces the lowest interest cost to the Board as provided in, and subject to, the official Notice of Sale and the parameters contained herein. Section 11. Tax Status. The City, by and through its Board, covenants to comply with all requirements of the Internal Revenue Code of 1986, as amended, necessary to assure that the interest on the Series 2001A Bonds will be and will remain excludable from gross income for federal income tax purposes. Section 12. Preliminary Official Statement. The preparation and distribution of a preliminary official statement in substantially the form presented at this meeting is approved, with such changes as the Chairperson or any Commissioner and the General Manager and Chief Financial Officer of the Board may, in consultation with the Staff Attorney and Bond Counsel, determine to be necessary or appropriate. Section 13. Other Staff Action. The Board ratifies and confirms actions taken and filings made by Staff necessary to effectuate the sale of the Series 2001A Bonds, including filing Board Minutes Page 76 April 24,2001 for an exception from prior approval or approval with the Department of Treasury. The Chairperson, any Commissioner, the General Manager and the Chief Financial Officer of the Board are severally authorized to execute such certificates and other documents and to take such other actions or make such other filings as may be necessary or convenient to effectuate the proper sale, execution and delivery of the Series 2001A Bonds. Section 14. Conflicting Resolutions. All resolutions or orders, or parts thereof, in conflict with the provisions of this Fifth Supplemental Revenue Bond Resolution are repealed. Section 15. Severability and Paragraph Headings. If any section,paragraph, clause or provision of this Fifth Supplemental Revenue Bond Resolution shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any other provisions of this Fifth Supplemental Revenue Bond Resolution. The paragraph headings in this Fifth Supplemental Revenue Bond Resolution are furnished for convenience of reference only and shall not be considered to be a part of this Fifth Supplemental Revenue Bond Resolution. Section 16. Publication and Recordation. This Fifth Supplemental Revenue Bond Resolution shall be published in full in The Lansing State Journal, a newspaper of general circulation in the City of Lansing qualified under State law to publish legal notices, promptly after its adoption, and shall be recorded in the minutes of the Board and such recording authenticated by the signatures of the Chairperson and the Secretary of the Board. Section 17. Effective Date. This Fifth Supplemental Revenue Bond Resolution shall be effective immediately upon its adoption. Adopted and signed on the day of , 2001. /s/ /s/ Diane R. Royal, Chairperson Mary E. Sova, Secretary ADOPTED: IN FAVOR: Commissioners Rosemarie E. Aquilina, Ronald C. Callen, Charles M. Creamer, Nancy W. Duncan, Mark A. Murray, and Diane R. Royal AGAINST: None ABSTAIN: None. ABSENT: Commissioners Ernest J. Christian and David O'Leary. Page 77 Board Minutes April 24,2001 STATE OF MICHIGAN ) ) ss: COUNTY OF INGHAM ) I, the undersigned, the Corporate Secretary of the Board of Water and Light of the City of Lansing, certify that the foregoing is a true and complete copy of a resolution adopted by the Board of Water and Light Commissioners of the City of Lansing at a regular meeting held on April 24, 2001, the original of which is on file in my office. I further certify that notice of the meeting was given in accordance with the provisions of the Open Meetings Act. /s/Mary E. Sova, Corporate Secretary Board of Water and Light of the City of Lansing LANSCNG 32063-44 275834 16:12 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 1/24 BOARD OF WATER AND LIGHT PO Bob 13007, Lansing,M148901 F WATER&LIGHTFAX Date: Tuesday, May 1, 2001 4: Number of pages including 24 cover sheet: To: City Clerk From: Mary Sova Phone: Phone: Fax: 377-0068 Fax phone: (5 17)702-6203 CC: REMARKS: ❑ Urgent ❑ For your review ❑ Reply ASAP ❑ Please comment Attached is a faxed set of minutes of the regular Board of Water and Light Commissioners'meeting,held April 24,2001 for filing with your office. An original copy is being mailed to your office today. 16: 13 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 2/24 32 MINUTES OF THE BOARD OF COMMISSIONERS' MEETING " LANSING BOARD OF WATER AND LIGHT Tuesday, April 24, 2001 The Board of Commissioners met in regular session at 6:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called the meeting to order. Present: Commissioners Rosemarie E. Aquiluia, Ronald C. Callen, Charles M. Creamer, Nancy W. Duncan, Mark A. Murray, and Diane R. Royal. Absent: Commissioners Ernest J. Christian, and David O'Leary. The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Duncan, seconded by Commissioner Murray, to approve the minutes of regular session held February 27, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. Jack Larsen, representing the Grand River Expedition 2000 Awards Committee, presented a Stewardship Award to the Board of Water and Light (BWL) for outstanding contribution to the integrity of the natural resources of the Grand River watershed and for the BWL's sponsorship of the Adopt A River Program. Mr. Larsen told the Board that Grand River Expedition 2000 is a non-profit volunteer organization. This group was involved in a 13-day canoe journey and river study held July 15-27, 2000, initiated to document the values, problems and opportunities of the Grand River and its watershed in an effort to foster awareness and responsibility for the Grand River. 16: 13 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 3/24 Page 33 oard Minutes April 24,2001 Chairperson Royal accepted the award on behalf of the Board of Water and Light. General Manager Pandy noted that the BWL was involved in another successful Adopt A River cleanup effort on April 21. COMMUNICATIONS There were no communications or petitions. REPORTS OF COMMITTEES FINANCE COMMITTEE REPORT The Finance Committee met on February 27, 2001, to discuss the following topics: (1) Preliminary Review of the Purchasing Policy; (2) Preliminary Review of the VEBA Trust Investment Policy; (3) Review of Utility Performance Indicators; (4) Growth and Expansion Status Report; (5) Ottawa Station Redevelopment, (6) Proposed Revenue Bond Issue; and (7) Quarterly Internal Audit Report. Chair Mark Murray called the Finance Committee to order at 6:50 p.m. Committee Members in attendance were Commissioners Murray, Christian, Creamer, O'Leary, and Royal (ex officio). Also present were Commissioners Callen and Duncan. Preliminary Review of Purchasing Policy The Committee reviewed Page 11 of the Purchasing Policy, dated June 29, 1987, which outlined the authority to award contracts. General Manager Pandy requested the Committee's guidance in determining which cases would be subject to approval of the Board as opposed to those considered as administrative or managerial in nature. This direction will assist management in finalizing the Purchasing Policy, which will be brought to Board in the near future for approval. The Committee concurred that the following items would require Board approval: • Expenditures not covered by the budget. • Contracts for outside professional services and consultants in excess of $100,000. Purchase of real property or interests in real property, in excess of$15,000 General Manager's discretion (any matter which the General Manager feels should receive Board approval). VEBA Trust Investment Policy A proposed VEBA Trust Investment Policy for the retiree health insurance benefit plan was reviewed. Chief Financial Officer Dana Tousley reported that an actuarial valuation to determine the funding level is to be conducted annually instead of biennially, due to the present 16:14 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 4/24 Board Minutes Page 34 April 24,2001 market volatility. He reported that a startup communication issue with the actuaries resulted in a delay with making monthly contributions to the fund this fiscal year. He assured that management intends to contribute $300,000 to the VEBA Trust by June 30, 2001. Commissioner Murray commented on the importaice for the BWL to maintain employee confidence that the organization is funding its obligations. Chief Financial Officer Tousley told the Commissioners that monthly transfers would begin immediately to fully fund the VEBA Trust at the $6,700,000 level by June 30, 2001 (this includes amounts from operating funds above the amount transferred from the defined benefit plan on July 1, 2000). The Finance Committee recommends the following: esoluhori#2DOZ:-44 ....... ............. .. VEBA Trust Investment Policy RESOLVED, That the VEBA Trust Investment Policy, appended to these minutes, be adopted and implemented by staff effective immediately. Review of Utility Performance Indicators PRESENTATION BY GENERAL MANAGER PANDY Mr. Pandy showed a series of graphs depicting the operating statistics of the BWL ranging from FY's 1991 —2000. The graphs are included with the meeting packet. The following were the highpoints of his presentation: Electric Utility • Number of customers and sales are up per employee. • Net generation for FY's 1999 and 2000 has maintained an even mix from Eckert; Erickson and Belle River. • Energy breakdown(% system total) for FY 2000 is: Erickson 26.15%, Belle River 26.13%, Eckert 47.72%. • Cost of production($/Mwh Generated) was on an upward trend, and started dropping in FY 2000, primarily due to cost reductions in fuel. • Modest coal costs over the next five years are anticipated for both Western and Eastern coal. • Railroad transportation services and scheduling has become an issue for on-tube coal deliveries, primarily due to the deregulation of the railroad industry. Staff is exploring coal storage alternatives. • Retail load and capability forecast indicates total peak demand with 15% reserves (MW); does not require additional BWL capacity until approximately 2019. • Electric outage average in FY 2000 was 30.69 minutes; FY 2001 to date was 33.38 minutes. Five-year average (FY 1996-2000) was 45.59 minutes. Gains in improving reliability would primarily come from the distribution system through a four-year tree trimming cycle. It is rare to lose the transmission system, as most substations are double-ended. 16: 15 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 5/24 Page 35 oard Minutes Apri]24,2001 • Electric revenue/Kwh has been lower than inflation. Average FY 2000 rate was 4.95 cents/Kwh(4.95 Kwh vs. 6.68 /Kwh if rates had risen at the rate of inflation). Steam Utility • Steam outage average in FY 2000 was 11.11 minutes; FY 2001 to date was 17.75 minutes. Five-year average (FY 1996-2000) was 27.69 minutes. • Steam rates have been lower than inflation. Average FY 2000 rate was $7.27 /Mlb ($7.27/Mlb vs. $12.52/Mlb if rates had risen at the rate of inflation). TVater Utility • Water rates have been lower than inflation. FY 1999 average was 1.74 cents/CCF (1.74�/CCF vs. 2.89�/CCF if rates had risen at rate of inflation). • Water outage average in FY 2000 was 4.45 minutes; FY'O1 to date was 2.5 minutes. Five- year average (FY 1996-2000) was 4.05 minutes. Eckert Station and Moores Park Plant Configuration General Manager Pandy distributed a diagram of the Eckert Station and Moores Park Steam Plant configuration. He noted that Eckert has six boilers serving six turbines. Three of the boilers are headered together and also provide steam to General Motors' (GM) Plant 6 and to the Downtown Heating District. Moores Park has four boilers leadered together to supply steam to GM, the Central Utility Complex, and the downtown Moores Park/Ottawa tie lines. PRESENTA TION B Y DIRECTOR OFILIETRICS AND AUDITSKELLIE WILLSON Director of Metrics and Audits Kellie Willson presented an overview of the BWL's overall performance. A copy of her broad analytical review is included with the meeting packet. A series of graphs depicted the following analysis and trends: • There was significant improvement in the overall customer satisfaction rating in fiscal year 2000. BWL is at or approaching `Best in Class," primarily due to low cost and reliability. • The measure of restoring power during outages has been improving over the past several surveys. • BWL overall performance remained relatively flat. Performance in FY 2000 was better than in 1999, primarily due to cost reductions in fuel costs and in purchased power. The impact of the conversion to Western coal is being realized. • A total of$56 million was spent in FY 2000 on total compensation-- a slight increase from the prior year. The amount paid for time worked decreased slightly due to a reduction in overtime and a storm-free year. 16:15 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91532 PAGE: 6/24 Board Minutes Page 36 April 24,2001 • A comparison of how much is paid to the City on return on equity(vs. how much remains as net income) indicates $6.4 million was paid to the City annually for FY's 1999 and 2000. Remaining net income was about$5 million in FY 1999 and $11 million in FY 2000. • Significant changes are depicted for FY 2000 on the Balance Sheet for the BWL as a whole, based on assets, liability and equity. The sharp changes are the result of borrowing about $127 million during the year. In November, 1999, BWL borrowed $78.5 million to finance the General Motors (GM) Central Utilities Complex. GM will pay 105% of the debt service on those bonds. In January, 2000, BWL borrowed an additional $48.23 million to finance the following projects: chilled water district in downtown Lansing ($26.54M), water system expansion($9.4M), a proposed new electric substation($8.2M), and a replacement of a chemical feeder for the Water Utility($840,000). The remaining $3.25 million was for debt service and legal, financial and administrative costs. • The Electric Utility had a better year than in FY 1999. As a result, the BWL also had a very good year in FY 2000. • The Belle River Power Supply Contract is disclosed as a footnote in the audit report, since technically the BWL does not own the 64.29% share of the Belle River Plant. Belle River is not listed in the BWL books as an asset or as a liability. • Water Utility revenues were fairly flat over the past year. Operating expenses continued to increase, narrowing the amount of operating income for the BWL. The Balance Sheet for the Water Utility indicates Water added more fixed assets in FY 2000 than the Electric Utility, after taking Contributions in Aid into account. • The Steam Utility's financial position deteriorated during FY 2000. Although sales and revenues showed healthy increases of 3% and 4.6%respectively, operating expenses increased by 9%. This was primarily due to maintenance of both the production facilities and the transmission and distribution systems. The Steam Utility Balance Sheet shows Steam took total assets from about$35 million to about$70 million due to the chilled water plant. On the liability side, it depicts the borrowing associated with providing chilled water. • Utility comparisons indicate the Electric Utility represents about two-thirds of the total assets of the BWL. • Measures of profitability indicate the BWL Operating Income to Revenue in FY 2000 was 4.5 cents for the BWL as a whole (operating revenue for every dollar sold). The Electric Utility kept 5 cents, the Water Utility kept 6 cents and the Steam Utility made no profit. The overall corporate Return on Capital Assets in FY 2000 was about 2% (relation of operating income to production facilities). Tle Electric Utility earned a 3%return, the Water Utility just under 1%, and the Steam Utility had a zero return. Growth and Expansion Status Assistant General Manager Bill Cook reported that in November 2000, the General Manager assigned him the task of reviewing BWL activities related to Growth and Expansion. In January, Mr. Cook provided a status update to the Finance Committee and was requested to return to the Committee in February with solutions to the issues identified. He reported that this undertaking is a work in progress as staff conducts its analysis to identify systemic problems. Mr. Cook's 16: 16 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 7/24 Page 37 oard Minutes April 24, 2001 written report is included with the meeting packet. A highlight of conclusions were presented as follows: Findings to Date: • Growth in capital spending at the BWL has taxed the utility's cash resources and borrowing capacity. Capital spending is being carefully reviewed to minimize the need for additional borrowing. Problems in this area are being addressed. • Left unchecked, added borrowing could affect the BWL bond rating and require rate increases and/or large operations and maintenance cuts. • The return on BWL expansion, particularly in the Water Utility, has been disappointing, and is an extremely long-term proposition. Water extensions historically across the country are long-term investments. • Such long-term paybacks may be causing adverse impact on existing BWL customers. A process has been implemented to identify and assure collection of supplemental connection and frontage fees in the future. • Preliminary estimates indicate that there is little room financially for unexpected events/expenses without added revenue. A major potential environmental liability relating to No.x emissions must be considered in future planning. Corrective Actions: • Wholesale water rate increases were initiated on January 1, 2001. • An expanded justification process including training, prioritization, uniform format, standard economic parameters, added quality control, and a follow-up process is being implemented. • Economic return requirements have been developed which are increased based on priority and Board assumed risk. • A process has been implemented to identify and bill appropriate fees and charges in a more timely and accurate manner. • A process has been implemented to ensure the annual updating of fees and charges. • Rules and Regulations are being reviewed for each utility, under the premise of increased levels of customer contribution. The target is to bring the Rules and Regulations to the Board for approval and implementation the start of FY 2002. • Sufficient information has been gathered to define a scope for a performance audit of past BWL performance in the abovementioned areas as well as a review of staff s corrective actions. A draft scope will be provided to the Finance Committee for review by March 13�`. 16: 17 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 8i24 Board Minutes Page 38 April 24,2001 • Staff is keenly aware that these actions are a beginning of the needed process improvements for growth and expansion. The Commissioners and staff engaged in lengthy discussion as to whether the water system expansion is a good investment. The Commissioners questioned the information provided to them at the time the individual agreements were approved. General Manager Pandy pointed out that the BWL has been in the water business for 115 years. Although it has never been a profitable business, the strategic vision of the utility has been to supply potable water to the community because it is a municipal public purpose and it creates a greater good in the community. He assured that a process to reimburse inter-utility transfers would be implemented this fiscal year so that each utility is self-supporting. Following discussion, the Committee concurred with the following actions identified in the Growth and Expansion Report, and recommends Board approval: Actions Identified in the Growth and Expansion Report—dated February 21, 2001: (Complete Report included with the Finance Committee Meeting packet.) Page Item Action 100 2C Implement process to collect supplemental connection and frontage fees, including training. 101 3B Use new Capital Project Justification Form and Evaluation Form 103 5D Establish annual return levels. • Mandatory 5.5% • Necessary 8.5% • Discretionary 12.0% 103 6A Direct staff to establish budgets for next 6 years with fixed obligation coverage (i.e., including Belle River) of> 1.7x. 103 8 Report tracking of major projects to Board annually. 104 9A Modify Rules and Regulations. Electric • Invest only 1.5x annual revenue (change from 3x) • Charge for trenches, temporaries, inspections and relocations • Adopt new charges for underground service 104 9B Water: Eliminate BWL funding (50%) for border streets, over sizing;require all main extensions funded by developers. 105 11 Update formal Economic Standards and Parameters (Attachment 6). 105 14 A draft scope of the RFP for consultant to evaluate BWL policies on growth and expansion for Finance Committee member review `h by March 13 . 16: 18 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91532 PAGE: 9/24 Page 39 :oard Minutes April 24, 2001 Action Identified in the Internal Audit Report: Page Item Action 500 & 592 2 Reimburse inter-utility transfers from 1985-2001 within 10 years: Water Utility pays Electric Utility $7.8 million Steam Utility pays Electric Utility$4.4 million Steam Utility pays Water Utility $2.6 million Ottawa Station Development Staff Attorney Larry Wilhite updated the Committee on four main areas involving the redevelopment of the Ottawa Station: Convergency Centers- Update • Mr. Wilhite and General Manager Pandy met with representatives of the Building Trades Council (Iron Workers, IBEW Local 352, Plumbers and Fitters), Convergency Center, and the Mayor's Chief of Staff to discuss union concerns regarding Convergency's general contractor, Pioneer Construction. • The local Building Trades Council received word that Pioneer was going to redevelop the Ottawa Station. They expressed concerns over non-Lansing labor, non-union labor, and Pioneer's safety record. • Pioneer's response was that they would allow an open shop and bid out locally. This seemed to appease the union during the meeting, but later their response indicated otherwise. • The union offered to help find labor and contractors and they suggested a project labor agreement, similar to the one used for the legislative offices and Oldsmobile Stadium. The main element of the project labor agreement is temporary union membership in exchange for a no-strike clause. Joint Development Agreement A meeting was held with Convergency to discuss so-called cornerstone principles, which the BWL provided to them a couple of months ago. Convergency agreed to provide security in the form of a letter of credit to ensure the BWL recovers its utility infrastructure investment. In addition, it was agreed that the BWL could approve contractors and subcontractors. The construction and redevelopment schedule is to be provided by Convergency. To that end, the BWL has prepared a draft Joint Development Agreement(JDA) for internal review only. The JDA is based on the premise of separate condominium units. (a) Floors 1 through 3, (b) Floors 4-10, and (c) Floor 11. Oldsmobile/GM Heritage Center A letter of interest has been received from the Oldsmobile GM Heritage Center. They are looking for a convenient, downtown location for the R.E. Olds and Oldsmobile/GM Heritage Center. They are interested in approximately 55-60,000 square feet of space at the Ottawa 16: 18 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 10/24 Board Minutes Page 40 April 24,2001 Station. The Center will be able to provide its own labor for build out. Mr. Wilhite intends to proceed with discussions regarding a sale price. Clean Michigan Grant General Manager Pandy met with representatives from the Michigan Department of Environmental Quality and the Michigan Economic Development Corporation. They are still interested in funding this effort but have requested that the City of Lansing resubmit its application based on Convergency Centers and other riverfront development. All other conditions of the grant remain effective; namely, (1) BWL to retain ownerslup, (2) BWL must obtain a developer, and (3) BWL must remediate the coal pile area. After a question and answer period, there was unanimous consensus for Staff Attorney Wilhite to continue with negotiations. Proposed Revenue Bond Issue General Manager Pandy displayed a business profile published in Standard & Poor's Credit Week Municipal, dated February 5, 2001, which lists the measure of risk for approximately 119 public power systems around the country. The BWL is listed as AA/Stable, which indicates the utility is in the favorable high end of the rating. He noted that while staff first proposed a $17.5 million bond issue, staff has been working to find alternatives to reduce the amount of borrowing. At the January 23, 2001 Finance Committee, staff was asked to look at several alternatives in the method and timing of borrowing. Cluef Financial Officer Dana Tousley reviewed the following FY 2001 proposed bond projects and costs: DATER UTILITY ToTAL • Refurbish Controls on Cedar Pump #3 $348,000 • Install Dye High Lift Pump #3 615,000 • Refurbish Dye Filters 99 and 410 1,460 STEA.V UTILITY Total • Chilled Water District, Phase II $11,084 Staff reviewed proposed financing alternatives and associated costs for the above projects. The calendar of events and Bond Resolution details were also discussed. Calendar of Events February 2001 - Review Projects and Costs April 2001 - Resolution Approved May 2001 - Competitive Sale June 2001 - Settlement 16: 19 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 11/24 Page 41 Soard Minutes April 24,2001 Bond Resolution Details • Fifth Supplemental to original dated: October 24, 1989 • Same terms as 1989, 1994, 1999 bond issues • Bond Term: 15 years • Interest Rate: 4.90%to 5.25% • Levelized Debt Service for all BWL debt • Book Entry Bonds • Redeemable at par after 10 years Following discussion, the Commissioners reaffirmed their preference to minimize the amount of borrowing, given the anticipated magnitude of added borrowing within the next year associated with environmental compliance (Nox), unexpected changes in the competitive market; and other utility revenue requirements. Emphasis was made on usuig care with future issuances to ensure the BWL's bond rating is not put at risk. Following discussion, the Committee recommended the following resolution for Board consideration: esoletton#2001-4 2 ............................................................... Staff to Draft a Resolution to Issue Reveme Bonds RESOLVED, That staff is hereby authorized to proceed in drafting a resolution to issue revenue bonds to finance the Chilled Water District, Phase II at an estimated cost of$11,084,000 for Board approval in April or May, 2001. Quarterly Internal Audit Report Director of Metrics and Audits Kellie Willson gave an overview of internal audit activities. A copy of her report is included with the meeting packet. Her involvement in the following projects were highlighted: • Review of major water system extensions, which involved working with the Assistant General Manager and Task Force to revise economic evaluation criteria and approval processes for all capital spending. • Followed up with management on compliance concerns related to transfers of funds between utilities. Board policy 16-02, was adopted by the Commissioners in October, 1985, but it has not yet been implemented. • Followed up with management to assure management complies with the funding process approved by the Commissioners to fund the VEBA Trust for retiree health care benefits. • Reviewed compliance issues related to the City Ethics Ordinance and the Commissioners' expectations. The Commissioners directed the Director of Metrics and Audits to prepare a recommended policy on this matter for review and Board consideration. General Manager's Statement of Financial Interests General Manager Pandy handed out a copy of his Statement of Financial Interests, recently filed with the City Clerk. 16:20 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 12124 Board Minutes Page 42 April 24,2001 There being no further business, the Finance Committee meeting adjourned at 9:27 p.m. Respectfully submitted, Mark A. Murray, Chair Finance Committee Moved by Commissioner Callen, seconded by Commissioner Murray, that the Finance Committee Report be considered as read in full and approved. Action: Carried unanimously. Moved by Commissioner Callen, seconded by Commissioner Murray, that Resolution 2001-4-1 (VEBA) be approved. Action: Carried unanimously. Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution 2001-4-2 (to draft Revenue Bond Resolution), be approved. Action: Carried unanimously. REPORT OF THE FINANCE COMMITTEE The Finance Committee met on March 27, 2001, at 5:30 p.m., to discuss the following topics: (1) Sales Forecast, (2) Capital Projects and Preliminary Forecast, (3) Steam Fuel Cost Adjustment, (4) Hydrant Rates, (5) Risk Assessment, and (6)to comment on the Request for Proposal and scope of performance audit services. Committee Members in attendance were Commissioners Murray, Christian, Creamer, and O'Leary. Also present were Commissioners Callen and Duncan. Sales Forecast Resource Planning Engineer, Dave Bolan, presented an overview of the BWL's base, high and low load forecasts developed for retail Electric, Steam (including Chilled Water) and Water utilities covering FY 2001 —2012. The forecasts will be used in planning studies, budget development capital expenditure decisions, load and capability analysis, and revenue forecasts. Base forecasts indicate retail electric and steam sales steadily climbing the next three years as new General Motors (GM) load comes on line, then declining as older GM plants are retired in 2004 or 2005. The water utility has shown significant sales growth in the past few years, credited to wholesale water agreements. With existing plant capacity, new production capability may not be required prior to 2012. However, with recent growth and associated uncertainty regarding water future load, this situation is being monitored to assess capital projects to increase water production and pumping capacity. The forecast 16:20 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6223 #91532 PAGE: 13/24 Page 43 ;oard Minutes April 24, 2001 for Chilled Water was based on present contracted loads. Assistant General Manager William Cook reported that electric sale for resale net revenues for FY 2002 are expected to reach $6.9 million. This amount reflects known agreements only, and as such, is down $2.4 million from expected FY 2001 levels. Due to an increase in retail sales as a result of expected simultaneous operation of all GM facilities, sale for resale revenues are projected to be reduced during the period from FY 2003 through FY 2005. Wholesale sales to the Michigan Public Power Agency are expected to increase in the next ten years. The BWL projects it will see lower cost per unit at Belle River in 2005 when a larger debt service credit is taken. Capital Projects and Preliminary Forecast General Manager Pandy presented a summary status report of BWL annual, planned and bonded capital projects. A handout detailing the individual projects as of February 28, 2001 showed a projected overrun of$3.6 million(1%). The Commissioners and staff'discussed methods used to improve the accuracy of project estimates to eliminate cost overruns. The BWL typically uses a contingency factor of 10%to 15%, depending on the type of project. Staff is in the process of developing procedures to better identify high-risk cost elements of a project. The FY 2002 Capital Budget and Operating and Maintenance Budget will be thoroughly reviewed with the Finance Committee on April 24. 2001. Steam Fuel Cost Adjustment General Manger Pandy presented an overview of the fuel conversion project implemented in January 2001 at the Moores Park Plant. Switching from Eastern to Western coal is projected to lead to lower steam bills for BWL customers. A proposed two-year freeze of the BWL's steam fuel cost adjustment would capture the savings from burning Western coal to pay for the capital investment made at the Moores Park Plant. Chief Financial Officer Dana Tousley presented justification for rebasing the steam fuel cost adjustment for Steam Rates 1, 2 and 3 from 168.3 to 127.1 cents/million BTU from July 1,2001 to July 1, 2003. The steam fuel cost was last rebased in 1984. Plans are in process to commission a steam cost of service and rate study using FY 2001 as the base year. The study will be used to determine if current steam rates are appropriate for central steam customers and the General Motors (GM) Plant 1/Lansing Grand River Plant. It will also serve as a baseline for the general steam rate review called for in the GM steam contract for Plant 6 in 2003. Staff recommends a sunset provision on the fuel cost adjustment clause in the steam rate schedules to drop and/or change by July 1, 2003. It was pointed out that a recent comparative analysis indicates existing BWL steam prices are 220/&-40% below natural gas prices. 16:21 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 14/24 Board Minutes Page 44 April 24,2001 The Finance Committee recommends the following resolution: esodutoori:#:.2001:=�=3 Public Hearing Set for Steam Rates 1, 2 and.3 RESOLVED, That the attached, proposed Steam Rates 1, 2 and 3 be the subject of a public hearing prior to further consideration by the Board of Commissioners. FURTHER RESOLVED, That a public hearing to solicit public input on this matter be set for Tuesday, June 26, 2001 at 5:30 p.m., in the Board of Water and Light Offices at 1232 Haco Drive. Also that the Corporate Secretary be directed to file with the City Clerk information regarding pending changes in the steam rate structures on or before April 27, 2001. Fire Hydrant Rates Chief Financial Officer Tousley reported that a rate design error has been discovered in the fire hydrant rates approved by the Board on July 25, 2000 and effective January 1, 2001. Water Rate No. 6 inadvertently over-recovers the revenue required from fire hydrants as a class. Mr. Tousley noted that for administrative reasons, the fire service and fire hydrant rate was split into two rate schedules—Rate 4 and Rate 6. Previously the fire service and fire hydrant rate had been included in one rate schedule and considered one rate class. The split of the revenue requirements between the two classes/rates was a complicating factor leading to the error. The rate modification will be retroactive to January 1, 2001. The Commissioners urged staff to maintain personal contact with customers prior to the hearing process to communicate the impact of the proposed change. This relationship brings the rate matter to their attention on a timely basis and provides the customer an opportunity to review the proposed change prior to the hearing for input. The Finance Committee recommends the following resolution: esolution#2001=4 :: Public Hearing Set for Fire Hydrant Charges—Rate No. 6 RESOLVED, That the attached proposed Fire Hydrant Charges - Rate No. 6, as revised, be the subject of a public hearing. FURTHER RESOLVED, That a public hearing to solicit public input on this matter be set for Tuesday, June 26, 2001 at 5:30 p.m., in the Board of Water and Light Offices at 1232 Haco Drive. Also that the Corporate Secretary be directed to file with the City Clerk information regarding pending changes in the fire hydrant charges on or before April 27, 2001. Annual Risk Review Chief Financial Officer Director Tousley reported that the primary reason for conducting a risk assessment is to identify risks associated with the BWL's business and ensures they are being 16:22 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 15/24 Page 45 oard Minutes April 24,2001 managed or mitigated in some manner. An overview of four types of reviews the external auditors conduct during the annual audit was presented. 1. Potential financial loss due to accident, natural disaster or negligence risks. The primary focus is on property and liability insurance to minimize the financial loss due to these risks. 2. Potential financial loss due to environmental risks. The primary focus is on current environmental issues and the financial loss of mitigation or removal of an environmental problem. 3. Potential financial loss due to legal risks. The primary focus is on current or future litigation and the financial loss associated with large adverse judgments. 4. Potential financial loss due to operational risks. The primary focus is on large dollar transactions and the contractual commitments involved. Examples of the type of contract examined include coal contracts, wholesale power contracts, purchase power contracts, large capital expenditures and associated contracts or bond issues, etc. The following types of insurance policies were summarized: Property Insurance Liability Insurance - General Liability -Fire and Other Perils - Workers'Compensation Boiler and Machinery -Automobile -Flood -Public Officials and Employees -Pension and Welfare Fund Fiduciary Surety and Bonds Other Insurance -BWL Employee Faithful Performance Bond -Business Travel Accident -Pension Employee Faithful Performance Bond -Special Travel Risk The BWL is self-insured for major storms and any major disruption of the transmission and distribution (T&D) system. Damage claims against contractors who damage the BWL T&D system are billed and collected from the offending party. The BWL is also self-insured up to $400,000 for workers' compensation with a specific excess policy to cover claims over $400,000. The purchasing policy currently has insurance purchases going to the Commissioners for approval. The committee was requested to consider a resolution that authorizes the General Manager or designee to purchase insurance as is appropriate. In light of the variability of market conditions for insurance and surety bonds, staff should follow the basic parameters listed below: PROPERTY INSURANCE 1. Maintain fire and boiler and machinery insurance on the major real property assets preferably on a replacement cost basis. Personal property may be insured on an actual cash value basis. 16:23 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 16/24 Board Minutes Page 46 April 24,2001 LIABILITY INSURANCE L Maintain general liability insurance for bodily injury and property damage liability at a minimum level of 10% of the annual gross revenue. 2. Maintain Automobile Liability Insurance that complies with the Michigan No-Fault Insurance laws. 3. Maintain excess liability insurance for the self-insured workers' compensation program. 4. Maintain wrongful acts insurance for Commissioners and Emplo)ees. SURETY BONDING 1. Maintain faithful performance bonding on employees with a limit of$100,000 per loss. 2. Require dishonesty bonding with similar limits on outside service workers and independent contractors. Mr. Tousley reported that regular updates would be provided to the Finance Committee on each of the four areas of risk assessment. The Finance Committee recommends the following resolution: esolutton'#:2001 4 ._......................._ ........... __ General Manager to Acquire and 1Llaintain Insurance Coverage or Surety Bonding RESOLVED, That the General Manager or designee shall acquire and maintain insurance coverage and surety bonding to finance various risks of loss on such terms and conditions, limits, deductibles or retentions and premiums as may in his judgment provide the best value for the Board of Water and Light. Coverage or surety bonding may be bid or negotiated with agents or insurers. RESOLVED FURTHER, That additional insurance coverage and bonding may be acquired whenever it is appropriate m the judgment of the General Manager. RESOLVED FURTHER, That a report on the current coverage shall be provided annually to the Commissioners. Growth and Expansion The Commissioners were asked for their comments on the performance audit specification on growth and expansion. Commissioner Murray suggested that Phases I and V be prioritized and itemized for separate bid, by virtue of their significance. Assistant General Manager Cook clarified that the Request for Proposal (RFP) was structured to receive bids for each of the five phases. 16:23 MRY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 17/24 Page 47 ;oard Minutes April 24, 2001 Other Matters Habitat for Humanity: General Manger Pandy reported that Habitat for Humanity has approached the BWL on the possibility of teaming up with Meijer's in Lansing to build a Habitat for Humanity house this summer. Meijer's has made a commitmeit of approximately $30,000 toward the project. Habitat is asking for BWL support in the form of a $20,000 sponsorship level, which would help purchase materials for the project. BWL volunteers to perform labor is also being requested. Mr. Pandy asked for the Committee's guidance on the appropriate amount of funds to support this project. WFMK Radio is considering a sponsorship in the form of advertisement in lieu of cash. The Committee supports employee involvement in the Habitat project through volunteer labor, but is concerned with the $20,000 level of cash contribution requested. General Manger Pandy told the Committee that the BWL has a community involvement funding committee that meets periodically to review community requests. Mr. Pandy said he has authority of up to $15,000 for that purpose. Following discussion, there was consensus among the Commissioners to delegate the General Manager the authority to involve the BWL in the Habitat project with appropriate discretion on the amount of monetary sponsorship. There being no further business, the Finance Committee meeting adjourned at 7:15 p.m. Respectfully submitted, Mark A. Murray, Chair Finance Committee Moved by Commissioner Duncan, seconded by Commissioner Murray, that the Finance Committee Report be received as presented. Action: Carried unanimously. Moved by Commissioner Creamer, seconded by Commissioner Murray, that Resolution # 2001- 4-3 (Public Hearing— Steam Rates) be approved. Action: Carried unanimously. Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution #2001-4- 4 (Public Hearing —Fire Hydrant Charges) be approved. Action: Carried unanimously. Moved by Commissioner Murray, seconded by Commissioner Duncan, that Resolution#2001-4- 5 (Insurance Coverage/Surety Bonding)be approved. Action: Carried unanimously. 16:24 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 19/24 Board Minutes Page 48 April 24,2001 GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. esolu tton'#:2001._4:` APPROVAL OF FIFTH SUPPLEMENT REVENUE BOND RESOLUTION RESOLVED, that the Fifth Supplemental Revenue Bond Resolution Authorizing Water Supply, Steam and Electric Utility System Revenue Bonds of the City of Lansing, Michigan, as appended to these minutes, be approved. Staff Commentary: The latest bond sizing (attached) from Speer Financial is $11,780,000 for the Chilled Water Phase II plus issuance costs. The bond sale date is tentatively set for May 17, 2001. The bond resolution has a new provision, Section 10, which allows the Board Chair or a Commissioner and either the General Manager or the Chief Financial Officer to accept competitive bids on May 17, 2001 in lieu of a special board meeting to award the bonds. The BWL's bond counsel, Kester So from Dickinson Wright, drafted the resolution with input from staff and Speer Financial and will perform the final legal review. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Discussion: General Manager Pandy commented that when staff first talked to the Board about borrowing money, a $20 million issue was in the original financial forecast. After receiving input from the Finance Committee and Commissioners, staff moved toward conservative borrowing and trimmed the bond issue down to about$11.8 million. Interest rates for the sale are expected to be in the range of 5%. Action: Carried unanimously. esoluttorz#2001 '� ': PURCHASE OF WATER TREATMENT CHEMICALS RESOLVED, That the Board of Water and Light(BWL) enter into a purchase agreement with Nalco Chemical Company (NALCO) of Naperville, Illinois, for the supply of Water Treatment Chemicals for Electric, Steam and Chilled Water facilities. The purchase agreement particulars are as follows: 1) The term of this agreement shall be thirty-six(36)months (July 1, 2001 —June 30, 2004). 2) NALCO shall become the sole supplier of proprietary water treatment chemicals for Erickson Station, Eckert Station, Moores Park Station and the Ottawa Chilled Water Plant. 3) The estimated cost of the proprietary water treatment chemicals for the duration of the agreement is $1,300,000. 16:25 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 19/24 Page 49 3oard Minutes Apri124, 2001 Staff Commentary: By entering into agreement with NALCO, the BWL will be provided with analytical services, proprietary water treatment commodities and consulting services for Erickson Station, Eckert Station, Moores Park Station and the Ottawa Chilled Water Plant. Moved by Commissioner Murray, seconded by Commissioner Creamer, that the resolution be approved. Discussion: Commissioner Callen indicated that in reviewing backup information submitted with the meeting packet, he could understand the difference between the alternate bids submitted by Nalco Chemical Company and BetzDearborn, but he asked for a clarification on the difference between the original bids submitted by Nalco and Betz. General Manager Pandy responded that he would look into the particulars of it and report back with the details. Action: Carried unanimously. Overview of Ottawa Station Development Documents Staff Attorney Larry Wilhite presented an overview of the general framework of the Joint Development Agreement(JDA)between the BWL and Convergency Centers Corporation and the Purchase and Development Agreement. Mr. Wilhite introduced Tom Maier, a senior attorney with Clark Hill and Associates. Mr. Maier drafted both documents and is a specialist in commercial transactions and utility law. He briefed the Board on the more complex aspects of the contract provisions. Mr. Maier noted the agreement provides that prior to undertaking construction, the developer is to provide plans, drawings, detailed engineering plans, specifications, bidders lists, bid documents, proposals, and all contract documents to the BWL for approval to assure that the developer complies with the terms under the agreement. The three portions of the Ottawa Station redevelopment project involve the following: 1. Convergency Centers Corporation development for a telecommunications Carrier Hotel. This project will utilize the middle seven floors. The JDA authorizes the sale of a portion of Ottawa Station to Convergency Centers Corporation. 2. Oldsmobile/General Motors Heritage Center for a combination of the R.E. Olds Transportation Museum on Museum Drive and the GM Heritage Center on Michigan Avenue. This project needs about 58,000 square feet•, and will take up the first, second and third levels of the Ottawa Station. The Purchase and Development Agreement is designed as a companion document to the Joint Development Agreement. 3. H&H Development for office space. This project involves the top floor (1 lth level). The Purchase and Development Agreement is designed as a companion document to the Joint Development Agreement. A preliminary architectural exhibit attached to the JDA was reviewed. Mr. Wilhite noted that approval of a resolution to declare the Ottawa Station surplus and no longer needed for the utility's operation, would be subject to a condominium survey and the creation of a master deed to comply with the Michigan Condominium Act. The closing of the property itself is subject to a 16:26 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 #91532 PAGE: 20/24 Board Minutes Page 50 April 24,2001 resolution by the BWL Board of Commissioners and a resolution by the Lansing City Council, approving the sale. The Board engaged in lengthy discussion on the business case for the project. EXECUTIVE SESSION Moved by Commissioner Creamer, seconded by Commissioner Murray, that t1B Board convene in Executive Session to discuss purchase price parameters for Convergency Centers Corporation and other interested buyers. (7:20 p.m.) Yeas: Commissioners Aquilina, Callen, Creamer, Duncan, Murray, Royal Nays: None Abstentions: None Absent: Commissioners Christian and O'Leary Action: Carried unanimously. The Board returned to open session at 8:27 p.m. Due to some uncertainty on the implications of declaring BWL property as surplus, and the consequences if the deal falls through, the Commissioners agreed to modify the General Manager's recommendation--to declare a portion of Ottawa Station as surplus--by including language to the effect that subject to reaching agreement on a purchase price and wording of the Joint Development Agreement,the Board indicates it will declare those portions of the Ottawa Station to be surplus. This contemplates that the Joint Development Agreement and Purchase Agreement are conditioned upon a resolution from the Board to include a declaration that the property is surplus. This would provide the necessary assurance that the Board is prepared to complete this transaction. esolution#.21�01-�4 .......................................................................... OTTAWA STATION TO BE DECLARED SURPLUS RESOLVED, That subject to reaching successful negotiations with Convergency Centers, the Board will declare those portions of the Ottawa Station as reviewed with the Board on April 24, 2001 (as set forth on Exhibit A, filed in the Corporate Secretary's Office), to be surplus property and no longer needed for the utility's operation. Further, this action is subject to a condominium survey to be performed after execution of the Joint Development Agreement. Staff Commentary: The Exhibit A schematic is a skeletal version of the manner in which the BWL plans to condominiumize the Ottawa Station. To create a legal condominium description, the BWL will have to perform a condominium survey. Upon completion of the survey, the legal description of each condominium unit will be finalized. A copy of Exhibit A is filed in the Corporate Secretary's Office and appended to the Official Board minutes. Moved by Commissioner Duncan, seconded by Commissioner Murray, that the resolution be approved. 16:26 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 *91532 PAGE: 21/24 Page 51 Board Minutes April 24,2001 Action: Carried unanimously. esolutc A. 2001-4 JOINT DEVELOPMENT AGREEMENT RESOLVED, That the General Manager and Corporate Secretary be authorized to sign the Joint Development Agreement, in substantially such form as reviewed with the Board and filed in the Corporate Secretary's Office (Exhibit B), between Convergency Centers Corporation and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001. Staff Commentary: The Joint Development Agreement(JDA) authorizes the sale of a portion of Ottawa Station to Convergency Centers Corp. The JDA also requires Convergency to sign a Project Labor Agreement with the Southeastern Michigan Building and Trades Council. Convergency is also required to accept the terms of the BWL utility proposal and the BWL is granted approval rights for all contractors and subcontractors. A copy of the JDA is filed in the Corporate Secretary's Office and appended to the official Board minutes. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. Action: Carried unanimously. solrtt�on:#2041=4 1 AGREEMENTS WITH OLDSMOBILE/GM HERITAGE CENTER AND H&H, INC. RESOLVED, That the General Manager and Corporate Secretary be authorized to sign the Purchase and Development Agreement, in substantially such form as reviewed with the Board and filed in the Corporate Secretary's Office (Exhibit C), between the Oldsmobile/GM Heritage Center and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001. RESOLVED FURTHER, That the General Manager and Corporate Secretary be authorized to sign the Purchase and Development Agreement, in substantially such form reviewed with the Board (Exhibit C), between H&H, Inc. and the Board of Water and Light, subject to agreement on a sale price within the parameters established by this Board on April 24, 2001. Staff Commentary This document is designed as a companion document to the Joint Development Agreement. It will be utilized for sale of condominium units to Oldsmobile/GM Heritage Center and H&H, Inc., both of which have expressed an interest in floors 1-3 and the 1 lt`floor of the Ottawa Station, respectively. A copy of the Purchase and Development Agreement is filed in the Corporate Secretary's Office and appended to the official Board minutes. Moved by Commissioner Creamer, seconded by Commissioner Murray, that the resolution be approved. #91532 PAGL: cc'�y 16�27 MAY 01, 2001 ID: BOARD OF WATER & LIG TEL N0: (517) 702-6203 page52 Board Minutes Apri124,2001 there will be ions progress with Convergency Centers ' torsion: Commissioner Duncan stated for the record that it is her understanding Discussion: Manager Pandy information coming back to the Board as the negotiations Corporation, the Oldsmobile/GM Heritage Centerthe Bo and ad a negottiations move forward and uld rP approval wo confirmed thatOnnation would be provide Wilhite commented that final app prior to completing the transaction. Staff Attorney ent upon the nature of the arrangement presented to the Board at that time and be depend p consummated by a Board resolution. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None GENERAL MANAGER'S REMARKS response letter from Unfair Labor Charge. General Manager Pandy handed April 19a 2001)to the unfair IBEW Files jection the Michigan Employment Relations Commission(MERC dated p t was filed by the IBEW, Local 352. The essen sew l letter"I assume th t both Thelabor charge that a of PERA results have been certifie the Commission l were t of d agviolation of SeetiMar h 29 election in parties understand that if based on this charge, the remedy would not include an order to t rerun the alle ations have been Case..." MERC directed IBEW to show cause in writing as to why g filed. diligently to find green power to include in e Status of Green Power. Staff has been working e have been found from which the BWL can BWL's power supply portfolio. Two supp ercent of that will be from biomass and the remaining fifty percent will be from purchase a total of 1 MW of renewable power. FiftyP This would be (landfill gas) from the Granger landfill in Lansing, an County, Michigan' small hydro plants (500 kW each) located in Cheboyg ores to sell this to BWL customers who power hydro a 100%basis, totaling 8,760 MWhs• Staff prop per block for 250kWh/month. to a the existing green power rate of$7.50 p would be willing pay premium on the current BWL electric rat would is a This represents about a 3 cent per kWh p of green power slightly below 6 cents. Customers wicube rsied of the availability marketing campaign to be sent to all oner Callen commended staff for the efforts that went into making renewable energy Commissioner an option at the BWL. P.22 i T r, 96% 001 ID: BOARD OF WATER & LIG TEL NO: (517) 702-6203 3oard Minutes 16:28 MAY 01, 2 APB 24,2001 Page 53 REMARKS BY COMMISSIONERS he recently heard an excellent Rotary Club by General Manager Commissioner Creamer comm a ion delivered t the Lan 'g as extremely well received by the presentation on electric d t de and . There was a great deal of interest on this topic and it w P Y members. the cost estimation for the Chilled Water tici ated environmental demolition costs. He asked if more are Commissioner Callen commented that p in reviewing s estimated. District,he noted there were rO ect is protected to come to a anticipated. He asked ' the P J ental problems have been r Pandy' P leted, except for system controls cheCt the General Manage responded that staff believes all the environm in within The project is anticipated to come encountered, since the project is essential y e Board that the Chilled Water project is which is taking Place this week and next. for 40 minutes. estimates. Special Projects Director Jack Hill told the e May 1 startup date. °o com fete. The electric chiller was eet startedearlier in the day approximately 95/ P All the systems are in place and are ready to serve an er Pandy question on contingency, General Manager response to Commissioner aspen's was included in the initial estimate and it has been spent- in an reported that a contingencyFees negotiated with the M1°lug Commissioner Callen asked for a clarification on Air Manufacturers Association. cyan Manufacturers' Association, in Assistant General Manager Cook reported that the Michit, Quail' has developed a new set an De artnlent of Environmental Q eproposed40,0 fees,but conjunction with the Michigan p from th ' final proposal would have increased fees from $40,00 per of Air Permit Fees. The original P as able to cyotiate a 43/o reduction year to $352,50� still rep represent an increase of 467%. the new fees e Lansing Center. The reception is eminded the Commissioners that there is a legislative reception o General Manager Pandy r m. to 7:30 p.m. at th May 9, 2001, from 5:30 p Lansing Regional Chamber of Commerce, and Wednesday, M the City of Lansing, BWL, co-sponsored by tors Bureau. Commissioners were invited to attend this function Lansing Convention Visa EXCUSED ABSENCES that the absences and seconded by Commissioner Duncan, On motion by Commissioner Murray be excused. Of Commissioners Christian and O'Leary Carried unanimously. p.23 T r, 96% BOARD OF WATER AND LIGHT 1232 Haco Drive-Lansing, Michigan Agenda February 27, 2001 —5:30 p.m. 1. Roll Call (Board Commissioners Aquilina, Callen, Christian, Creamer, Duncan, Murray, O'Leary, and Chairman Royal - 8) Il. Pledge of Allegiance III. Approval of Minutes: Regular Scheduled Session of January 23, 2001 IV. Public Comments Members of the public are welcome to speak to the Board on any agenda subject or on any other subject now, or at the end of the meeting. V. Communications and Petitions Thank you notes from several retirees regarding their recent pension and Medicare increases. VI. Reports of Committees Chair 1. Finance Committee Report—Mark A. Murray, 2. Ad Hoc Committee Report—David O'Leary, Chair VII. Manager's Recommendations A. Adopt amendments to BWL's Defined Contribution Pension Plan, Defined Benefit Pension Plan, and the Post-Retirement Benefit Plan. VIIl. Unfinished Business IX. New Business X. Resolutions Honoring Susan F. McCormick XI. Manager's Remarks XII. Commissioner's Remarks XIII. Motion of Excused Absence XIV. Public Comments Members of the public are welcome to speak to the Board on any Board of Water and Light subject. Page 22 r , MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, February 27, 2001 The Board of Commissioners met in regular session at 5:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairperson Diane Royal called the meeting to order. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Charles M. Creamer, Nancy W. Duncan, Mark A. Murray, David O'Leary, and Diane R. Royal. Absent: Commissioner Rosemarie E. Aquilina The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Christian, seconded by Commissioner O'Leary, to approve the minutes of regular session held January 23, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. COMMUNICATIONS Letters of thanks for the recent pension increases approved by the Board were received from the following Board of Water and Light retirees: Ruth A. Dexter, Emil K. Kletke, Doris M. McDonald, Norval J. Mitchell, Leo J. Parker, and Wanda L. Ray Board Minutes Page 23 February 27,2001 Placed on file. REPORTS OF COMMITTEES #2001-1-1 FINANCE COMMITTEE REPORT The Finance Committee met on January 23, 2001, to review the status on Growth and Expansion, Ottawa Station Redevelopment, and the Proposed Bond Issue. Committee members in attendance were Commissioners Mark A. Murray (Chair), Ernest J. Christian, David O'Leary, and Board Chair Diane Royal. Also present were Commissioners Ronald C. Callen, and Nancy W. Duncan. Absent was Committee Member Charles M. Creamer. Growth and Expansion Status. General Manager Pandy reviewed highlights of a memo dated January 23, 2001, from Assistant General Manager Bill Cook on the status of Utility Growth and Expansion. He also showed a series of graphs indicating the Board of Water and Light's (BWL) levels of capital expenditures, debt service, and related indicators over the past several years. General Manager Pandy said his goal was to come to the Board with an assessment of the actual financial performance of the various expansion projects by geographic area. He noted that the water system expansion and chilled water projects are like new start-up businesses. They are long-term investments that will benefit the BWL in the future. Assistant General Manager Bill Cook then reviewed the status of Utility Growth and Expansion in greater detail. Commissioner Murray expressed appreciation that the status report identified key issues, and expressed a hope that additional detail would be forthcoming to address the issues raised. Mr. Cook said that his approach has been to address systemic problems first so future projects will be consistently and rigorously evaluated. He expects new processes and procedures to be in place within another month. Within two months he expects to have specific economic parameters to discuss with the Finance Committee for their review and subsequent Board approval in their capacity as the BWL's regulatory body. Commissioner Murray expressed concern about the BWL issuing more bonds at this time and about BWL's ability to accurately estimate project costs in the future. Commissioner Murray asked that the Growth and Expansion topic be placed on the agenda for the February 27, 2001, Finance Committee meeting with the expectation that staff will have well-defined solutions to the issues they have identified. Proposed Revenue Bond Issue. Chief Financial Officer Dana Tousley outlined for the Board the steps required for issuing bonds. He said that he expects the BWL will keep its AA rating on this proposed small bond issue, but BWL's rating in the future may be lowered because of the high level of fixed obligations, He reviewed a worksheet that forecasts the BWL's effective fixed obligation coverage taking into account the Belle River obligations and payment of return on equity to the City. Mr. Tousley noted that about$11 million of the proposed bond issue is for completion of the chilled water system. An estimated additional $4.2 million will be needed for various water projects, General Manager Pandy noted that the largest of the water projects is $1.5 million for two filters at the Dye Water Conditioning Plant. The filters are needed to handle the growth in water sales due to Board Minutes Pa February 27,2001 Mr. Tousley noted that a full issue remains to be done, evaluation of the capital expenditures to be nd 1qurraY asked staff to check with the BWL's financial advisors on the llolAU of using none-year note and (2) on sizing the bond issue for current capital needs only, more bonds the following year when capital needs have been more thoroughly identified led. JY noted that the BWL,has to move more toward the direction of a financial focus. .ssioner Murray observed that ' recent years B WL management has activelyused .d and care will be needed with future issuances to ensure that BWL's bon Ths not put at is means that substantiallya debt to greater care is now required and that in the future, he BWL will e to bypass some deals or find others to finance them. He also cautioned a NL's cash reserves during these good economic times. against dip ping pping into Mr. Pandy informed the Commissioners that Sue McCormick the for much of the BWL's growth and expansion, has taken a position asaDirectorng Manager responsible City of AnnArbor. Mr. Pand new position is a career Opportunity,Y praised her many accompli with other compant areas and wi on to leave shments and acknowledged that while her her decisi the BWL was also due to her frustration Expansion Report. th the way expansion was portrayed in the System Growth and Ottawa Station Redevelopment. real estate matters Staff Attorney Larry Wilhite briefed the Commissioners on Plant by associated with the proposed redevelopment of the Ottawa Station Power Convergency Centers. The building has been appraised at $2.8 million. Also, a Potential tenant has expressed interest in the remaining 5 5,000 square feet not Convergency Centers. Mr. Wilhite said that area unions are activelyo needed by selected by Convergency Centers and this will be a major issue to be adpposed to the contractor lssistant General Manager Bill Cook handed out a relim' dressed. Inceptual alternatives for the Ottawa Station Power Plant and site. He intends ti the )vide all major project information to the C r unary economic evaluation of four lmptions, sensitivities, and risk analyses all clearly described. Mr. Coo future to ommissioners in a similar format with the alternatives, i section for future follow-up so the BWL, can improve future estimates and ea ohecthe form also 1era1. p ] management issioner Murray concluded the meetingb ttee meeting for 5:30 Y asking staff to schedule the next Finance osed Bond Issue 2 p.m. on Tuesday, February 27, 2001, with the following agenda items: ( ) Ottawa Station Redevelopment, (3) Growth&Expansternal Audit Rep ion Status Report, w of Utility performance Indicators, and 5 ) Quarterly ition must be received in advance of meetings and directed staff not to review e said that that the Commissioners have not seen in advance. anything at submitted, ray, Chair nittee "Missioner Duncan, seconded by Commissioner Creamer, that the Finance ort (Resolution 2001-2-1) be considered as read in full and approved. Board Minutes February 27,2001 25 �$e Action: Carried unanimously. #2001-1-2 BOARD OF COMMISSIONERS' AE HOC COMMITTEE ON PAYMENTS IN LIEU OF TAX d Hoc Committee met on February 13, 2001,to discuss issues rely The Board's A payments in lieu taxes to the City of Lansing. Chair Diane R. l resent were: Commissioners David O'Leary (Chair), Committee Members p Y Mark A. Murray and General Manager Joseph Pand , Jr The consensus of the Commissioi. a ments in lieu of taxes (PIL,T). Discussion centered on p yand o t billed retail sales from water, electric with terminat on set for June 30, eam, which has been paid was that the 4/o of net 1992,w based on a return-on-equity agreement dated June 30, agreement for the Board of Water and Light and the City of Lansing 2002, has been an equitable g during its ten-year term. General Manager to review BWL issues as they relate to the City. The Committee asked theer to wed various benchmark comparisons and directed the General Manager The Committee reviewed summary of the merits of the 4% methodology. prepare a one-pageprudent to attempt to schedule a The Commi ttee reviewed schedules and agreed that it would be p agreed to contact the tin with the City before March 15, 200t attempt to schedule the initial meeting- Mayor g h Graves, Jr., Mayor's Chief of Staff, Joseph Respectfully submitted, David O'Leary, Chair payment In Lieu of Taxes Ad Hoc Committee on Pay that the report of the Ad d b seconded Commissioner Callen, eary, esotution 2001-2-2)be considered as read in full Moved by Commissioner O'L Hoc Committee on Payment in Lieu of Taxes (R and approved. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATIONS s on items presented are on file in the Office of the Corporate Secretary. Background maternal #2001-1-3 AMENDMENT TO PENSION PLANS RESOLVED, That Board Minutes February 27,2001 Page 26 The Second Amendment to the Lansing Board of Water and Light Defined Contribution Plan for Employees' Pensions, and the Fou rth Amendment to the Lansing Board of Water and Light Defined Benefit Plan for Employees' Pensions, and the Fi rst Amendment to the Post-Retirement Benefit Plan for Eligible Employees of the Lansing Board of Water and Light are hereby adopted as indicated therein. sioners and the Corporate URTHER, That the Chair of the Board of CommIs an RESO LVED F other documents necessary to Secretary are authorized to execute said amendments an y implement the foregoing resolution. The first two amen dments are necessary to implement the change to the non-bargaining 001. compensation plan(Resolution 2001 by the Commed yssionerrs before March 15, 2001. IRS These amendments need to be adopted by th require that any retroactive plan changes be adopted These amendments.5monthsafter require employee en regulations q plan year ended December 31, 20 of the plan year. The DC p Y employee disclosure. The amendm ent to the Post-Retirement Benefit Plan above is e describing le employees eligible describing or how the benefits are paid (Section 1) and correcting language the pla n Section 2). Since these are technical corrections, they don't require participant disclosure. missioner Duncan, seconded by Commissioner O'Leary, that the resolution be Moved by Com approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. Board Minutes February 27,2001 Page 27 RESOLUTIONS RESOLUTION HONORING SUSAN F. MCCORMICK WHEREAS, Susan "Sue" McCormick has worked tirelessly and tenaciously on behalf of al People dedicated to achieving safe, sufficient drinking water, increasing consumer confidence and lmproving satisfaction. Sue McCormick left her position as Manager of Business Development at the Lansing Board of Water and Light to accept the Position ire Utilities for the City of Ann Arbor effective January 29, 2001, and p of Director of WHEREAS, During her years of service to the people of the Greater Lansing area, Sue McCormick worked in the public arena during an era of great change and competition in the utility industry. She served as a project coordinator for a feasibility study evaluating the regionalization of water supply systems for 17 communities in the Greater Lansing area, which resulted in the formation of the Mid-Michigan Water Authority She was appointed as the Alternate Delegate to the (MMWA) in January of 1996, elected to serve as Secretaryof the g MMWA for the City of Lansing and was duty to her work, Sue in met/i dusin 1 96 and 1997, intelligence,biting a personal sense of enthusiasm, and creativity, and WHEREAS, Sue McCormick began her career at the BWL in Environmental Engineering as a Environmental Laboratory Technician (1979) and then as Environmental Chemist. Highlights o her accomplishments at the Board of Water and Light (BWL) are numerous. She served as f Manager in the Marketing process since 1997, responsible for managing the organizational process of new market opportunities, including system extension, acquisitions and new venture opportunities for expansion of products and services. She previously held the position of Manager of Water Technical Support Services (1994-97) with emphasis on water system planning and development, water quality and regulatory compliance, and she held the position of Manager of Water and Steam System Planning (1988-94) with responsibility for load and sales forecasting, system master plans, and resource studies, and WHEREAS, Among Sue McCormick's recent accomplishments was her election as Vice President of the National American Water Works Association's (AWWA) Board of Directors in January 2000. The AWWA is the world's largest scientific and professional association dedicated to drinking water. Ms. McCormick has served in key leadership roles for both the State Section and National levels of AWWA. She is the recipient of the AWWA, Michigan Section, Raymond J. Faust Award (1994) for outstanding personal service to the water ndust and the George Warren Fuller Award (2000) for outstanding service to AWWA, and ry WHEREAS, There can be little doubt that the record of Susan F. McCormick in her 22-y ear career with the Board of Water and Light will continue to reap rewards for the people of Michigan as well as the citizens of Lansing. We offer this expression of our appreciation for her accomplishments and continued technical excellence. Board Minutes rebruary 27,2001 page 28 tulate RESOLVED, That the members of this body hereby Shes for sucongrass n her new position as Susan F. McCormick for a job well done. We offer our best Director of Utilities for the City of Ann Arbor. Discussio n: The Commissioners commended Sue McCormick's excellence and professionalism during her employment with the Board of Water and Light. that the resolution be Moved by Commissioner Callen, seconded by Commissioner Christian, approved. Action: Carried unanimously. GENERAL MANAGER'5 REMARKS andy ions Begin on Return on Equity Agreement. General et o Manager P March 13 with ad Initial Discuss g that the Board's Ad Hoc Committee is appn Payment in Lieu of Taxes oint d by the Mayor to discuss the Return on Equity sheet special committee of City officials pp Pandyr. handed outone-page informational Agreement, due to expire June 30, 2002. 0 his issue for Commissioner input prior to the meeting on summarizing the Boards position o March 13tb Financ ial Performance Reviewed. General Manager Pandy presented an overview of the BWL's financial performance for fiscal year to date. Actual Actual FYI FYT Operating Ratio 93.6% 92.2% Return on Assets 2.4% 2.7% the sam Mr. Pandy noted that based on unit sales and expenses remaining Assets e 4.0%t and a remainder of this year or the fiscal year, the BWL could achieve a Return on tin Ratio of 93.6%. The forecast assumes $2.9 million additional credited to the BWL's operating increases implemented January 1, 2001. The decline in exp lower l costs. Dick conversion from Eastern to Western coal, which has resulted inrocess changes implemented en Director of Production, was present her efficiency and better ser briefed vice to our ard oncustomers. Production aimed at lug on Gas Aggregation Program. General Manager Pandyhanded an e o reported that the Update Aril 1999—December, of the BWL Gas Aggregation Program(April, BWL has not been successful in locating new gas supplies at a competitive price; consequently, program rom th e natural gas program will conclude 9.March 3 a u0mulat ve income of$91,444.04.e Savn gs to through December, 2001. Total net revenue f 0, was $203,818.11, with a c personal letter and through gas customers totaled $469,970.52. C�h of the BWL's demers are being a lion not vised by to offer the natural gas the CONNECTIONS NEWSLETTER in Ma program. Board Minutes February 27,2001 Page 29 Update on Share the Success Program. General Manager Pandy reported that th Share the Success Program (STS) corporate score for the 2000-2001 e BWd s fiscal make progress in January. Through the first seven months o year continued to accumulated 128 out of a possible 250 points. There is ample topportun opportunity to ddyear, emploo nts have before the June 30 year-end. A handout was provided summari us of the STSzing the status p before the major processes through January. program and Clerical-Technical Election Update. General Manager Pandy reported that the Michigan Workers (IBEW), Local 352, have decided International Brotherhood that the Clerical and Technical election ,E on March 29, 2001. Eighty-five employees are eligible to vote. 1 be held Update on Proposed Gas Pipeline Route. General Manager Pandy reported that W Pipe Line Company has proposed an alternate route for an underground gasolinePipeline Wolverine would run parallel along Interstate 96 through south Lansing and neighboring communities that Pipeline would run along the power line right-of-way between Interstate 96 and JollyRoad The come within 200 feet off the BWL's Wise Road Water Plant. Wolverine's proposed pipeline plan would eliminate the need to build a controversial section throw oad and BWL is joining City of Lansing officials in expressing concerns that the Meridian Township. water plant and a major retail complex. p The route is too close to the Small Business Association of Michigan Supports the Green Power Program. General Manager Pandy handed out a letter from the Small Business Association of Michigan in sup of a 10 MW Wind Power Project Purchase Agreement offered by Bay Windpowerg LLC, through support the Michigan Public Power Agency , through g y(MPPA). Assistant General Manager Cook reported that MPPA is considering a long-term 10 MW Wind Power Project Power Purchase A reem BWL is asking for a three-year proposal, independent of the MPPA project, and has issuent. The separate Request for Proposal for Green Power. A response is due on April 1. d a Possible Road Salt Substitute. General Manager Pandy reported that State Senator Va Regenmorter is introducing legislation to investigate the use of an alternative salt substituten use in de-icing Michigan roads. The legislation focuses on taking a long-range look at salt for substitute options because of the damage road salt causes to automobiles and bridges in the State of Michigan. The State of Michigan is experimenting with calcium magnesium acetate on the Zilwaukee Bridge due to its environmental sensitivity. Mr. Pandy reported that the BWL have an opportunity to produce a salt substitute known as calcium magnesium acetate. might described an experiment that was conducted by Water Production staff, which caused a simple acid base reaction of the sludge produced in the softening process with an acetic acid vinegar)to form calcium magnesium acetate. This product has been produced in a limited quantity and worked well in melting ice. The product can be used in liquid form or dried into a solid form Further analysis is being conducted to determine the product's feasibility as a salt substitute successful, this product would offer the BWL the prospect to dispose of sludge through , If marketing opportunities. Currently the softening process produces approximately 30 000-32 tons of sludge per year. The sale price per ton of calcium magnesium acetate is approximately $600 per ton. y [Commissioner Murray arrived at the meeting at 6:05 p.m.] Board Minutes February 27,2001 Page 30 ids Clean-Air Standard Method. General Manager a sets air on Supreme Court Upho held the way the fed government late breaking news that the Supreme Court up compliance costs against the arguments that officials must balance comp for implementing new standards, rejecting industry health benefits of cleaner air. The courte at on of a section of the Clean uled unlawful the EPA's Air Act was n of ozone; ozone rules, saying the agency s interpretation contributes to the production Pand noted that nitrous oxide (Nox) co tri Michigan, Ohio and Indiana unreasonable. Mr. Y consequently, there may be some effect on the Nox regulations, enin states on the side of industry in this camas More important nilinginformatlon were the three intervening will be provided to the Board once staff completes its review of t REMARKS BY COMMISSIONERS asked if there has been any other time in the past ten years where natural Commissioner Creamer ask erienced. He asked how as prices have escalated at the significant amount this increase imp currently being exp g acts electricity consumption prices General Manager Pandy re soar to the current level. sponded that he has never seen gas eneration and heating customers has The combination of demand from the electric industry for g as-fired capacity. rice. The electric industry has been awash with new g Permit and impacted the p as primarily due to lower cost and it is easy to e t of homes in Combustion turbines are burning g p al ocularly in a as compared to building a coal-fired or nuclear for gas More price up, p install pustomers consider America are heated by natural gas. n, f natural gas princes remain high,noted that the spiking of tough winter season. In the long run, um Mr. Pandy n other heating options such as electric heat or a heat pump. gas prices has prompte d the BWL to review opportunities in the Steam Utility. Staff will bring forward a recommen dation th on the price of steam for Board consideration within the next couple of months. ked about the status of General Motors' (GM) new Mid-Michigan Plant Commissioner Callen as in Delta Township. that staff is meeting with GM officials on March Ist to Cook added that staff met General Manrther ager Pandy reported Assistant General � act to the BV1I--, To date, the explore the nature and extent of the d�he delay and financial impanage Delta Township. with GM on February 27 to discuss BWL has invested approximately $3.5 million in GM'shid-Michigan Plant in e ed b the Capitol Loop reconstruction planned Y Comnssioner Callen inquired about the uPcomm and the City of Lansing in 2003 and 2004. Michigan Department of Transportation General Manager Pandy reported that the BWL would be participating in coordination meetings at which time more Info will be gathered on the scope tha tproject e C ty plan possibly continue their incorporating BWL upgrades in the reconstruction. He note ital Loop reconstruction. combined sewer overflow work at the same time of the Cap Board Minutes February 27,2001 Page 31 EXCUSED ABSENCES On motion by Commissioner Murray seconded by Commissioner Christi Commissioner Aquilina be excused. an, that the absence of Carried unanimously. PUBLIC COMMENTS T CHAIR ANNOUNCED THAT MEMBERS OF THE O THE BOARD ON ANY BOARD OF WATER AND LIGHT SPEAK WELCOME TO None. ADJOURNMENT On motion by Commissioner Murray, seconded by Commissioner Cream adjourned by unanimous consent at 6:25 p.m, er, the meeting Isl"aryE• Sova, Secretary Filed with Lansing City Clerk March 7, 2001 13:32 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 1/11 BOARD OF WATER AND LIGHT PO Box 13007, Lansing,MI 48901 YAAWATER&LIGHT Date: Thursday,Mar 7,2001 1 Number of pages including 11 cover sheet: To: City CIerk's Office From: Mary Sova Phone: Phone: Fag: 377-0068 Fax phone: (517)371-6203 CC: REMARKS: ❑ Urgent ❑ For your review ❑ Reply ASAP ❑ Please comment Attached is a faxed set of minutes of the regular Board of Water and Light Commissioners'meeting,held February 27,2001 for filing with your office. An original copy is being mailed to your office today. 13:32 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE 2/11 Page 22 MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, February 27, 2001 The Board of Commissioners met in regular session at 5:30 p.m., in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chairperson Diane Royal called the meeting to order. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Charles M. Creamer, Nancy W. Duncan, Mark A. Murray, David O'Leary, and Diane R. Royal. Absent: Commissioner Rosemarie E. Aquilma The Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner Christian, seconded by Commissioner O'Leary, to approve the minutes of regular session held January 23, 2001. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. COMMUNICATIONS Letters of thanks for the recent pension increases approved by the Board were received from the following Board of Water and Light retirees: Ruth A. Dexter, Emil K. Kletke, Doris M. McDonald, Norval J. Mitchell, Leo J. Parker, and Wanda L. Ray 13:33 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 3/11 Page 23 Board Minutes February 27.2001 Placed on file. REPORTS OF COMMITTEES #2001-1-1 FINANCE COMMITTEE REPORT The Finance Committee met on January 23,2001, to review the status on Growth and Expansion, Ottawa Station Redevelopment, and the Proposed Bond Issue. Committee members in attendance were Commissimers Mark A. Murray (Chair), Ernest J. Christian, David O'Leary, and Board Chair Diane Royal. Also present were Commissioners Ronald C. Callen, and Nancy W. Duncan. Absent was Committee Member Charles M. Creamer. Growth and Expansion Status. General Manager Pandy reviewed highlights of a memo dated January 23, 2001, from Assistant General Manager Bill Cook on the status of Utility Growth and Expansion. He also showed a series of graphs indicating the Board of Water and Light's (BWL) levels of capital expenditures, debt service, and related indicators over the past several years. General Manager Pandy said his goal was to come to the Board with an assessment of the actual financial performance of the various expansion projects by geographic area. He noted that the water system expansion and chilled water projects are like new start-up businesses. They are long-term investments that will benefit the BWL in the future. Assistant General Manager Bill Cook then reviewed the status of Utility Growth and Expansion in greater detail. Commissioner Murray expressed appreciation that the status report identified key issues, and expressed a hope that additional detail would be forthcoming to address the issues raised. Mr. Cook said that his approach has been to address systemic problems first so future projects will be consistently and rigorously evaluated. He expects new processes and procedures to be in place within another month. Within two months he expects to have specific economic parameters to discuss with the Finance Committee for their review and subsequent Board approval in their capacity as the BWL's regulatory body. Commissioner Murray expressed concern about the BWL issuing more bonds at this time and about BWL's ability to accurately estimate project costs in the future. Commissioner Murray asked that the Growth and Expansion topic be placed on the agenda for the February 27,2001,Finance Committee meeting with the expectation that staff will have well-defined solutions to the issues they have identified. Proposed Revenue Bond Issue. Chief Financial Officer Dana Tousley outlined for the Board the steps required for issuing bonds. He said that he expects the BWL will keep its AA rating on this proposed small bond issue, but BWL's rating in the future may be lowered because of the high level of fixed obligations. He reviewed a worksheet that forecasts the BWL's effective fixed obligation coverage taking into account the Belle River obligations and payment of return on equity to the City. Mr. Tousley noted that about$11 million of the proposed bond issue is for completion of the chilled water system. An estimated additional $4.2 million will be needed for various water projects. General Manager Pandy noted that the largest of the water projects is S1.5 million for two filters at the Dye Water Conditioning Plant. The filters are needed to handle the growth in water sales due to 13:34 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 4111 Page 24 3oard Minutes N ebmary 27,2001 system expansion. Mr. Tousley noted that a full evaluation of the capital expenditures to be included in the bond issue remains to be done. Commissioner Murray asked staff to check with the BVVL's financial advisors on the following: (1) the feasibility of using a one-year note and(2)on sizing the bond issue for current capital needs only, then issuing more bonds the following year when capital needs have been more thoroughly identified and evaluated. Mr. Pandy noted that the BWL has to move more toward the direction of a financial focus. Commissioner Murray observed that in recent years BWL management has actively used debt to expand and care will be needed with future issuances to ensure that BWL's bond rating is not put at risk. This means that substantially greater care is now required and that in the future, the BWL will have to bypass some deals or find others to finance them. He also cautioned against dipping into BWL's cash reserves during these good economic times. Mr. Pandy informed the Commissioners that Sue McCormick, the Marketing Manager responsible for much of the BWL's growth and expansion,has taken a position as Director of Utilities with the City of Ann Arbor. Mr. Pandy praised her many accomplishments and acknowledged that while her new position is a career opportunity,her decision to leave the BIVL was also due to her frustration with other company areas and with the way expansion was portrayed in the System Growth and Expansion Report. Ottawa Station Redevelopment. Staff Attorney Larry Williite briefed the Commissioners on real estate matters associated with the proposed redevelopment of the Ottawa Station Power Plant by Convergency Centers. The building has been appraised at$2.8 million. Also, a potential tenant has expressed interest in the remaining 55,000 square feet not needed by Convergency Centers. Mr. Wilhite said that area unions are actively opposed to the contractor selected by Convergency Centers and this will be a major issue to be addressed. Assistant General Manager Bill Cook handed out a preliminary economic evaluation of four conceptual alternatives for the Ottawa Station Power Plant and site. He intends in the future to provide all major project information to the Commissioners in a similar format with the alternatives, assumptions, sensitivities, and risk analyses all clearly described. Mr. Cook noted that the form also has a section for future follow-up so the BWL can improve future estimates and project management in general. Commissioner Murray concluded the meeting by asking staff to schedule the next Finance Committee meeting for 5:30 p.m. on Tuesday, February 27, 2001, with the following agenda items: (1)Proposed Bond Issue, (2) Ottawa Station Redevelopment, (3) Growth&Expansion Status Report, (4)Review of Utility Performance Indicators, and(5) Quarterly Internal Audit Report. He said that all information must be received in advance of meetings and directed staff not to review anything at the meeting that the Commissioners have not seen in advance. Respectfully submitted, Mark A.Murray, Chair Finance Committee Moved by Commissioner Duncan, seconded by Commissioner Creamer, that the Finance Committee Report(Resolution 2001-2-1) be considered as read in full and approved. 13:35 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE 5/11 Board Minutes Page 25 February 27,2001 Action: Carried unanimously. #2001-1-2 BOARD OF COMMISSIONERS' AD HOC COMMITTEE ON PAYMENTS IN LIEU OF TAXES The Board's Ad Hoc Committee met on February 13, 2001, to discuss issues relative to the payments in lieu taxes to the City of Lansing. Committee Members present were: Commissioners David O'Leary(Chair), Diane R. Royal, Mark A. Murray and General Manager Joseph Pandy, Jr. Discussion centered on payments in lieu of taxes (PILT). The consensus of the Commissioners was that the 4% of net billed retail sales from water, electric and steam, which has been paid based on a return-on-equity agreement dated June 30, 1992, with termination set for June 30, 2002, has been an equitable agreement for the Board of Water and Light and the City of Lansing during its ten-year term. The Committee asked the General Manager to review BWL issues as they relate to the City. The Committee reviewed various benchmark comparisons and directed the General Manager to prepare a one-page executive summary of the merits of the 4%methodology. The Committee reviewed schedules and agreed that it would be prudent to attempt to schedule a meeting with the City before March 15, 2001. Committee Chair O'Leary agreed to contact the Mayor's Chief of Staff, Joseph Graves, Jr., to attempt to schedule the ilutial meeting. Respectfully submitted, David O'Leary, Chair Ad Hoc Committee on Payment In Lieu of Taxes Moved by Commissioner O'Leary, seconded by Commissioner Callen, that the report of the Ad Hoc Committee on Payment in Lieu of Taxes(Resolution 2001-2-2) be considered as read m full and approved. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. #2001-1-3 AMENDMENT TO PENSION PLANS RESOLVED, That 13:35 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 6/11 Fage 26 3oard Minutes February 27,2001 • The Second Amendment to the Lansing Board of Water and Light Defined Contribution Plan for Employees' Pensions, and the • Fourth Amendment to the Lansing Board of Water and Light Defused Benefit Plan for Employees' Pensions, and the • First Amendment to the Post-Retirement Benefit Plan for Eligible Employees of the Lansing Board of Water and Light are hereby adopted as indicated therein. RESOLVED FURTHER, That the Chair of the Board of Commissioners and the Corporate Secretary are authorized to execute said amendments and any other documents necessary to implement the foregoing resolution. -------------------- The first two amendments are necessary to implement the change to the non-bargaining compensation plan (Resolution 2001-1-4) adopted by the Commissioners January 23, 2001. These amendments need to be adopted by the Commissioners before March 15, 2001. IRS regulations require that any retroactive plan changes be adopted within 2.5 months after the end of the plan year. The DC plan year ended December 31, 2000. These amendments require employee disclosure. The amendment to the Post-Retirement Benefit Plan above is correcting language describing how the benefits are paid (Section 1) and correcting language describing employees eligible for the plan(Section 2). Since these are technical corrections, they don't require participant disclosure. Moved by Commissioner Duncan, seconded by Commissioner O'Leary, that the resolution be approved. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. 13:36 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 7/11 Board Minutes Page 27 February 27,2001 RESOLUTIONS RESOLUTION HONORING SUSAN F. MCCORMICK WHEREAS, Susan"Sue" McCormick has worked tirelessly and tenaciously on behalf of all people dedicated to achieving safe, sufficient drinking water, increasing consumer confidence and improving satisfaction. Sue McCormick left her position as Manager of Business Development at the Lansing Board of Water and Light to accept the position of Director of Utilities for the City of Ann Arbor effective January 29, 2001, and WHEREAS,During her years of service to the people of the Greater Lansing area, Sue McCormick worked in the public arena during an era of great change and competition in the utility industry. She served as a project coordinator for a feasibility study evaluating the regionalization of water supply systems for 17 communities in the Greater Lansing area, which resulted in the formation of the Mid-Michigan Water Authority (MMWA) in January of 1996. She was appointed as the Alternate Delegate to the MMWA for the City of Lansing and was elected to serve as Secretary of the MMWA in 1996 and 1997. Exhibiting a personal sense of duty to her work, Sue McCormick met industry challenges with intelligence, creativity, and enthusiasm, and WHEREAS, Sue McCormick began her career at the BWL in Envirolunental Engineering as an Environmental Laboratory Technician (1979) and then as Environmental Chemist. Highlights of her accomplishments at the Board of Water and Light(BWL) are numerous. She served as Manager in the Marketing process since 1997, responsible for managing the organizational process of new market opportunities, including system extension, acquisitions and new venture opportunities for expansion of products and services. She previously held the position of Manager of Water Technical Support Services (1994-97) with emphasis on water system planning and development, water quality and regulatory compliance, and she held the position of Manager of Water and Steam System Planning (1988-94) with responsibility for load and sales forecasting, system master plans, and resource studies, and WHEREAS,Among Sue McCormick's recent accomplislunents was her election as Vice President of the National American Water Works Association's (AWWA) Board of Directors in January 2000. The AWWA is the world's largest scientific and professional association dedicated to drinking water. Ms. McCormick has served in key leadership roles for both the State Section and National levels of AWWA. She is the recipient of the AWWA, Michigan Section, Raymond J. Faust Award (1994) for outstanding personal service to the water industry and the George Warren Fuller Award (2000) for outstanding service to AWWA, and WHEREAS,There can be little doubt that the record of Susan F. McCormick in her 22-year career with the Board of Water and Light will continue to reap rewards for the people of Michigan as well as the citizens of Lansing. We offer this expression of our appreciation for her accomplishments and continued technical excellence. 13:37 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 8i11 3oard Minutes Page 28 r coruary 27.2001 RESOLVED, That the members of this body hereby honor and congratulate Susan F. McCormick for a job well done. We offer our best wishes for success in her new position as Director of Utilities for the City of Ann Arbor. Discussion: The Commissioners commended Sue McCormick's excellence and professionalism during her employment with the Board of Water and Light. Moved by Commissioner Callen, seconded by Commissioner Christian, that the resolution be approved. Action: Carried unanimously. GENERAL MANAGER'S REMARKS Initial Discussions Begin on Return on Equity Agreement. General Manager Pandy reported that the Board's Ad Hoc Committee on Payment in Lieu of Taxes will meet on March 13 with a special committee of City officials appointed by the Mayor to discuss the Return on Equity Agreement, due to expire June 30, 2002. Mr. Pandy handed out a one-page informational sheet summarizing the Board's position on this issue for Commissioner input prior to the meeting on March 13a`. Financial Performance Reviewed. General Manager Pandy presented an overview of the BWL's financial performance for fiscal year to date. Actual Actual FYTD 1/1/00 FYTD 1/1/01 Operating Ratio 93.6% 92.2% Return on Assets 2.4% 2.7% Mr. Pandy noted that based on unit sales and expenses remaining the same as last year for the remainder of this fiscal year, the BWL could achieve a Return on Assets of 4.0% and an Operating Ratio of 93.6%. The forecast assumes $2.9 million of additional revenue due to rate increases implemented January 1, 2001. The decline in expenses is also credited to the BWL's conversion from Eastern to Western coal, which has resulted in lower fuel costs. Dick Peffley Director of Production, was present and briefed the Board on process changes implemented in Production aimed at higher efficiency and better service to our customers. Update on Gas Aggregation Program. General Manager Pandy handed out a 21-month recap of the BWL Gas Aggregation Program (April, 1999— December, 2000). He reported that the BWL has not been successful in locating new gas supplies at a competitive price; consequently, the natural gas program will conclude on March 31, 2001. Total net revenue from the program through December, 2000, was $203,818.11, with a cumulative income of$81,444.04. Savings to gas customers totaled $468,970.52. Customers are being advised by personal letter and through the CONNECTIONS NEWSLETTER in March of the BWL's decision not to offer the natural gas program. 13:38 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 9/11 Board Minutes Page 29 February 27.2001 Update on Share the Success Program. General Manager Pandy reported that the BWL's Share the Success Program (STS) corporate score for the 2000-2001 fiscal year continued to make progress in January. Through the first seven months of the fiscal year, employees have accumulated 128 out of a possible 250 points. There is ample opportunity to add points before the June 30 year-end. A handout was provided summarizing the status of the STS program and the major processes through January. Clerical-Technical Election Update. General Manager Pandy reported that the Michigan Employment Relations Commissioner(MERC) and the International Brotherhood of Electrical Workers(IBEW), Local 352, have decided that the Clerical and Teclnical election will be held on March 29, 2001. Eighty-five employees are eligible to vote. Update on Proposed Gas Pipeline Route, General Manager Pandy reported that Wolverine Pipe Line Company has proposed an alternate route for an underground gasoline pipeline that would run parallel along Interstate 96 through south Lansing and neighboring communities. The pipeline would run along the power line right-of-way between Interstate 96 and Jolly Road and come within 200 feet off the BWL's Wise Road Water Plant. Wolverine's proposed pipeline plan would eliminate the need to build a controversial section through Meridian Township. The BWL is joining City of Lansing officials in expressing concerns that the route is too close to the water plant and a major retail complex. Small Business Association of Michigan Supports the Green Power Program General Manager Pandy handed out a letter from the Small Business Association of Michigan in support of a 10 MW Wind Power Project Purchase Agreement offered by Bay Windpower, LLC, through the Michigan Public Power Agency(MPPA). Assistant General Manager Cook reported that MPPA is considering a long-term 10 MW Wind Power Project Power Purchase Agreement. The BWL is asking for a three-year proposal, independent of the MPPA project, and has issued a separate Request for Proposal for Green Power. A response is due on April 1. Possible Road Salt Substitute. General Manager Pandy reported that State Senator Van Regenmorter is introducing legislation to investigate the use of an alternative salt substitute for use in de-icing Michigan roads. The legislation focuses on taking a long-range look at salt substitute options because of the damage road salt causes to automobiles and bridges in the State of Michigan. The State of Michigan is experimenting with calcium magnesium acetate on the Zilwaukee Bridge due to its environmental sensitivity. Mr. Pandy reported that the BWL might have an opportunity to produce a salt substitute known as calcium magnesium acetate. He described an experiment that was conducted by Water Production staff, which caused a simple acid base reaction of the sludge produced in the softening process with an acetic acid (vinegar) to form calcium magnesium acetate. This product has been produced in a limited quantity and worked well in melting ice. The product can be used in liquid form or dried into a solid form. Further analysis is being conducted to determine the product's feasibility as a salt substitute. If successful, this product would offer the BWL the prospect to dispose of sludge through marketing opportunities. Currently the softening process produces approximately 30,000-32,000 tons of sludge per year. The sale price per ton of calcium magnesium acetate is approximately $600 per ton. [Commissioner Murray arrived at the meeting at 6:05 p.m.] 13:39 MAR 07, 2001 ID: BOARD OF WATER & LIG TEL NO: (517) 371-6203 #90695 PAGE: 10/11 Page 30 3card Minutes P ebruary 27.2001 Supreme Court Upholds Clean-Air Standard Method. General Manager Pandy reported on late breaking news that the Supreme Court upheld the way the federal government sets clean-air standards, rejecting industry arguments that officials must balance compliance costs against the health benefits of cleaner air. The court ruled unlawful the EPA's policy for implementing new ozone rules, saying the agency's interpretation of a section of the Clean Air Act was unreasonable. Mr. Pandy noted that nitrous oxide (No,) contributes to the production of ozone; consequently, there may be some effect on the No,regulations. Michigan, Ohio and Indiana were the three intervening states on the side of industry in this case. More particular information will be provided to the Board once staff completes its review of this important ruling. REMARKS BY COMMISSIONERS Commissioner Creamer asked if there has been airy other time in the past ten years where natural ignificant amount currently being experienced. He asked how gas prices have escalated at the s this increase impacts electricity consumption. General Manager Pandy responded that he has never seen gas prices soar to the current level. The combination of demand from the electric uidustry for generation and heating customers has impacted the price. The electric industry has been awash with new gas-fired capacity. Combustion turbines are burning gas primarily due to lower cost and it is easy to permit and install as compared to building a coal-fired or nuclear plant. More than fifty percent of homes in America are heated by natural gas. The high demand for gas drives the price up, particularly in a tough winter season. In the long run, if natural gas prices remain high, customers may consider other heating options such as electric heat or a heat pump. Mr. Pandy noted that the spiking of gas prices has prompted the BWL to review opportunities in the Steam Utility. Staff will bring forward a recommendation on the price of steam for Board consideration within the next couple of months. Commissioner Callen asked about the status of General Motors' (GM) new Mid-Michigan Plant in Delta Township. General Manager Pandy reported that staff is meeting with GM officials on March lst to further explore the nature and extent of the delay. Assistant General Manager Cook added that staff met with GM on February 27th to discuss the delay and financial impact to the BWL. To date, the BWL has invested approximately $3.5 million in GM's Mid-Michigan Plant in Delta Township. Commissioner Callen inquired about the upcoming Capitol Loop reconstruction planned by the Michigan Department of Transportation and the City of Lansing in 2003 and 2004. General Manager Pandy reported that the BWL would be participating in coordination meetings at which time more information will be gathered on the scope of the project and possibly incorporating BWL upgrades in the reconstruction. He noted that the City plans to continue their combined sewer overflow work at the same time of the Capital Loop reconstruction. 13�39 MAR 07, 2001 ID- BOARD OF WATER & LIG TEL N0: (517) 371-6203 #90695 PAGE 11i11 page3l Board Minutes FebruarY 27.2001 EXCUSED ABSENCES On motion by Com missioner Murray seconded by Commissioner Christian, that the absence of Commissioner Aquiline be excused. Carried unanimously. PUBLIC COMMENTS IC ARE THE CHAIR p OUNCED THAT MEMBERS OF THE AND LIGHT JECT.WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER None. ADJOURNMENT On motion by Commissioner Murray, seconded by Commissioner Creaner, the meeting adjourned by unanimous consent at 6:25 P.M. Is/1Llary E. Sova, Secretary Filed with Lansing City Clerk March 7, 2001 P. 1 MINUTES OF THE BOARD OF COMMISSIONERS' MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, January 23, 2001 The Board of Commissioners met in regular session at 5:30 p.m., in the Boardroom of the . Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Chair Diane Royal called-the meeting to order. Present: Commissioners Ronald C. Callen, Ernest J. Christian, Nancy W. Duncan, Mark A. Murray, David O'Leary, and Diane R. Royal, Absent: Commissioners Rosemarie E. Aquilina and Charles M. Creamer. The Acting Secretary declared a quorum present. All said the Pledge of Allegiance. APPROVAL OF MINUTES Motion made by Commissioner O'Leary, seconded by Commissioner Christian, to approve the minutes of rescheduled regular session held December 19, 2000. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. No persons spoke. COMMUNICATIONS There were no communications or petitions. Page 2 Board Minutes January 23,2001 REPORTS OF COMMITTEES #2001-1-1 PERSONNEL COMMITTEE REPORT The Personnel Coinmittee met on January 23, 2001, to review a proposed increase to the Defined Benefit pensions for retirees and a proposed change to the non-bargaining unit compensation plan. Committee members present were Commissioners Callen, Duncan, and Royal. Absent was Commissioner Aquilina. Pension and Medicare Reimbursement Adjustments: Chief Financial Officer Dana Tousley gave a presentation on the adjustment to the pensions of Defined Benefit retirees and the monthly Medicare reimbursement. He reported that the BWL Pension Fund is over-funded. However, the following factors contributed to reducing the over-finding: (1) the early retirement incentive in 1994, when 100 people left the BWL; (2) seventy-eight percent (78%) of BWL employees signed up for the defined contribution plan; 3) the VEBA trust fund for funding health insurance for pensioners; and 4) increases to pensioners. Mr. Tousley presented several alternatives that would increase pensioners' monthly checks ranging from an average of 7.39% to 9.48%. The difference in pension increase between alternative A and alternative B was $25.00 per month. Following discussion, the Personnel Committee approved the following resolutions for Board consideration: #2001-1-2 Increase in Pension of Defined Benefit Retirees RESOLVED, That effective January 1, 2001, the monthly pensions of Defined Benefit retirees be increased by one percent (1%) for each year retired prior to January 1, 2000, with a maximum increase of$I50.00 per month. #2001-1-3 Increase in Medicare Reimbursement RESOLVED, That effective January 1, 2001, the monthly Medicare reimbursement is hereby established as 90% of the Medicare premium that Defined Benefit and Defined Contribution retirees eligible for Medicare are required to pay. Changes to Salary Plan for Non-Bargaining Employees. Human Resource Director Linda Gardner reviewed the background of the new salary plan for non-bargaining employees approved by the Board last year. She presented issues voiced by non-bargaining employees with regard to not seeing their earnings more fully reflected in their pensions. Also, non-bargaining employees are concerned that variable pay awards would not be made to those being paid above the maximum of their pay range, if the one-year exemption was to expire. Ms. Gardner presented management's recommendation for the approval of two adjustments to the pay for non-bargaining employees. The first adjustment would mitigate the adverse impact Board Minutes Page 3 January 23,2001 that the salary plan has on pension earnings by including individual variable pay performance increases in the pension calculation. For participants of the Defined Benefit pension plan, this would mean that individual variable pay awards would be included in the calculation of the employee's salary, which is used to calculate the pension benefit. For participants of the Defined Contribution plan, this would mean that individual variable pay awards would be included in the calculation of the employer's annual contribution to the employee's retirement account. The second adjustment would extend the current one-year exemption for an additional four years, which would permit employees to earn individual variable pay awards above the maximum of their pay range. She noted that over the five total years covered by the proposed four-year exemption, management anticipates that pay ranges will move forward in a manner that will capture nearly all of the employees currently above the maximum of their pay range. (see Attachment 11 of Proposed Variable Pay/Pension Contribution included with the Pe77So7777el Committee meeting packet, dated lanumy 18, 2007) Three options and costs associated with each were reviewed and discussed. Option A would include individual variable pay in the pension calculation for employees earning pay above their base pay cap and would extend for four years the exemption allowing employees to earn variable pay above their pay range maximum. Option B would include individual variable pay in the pension calculation for employees earning pay above their base pay cap. Option C retains the current plan. The Personnel Committee recommends Option A with the following resolution for Board consideration: #2001-1-4 Non-Bargaining Pay Plan Changes RESOLVED, That for non-bargaining employees employed before July 1, 2000, the one-year exemption that allows Individual Variable Pay to be paid to all employees above the Base Pay Cap and the Range Maximum be extended for an additional four years. (From July 1, 2001 through and including July 1, 2004.) RESOLVED FURTHER, That for non-bargaining employees' Individual Variable Pay be counted towards pension calculations and/or funding for the pension plan retroactive to July 1, 2000 as follows: 1. Defined Contribution Plan—That any Individual Variable Pay will count towards a pension contribution. 2. Defined Benefit Plan—That any Individual Variable Pay will count towards a pension calculation. Page 4 Board Minutes January 23,2001 Respectfully submitted, Ronald C. Callen, Chair Personnel Committee Discussion: General Manager Pandy reported that pension matters are negotiated every three years. He noted that the increase is designed to adjust defined benefit pensions by amounts that are somewhat below the rate of inflation. Mr. Pandy added that staff had recommended alternative B to the Persomiel Conu-nittee. Alternative B was an increase of one percent (1%) for each year retired prior to January 1, 2000, up to a maximum of$125.00 per month. However, the Personnel Committee preferred alternative A, an increase of one percent (1%) for each year retired prior to January 1, 2000, up to a maximum of$150.00 per month. This higher amount would have minimal impact on the over-funded defined benefit pension plan, but would make a big difference to those retired a longer period of time. Commissioner Murray stated his preference that such matters be defined in policies that clearly describe their overall purposes. Commissioner Callen described the proposed increase in the monthly Medicare premium reimbursement. The Committee recommended setting this reimbursement at ninety percent (90%) of the Medicare premium rather than at a fixed dollar amount as has been done in the past. General Manager Pandy stated that he would be meeting with the retirees' group in the near future. They have been very appreciative, in the past, for what the Board of Water and Light is doing for them. Moved by Commissioner Callen, seconded by Commissioner Christian, that the Personnel Committee Report (Resolution 2001-1-1) be considered as read in fiull and approved. Action: Carried unanimously. Moved by Commissioner Christian, seconded by Commissioner Duncan, that Resolutions 2001-1-2 and 2001-1-3 be approved. Action: Carried unanimously. Moved by Commissioner Callen, seconded by Commissioner Christian, that Resolution 2001-1-4 be approved. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATIONS Background materials on items presented are on file in the Office of the Corporate Secretary. #2001-1-5 USE OF SPECIAL COUNSEL RESOLVED, That the General Manager be authorized to retain the following law firms as special counsel on an as-needed basis for a period of two years from February 17, 2001 to Board Minutes Page 5 January 23,2001 February 17, 2003. These firms will provide advice and services as needed in the areas of public finance, municipal law, general litigation, real estate, energy, enviromnental and employment law. These firms will be submitted to the City Attorney and, upon his recommendation, to the City Council for approval. Use of Special Counsel is subject to the recommendation of the Utility Staff Attorney and the approval of the General Manager. Canady Law Offices Clark Hill, PLC Dickinson, Wright Howard &Howard Melvin McWilliams, P.C. Willingham & Cote', P.C. Knaggs, Harter, Brake & Schneider, P.C. Moved by Corrunissioner Christian, seconded by Commissioner Duncan, that the resolution be approved. Discussion: Commissioner Callen disclosed his intention to recuse himself from discussion or vote on Resolution 2001-1-5, Use of Special Counsel, as he is currently involved with one of the firms. Action: Adopted by the following vote: Yeas: Commissioners Christian, Duncan, Murray, O'Leary, Royal Nays: None Abstentions: Commissioner Callen Absent: Commissioners Aquilina and Creamer #2001-1-6 REVISION OF THE BOARD'S RULES OF ADMINISTRATIVE PROCEDURES RESOLVED, That the Board's Rules of Administrative Procedures, as amended, and appended to these minutes, be approved and forwarded to the City for consideration. RESOLVED FURTHER, That the Board of Commissioners' proposed schedule of meetings for 2001 be established and published. Moved by Commissioner Murray, seconded by Commissioner Christian, that the resolution be approved. Discussion: General Manager Pandy advised the Commissioners that the proposed rules provide for quarterly Board Meetings in the future with committee meetings held in the intervening months. He added that the revised schedule of meetings will be published as required. Commissioner Duncan noted that Human Resources Committee meeting agendas should provide for evaluating the three Board appointed positions rp for to their annual appointment date. Several Commissioners expressed concern over the large volume of information they received both prior to and during the four meetings held on January 23, 2001. Page 6 Board Minutes January 23,2001 General Manager Pandy assured the Commissioners that materials for future meetings will be provided in advance and that general informational materials will be provided monthly. After adoption of the Rules of Administrative Procedure by Board Commissioners, the Rules must be sent to the City Attorney for review. Then they will be forwarded to the Lansing City Council for approval. Moved by Commissioner O'Leary seconded by Cominissioner Christian, that in addition to approving the Rules, as amended, to accept additional changes as follows: 1. Add"on the following items" to the end of the opening sentence in Section 4.1. 2. Revise Section 10.1.1(3) as follows: "Public Comments on agenda items shall be limited to three (3) minutes unless waived at the discretion of the Chair." 3. Revise Section 10.1.l(13) as follows: "Public Comments on BWL-related matters shall be limited to three (3) minutes unless waived at the discretion of the Chair." 4. Insert "by the Mayor" after the word "removal" in the last sentence of Section 12.1. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS None GENERAL MANAGER'S REMARKS Employee Efforts Commended. General Manager Pandy congratulated Board of Water and Light employees on the good job they have been doing during the difficult weather conditions Lansing has been experiencing. BWL employees assisted General Motors in unloading train cars of coal which were not delivered to their original destination. The BWL has experienced 30% more water main breaks this winter than in the past. The Commissioners expressed their appreciation to BWL employees for their effort with the workload. Board Minutes Page 7 January 23,2001 Deregulation. Discussion was held on the California Deregulation issue. Mr. Pandy reported that at this time, the BWL is well positioned. Western coal is currently being burled in all six of the units at Eckert Station. The power supply problem in California will affect the national economy and is tarnishing the image of electric utilities and deregulation. Budget Update. General Manager Pandy reported that revenue is down 4.5% and expenses are down 6.8% in the budget, through December. Items impacting these numbers are the use of Western coal, reduction in overtime, and reduction in fael cost. BWL Activities for Year 2000 Highlighted. General Manager Pandy handed out a report entitled HIGHLIGHTS OF CITY OF LANSING, DEPARTMENT ACHIEVEMENTS-2000. Board of Water and Light activities are noted on page one of this report. REMARKS BY COMMISSIONERS None. EXCUSED ABSENCES On motion by Commissioner Christian seconded by Commissioner Callen, that the absences of Commissioners Aquilina and Creamer be excused. Carried unanimously. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY BOARD OF WATER AND LIGHT SUBJECT. Joseph Davis, President of IBEW, Local 352, commented on the petition for the union election that has not taken place for BWL clerical/technical employees. He mentioned that the union obtained information through the Freedom of Information Act relative to fees paid to Gabriel Hall and Associates—the consultant hired to represent the BWL on union matters. Mr. Davis stated that"BWL employees come to the cause when there is work to be done." Whether or not employees belong to a union has no bearing on the quality of work they perform. He stated his disappointment to learn the Pledge of Allegiance is being omitted from the Board Agenda as the result of changes made to the Board's Rules of Administrative Procedure. ADJOURNMENT There being no objection, the meeting adjourned by unanimous consent at 6:52 p.m. /s/Rosennaiy Sullivan, Acting Secretary Filed with Lansing City Clerk January 31,2001 Page 8 Board Minutes ,January 23,2001 BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN RULES OF ADMINISTRATIVE PROCEDURE AS AMENDED 1/23/01 SUBJECT TO CITY COUNCIL APPROVAL I. MEETINGS 1.1 Regular Meetings 1.1.1 The Board of Water and Light (BWL) Commissioners shall hold regular menthly QUARTERLY meetings on the fourth Tuesday OF EACH QUARTER in the Board Room, 1232 Haco Drive or at such other place, as the Board shall determine, unless a regular meeting is rescheduled as provided herein. 1.1.2 A schedule of dates, places and times for the ansuing aix-(6) EACH REGULAR QUARTERLY MEETING TO BE HELD IN THE CALENDAR YEAR SHALL BE ADOPTED BY THE BOARD DURING OCTOBER OF net later than its-regular ineetinggs during Rine and Deeember fef each year. 1.2 Special Meetings 1.2.1 Special meetings of the Board may be called by the General Manager or CORPORATE Secretary on the request of the Chair of the Board or on the request of any two members. 1.2.2 Board members shall have at least 18 hours written notice of a special meeting designating the time and purpose of such meeting. The notice shall be delivered personally to each member of the Board or left at his or her usual place of residence or business by the CORPORATE Secretary or someone designated by the CORPORATE Secretary. 1.3 Rescheduled Meetings 1.3.1 The Chair may reschedule any regular or special meeting. 1.3.2 Notice of any rescheduled meeting shall be given as required pursuant to Section 1.2.2, and Section 2.2. 1.4 ConflictingTimes tines ALL REGULAR Board meetings shall be scheduled to avoid conflicting with REGULAR meetings of the Lansing City Council. Board Minutes Page 9 January 23,2001 1.5 Committee of the Whole Meetin&s 1.5.1 The Board may convene as a Committee of the Whole upon call by the Chair or any two Board members. 1.5.2 Notice shall be provided in accordance with the provisions for special meetings. 1.5.3 The Committee OF THE WHOLE shall report its recommendations, if any, for consideration by the Board at a regular or special meeting. 1.6 Closed Meetings Meetings that are closed to the public may be ht4d CLOSED TO THE _ PUBLIC only for those purposes permitted tinder the Michigan Open Meetings Act, as amended. II. NOTICE OF MEETINGS 2.1 Publication of Dates A notice listing the dates of the regular meetings shall be published se—, ANNUALLY in a newspaper of general circulation in Ingham County at least three days prior to the time of the regularly scheduled meetings in July and January. At the regularly scheduled meetings in June and Devoe; OCTOBER each year, the Board shall name the newspaper in which the notice shall be published. 2.2 Posting Notice Notice of ALL MEETINGS OF THE BOARD fegular, feseheduled, reeessed meetings, as well as my special , shall be posted in accordance with state law. 2.3 Designated Person The Corporate Secretary shall be responsible for posting notices. III. QUORUM FOR A REGULAR OR SPECIAL MEETING 3.1 Number Required The presence of five members of the Board, in person or by telephonic attendance, shall be a quorum for the transaction of business at all REGULAR AND SPECIAL MEETINGS; provided one amber A MAJORITY of the ATTENDING BOARD MEMBERS are is present at the location designated in the public notice. Page 10 Board Minutes January 23,2001 3.2 Lack of Quorum In the absence of a quorum, those present may adjourn any meeting or hearing to a later date or hold the meeting for the purpose of considering such matters as are on the agenda. No action taken in the absence of a quorum shall be valid or effective unless and until ratified and confirmed at a subsequent regular or special meeting at which a quorum is present and at which five affirmative votes are given for ratification. IV. OFFICIAL ACTION AT REGULAR OR SPECIAL MEETINGS 4.1 The concurring vote of five (5) members shall be necessary for official action AND SUCH VOTE MAY ONLY TAKE PLACE AT fat-REGULAR OR SPECIAL MEETINGS OF THE BOARD ON THE FOLLOWING ITEMS: 4.1.1 Adopting the annual fiscal year budget and any amendments thereto. 4.1.2 Adopting rates for furnishing electric, water, and steam service. 4.1.3 Appointment or removal of the Director, Internal Auditor, and Secretary. 4.1.4 Purchase and sale of real property. 4.1.5 Sale or exchange of facilities as set forth in 5-207 of Lansing's City Charter. 4.1.6 Providing compensation, benefits, conditions of employment, and retirement plans. 4.2 Except as may be required by law or by section 10.3, all other matters considered by the Board shall require the affirmative vote of a simple majority of members present AT A REGULAR OR SPECIAL MEETING. V. VOTING 5.1 Roll Call Vote A roll call vote shall be required upon request of any Board member, for holding a closed meeting, or as determined by the Chair of the Board. 5.2 Unanimous Consent If there is no objection to the proposed action, the action may be taken by unanimous consent, except actions required by roll call vote pursuant to these rules, the Charter of the City of Lansing, or the law of the State of Michigan. Board Minutes Page 11 January 23,2001 VI. ANNUAL ORGANIZATION The Board shall organize at its first regular meeting in FOLLOWING July I"or as soon thereafter as is reasonably convenient, by selecting one of its members as Chair, one of its members as Vice Chair and one of its members as Chair Pro Tem, each of whom shall serve until the first regular meeting in the following July or a successor has been selected. VII. DUTIES OF OFFICERS 7.1 Chair The Chair shall preside at all REGULAR OR SPECIAL meetings of the Board, see that all orders and regulations are executed and complied with, see that all legal contracts with the BWL for or in the name of the City are performed, and shall perform such other duties as may be from time to time lawfully required of the Chair. The Chair shall also be a member of all committees of the Board. It shall not be necessary for the Chair to relinquish the chair for the purpose of participating in debate or for the making of routine motions and resolutions. 7.2 Vice Chair In the absence of the Chair, the Vice Chair shall perform all the duties and have all the powers of the Chair. 7.3 Chair Pro Tern The Chair Pro Tern shall perform all the duties and have all the powers of the Chair in the absence of the Chair and Vice Chair; the Chair Pro Tem shall also preside over meetings of the Committee of the Whole. VIII. CHARTER POSITIONS 8.1 Director The Board shall at its first regular meeting in FOLLOWING July 1st of each year, or as soon thereafter as may be, appoint a Director who shall also be known as the General Manager. The Director shall be the executive officer of the Board of Water and Light and be directly responsible to the Board. The Director shall serve for the fiscal year or until a successor is appointed,whichever last occurs. 8.2 Secretary The Board shall at its first regular meeting tin FOLLOWING July I" of each year, or as soon thereafter as may be, appoint a Secretary who shall also be known as the Corporate Secretary. The Secretary shall be responsible to the Board and shall serve for the fiscal year or until a successor is appointed, whichever last occurs. Page 12 Board Minutes January 23,2001 8.3 Internal Auditor The Board shall at its first regular meeting i-rn FOLLOWING July I" of each year, or as soon thereafter as may be, appoint an Internal Auditor who shall also be known as the Director of Metrics and Audits. The Internal Auditor shall report directly to the Board and shall serve for the fiscal year or until a successor is appointed, whichever last occurs. IX. STANDING COMMITTEES 9.1 COMMITTEES 9.1.1 IN ORDER TO CARRY OUT ITS POLICYMAKING OBLIGATIONS, THE BOARD OF WATER AND LIGHT COMMISSIONERS SHALL MEET AS OFTEN AS NEEDED, AS ONE OR MORE STANDING COMMITTEES, IN THE BOARD ROOM, 1232 HACO DRIVE OR AT SUCH OTHER PLACE, AS THE BOARD SHALL DETERMINE. NOTICE OF THESE MEETINGS SHALL BE PROVIDED IN ACCORDANCE WITH THE LANSING CITY CHARTER AND STATE LAW. 9.2 COMMITTEES AND DUTIES 9.2.1 The following standing committees shall be appointed: Finance Nominating Persm=mcIHUMAN RESOURCES Executive 9.2.2 The Finance Committee shall have oversight responsibility for financial planning PERFORMANCE MEASURES AND AUDITS, CAPITAL EXPENDITURES AND RETURNS, BOND INDEBTEDNESS AND CREDIT RATING, ANNUAL O&M BUDGET, AND RATE REVIEW accounting and auditing. 9.2.3 The Nominating Committee shall AT ITS FIRST REGULAR MEETING FOLLOWING JULY 1ST OF EACH YEAR, nominate a slate of officers at the ITS annual organizational meeting in �ul and shall endeavor to rotate officers of the Board annually. The Nominating Committee may suggest candidates to serve on the Board. The Board shall review suggestions made by the Nominating Committee and may make recommendations to the Mayor. Board Minutes Page 13 January 23,2001 9.2.4 The Persatuiel HUMAN RESOURCES Committee shall have oversight responsibility for NON-BARGAINING SALARY ADJUSTMENTS, EMPLOYEE SURVEY RESULTS, LABOR RELATIONS, PERFORMANCE APPRAISAL REVIEW FOR BOARD-APPOINTED POSITIONS, BOARD STAFF APPOINTMENTS, salary, wages, employee benefits, and the investment policies of the retirement plans. 9.2.5 THE EXECUTIVE COMMITTEE SHALL POSSESS THE AUTHORITY OF THE BOARD TO DIRECT THE MANAGEMENT OF THE AFFAIRS AND BUSINESS OF THE BWL. DURING THE INTERVALS BETWEEN THE BOARD OF COMMISSIONERS' MEETINGS, THE EXECUTIVE COMMITTEE SHALL ASSIST IN THE DEVELOPMENT OF THE BWL'S POSITION ON MAJOR ISSUES AND SUBMIT AND RECOMMEND THIS POSITION TO THE BOARD FOR CONSIDERATION AND ACTION. THE EXECUTIVE COMMITTEE SHALL CONSIDER ALL MATTERS NOT SPECIFICALLY ASSIGNED TO OTHER STANDING COMMITTEES. THE EXECUTIVE COMMITTEE SHALL CONSIDER AND ACT UPON SUCH OTHER ACTIVITIES AS DIRECTED OR REFERRED TO IT BY THE BOARD. 9.3 Appointment OF STANDING COMMITTEES The Chair shall appoint the standing committees and such other special committees as the Board may from time to time establish. The first member named on each committee shall be the Chair of the committee. All committees, except the Executive Committee, shall have four (4) regular members and two (2) alternates who shall serve in the absence of regular member(s). The Executive Committee shall consist of the Board Chair, Vice Chair, and Chair Pro Tem AND ONE (1) COMMISSIONER, ELECTED BY THE BOARD, WHOSE TERM SHALL BE CONCURRENT WITH THE TERMS OF THE OFFICERS. 9.4 Sub-Committees Authorized The standing EXECUTIVE Committee shall establish such sub- conunittees as deemed necessary. 9.5 Quorum FOR COMMITTEE MEETINGS A quorum for a standing committee shall be two. 9.6 COMMITTEE Meetings MEETINGS OF STANDING COMMITTEES MAY BE CALLED BY THE GENERAL MANAGER OR CORPORATE SECRETARY ON THE REQUEST OF THE CHAIR OF THE BOARD, CHAIR OF A COMMITTEE OR ANY TWO COMMITTEE MEMBERS. ^ eon- nine-, Page 14 Board Minutes January 23,2001 9.7 Action of Committee Reports EACH STANDING COMMITTEE SHALL REPORT ITS RECOMMENDATION, IF ANY, FOR CONSIDERATION BY THE BOARD AT A REGULAR OR SPECIAL MEETING. Upon adoption of a motion to accept(or approve) a committee report, the recommendation of the committee becomes the action of the Board; provided, however, if any resolutions are necessary to carry out the report, they shall be enacted separately pursuant to section 17.5. 9.8 D ,.a,.,, COMMITTEE Resolutions Committee reports recormnending action by the Board shall have incorporated in the report the necessary resolutions or motions to accomplish the action. 9.9 Discharge of Consideration A committee shall be discharged of any matter referred to it by an affirmative vote of two-thirds of the Board members. X. AGENDA FOR REGULAR MEETINGS 10.1 Order of Business 10.1.1 The order of business at any regular meeting of the Board shall be as follows: 1. Roll Call -32. Approval of Minutes 43. Public Comments on agenda items; SHALL BE LIMITED TO THREE (3) MINUTES UNLESS WAIVED at THE discretion of the Chair -54. Communications 65. Committee Reports -76. Manager's Recommendations -97. Unfinished Business 98. New Business 4-09. Resolutions 4410. Manager's Remarks -1-211. Remarks by Board Members Board Minutes Page 15 January 23,2001 4412. Motion of Excused Absence 4-413. Public Comments on BWL-related matters e Rmi4 SHALL BE LIMITED TO THREE (3) MINUTES UNLESS WAIVED at THE discretion of the Chair 4-514. Adjournment 10.1.2 In the absence of any objection, the presiding officer shall have the discretion to vaiy the order of business. 10.1.3 Preparation of Agenda The agenda shall be prepared by the General Manager and be available for distribution by noon an the Thufsday THREE DAYS preceding a regular OR SPECIAL meeting. 10.1.4 Additions to Agenda In the absence of any objection, the General Manager or any member may add an item to the agenda at a meeting. In the event of objection, an affirmative vote of five Hers THE MAJORITY OF THE BOARD shall be required to add an item to the agenda. 10.1.5 Public Comments Immediately following Approval of Minutes, the Chair will announce that members of the public are invited to address the Board regarding any item on the agenda. Anyone wishing to comment on any matter not on the agenda may do so immediately prior to adjournment. The Chair may exercise its discretion in prescribing how members of the public will seek recognition, or imposing reasonable time limits for comments under the circumstances, or in limiting remarks to the subject matter under discussion. 10.1.6 Reports and Recommendations of Director and General Manager The Director and General Manager shall advise the Board by mail of Reports and Recommendations to be considered at each regular meeting. XI. AGENDA FOR COMMITTEE MEETINGS 11.1 ORDER OF BUSINESS 11.1.1 THE ORDER OF BUSINESS AT ANY COMMITTEE MEETING OF THE BOARD SHALL BE AS FOLLOWS: Page 16 Board Minutes January 23,2001 1. ROLL CALL 2. PUBLIC COMMENT ON AGENDA ITEMS; TIME LIMIT AT DISCRETION OF THE CHAIR 3. APPROVAL OF MINUTES 4. AGENDA TOPICS 5. OTHER 6. ADJOURN 11.1.2 A CONCURRING VOTE OF A MAJORITY OF COMMITTEE MEMBERS PRESENT SHALL BE NECESSARY TO MOVE A RECOMMENDATION TO THE BOARD. XII. MEMBERS OF THE BOARD 12.1 Attendance Each member of the Board shall attend all meetings of the Board IN PERSON OR BY TELECONFERENCE unless otherwise excused. Each member must attend at least sixty (60) FIFTY (50) percent of REGULAR OR SPECIAL#fie-ieetings of the Board and FIFTY (50) PERCENT OF ASSIGNED COMMITTEE MEETINGS in person or by teleeenference ' DURING ANY FISCAL YEAR. Failure to do so attend at least sixty (60) pereen4 of the ineetings of the Board during any fiseal year will be brought to the attention of the Mayor and may be grounds for removal BY THE MAYOR from the office as a Board member. 12.1.1 Attendance in person by members of the Board at se ALL meetings OF THE BOARD is encouraged. If personal attendance is not possible, attendance may be by teleconference as long as the telephonic call is required to be open to the public at the location specified in the notice of the meeting and A MAJORITY of the Board is physically present at the location specified in the notice of the meeting. All votes taken during a teleconferenced meeting shall be by roll call. 12.2 Disqualification to Vote Any member of the Board having a direct or indirect financial interest in any matter before the Board, or who may stand to gain or lose financially or otherwise due to action of the Board on any matter, shall indicate such interest to the Board and be disqualified from voting on such matter as set forth in Section 5-505 of the Lansing City Charter. XIII. RECONSIDERATION OF ACTION Any member may move to reconsider a previous action of the Board. Such motion to reconsider shall be made not later than the next regular Board meeting. Board Minutes Page 17 January 23,2001 XIV. MINUTES 14.1 Preparation and Filing The Secretary shall keep minutes of REGULAR AND SPECIAL eae13 meetings of the Board and shall file a copy in the office of the City Clerk as a public record. No official action taken by the Board shall be valid or effective until a copy of the minutes of the meeting at which such action was taken shall have been filed with the City Clerk. 14.2 Corrections Corrections in the REGULAR OR SPECIAL MEETING minutes shall be made not later than the next meeting after the meeting to which the minutes refer. The corrected minutes shall show both the original entry and the correction. 14.3 Delivery to Members The Secretary shall provide each member of the Board with a copy of the REGULAR OR SPECIAL MEETING minutes as soon as it has been filed with the City Clerk. Corrected minutes shall be available no later than the next subsequent meeting after correction. 14.4 Public hlspection Proposed minutes will be available for public inspection not more than eight (8) business days after the meeting to which the minutes refer. Approved minutes will be available for public inspection not later than five (5)business days after the meeting at which the minutes are approved. Copies of the minutes will be made available to the public at a reasonable estimated cost for printing or copying. (1976 Public Act 267). XV. CONFIDENTIAL COMMUNICATIONS Any communications or memoranda addressed to Board members by the General Manager when marked "Confidential"shall not be released to any unauthorized person until such time as the writing has been declassified by the Chair or General Manager or made a part of the proceedings of a regular or special meeting or committee meeting. No documents shall be withheld when requested by a member of the public unless the witliliolding of such documents is authorized by Public Act 442, 1976, or by any other provision of law. XVI. CONTRACT LIMITATIONS The Board shall not have the power to make any contract with or give any official position to any person who is la-iown to be in default to the City. Board Minutes Page 18 January 23,2001 XVII. AMENDMENTS Any member of the Board may initiate amendments to the Rules of Administrative Procedure by presenting them in writing at any regular meeting. All Board members must be notified of such amendments mailed at least four (4) days before the amendment is to be voted upon. The affinnative vote of five (5) members shall be required to amend the rules of procedure. XVIII. MISCELLANEOUS 18.1 Parliamentary Procedure All questions of procedure not covered by these rules or the City Charter of the City of Lansing shall be governed by the provisions in "Robert's Rules of Order." 18.2 News Media Regulations 18.2.1 Members of the news media shall be provided with a table in the Board Room for their use. They shall have made available to them, upon request, a copy of the General Manager's Recommendations and any data accompanying the recommendations not marked "Confidential"at 10:00 a.m. one working day prior to the date of the meeting. 18.2.2 Following the adjounmlent of a Board meeting, members of the news media may request interviews of Board members. 18.2.3 All policy statements shall be made on behalf of the Board by the Chair. 18.3 Vacancy Resignation Absence of Elected Officers 18.3.1 In the event the office of Chair shall become vacant by death, resignation or otherwise, the Vice Chair shall assume the office of Chair, the Chair Pro Tern shall assume the office of Vice Chair and the Board shall elect a Chair Pro Tem. 18.3.2 In the absence of the Chair, Vice Chair and Chair Pro Tenn, a Chair Pro Tem shall be elected who would hold office during the session, unless such office is tenninated by the entrance of the Chair, Vice Chair or Chair Pro Tem. 18.4 Freedom of Information It shall be the policy of this Board to follow the provisions of Public Act 442, 1976, as it may be amended by legislative enactment of judicial decision. Board Minutes Page 19 January 23,2001 18.5 Resolutions Any Board member may sponsor a resolution. Any resolution may be co- sponsored by other Board members. A resolution must be submitted for placement on the Agenda as specified under Article X- Agenda. The sponsor of a resolution may withdraw the resolution at any time prior to enactment. Consent of the co-sponsors to withdrawal is not required. Adopted by the Board 5/8/79, and amended 8/14/79, 11/14/79,3/11/80, 11/11/80, 7/14/81, 8/11/81, 7/13/82, 7/26/83, 6/26/84,3/5/85, 12/18/90, 1/5/91,7/28/98. PROPOSED SCHEDULE OF RECURRING BOMW A-ND U(JMiv111'1hE11Emb CALENDAR YEAR 2001 Regular Board Executive Committee Committee of the Whole Finance Committee Nominating Committee Human Resources Pension Fund Trustees Committee January 23 Board Meeting • Growth&Expansion Status • Annual Pension • Revenue Bond Issue Trustees Meeting RE: • Ottawa Business Case investments,actuarial valuation,audits,and policies. • Participants'Investment Options for the DC Pension Plan • Review of Utility February 27 Performance Indicators Quarterly Intemal Audit Report March 27 Sales Forecast New Non-Bargaining • Capital Projects Status Salary Adjustments • Capital Forecast Utility Fees and Charges Risk Assessment (environmental,operational, financial and legal) April 24 Board Meeting Annual Budget Review • Consider New Non- Annual Rate Review Bargaining Salary Quarterly Intemal Audit Adjustments for FY Report • Consider Utility Fees and Charges • Consider FY Operating Budget Review STS Incentive May 22 Program—corporate and process measures Review Employee Survey Results June 26 Review Business Plan Board Officer and Performance Nominations Objectives Review Board Policies and Procedures Review Rules and Regulations July 24 Board Meeting—Annual Mtg. Quarterly Internal Audit • Approve Board Officers Report • Consider STS Performance Measures August 28 Performance Appraisal Review for three Board- Appointed Positions September 25 Annual Board Retreat October 23 Board Meeting Annual Audit Review of • Consider Performance BWL Enterprise Fund Appraisals for three • Quarterly Intemal Audit Board-Appointed Report Positions • Consider Board Staff Appointments November December Printed: 1/30/2001