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HomeMy WebLinkAbout2006 Minutes BOWL Preliminary—Subject to Board Approval on January 23, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, November 28, 2006 a Cs? The Board of Commissioners met in the Boardroom of the Administrative Offices, 123:k4aclE i Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone Jaies � G� (teleconference), Julee Rodocker and Robin Smith. r" (Note: 41h Ward Vacancy exists.) �0 N Absent: Commissioner Santiago Rios The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 5:39 p.m. APPROVAL O F MINUTES By motion of Commissioner Calkins, seconded by Commissioner Graves the minutes of the October 30, 2006 special board meeting were unanimously approved. PUBLIC COMMENT THE CHAIR ANNOUNCED THAT MEMEBERS 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. Judith Mulha, Friends of Francis Park noted that the purpose of their organization is to promote and enhance Francis Park, which was established in 1908. In 2008 they will celebrate the parks 100th birthday. Ms. Mulha requested the Board's participation in planning the celebration in two regards: 1) advice on returning a water feature to the park and 2) suggestions on how to promote the return of the river aspect to the park. She went onto state that over time tree growth has occurred which now covers what used to be a clear view of the river. Ms. Mulha also reported that Michigan State University's School of Architecture is working on a new master plan, which they have not had in the past 20 years. She would like to engage the BWL to discuss partnership possibilities for the upcoming community project. Board Mtg.Minutes November 28,2006 Page 2 of 37 June Kneostman, 1521 Cambridge Road of the Garden Club of Great Lansing reported that they have never really worked with the City in the past and the Francis Park project would be the first. They have worked on several other projects in the area such as, the MSU children's garden and the Lansing Public Library Japanese viewing garden. Ms. Kneostman noted that they typically direct their efforts to people and projects that are interested in beautification and in making the City a more attractive place to live and visit. She went onto state that due to financial problems park maintenance has decreased and the Francis Park rose garden is in need of attention as activity use has dropped by 50%. Ms. Kneostman advised that the MSU Department of Landscape Architecture met with the City of Lansing's Park Department at Francis Park. After said meeting, she noted that MSU agreed to work with City Council, community participants and students in developing a master plan that would incorporate everyone's suggestions. Ms. Knoeostman invited the BWL to participate with them in undertaking this project. Brochures and literature were given to Secretary Jones to keep on record and distribute to the Commissioners. COMMUNICATIONS None. COMMITTEE REPORTS esolution 2006-11-11 Joint Meeting Lansing City Council and Board of Water and Light Commissioners November 1, 2006 Chairperson Smith called the joint meeting to order at 7:49 a.m. The meeting was held at the Radisson Hotel, 111 North Grand Avenue, Lansing. Councilmember's Present: Joan Bauer, Kathie Dunbar, Brian Jeffries, Harold Leeman and, Carol Wood. Absent: Councilmember's Sandy Allen, Tim Kaltenbach, and Randy Williams. Commissioners Present: Gary Calkins, Robert Cochran, Semone James, Santiago Rios, Julee Rodocker, and Robin Smith. Absent: Commissioner Joseph Graves. (Note: 41b Ward Vacancy exists.) City Staff Present: City Attorney Brigham Smith and Mayor Chief of Staff Jerry Ambrose. BWL Staff Present: Interim General Manager Dick Peffley, Sr. Vice President of Operations Bill Cook, Manager of Finance and Planning Sue Flores, Interim Internal Auditor Charles Moore, Corporate Secretary Rhonda Jones, and Governmental Affairs Analyst Calvin Jones. The purpose of the joint meeting was for the BWL to present an update to City Council on the following topics: 1. General Manager Selection Process. Board Chair Smith reported that a request for proposal (RFP) seeking Executive Search Services for the purpose of obtaining assistance in hiring a General Manager for the BWL was sent to respective bidders on October 25, 2006. Sealed Board Mtg.Minutes November 28,2006 Page 3 of 37 proposals are due back to the BWL by November 10, 2006. Upon selection of an Executive Search firm the Commissioners will proceed with the General Manager selection process. Councilmember Wood asked if the process would be similar to the last one? She also asked if the General Manager would have to reside in Lansing? Board Chair Smith responded by stating yes to both questions and also advised that the process would be shorten. She went onto report that the model previously developed was adopted by APPA. 2. Human Resource Audit Update. Board Chair Smith advised Council that in August 2006, Michael Goree of Growth Strategies Consulting, Inc was awarded the RFP to conduct the Human Resource Audit. Mr. Goree has since reviewed several BWL documents and met with the Commissioners and several employees including union representatives. A final report is forthcoming and tentatively scheduled for delivery by early December 2006. Commissioner Cochran also explained that Dick Peffley, Interim General Manager has given Mr. Goree full access to the organization. During the audit he has met with 75 non-bargaining and 100 bargaining employees. Commissioner Cochran went onto report that Mr. Goree is very frank and he has received positive feedback from employees regarding their interactions with Mr. Goree. Commissioner Cochran went onto state that there is an issue with the Rules of Procedure since the current version has not been approved. However, it was suggested that upon completion of the current review each Commissioner would speak to their respective Councilmember counterpart in encouraging the adoption of the current guidelines. Commissioner Rios advised that the Rules of Procedure would not affect the audit since this is not an investigation but an opportunity to review the process and procedures. Board Chair Smith advised that the Human Resource department has been very receptive to the audit and in working with Mr. Goree. 3. Collective Bargaining Agreement. Board Chair Smith reported that the IBEW Local 352 ratified the union contract on October 18, 2006 and the Board approved it at a Special Board meeting on October 31, 2006. The contract represents a two-year extension that was signed and approved prior to its expiration date. Board Chair Smith went onto commend everyone for their participation in the negotiation process. Interim General Manager Peffley also stated that the contract was different as it included a healthcare taskforce of which some individuals have already attended a seminar on the topic. He went onto state that he will work with Joseph Davis, Business Manager of IBEW Local 352 and Jim Dravenstat-Moceri, Executive Board member of IBEW Local 352 in addressing the ambiguous contract language. Mr. Peffley also stated that trying to change the contract language would have made the process more difficult whereas, the method they are utilizing will attempt to make it a more positive experience. 4. Tree Trimming. Mr. Peffley reported that the BWL would finish its first cycle of tree trimming by June 2007. He also stated that the next cycle should not be as harsh as the first one and therefore, it should not warrant as many complaints. After visiting North Fairview and speaking to area residents, he requested the tree trimming crew to return that evening to pick-up Board Mtg.Minutes November 28,2006 Page 4 of 37 the remaining debris. Mr. Peffley went onto state that a meeting with the City Forester is scheduled for November 71h and Mark Nixon, Communications Director is coordinating a community meeting for further discussion. City Council expressed concerned over pending tree trimming areas, the relationship between the BWL and the City Forestry department, and policy. Staff explained that the BWL is open to any suggestions including that of working with the City Forestry department as suggested by Councilmember Dunbar. It was also noted that the Forestry department is must be notified anytime the BWL needs to cut a tree limb 6 inches or larger in diameter or if a tree must be removed. The notification process was followed in the North Fairview situation. However, there is agreement between the contractors and the City Forester as the whether or not more than 6 inches were cut. Councilmember Baur stated that power companies in other areas have been sued to prevent the cutting of trees in nice neighborhoods. Joseph Davis, Business Manager of IBEW Local 352 stated that there is a tight rope in clearing areas and as such, tree clearing is important to reliability and safety. He went onto state that an ice storm will often determine where tree trimming needs to occur. Commissioner Rios advised that we must work hard to develop the process and balance efficiency with what is done. He went onto state that we are not in an ice storm situation right now and so there is time to look at the issue. Commissioner Rios noted that the BWL might want to consider working with a local firm as opposed to an out of state contractor. Board Chair Smith commended everyone for the dialogue on this issue. Council President Leeman asked if tree trimming is conducted all year round? Bill Cook, Sr. Vice President of Operations responded by stating yes and also advised that more tree trimming work can be done during the winter months. 5. Lead Water Services Replacement Program. Board Chair Smith reported that as of September 30, 2006 of the 12,919 services needing replacement, 3,315 have been completed. She went onto state that the BWL is currently ahead of schedule and 26% of the replacement work is complete. Councilmember Jeffries inquired into the compaction aspect of the roadway. Mr. Cook advised that street repair is 11.5% of the total cost and by fiscal year end the BWL will have spent$13,000,000 of which compaction is a large part. Councilmember Woods asked if the BWL restores the right away and if the 2003 policy is being followed? Mr. Cook stated that the BWL is working with the City Planning Department in regards to restoration issues and also advised that he could look into the policy that Councilmember Woods is referring to. Board Mtg.Minutes November 28,2006 Page 5 of 37 Councilmember Jeffries asked if the process is to use sod or seed? Mr. Cook reported that the BWL uses Spartan seed and compacts to standard. Council President Leeman asked if the BWL completes the replacements when the City replaces a road? He also stated that he notices that sometimes the area sinks after the replacement work has been done. Mr. Cook stated that the BWL works closely with the City to coordinate that effort. He also noted that there is a practice in place and not a policy. He went onto report that a compaction test is done before the fill. Mr. Cook also advised that the sinking area maybe a temporary patch due to economies of scale and a permanent patch would be completed at a later date. Council President Leeman asked BWL staff to verify if the work is done within a 30-day timeframe. Councilmember Woods departed at 8:31 a.m. due to a prior obligation. 6. Integrated Resource Plan (IRP). Board Chair Smith reported six recommendations from Sargent & Lundy's findings regarding the Integrated Resource Plan that are as follows: • Over the next 5 to 10 years, continue status quo electric generation operations and maximize the value of the excess generating capacity • Fully evaluate the option to retire the Moores Park units • Implement a more comprehensive condition assessment program for the Eckert, Erickson and Moores Park units • Evaluate selective additions of emission controls, but use emission allowance purchases as the primary means of complying with CAIR and CAMR • Consider ownership or long-term power purchase from large wind power projects • Consider the option of starting to add new generating facilities within the next 10 years to address the need for better long-term balance in the age and technology mix of the BWL generating fleet Mr. Peffley reported that the IRP was an extensive one-year project with a reputable company (Sargent & Lundy) that indicated that BWL maintenance is in the upper quartile. The current capital investment strategy also revealed that Eckert units 1-3 are ok until 2015. The BWL is presently in a good position that allows capitalization of sales and wholesale. Mr. Peffley added that they would also look at adding base load generation and develop a plan for the future. Mr. Cook noted that the Governor has spoken a great deal about renewables and the IRP indicated that the BWL should start to look at those items, which they are to do. Commissioner Calkins asked staff to comment on the steam issue. Mr. Peffley noted that General Motors was 70% of the BWL's steam load, which represented one of the largest steam contracts in the country. Recommendations regarding the steam system will be forthcoming in the near future. Commissioner Rios asked staff to speak to the issue of environmental regulations. Board Mtg.Minutes November 28,2006 Page 6 of 37 Mr. Peffley reported that there are no pending environmental regulations that would shut down BWL units. There are some expenses involved and testing is currently underway. Board Chair Smith advised Council that BWL staff is regularly updating the Commissioners to make them aware of any potential changes that may affect the way they conduct business. Jerry Ambrose, Mayor Chief of Staff stated that he appreciated the 30% steam rate increase as oppose to 65%. He went onto ask what type of feedback is the BWL receiving from customers? Mr. Peffley reported that they are scheduled to bring forth a plan within 30-days relative to steam recommendations. He went onto state that they did not want to make a request for another 30% rate increase. Mr. Cook further advised that the BWL is still in the evaluating process of cutting cost and finding other uses for steam. Commissioner James asked staff to look at alternative uses for steam such as ethanol. She went onto state that Michigan State University (MSU) is in the process of developing a potential plan to develop the product in the Lansing area. Council President Leeman asked about the status of taking responsibility for MSU's utilities? Mr. Cook responded by stating that periodically MSU contacts the BWL regarding the possibility of obtaining water service. However, MSU recently refurbished their entire steam and electric systems and thus received grants from the State of Michigan to pay for the cost. Maintaining control of their own system allows them the opportunity to avoid the out of pocket costs that are associated with changing the utilities to BWL. Councilmember Jeffries asked if there is an option to consider the crossover (or subsidization) of utilities? Mr. Peffley indicated that that issue would be addressed in the proposal. Mr. Ambrose asked if chilled water has been reviewed? Mr. Peffley responded by stating that chilled water is primarily an issue of too much load relative to demand. If steam costs are decreased then it may help but there is nominal room for improvement. Councilmember Jeffries noted that the BWL must be sensitive to whether or not residents are subsidizing the downtown area and the suburbs. Board Chair Smith advised that although the plan would be all encompassing she believes that in theory no cross subsidization was adopted to avoid subsidiary issues. Commissioner Rios departed at 8:53 a.m. due to a prior obligation. Board Mtg.Minutes November 28,2006 Page 7 of 37 7. Overview of BWL Finances. Sue Flores, Manager of Finance and Planning reviewed the financial report for the fiscal period of July 1, 2006 thru September 30, 2006. During the review Ms. Flores reported that net income is $10,255,000, wholesales sales are up, and the operating and maintenance budget is lower than the original projected expenses. It was also advised that the BWL is selling its excess sulfur dioxide (SO2) environmental credits to other utilities. Staff explained to Council that there are economies of scale that allow the BWL to rely on the cap and trade mechanism as a means to help maintain the existing units. It was also reported that nationwide each state has a pollution limit that it can reach. In addition to selling excess SO2 credits, the BWL currently purchases nitrogen oxide (NOx) credits. Councilmember Dunbar expressed concern over the fact that excess pollutant credits are sold as opposed to rewarding organizations by another means besides excess credit sales. She went onto ask staff where are the credits being sold and is it affecting Michigan? Mr. Peffley responded by stating that that the credits are sold out of state. He also advised Council that the sale of pollution credits is a federally mandated program managed by the Department of Environmental Quality. Mr. Peffley went onto explain that Michigan environmental regulations are stricter than that of other states, which helps the BWL achieve its goal. Ms. Flores continued the finance report and advised that due to a change in administrative procedures the BWL is projected to save $500,000 on health insurance. However, she explained that the BWL would not receive a check for the savings amount, as this is a reduction in the BWL's increase against budgeted items. Board Chair Smith recommended a full financial review take place with City Council at a Committee of the Whole meeting so that they may have talking points relative to the budget. Commissioner Cochran asked if it is correct to state that this is the best wholesale season ever? Mr. Cook replied by stating that the wholesale market has been good essentially for the reasons pointed out the IRP. There are few coal plants being built at this time and so those in need of generation are purchasing power on the wholesale market. The Commissioners advised Council that 30% of the revenue was from wholesale sales due to the availability of excess capacity. Currently, plants are not being built due to the associated costs and environmental regulations. Councilmember Dunbar asked if it time to start looking at wind generation or clean generation, which can also become a tourist attraction or a source of education? Mr. Davis explained the reliability issues related to wind generation. 8. Commissioner Seat Vacancy. Council President Leeman reported that Mayor Bernero is reviewing candidate names and will submit them for approval. Commissioner Calkins reiterated the need to obtain timely City Council approval for the amended Rules of Procedure once they are presented to the City Attorney's office and then Board Mtg.Minutes November 28,2006 Page 8 of 37 forwarded to City Council. It was further indicated that prior submitted guidelines had not yet received approval. However, since the Board is in the process of reviewing the existing guidelines then new amended rules may be forthcoming. 9. Other a. Ethanol Plants. Gv,unissivae Geeh, ,te that four-ethanol a t� a be ",b.built ; tbypFoduet. He also stated that fei:ty two ethanol plants are eui:Fendy ho being built -h0Ut the b V Vl.11l 1,'. 118 YYe vVI, the�:liTi hnelegy is fiet yet ready to build it an an eeenefnie fnedel. Commissioner Cochran reported that four ethanol plants are under construction in our region, 42 plants nationwide. These plants are going to put upward price pressure on corn supplies, and will also put downward price pressure on the by-products of the process. Research is ongoing to economically use cellulose (ic) as a raw stock for conversion to ethanol. Then, leftovers from farming, forestry, and other agricultural by-products can be used for ethanol production. This research holds promise, but is not yet in hand. Commissioner Smith stated that they are in the process of looking at this topic with MSU and the BWL wants to be at the table when the discussions begin. Councilmember Bauer stated that Council and the Commissioners should continue communications because their quarterly meetings and partnership relationships are very important. She went onto note her appreciation for Calvin Jones and operational access to Mr. Peffley. b. Grosbeck 3 Easement. Council President Leeman asked about the status of the Pat Linderman Grosbeck 3 easement as it is moving along and he would like to see the BWL sign off on the project. He also inquired into the line pit on Aurelius Road. Staff responded by stating that BWL General Counsel is working on the project. In response to Aurelius Road, two of the pits have been moved and they are working with the Department of Environmental Quality to see what can be done with the other pit. c. I-496 Steam Leaks. Council President Leeman asked if there would be any I-496 steam leaks this season. Staff explained that it depends on how much steam GM takes because it is difficult to regulate steam traps. However, they do have it under better control than last year and once the plant is closed then they will shut down the line. Staff reported that they are hesitant to invest additional capital in a line that will soon be closed. d. Delta Township Survey. Staff reported that they are working with Delta Township in addressing contractual concerns relative to the water agreement. Delta had been relying on the BWL to address issues outside of the bounds of the contract. Nevertheless, they are working to correct the situation. The contractual period is indefinite and the BWL thinks that the fees should increase by approximately 90%. The next step of the process is nonbinding mediation and if that does not work then they could go to court. Staff also advised that a cost of service study was conducted. However, the township has hired a consultant to review the data and subsequent findings. Board Mtg.Minutes November 28,2006 Page 9 of 37 The meeting adjourned at 9:33 a.m. Motion by Commissioner Cochran, seconded by Commissioner Graves, to receive the Joint City Council/BWL Commissioner Report as presented. Action: Carried unanimously esolution 2006-II-2 COMMITTEE OF THE WHOLE November 14, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Tuesday, November 14, 2006. Commissioner Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, Julee Rodocker and Robin Smith (arrived at 4:25 p.m.). Absent: None. (Note: 41h Ward Vacancy) Public Comment There were no public comments. New Designated and Alternate Designated Rep for the Acid Rain Program Amy Cavanaugh, General Counsel presented the Board with a resolution in which new BWL designated representatives would be appointed for the purpose of reporting to the Environmental Protection Agency under the Clean Air Act. The Clean Air Act requires that the resolution be presented to the owners of the affected source to designate the respective representatives. Motion by Commissioner Calkins, seconded by Commissioner Graves to accept staff's recommendation to appoint Mary Dwyer and Robert Van Ells as the new designated and alternate designated representatives for the Acid Rain Program. Carried unanimously. Discussion of Rules of Procedure Ms. Cavanaugh reviewed the suggested changes to the Rules of Procedures proposed by the Ad Hoc Committee from a previous meeting held on October 17, 2006. The discussion involved issues related to the number of members needed for a committee, public hearing information, and electronic equipment disbursement. In addition to the discussion, Commissioner Cochran advised that a cell phone policy relative to BWL employee usage is in the process of being developed but is not yet complete. Ms. Cavanaugh stated that she is unaware of the policy. However, Dick Peffley, Interim General Manager explained that they are in the process of completing a policy that addresses standby Board Mtg.Minutes November 28,2006 Page 10 of 37 employees that would eliminate the use of pagers, reduce standby time and overall cost. He went onto explain that the Board as a whole is covered under the BWL's existing cellular contract. Motion by Commissioner James, seconded by Commissioner Graves to move the proposed changes to the Rules of Procedure to the Board for a full vote. Discussion: The discussion primarily centered around the proposed changes to the number of votes needed for extraordinary measures, committee chair appointments, and retaining consultants without prior Board approval. The Commissioners explained that continuing the 5- vote measures on items of extraordinary circumstances is idealistic as it maintains a certain level of difficulty in passing or failing certain measures. However, others expressed concern in that Board vacancies can cause an impasse in addressing various matters. Therefore, it was suggested that the Rules of Procedures be changed to reflect voting measures for the majority of the sitting Board members as opposed to a majority of the Board seats. In an effort to reduce exclusionary practices and allow for a more democratic process the proposed guidelines suggested changing the method in which committee chair appointments are conducted. During discussion, concern was expressed regarding the perceived convoluted process for which committee chair appointments would take place if the proposed language changes were adopted. Commissioner Smith introduced a friendly amendment to the motion in which the proposed changes to the nominating process (committee chair appointments) would be removed from the amended Rules of Procedure. Commissioner James accepted the motion as amended and further advised that the Ad Hoc Committee would decide whether or not to revisit the issue of committee chair appointments and bring forth a new recommendation if deemed necessary. Carried unanimously. URPA Requirements (Smart Meterin ) Motion by Commissioner Calkins, seconded by Commissioner Cochran to move the PURPA requirements (Smart Metering) recommendation to the full Board. Carried unanimously. Update on Safety Council Report Jack Hill, Director of Safety provided an update to the Board regarding BWL's safety record. He advised that the Safety Council suggested the BWL avoid trying to initiate too many projects at once. There are nine major categories and a 30-month program to implement the initiatives. Input and participation is obtained from the Joint Safety Council (JSC) that includes executive staff and the Process Advisory Committee (PAC), which is made up of equal levels of bargaining and non-bargaining employees on different levels. Mr. Hill went on to report that they found that the BWL has practices in place but they cannot validate them. He also advised that the year- to-date safety incident rate through October 2006 is 6.3, the target record (an average of Consumers Energy and Detroit Edison) is 4.9, and the year end total for 2005 was 9.5. Mr. Hill Board Mtg.Minutes November 28,2006 Page 11 of 37 went onto explain that employees with three infractions come before a management review board to discuss and review the occurrence with the employee. Commissioner Rios asked if the BWL has a process in which to audit whether or not the BWL has the equipment in place to make sure that we are being safe? Staff indicated that Delivery has a list sheet for their trucks that show whether or not the needed safety equipment is in place. Commissioner Smith asked if the BWL is considering the implementation of a reward system based on finding the safety errors in the "What's Wrong With This Picture" pictorial in the Pipeline? Mr. Hill responded by stating yes and advised that they are looking at changing the process so that employees will be required to tie the errors back to the safety book policy number to encourage familiarity with the guidelines. Commissioner Rodocker asked if there is a policy in place wherein if a person has regular injuries then they could be terminated due to liability? Mr. Peffley explained that they do not have a policy in place. However, it is reviewed on a case- by-case basis. Commissioner Rodocker also asked if there are chronic persons within the organization? Mr. Peffley advised that there are a few persons with chronic safety issues and they are currently working with those individuals. BWL Growth and Expansion Bill Cook, Senior Vice President of Operations reviewed the presentation on BWL's growth and expansion efforts. The presentation included information on strategies, standardized evaluations, community economic development participation, governmental collaboration, 425 agreements, marketing process, rules and regulations, new steam and electric customers, growth areas, steam market incentives, customer service, energy education and products and services. During the presentation several questions were raised relative to expanding the BWL's relationship with Michigan State University (MSU), steam development projects, and branding. As such the following questions were asked and answered: Commissioner Smith asked if the BWL fostered a better relationship with MSU then would those actions enhance the possibility of MSU taking water service from the BWL? Mr. Cook responded by stating no and explained that the cost of taking water service is a strong deterrent to MSU. Commissioner Graves asked if the BWL is placing new downtown development projects on steam? Board Mtg.Minutes November 28,2006 Page 12 of 37 Mr. Cook explained not the newer projects as it depends on whether or not it is economical for the customer. He also advised that several customers are backing away from steam due to the potential rate increases. A question was raised in regards to offering broadband services at which staff reported that it typically works best in areas that are not saturated with existing services. Commissioner Rios stated that the presentation was good. However, they need to look at steam because they are not in a position to eliminate the service and yet need to make it work. He also indicated that the BWL needs to improve its marketing efforts so that everyone knows that the BWL is not just a utility company. After further discussion, the Commissioners expressed a strong desire for the BWL to improve its branding position of products and services. Commissioner Graves also stated that the question of whether or not steam will exist or cease is still present as steam is not an open or shut case. Commissioner Rios further expounded by stating that he did not intend to imply that steam is an open or shut case, only that the BWL is not in a position to walk away from the service. Parameters of the Interim Internal Auditor's Scope Charles Moore, Interim Internal Auditor reported that he is in the process of obtaining a list of items to prioritize and he has also met with Dick Peffley, Interim General Manager to discuss those matters. It should take approximately 30-days to compile those items and as such he has begun auditing projects in which the external auditor has expressed prior concern. Commissioner Smith departed at 7:00 p.m.due to a prior obligation. Commissioner Calkins stated that he believes the current interim auditor should establish parameters for what the new permanent auditor should review upon their hiring into the BWL. He also inquired into the items that the previous auditor, Glenn Holloway suggested prior to his departure. Commissioner Graves advised that he is not trying to dismiss the external auditors report. However, he is reliant on Mr. Moore or persons like him due to his lack of expertise in this area. Commissioner James explained that the scope of work should involve Mr. Moore working with Mr. Peffley and developing the parameters for the new internal auditor. She also stated that she wants to make sure that the unions' needs are addressed during the process. Jim Dravenstat-Moceri, IBEW Local 352 Executive explained that he cannot say what the unions needs are specifically. However, they are very interested in what is said relative to the audit. Mr. Moore stated that they did not start the process until after he had spoken to Mr. Peffley. However, they need to make sure that the items that keep appearing on Plante &Moran's auditor reports are corrected. Board Mtg.Minutes November 28,2006 Page 13 of 37 Commissioner Calkins stated that he would downplay the audit and create structure. Commissioner James commented that she wanted to ensure that the Board has the deliverables at the end of the project and she would also like input from the other Commissioners. Mr. Moore stated that the number one priority is to get that process in place as there is a minimum number of audits that you should receive everyone year such as, construction and investments. He also stated that they are not just doing audits to occupy their time but to complete that task while reviewing the process. Commissioner Rios advised that the following items should be prioritized: 1. Review previous internal auditor's items, list of things changed—why and why not 2. Overall process audit plan 3. Review material list Mr. Moore indicated that he would add an analysis of the financial projections to his existing projects. Commissioner James stated that she would convene with the Finance Committee and Mr. Moore to discuss and submit a plan to the Board for approval. Six-year Forecast Mr. Peffley stated that the revised six-year forecast is not a recommendation because there are policy ramifications. It is an indication that they can live within the confines of the budget and it does not place a burden on the ratepayers. He also stated that they have the capability to plug in utility rates and a rate of return to determine viable numbers. Mr. Peffley also advised that the revised forecast demonstrates that the BWL can live within its means with modest rate changes. Commissioner Graves suggested that instead of reviewing the forecast, he recommends that Mr. Moore review the data and provides input as to what has been presented. Once the review has been submitted then they will reschedule another meeting to discuss the forecast in detail. Commissioner Rios agreed with the suggestion and advised that they also need to identify policy issues to fully discuss at a later date. Commissioner Calkins responded by stating that they need to develop a philosophy on steam. Commissioner Rios replied that a philosophy is a policy issue and that they also need to determine their rate differential between the BWL and other utilities. There being no further business the meeting adjourned at 7:20 p.m. Respectfully submitted Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Cochran, seconded by Commissioner Graves, to receive the Committee of the Whole Report as presented. Board Mtg.Minutes November 28,2006 Page 14 of 37 Action: Carried unanimously. MANAGER'S RECOMMENDATIONS esolution 2006-11-3 2006 Integrated Resource Plan, Policy Assumptions and Action Plan WHEREAS, the Energy Policy Act of 1992 requires utilities with annual sales exceeding 500 GWh to consider integrated resource planning; and WHEREAS, the Board of Water and Light adopted policy 19-07, which states that the Board of Water and Light will employ Integrated Resource Planning as defined in the Energy Policy Act of 1992; and WHEREAS, the Board of Water and Light has recently completed an Integrated Resource Plan for the period 2006 through 2030; and WHEREAS, the Board of Water and Light commissioners at their October 10, 2006 Committee of the Whole meeting considered the recommendations of the Integrated Resource Plan, policy assumptions and action plan. RESOLVED, that the attached policy assumptions, recommendations and action plan be adopted. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2006-11-3 regarding the 2006 Integrated Resource Plan, Policy Assumptions and Action Plan. Action: Carried unanimously. esolution 2006-11- Smart Metering and Interconnection Standards as Required by the Energy Policy 2005 RESOLVED, that the Lansing Board of Water and Light previously commenced consideration of the Smart Metering and Interconnection standards referenced in the Energy Policy Act of 2005; and FURTHER RESOLVED, that the Lansing Board of Water and Light shall hold a public hearing to accept public comment on the Smart Metering and Interconnection standards, to be scheduled in March 2007. -------------------- Motion by Commissioner Graves, seconded by Commissioner Rodocker, to adopt Resolution 2006-11-4 for the Smart Metering and Interconnection Standards as required by the Energy Policy Act of 2005. Board Mtg.Minutes November 28,2006 Page 15 of 37 Action: Carried unanimously. esolution 2006-11- Designated Representative and Alternative Designated Representative to Comply with Clean Air Act RESOLVED, that Mary Dwyer and Robert Van Ells are respectively named the BWL's designated representative and alternate designated representative for the purpose of reporting to the Environmental Protection Agency (EPA) under the Clean Air Act; and RESOLVED FURTHER, that the designated representative and the alternate designated representative are authorized to bind the BWL by their respective actions, inactions, and submissions with respect to the Clean Air Act. -------------------- Motion by Commissioner Rodocker, seconded by Commissioner Graves, to adopt Resolution 2006-11-5 regarding the Designated Representative and Alternative Designated Representative to Comply with the Clean Air Act. Action: Carried unanimously. UNFINISHED BUSINESS Internal Auditor Search Update. Commissioner Smith reported that this was the time set aside for Charles Blockett (of Charles Blockett, Jr. and Associates) to come before the Board and present the credentials for the candidates that applied for the Internal Auditor position. All of the Commissioners received packets that included detailed data received as a result of the recruitment strategy. Commissioner Smith went onto state that it was her understanding that one of their primary objectives was to reduce the candidate pool to five finalists. However, the Board was not prepared to do and instead asked Mr. Blockett to provide an update and an explain the next phase of the process. Commissioner Smith charged each Commissioner with selecting their top 5 candidates and submitting their names to Secretary Jones and Mr. Blockett by Friday, December Is' so that they may have further discussion at the next meeting. The next meeting is tentatively scheduled for the Committee of the Whole on Monday, December 18, 2006. Commissioners Calkins and Cochran support the ideal of reducing the finalist count from 5 to 3 provided that the Board would have discussion regarding the remaining candidates prior to reducing the number of finalists. The Commissioners agreed to have further conversation on this topic at their next meeting. Mr. Blockett advised that it would require additional modification to the plan but that reducing the finalists to three is the Board's decision. He went onto note that in his experience he has found that five is typically a good pool of candidates. Commissioner Smith also concurred and reported that interviewing five candidates will give them a good basis of comparison, especially due to the key position this individual will hold. Mr. Blockett reported that he initially received 41 applicants of which he narrowed the candidate pool to the top 10 based on the criteria laid out by the Commissioners. Some of the criteria included: 1) CPA, CIA or CFE certification, 2) advanced degree and 3) utility experience. Board Mtg.Minutes November 28,2006 Page 16 of 37 Thereafter, he narrowed the list to 21 individuals, 18 of which he conducted in depth telephone interviews. Based on the Board's charge to Mr. Blockett, he reduced the candidate pool to ten and sent the Board a packet of materials on November 21, 2006 that included said information. Mr. Blockett stated that it is his understanding that during the December 181h meeting they will reach consensus on the top 5 candidates and establish interview dates. Once the candidate pool is reduced to five then he will conduct an extensive background, reference and criminal record check on each individual. Mr. Blockett noted that the delay in selecting the finalists would extend the timeline by approximately 2-weeks. After the candidates are selected, he would then notify them of the pending interviews, remaining process, and also ask for a written report so that the Commissioners may view their work from different dimensions. Mr. Blockett further explained that an Advisory Committee consisting of 10 individuals (typically senior management) would receive training and develop interview questions so that they may conduct an hour interview with each finalist. After which, a memo would be written advising of their first and second choices and the rationale behind their decision. The information from the Advisory Committee would provide additional input and observations for the Commissioners consideration in choosing the Auditor. Mr. Blockett noted that this is a 2-day process of which interviews are conducted on the first day and an optional public forum could take place on the second day. The public forum would consist of allowing each candidate five minutes to talk about his or her selves and the remaining time would consist of a meet and greet. In an effort to shorten the process, the Commissioners agreed to eliminate the public forum and reduce the interviewing time to 1 — 1 1/2 days. Thereby, allowing the Advisory Committee to interview the candidates with subsequent interviews by the Commissioners. Commissioner Graves expressed concern regarding the value of the information that would be received by an Advisory Committee due to the healthy tension between this position and staff. Mr. Blockett strongly recommended obtaining as much input as possible and he also advised that the interview questions asked by the committee would be completely different than that of the Commissioners. It was suggested that receiving viewpoints from persons with varying backgrounds in the organization maybe helpful. The Commissioners agreed to move further discussion on this topic to the December 181h meeting. Action items for December 18th (tentative) meeting date: • Narrow the finalist pool to a minimum of five candidates (and discuss whether or not to further reduce the selection to three). • Determine tentative finalists interviewing dates • Reach consensus on whether or not to form an Advisory Committee • Schedule a time and date for Mr. Blockett to conduct training and develop interview questions with the Commissioners. NEW BUSINESS None. Board Mtg.Minutes November 28,2006 Page 17 of 37 RESOLUTIONS esolution 2006-11- BOARD OF WATER AND LIGHT RESOLUTION HONORING RONALD C. CALLEN WHEREAS, it is a pleasure to extend this expression of our thanks and best wishes to Ronald C. Callen for his service as a Commissioner of the Board of Water and Light; and WHEREAS, Ronald C. Callen was appointed to the Board of Commissioners on April 20, 1998 as a Fourth Ward Commissioner. This Board wishes to acknowledge his many contributions to the Board of Water and Light, the City of Lansing and its citizens; and WHEREAS, Ron served as Vice-Chair, Chair Pro Tern and three times as Chair of the Board of Commissioners, a member of the Executive Committee since 2000, the Nominating Committee 1998-99, Finance Committee 1999-2000 and 2003-04, and the Human Resources Committee 1998-99, 2000-01 (Chair), 2001-03; and WHEREAS, Ron Callen's commitment to excellence in public service has provided the Board of Water and Light with outstanding leadership. His expertise includes integrated resource planning, especially in areas concerning the environment, nuclear power use, high-level nuclear waste disposal and plant decommissioning; and WHEREAS, Ron Callen's 25 years of experience in utility regulation and public involvement has assisted him as a Commissioner to enhance the quality of the Lansing Board of Water and Light operations and protect the interests of citizens, business, and industry in Lansing. RESOLVED, That the members of the Board of Water and Light Commissioners hereby honor and commend Ronald C. Callen upon leaving this Board with over eight years of distinguished service. In Regular Session this 281h day of November 2006, we sincerely wish Ron continued success in all his endeavors. Moved by Commissioner Smith, seconded by Commissioner James, to approve the resolution. Action: Carried unanimously esolution Resolution by by the Board of Commissioners #2006-11-7 BOARD MEETING SCHEDULE In accordance with the Board's Rules of Administrative Procedure, a schedule of dates, places and times for each regular meeting of the Board for the calendar year shall be adopted by the Board in November. Board Mtg.Minutes November 28,2006 Page 18 of 37 RESOLVED, That regular meetings of the Board of Commissioners are hereby set for calendar year 2007 as follows, unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2007 Tuesday January 23 Tuesday March 27 Tuesday May 22 Tuesday July 24 Tuesday September 25 Tuesday November 27 Meetings will be held in the Board Room located in the Board of Water and Light Customer Service Center, 1232 Haco Drive, Lansing, 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 7, 2007. Motion by Commissioner Graves, seconded by Commissioner Rodocker, to approve the resolution. Action: Carried unanimously. esolution Resolution by by the Board of Commissioners #2006-11-8 Amend the Rules of Procedure of the Board of Water and Light RESOLVED, that the Board of Commissioners hereby approves the Rules of Procedure, as amended, with an effective date of January 1, 2007, subject to City Council concurrence. RESOLVED FURTHER, that the Rules of Procedure be submitted to the City Attorney for approval as to form. The City Charter specifies that the Rules shall then be submitted to the City Clerk for transmission to the City Council for concurrence. Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2006-11-8 regarding the amendment of the Rules of Procedure of the Board of Water and Light. Action: Carried unanimously. Discussion: The Commissioners charged Amy Cavanaugh, General Counsel with the responsibility of ensuring that a copy of the amended Rules of Procedure are simultaneously given to the City Attorney and City Council. The Commissioners also agreed to contact their respective City Council counterpart to encourage the expeditious approval of said changes. Board Mtg.Minutes November 28,2006 Page 19 of 37 Ms. Cavanaugh responded by stating that the document is traditionally sent to the City Attorney for approval as to form on then onto the City Clerk. However, there is nothing prohibiting their suggestion based on the City Charter. BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN RULES OF PROCEDURE AS AMENDED 11/28/06 I. MEETINGS 1.1 Regular Meetings 1.1.1 The Board of Water and Light (BWL) Commissioners shall hold regular bi-monthly meetings on the fourth Tuesday of the month 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 each regular bi-monthly meeting to be held in the calendar year shall be adopted by the Board during November of 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 Members of the Board 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 Conflicting Times All regular Board meetings shall be scheduled to avoid conflicting with regular meetings of the Lansing City Council. Board Mtg.Minutes November 28,2006 Page 20 of 37 1.5 Committee of the Whole Meetings 1.5.1 The Board may convene as a Committee of the Whole upon call by the Vice Chair or any two members of the Board. 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 closed to the public only for those purposes permitted under the Michigan Open Meetings Act, as amended. H. NOTICE OF MEETINGS 2.1 Publication of Dates A notice listing the dates of the regular meetings shall be published annually in a newspaper of general circulation in Ingham County at least three days prior to the time of the regularly scheduled meeting in January. At the regularly scheduled meetings in November 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 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 a majority of the attending members of the Board are present at the location designated in the public notice. Board Mtg.Minutes November 28,2006 Page 21 of 37 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 the majority of all Members of the Board confirmed by the City Council shall be necessary for official action and such vote may only take place at 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. 4.1.7 Removal of a Commissioner from service as an officer, except at the end of the officer's term. 4.2 Except as may be required by law or by section 10.1.4, 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. 4.3 The Board speaks through resolutions. A member of the Board may only speak on the Board's behalf in accordance with its resolutions. See 18.2.3. V. VOTING 5.1 Roll Call Vote A roll call vote shall be required for holding a closed meeting as specified by the Open Meetings Act or upon request of any Board member. 5.2 Unanimous Consent Board Mtg.Minutes November 28,2006 Paoe 22 of 37 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. 5.3 Conflict of Interest If a Board member has a conflict of interest on an issue before the Board, he or she shall reveal the conflict, not participate in discussion or any decision regarding the issue, and shall refrain from discussing the issue with any other Board member or Staff. VI. ANNUAL ORGANIZATION The Board shall organize at its first regular meeting following July 1"or as soon thereafter as is reasonably convenient, by selecting one of its members as Chair and, one of its members as Vice Chair, 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 and public hearings conducted by 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 an ex officio member of all committees of the Board, unless the Chair is an official member of a Committee. If the Chair is an official member of a Committee, she or he shall possess all voting privileges. 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. The Vice Chair shall also preside over meetings of the Committee of the Whole. 7.3 Past Chair The Past Chair shall assume the duties of the Chair when neither the Chair nor the Vice Chair is present. VIII. CHARTER POSITIONS Board Mtg.Minutes November 28,2006 Page 23 of 37 8.1 Director, Secretary and Internal Auditor The Board shall, at its first regular meeting following July I" of each year, or as soon as practicable thereafter, appoint a Director, an Internal Auditor and a Secretary. The Director shall also be known as the General Manager, and shall be the highest executive officer of the Board of Water and Light. The Secretary shall also be known as the Corporate Secretary. The Internal Auditor shall also be known as the Director of Internal Audit. These positions shall be contract positions, shall report directly to the Board of Commissioners, and shall serve at the pleasure of the Board of Commissioners. 8.2 Unless otherwise determined by the Board of Commissioners, contract reviews for the Charter Position employees shall commence no later than sixty (60) days prior to the end of the fiscal year and be completed no later than the start of the next fiscal year. 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 COMMITTEE CHAIRS 9.2.1 The following standing committees shall be appointed by the Chair: Finance Human Resource Nominating 9.2.2 The Finance Committee shall have oversight responsibility for financial performance measures and audits, capital expenditures and returns, bond indebtedness and credit rating, annual O&M budget, rate review, and the investment policies of the retirement plans. 9.2.3 The Nominating Committee shall at its first regular meeting following July lst of each year, nominate a slate of officers at its annual organizational meeting 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 Mtg.Minutes November 28,2006 Page 24 of 37 9.2.4 Ad Hoc Committee shall convene whenever the need arises to address an issue or topic that would not appropriately fall within either of the other standing committees and would not require the attention of the Committee of the Whole. 9.2.5 The 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, and employee benefits. 9.2.6 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 or as otherwise specified in these Rules. 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 Chair, Vice Chair and most immediate Past Chair and one (1) Commissioner elected by the Board, whose term shall be concurrent with the terms of the Officers. If no Past Chair is present on the Board, the Board shall elect a second Executive Committee member. The Nominating Committee shall not consist of any members who intend to run for an officer position. 9.4 Sub-Committees Authorized The standing Executive Committee shall establish such sub-committees as deemed necessary. 9.5 Quorum for Committee Meetings A quorum for a standing committee shall be three. 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. 9.7 Committee Reports Board Mtg.Minutes November 28,2006 Page 25 of 37 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 18.5. 9.8 Committee Resolutions Committee reports recommending 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. 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 2. Approval of Minutes 3. Public Comments on agenda items shall be limited to three (3) minutes unless waived at the discretion of the Chair 4. Communications 5. Committee Reports 6. General Manager's Recommendations 7. Unfinished Business 8. New Business 9. Resolutions 10. Manager's Remarks 11. Remarks by members of the Board. 12. Motion of Excused Absence Board Mtg.Minutes November 28,2006 Page 26 of 37 13. Public Comments on BWL-related matters shall be limited to three (3) minutes unless waived at the discretion of the Chair 14. Adjournment 10.1.2 In the absence of any objection, the presiding officer shall have the discretion to vary the order of business. 10.1.3 Preparation of Agenda A preliminary agenda shall be prepared by the General Manager and made available for distribution three days preceding a regular or special meeting for informational purposes only. However, the agenda is subject to unilateral change by the General Manager up until the meeting. 10.1.4 Changes to the Agenda In the absence of any objection, the General Manager or any member of the Board may add or subtract an agenda item at a meeting. In the event of objection, an affirmative vote of the majority of the Board shall be required to add, or subtract an agenda item. 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: 1. Roll Call Board Mtg.Minutes November 28,2006 Page 27 of 37 2. Public comment on agenda items shall be limited to three (3) minutes unless waived at the discretion of the chair 3. Agenda Topics 4. Other 5. 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. PUBLIC HEARINGS 12.1 The Board is required to hold a public hearing at least thirty days before the effective date of any changes in rate structure. The Board may also choose to hold public hearing on other topics as necessary or appropriate. 12.2 Although the Board will generally hold its public hearings in the Board Room at 1232 Haco Drive, Lansing, the Board may conduct public hearings at such places that it determines will best serve the public interest. 12.3 Notice of the hearing will be placed in at least one (1) newspaper of general circulation in the Lansing, Michigan area, no less than fourteen (14) days before the public hearing. The notice shall state the date, time, place and subject of the hearing. Notice shall also be posted electronically on the LBWL's website. 12.4 A quorum of the Board shall be necessary to conduct a public hearing. 12.5 No Commissioner shall engage in ex parte conversations about the topic of the public hearing either before or after the hearing until the full Board takes action on the topic. 12.6 Public hearings shall be open to the public, in accordance with the Open Meetings Act. 12.7 Individuals and organizations are invited to comment on the topic of the public hearing, either orally or in writing. Written comments should be addressed to the Corporate Secretary and should be presented on or before the date of the hearing. Oral comments shall be presented at the public hearing. The Chair may set reasonable limits on the length of oral presentations. Abusive or obscene comments shall not be permitted. 12.8 A transcript or recording of the hearing shall be made and kept for no less than three years. 12.9 In the case of a rate hearing, the Board will generally have a separate meeting or meetings after the public hearing to discuss the proposed changes to the rate structure and vote on the proposed changes. If the Board's discussions indicate that it intends to raise any customer's rate higher than proposed during the public hearing, the Board shall hold an additional public hearing on the proposed higher rate in accordance with this section before voting on the rates. The Board is not required to hold any additional hearings in order to approve a rate lower than the rate proposed at the public hearing. Board Mtg.Minutes November 28,2006 Page 28 of 37 12.10 If the Board acts on the topic discussed at the public hearing, it shall do so at a public meeting and shall approve a written resolution describing its action. 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 fifty (50) percent of regular or special meetings of the Board and fifty (50) percent of assigned committee meetings during any fiscal year. Failure to do so will be brought to the attention of City Council and may be grounds for removal by City Council from the office as a member of the Board. 12.1.1 Attendance in person by members of the Board at all meetings of the Board and Committees is encouraged. If personal attendance is not possible, attendance may be by teleconference or videoconference as long as the member's comments are heard by the entire assembly. Further, a majority of the Board or Committee must be physically present at the location specified in the notice of the meeting. All votes taken during a teleconference meeting shall be by roll call. Should a member participate in a Closed Meeting, in accordance with 1.6, via teleconference or videoconference, such member shall affirmatively state for the record that no unauthorized person can hear or view any portion of the Closed Meeting. Telephonic or videoconference participation in Closed Meetings is only permissible if the conversation cannot be overheard by unauthorized individuals. 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. XIV. MINUTES 14.1 Preparation and Filing The Secretary shall keep minutes of regular and special 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. Board Mtg.Minutes November 28,2006 Page 29 of 37 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 Inspection 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. CONFIDENTIALITY 15.1 Communications Members of the Board shall treat all information marked "confidential" or "privileged" accordingly and shall not release such information to unauthorized individuals, unless disclosure is required by law. All such information shall be returned to the Corporate Secretary or destroyed. 15.2 Closed Session All written and verbal information obtained and/or discussed in Closed Session shall be confidential and never discussed or shared outside of Closed Session, unless otherwise specified by 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 known to be in default to the City. 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 members of the Board must be notified of such amendments mailed at least four (4) days before the amendment is to be voted upon. The affirmative vote of five (5) members shall be required to amend the rules of procedure. Board Mtg.Minutes November 28,2006 Page 30 of 37 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 adjournment of a Board meeting, members of the news media may request interviews of members of the Board. 18.2.3 All policy statements shall be made on behalf of the Board by the Chair. See 4.3.1. 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, and the most immediate Past Chair shall assume the office of Vice Chair. 18.3.2 In the absence of the Chair, Vice Chair and Past Chair, a Temporary Chair shall be elected, who would hold office during the session, until the return or election of the Chair, Vice Chair or Past Chair. 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 or judicial decision. 18.5 Resolutions Any member of the Board may sponsor a resolution. Any resolution may be co-sponsored by other members of the Board. 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. 18.6 Reimbursement of Expenses Board Mtg.Minutes November 28,2006 Page 31 of 37 18.6.1 Consultant Expenses: The Board may hire external consultants, such as outside counsel and accountants. The full Board will meet before a consultant is hired to determine the scope of the issues to be addressed by the consultant, the consultant's budget, and the scope of contact with the Board. One Board member may be authorized as the primary contact with the consultant. If time constraints preclude a meeting of the full Board to discuss hiring the consultant, the Executive Committee may meet to approve the initial contact with the consultant, but may not authorize an expenditure of more than $1,000 to a consultant without the approval of the full Board. The consultant's work product shall be written and shall be immediately transmitted to all Board members upon completion of the requested work. All payments to consultants hired by the Board shall be deducted from the Board's budget. Board funds may not be expended to address an issue only applicable to one Commissioner. 18.6.2 Board Member Travel Expenses: The Board recognizes the value of membership and attendance at conferences, workshops, and meetings at the state, regional, and national levels that are appropriate and necessary to carry out Board of Water and Light business. As such, the Board encourages: 1. The attendance of its members in at least one out-of-state and one in-state conference seminar per year. 2. Each newly appointed member of the Board is encouraged to attend a formal workshop on governance as offered by the American Public Power Association. Additional travel must be pre-approved by the Executive Committee. Travel expenses shall be reimbursed in accordance with the Board's Travel Expense Policy. 18.6.3 Board Member Miscellaneous Expenses: Members of the Board may incur additional business expenses while representing the Board of Water and Light in the community. Business expenses such as cell phone, business luncheons, and parking are such examples of legitimate business expenses. Upon filing a claim in the prescribed form, each member of the Board shall be reimbursed for reasonable and necessary expenses incurred in the discharge of the Board Member's official duties, in accordance with the Board's Expense Reimbursement Policy The Executive Committee shall review Commissioner expenses on a quarterly basis. 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, 1/23/01, 11/19/02, 3/28/06, and 11/28/06. Board Mtg.Minutes November 28,2006 Page 32 of 37 MANAGER'S REMARKS Commissioner Smith noted that after speaking to Mr. Peffley the coal and rail update was removed from the agenda. She also advised that if there are any Commissioners that would like to receive the 15-minute presentation then Mr. Peffley will schedule time to speak with them. Mr. Peffley explained that the coal and rail update was originally presented at the Committee of the Whole meeting to a relatively large audience. In the interest of time they will not present the update again and will instead focus on the steam utility update. Steam Utility Plan-Status Update Bill Cook, Senior Vice President of Operations noted that the Board passed Resolution 2006-8-5 approximately 90 days ago that dealt with the 35% steam rate increase. At the time, staff was asked to develop a steam strategic plan that addressed issues relative to the Integrate Resource Plan (IRP), costs and efficiencies, utility growth, the consideration of opting out of steam, and the development of a rate increase strategy. Mr. Cook further advised that the analysis is not yet complete. However, they wanted to present a steam utility update on where they are in the process to date. The presentation materials included information on the following: • Adjust the steam rate increase down to 35% The estimated increase in net revenue due to the 35% rate increase is $2,178,000 annually. This resulted in a FY2007 revenue reduction of$1,878,000 for the original increase recommendation of 65%. Mr. Cook noted that the BWL's overall income of all utilities including the 35% increase was budgeted at $35,000 for all four utilities through October 2006. The 35% rate increase presently in effect caused a net loss of$1,600,000 whereas, the corresponding original budgeted rate increase of 65% would have resulted in a net loss of$1,2000,000. He went onto report that through September 2006 all BWL utilities have a combined net income of $10,254,506. The combined net income for this period was estimated in the FY2007 budget to be $5,111,111. Mr. Cook explained that organizationally as of September 2006, net income is twice as high as anticipated due to the sell of electricity and emission credits. He also reported that steam sales are lower than expected due to (warm) weather conditions. Mr. Cook commented that the steam utility as a financially independent entity is still losing money and has loss $1,600,000 fiscal year to date. • Develop a Steam Strategic Plan/Process to Include, A) Comprehensive 3-5 year Business Plan State of Michigan Concerns. Mr. Cook noted that he contacted Phyllis Mellon, Chief Deputy Director of the State of Michigan to ensure that the BWL had supplied them with all of the requested materials. Ms. Mellon is interested in the BWL's long-term strategies with respect to steam and will contact the BWL in the future to discuss the issue. Mr. Cook also stated that the State expressed interest in having an independent consultant do a cost of service study. There was no discussion as to who would be responsible for the cost of said study. The Commissioners expressed an interest in knowing what the discussions will entail. For example, does the State want to discuss the materials forwarded to them, generating additional steam load, steam utility solutions or the impact steam increases will have on State facilities. Board Mtg.Minutes November 28,2006 Page 33 of 37 Mr. Cook advised that they keep in touch with large customers so that they are aware of any significant changes in their usage profile so that they may incorporate those changes. He also indicated that the discussion would probably cover a range of those topics mentioned by the Commissioners. He went onto explain that the State has always been a good partner with the BWL and they are one of their largest customers. Mr. Cook noted that they certainly would want to involve the State in anything they do because they will be impacted by the BWL's decisions. Commissioner Smith concurred and further noted that she wanted to make sure that the BWL involves the State as much as possible with the process. She also noted that customer involvement will allow them to see why the BWL is making the decisions that it is making in trying to make the best decisions for all parties involved. Commissioner Graves advised that he understands that the State is one of the BWL's larger customers and suggested that they be reminded of their responsibility in growing load and assisting the BWL in developing the steam plan. • GM Contract Early Contract Termination Fees. a. Plant 1 termination fee is $5,200,000. GM has paid $520,000 and a reduction of $600,000 was made to settle a separate metering and billing issue. GM is not contesting the dollar amount. b. Plant 6 Rate of Return Guarantee is $9,322,000. GM is contesting the dollar amount. c. Debt service balance on the steam line serving Plant 6 is $3,020,491. GM is not contesting the dollar amount. The BWL is currently working with GM to finalize these payments and the contract allows GM to withhold payment until 2009. Therefore, the BWL does not expect that any payments will be received prior to that date. Commissioner Smith asked if the six-year forecast will contain any dollars from the pending contract termination fees? Mr. Cook replied by stating that the dollars will not appear in the 2007 or 2008 forecast. • Elements of the IRP a. Minimize investment in Eckert 1-3 until detailed Moores Park retirement evaluation is completed b. Delayed$2.9 million from FY2007 capital budget (except for those that are absolutely critical to maintain service). c. Fully evaluate option to retire Moores Park (analysis ongoing) • Plans to Further Reduce Costs Mr. Cook noted that operations and maintenance (O&M) expenses state that 27% of steam cost is coal, 25% labor and 11% benefits. This is an indication that cost-cutting measures will not be a painless endeavor. He also advised that steam utility costs allocations are also under review as some costs may or may not be appropriately charged. 0 Plans to Improve Efficiencies Including Scaling Back Board Mtg.Minutes November 28,2006 Page 34 of 37 The steam abandonment policy is in draft form and will be brought before the Board in the near future. The policy essentially addresses the issue of unproductive or uneconomic sections of the steam utility that can be pruned off. Presently, areas have been selectively chosen based on a capital expenditure basis where the cost of maintenance fees outweighs annual revenue. Mr. Cook went onto report that at some point in weighing alternatives the issue of who is going to pay for the steam conversion will arise. • Analysis and Plan for Business Growth Potential Steam utility marketing plan has been completed, and indicates modest growth potential. Some of the steam marketing challenges include a limited service territory (approximately one square mile in size), age of infrastructure (dates back to 1906), high construction costs, potential rate increases and the price of steam vs. natural gas. Commissioner Graves asked if the BWL is serving all State facilities located within the steam radius? Staff responded by stating yes. Commissioner Smith asked how does Lansing Community College fit into the load growth as the University Center is coming online; do they have more potential for downtown growth? Mr. Cook responded by stating that Lansing Community College is one of larger steam customers. They are in much of the investment that the BWL feels makes sense in basically getting piping to them to repair some of the leaks. • Consider the option of getting out of steam business entirely Mr. Cook stated that in 1981 the BWL faced the same dilemma. They in fact have a letter from Earl Brush, to our customers stating that the steam utility was in need of significant repair and some reliability considerations were going to have to be done at that time. They were looking at a time when steam was 8% above the price of natural gas and they recommended a 13% increase in lst year and a 20% increase in the 2°d year. As part of that process, they called the steam customers in to present their case and then received input from the public with respect to steam customers. Mr. Cook also reported that out of curiosity they used the IRP data to see what kind of systems purchase steam utilities. They found that there are firms that purchase steam systems at bargain prices, strip them of any value and either leave or advise the customers that they will no longer provide that service. He noted that that is probably not an acceptable alternative for the BWL but it is what is happening in the industry. Another issue yet to be addressed is Consumers Energy's ability to provide natural gas to the downtown area and who will absorb the cost of the conversion from steam to natural gas. The BWL is aware that they do not have a high-pressure gas system downtown because they have not needed it in the past. As a result, Consumers Energy would need to enhance their transmission system and discuss the associated cost to the customer. Mr. Cook went onto state that they have not approached Consumers Energy to discuss the issue at this present time. He further reported that it might make economic sense to keep the State of Michigan, Lansing Community College, and GM while trying to resolve the rest of issues as opposed to a complete gutting of the system. • Develop a Steam Strategic Plan/Process to Include, B) a rate increase strategy over the next 3-5 years that makes the steam business financially independent Board Mtg.Minutes November 28,2006 Page 35 of 37 Six Year Forecast- Status Quo: Continuing current operations in steam would require a 18.2% per year rate increase in each of the next 5 years to stand alone. Mr. Cook noted that the 18.2% is the benchmark. Therefore, any cost cutting measures to improve operations would decrease from the benchmark. He went onto advise that some of the issues discussed during the presentation will be brought before the Board during the 1"quarter of 2007. The dates are very aggressive but they are trying to tie this project in with the budgeting process for the upcoming year and as a result they will also attempt to finalize a recommendation for Board approved by mid 2nd quarter of 2007. Charles Moore, Interim Internal Auditor ask if it was possible to get an allocation of what the 37 steam utility employees (p. 8) costs are so that they may see how it is allocated as it will affect labor costs and social security pension. Mr. Cook noted that that is the direction they are moving towards in looking at the entire business model for the steam utility in determining if every cost is legitimate. He also reported that in 2005, they changed the allocation method and the allocation to steam increased 40-50%. It went from 5 to 7.5% of the A&G cost, which has exacerbated some of the problems. Commissioner Smith thanked staff for the presentation and indicated that it was the first time in 3-4 years that she had heard a comprehensive address relative to steam issues. She went onto state that they can clearly see how the last rate increase affected their community as a whole and that the BWL has a commitment to look at the issue from a ratepayers view not just financially. Commissioner Smith noted that she does not believe in cross subsidization but they need to look at what is going to be best. She further stated that this was the first she had heard the BWL talk about having a core base of steam utility customers and looking at what we are going to do for them. Commissioner Smith commented that the BWL did a good job on bringing a lot of the residential properties in two of the areas but she thinks this is a good comprehensive approach in getting more people involved in deciding what may happen. She also noted that it is the best way to move forward and that the BWL should not just look at it as something that is always going to be there and drain the other utilities because someway or another they are going to begin to pay for it. Commissioner Smith also stated that when you look at the allocation of resources in terms of manpower, fleet services and items of that nature they need to be properly allocated. Commissioner Graves stated that in moving forward it is clear to him that there is going to be considerable financial considerations that relate to the financial stability of the BWL. He also noted that there are going to be policy and legal issues that they will have to address in very significant ways. Unfortunately, some of the legal issues are completely integrated with other discussions. Therefore, he would like to put General Counsel on alert that these legal discussions will take place with various components and these discussions may involve internal as well as outside counsel. Staff noted that in 1981, the BWL did not get as far in the process as they have to date (in 2007) in determining how they would address the steam issues. However, in 1981 they decided to increase the rates by 35% and reinvest$10,000,000 to install main in the downtown area to increase reliability and pressure reducing valves at Eckert to allow steam to be supplied to Moores Park. Board Mtg.Minutes November 28,2006 Page 36 of 37 A complete copy of the Steam Utility Plan-Status Update report dated November 2006 is on file with the permanent minutes. Interim General Manager Dick Peffley reported the following: • They are in the process of signing a 4-year contract for 75,000 megawatts of hydro renewable power. The contract takes effect January 1, 2007. • The BWL could earn a possible $13,000,000 in revenue for wholesales sales if all excess capacity is sold. • Utility Financial Solutions will review the six-year forecast and he has also completed the information necessary to provide Mr. Moore in regards to the revised forecast. • The BWL's cost per kWh is the 41h lowest based on 2005 revenue per kW figures. • There have been a total of 13 stories on the BWL; 7 positive, 5 neutral, and 1 negative. • Capitol Advocacy Services Group, LLC was awarded the most recent lobbyist contract with the BWL. Governmental Relations Analyst Calvin Jones introduced Noel A. LaPorte, President. Mr. LaPorte expressed his gratitude and advised that he is looking forward to working with the BWL and being proactive on the BWL's behalf. Commissioner Smith thanked Mr. LaPorte for appearing before the Board and advised that she was glad to hear that he would be proactive in addressing issues on their behalf. She also commented that the Board would like to receive periodic status reports and they are also open to appearing before the legislature (similar to the fashion in which the former General Manager appeared) if such service is needed. COMMISSIONERS' REMARKS Commissioner Calkins inquired about the agenda for the upcoming Board retreat. Commissioner Smith responded by stating that she had spoken to the facilitator and he will send it to the Board by Wednesday, November 291h. She also pointed out an article on the Calvin Jones family in the latest issue of"Greater Lansing Woman" and encouraged everyone to read it. Commissioner Smith commended the BWL on its involvement in Silver Bells in the City, especially that of the General Manager. She went onto note its benefit to the regional area. EXCUSED ABSENCES On motion by Commissioner Graves, seconded by Commissioner Rodocker that the absence of Commissioner Rios be excused. Carried unanimously. PUBLIC COMMENT There were no public comments. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Graves, the meeting adjourned at 7:24 p.m. Board Mtg.Minutes November 28,2006 Page 37 of 37 /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk December 9, 2006 �r- !_ rr ZU.2 o r LD E _ Approved by the Board: November 28, 2006 �. —� ;'i-i 40 MINUTES ©F T E,BQA Dr0F 1C,OMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Monday, October 30, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Semone James, Santiago Rios, and Robin Smith(teleconferenced 5:47 p.m.). (Note: 4`h Ward Vacancy exists.) Absent: Commissioners Joseph Graves and Julee Rodocker. The Secretary declared a quorum present. Vice Chair Rios asked all to rise for the Pledge of Allegiance to the Flag. Vice Chair Rios called the meeting to order at 5:46 p.m. APPROVAL OF MINUTES By motion of Commissioner Cochran, seconded by Commissioner Calkins the minutes of the September 26, 2006 regular meeting were unanimously approved. PUBLIC COMMENT Joseph Davis, Business Manager of the IBEW Local 352 spoke to the issue of the recently ratified collective bargaining agreement scheduled for discussion under Manager's recommendations. He also expressed his desire for the Commissioners to complete the process during the Special Board meeting. A letter of resignation was received from Commissioner Ronald C. Callen, effective September 26, 2006. Received and placed on file. A letter was received from Fred Whiting, dated September 26, 2006 regarding the estimated billing process. Special Board Mtg October 30,2006 Page 2 of 25 Received and referred to management. A resolution was received from Lansing City Council designating October 1, 2006 as Public Power Week. Received and placed on file. A letter was received from Donald Hillman, Ph.D., dated October 17, 2006 regarding the electrical pollution of our environment. Received and placed on file. A letter was received from Nancy Parsons Mahlow, dated October 17, 2006 regarding tree-trimming concerns. Received and referred to management. A letter was received from Jennie Grau, dated October 18, 2006 regarding tree-trimming concerns. Received and referred to management. COMMITTEE REPORTS esolution 2006-10-1 COMMITTEE OF THE WHOLE REPORT October 6, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 11:30 a.m. on Friday, October 6, 2006. Commissioner Rios called the meeting to order at 11:48 a.m. and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Joseph Graves, Semone James (arrived at 11:46 a.m.), Santiago Rios, Julee Rodocker and Robin Smith. Absent: Commissioner Calkins Public Comment There were no public comments. Coal and Rail Contract Special Board Mt- October 30,2006 Page 3 of 25 Ron Ishimoto, Manager of Fuel Procurement gave a presentation on BWL fuel supply contracts and its associated pricing. The presentation reviewed the process undertaken to secure a new contractual agreement as well as the pricing strategy implemented to help reduce costs. It was also indicated that Arch Coal was the only supplier willing to negotiate, as others wanted to lock-in a set price. Mr. Ishimoto reported that the BWL secured a price of$12.00 per ton, which will result in a savings of$3.33 per ton or$.39 per kWh. Commissioner Smith asked what parameters are in place to allow the BWL to terminate the contract? Mr. Ishimoto responded by stating that there are several items within the contract that allow them the opportunity to back out if needed. Some of those items include quality (coal does not meet spec) and failure to deliver, among others. Dick Peffley, Interim General Manager further explained that delays in coal delivery from Union Pacific (Origin Rail Transportation) have been a bottleneck in the past. The contract stipulates that as long as they deliver 1.5 million tons a year then they are not in default of the contract. However, if Union Pacific is delayed in delivering the coal then the BWL is protected within the contract. Therefore, we would not be in breach of failing to buy from Arch Coal if there is a problem with the rail. Commissioner Rios recommended moving the presentation to the full Board not for purposes of approving it contractually but to communicate the cost savings to the employees and general public. Charles Moore, Interim Internal Auditor stated that he calculated a$9,000,000 calendar year savings. He went onto ask how this will affect rates? Bill Cook, Senior Vice President of Operations, explained that the savings will be directly passed onto the customers in the form of an energy cost adjustment for both steam and electricity. The savings will be reflected in the February billing dependent upon when the actual invoice is received. Commissioner Graves stated that they had projected 4% and went onto asks what are we currently projecting? Mr. Cook responded that stating that he would have to check and get back with Commissioner Graves as the initial projection was based on fiscal year 2007. After further discussion, it was suggested that the cost savings for the average residential customer be communicated to the public to help relay the relevance of this project and its cost savings ramifications. A copy of the presentation is on file if needed. Update on Organizational Changes Special Board Mtg October 30,2006 Page 4 of 25 The discussion centered on the topic of whether or not the Interim General Manager should make organizational changes. Commissioner Rios stated that when Mr. Peffley was appointed as the Interim General Manager he was given all the powers, authority, and duties of a General Manager. He went onto state that in his opinion he has all the authority that comes with that position including making whatever personnel and organizational changes deemed necessary as well as the authority to bring forth issues to the Commissioners with whatever needs Board approval. Commissioner Graves went onto stated that he did not disagree with Commissioner Rios' statement. However, he is concerned with the level of risk involved in having an Interim General Manager change organizational structure. Mr. Peffley reported that he did not have any other pending changes for the future. He presently has the team in place that he would like to work with and they are moving forward with the current group. Collective Bargaining Agreement On motion by Commissioner Smith, seconded by Commissioner Cochran to go into executive session to discuss the strategy and negotiation sessions connected with the negotiation of a collective bargaining agreement, protected by the Open Meetings Act (OMA) exemption MCL 15.268 (c). (12:09 p.m.). The roll was called. Yeas: Commissioners Cochran, Graves, James, Rios, Rodocker and Smith. Nays: None Absent: Commissioner Calkins Carried unanimously. Contract Discussions for Interim General Manager and Corporate Secretary The Commissioners continued in executive session to discuss a legal opinion with Amy Cavanaugh, General Counsel, protected by the Open Meetings Act exemption MCL 15.268(h). The Committee of the Whole meeting reconvened in open session at 1:08 p.m. Commissioner Rios advised that Ms. Cavanaugh would draft contracts for approval and discussion with the Interim General Manager and Corporate Secretary. Special Board Mtg October 30,2006 Page 5 of 25 Moved by Commissioner Cochran, seconded by Commissioner Smith, to move the employment agreements for the Interim General Manager and Corporate Secretary to the full Board for recommendation and approval. Other The Commissioners discussed the topic of BWL issued cell phones. It was stated that language within the Rules of Procedure under Reimbursement of Expenses addresses Members of the Board business expenses, which can be reimbursed upon submission of a receipt(s) to the BWL. After further discussion, it was suggested by the Interim Internal Auditor that all Board expenses be submitted to the Executive Committee for review on a monthly basis. There being no further business, the Committee of the Whole adjourned at 1:30 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Calkins to receive the report as presented. Action: Carried unanimously. esolution 2006-I0-2 COMMITTEE OF THE WHOLE REPORT October 10, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 5:30 p.m. on Tuesday, October 10, 2006. Commissioner Cochran called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James and Julee Rodocker. Absent: Commissioners Santiago Rios and Robin Smith. Public Comment There were no public comments. Discuss a Legal Opinion Moved by Commissioner Graves, seconded by Commissioner James to go into executive session to discuss a legal opinion presented by Melissa Jackson of Foster, Swift, Collins Special Board Mtg October 30,2006 Page 6 of 25 & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (5:30 p.m.). The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James and Rodocker. Nays: None Absent: Commissioners Santiago Rios and Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner James that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole meeting reconvened in open session at 5:58 p.m. Intestrated Resource Plan (IRP) Presentation Bill Cook, Senior Vice President of Operations introduced Robert Presnak, Senior Vice President and John Yost, Principal Consultant with Sargent & Lundy, LLC Consulting Group. Sargent & Lundy, LLC were charged with the responsibility of assessing the BWL steam and electric utility and providing recommendations based on their study findings. Mr. Yost proceeded to review the presentation that included load and demand forecasts, supply option development and evaluations, resource plan development and analysis, as well as environmental and other planning issues. Throughout the presentation the Commissioners raised several questions, some of which include the following: Commissioner Graves asked Mr. Yost what type of other work does Sargent & Lundy conduct and have they provided the BWL with these types of services in the past? Mr. Yost responded by stating that they are primarily a power-engineering firm that specializes in nuclear engineering, fossil power and renewable energy, and transmission engineering in addition to consulting work. Commissioner Cochran asked which were the least expensive resources? Mr. Yost stated that they did not review just the economics of the coal plant. They also looked at larger coal plants and their economies of scale assuming that the BWL could work with other partners to build a facility. Commissioner James asked if they had determined at what point the BWL would have to replace the units; at what point is it no longer optional to continue to make repairs? Special Board Mtg October 30,2006 Page 7 of 25 Mr. Yost responded by stating that that is an economic decision. However, they have determined that based on the figures there is not a need until the year 2030. At its current rate, the BWL could continue to utilize the equipment for the next 20—30 years and it would be economical. Mr. Yost went onto state that when considering retirement due to the age of the units one should start within the next 10— 15 years or by the year 2020. He also stated that economically the units could function for 50 years provided the parts are continually replaced. However,by 2030 the BWL will need to start replacing the generating units. He also stated that large costs are generally the driving factor in retirement. Commissioner James asked what other uses are there for back-up gas boilers (see page 16)? Mr. Yost explained that if the BWL opted out of the steam business then there would be no other use for gas boilers as there is a small resale value and the analysis was based on the assumption that the electric and steam utility would continue. Commissioner Graves asked if the purchase of gas boilers is economical (see page 16)? Mr. Yost reported that initially they looked at the viable options and then tried to determine if they were economical. He went onto state that the BWL would only purchase a gas boiler for reliability purposes (not resale value). Commissioner Graves went onto state that based on the presentation thus far it would appear that it is best to continue operating Moores Park. Mr. Yost continued with the presentation and advised that there is a savings in discontinuing the use of Moores Park. He also stated that the economic evaluations are based on cumulative present value, which takes into account the stream of revenues and costs between the present and the year 2030 and converts it to an equivalent lump sum dollar. This is done to allow for cost and investments that occur in different years. The discount rate used was 5%. Mr. Yost went onto explain that without excess wholesale market sales then the revenue requirements from BWL retail customers may increase. In regards to revenue requirements, anything with a 10% differential is the noise level of the accuracy of a long-term plan given all of the uncertainties (see page 17). He further explained that it is important to note that there is a large surplus value. Mr. Yost went onto report that the assets provide economics that are significantly better than the overall wholesale market. Primarily because the BWL units are coal fired which indicates low fuel costs and debt service due to their age, depreciation, and non-existent balance. He further expounded that the retirement of Eckert units 1 — 3 affects electric only whereas, the retirement of Moores Park has little affect on electric but the benefit of retirement alters the steam system and reduces the cost of excess capacity. Commissioner Cochran asked why does the regional market price increase in the year 2015 (see page 18)? Special Board Mtg October 30,2006 Page 8 of 25 Mr. Yost responded by stating that 1) there is significant need for base load generation in Michigan and the Midwest in 2010 but most of the projects cannot aboard until 2015. He went onto state that one will see significant influx of generation during that time period and 2) the new the Clean Air Interstate Rule and the Clean Air Mercury Rule will have significant impact on the cost of power. Commissioner Cochran went onto ask why would the cost increase occur with the influx of new systems going online? Mr. Yost explained that coal plants are a long-term investment with capital recovery costs and fixed costs. Therefore, the first several years average a higher cost of service. He went onto state that the wholesale markets perspective going forward is good from now through the year 2030. Mr. Yost also explained that the wholesale market price has been depressed because utilities have been able to meet their generation needs throughout the year, which allowed them to presumably meet their load requirements. He also stated that most utilities want to add base load generation. Commissioner Cochran asked how many years do they estimate that this will continue to be the case? How long will the bull market for excess sales continue to last? Mr. Yost responded by stating that assuming utilities add generation according to their needs then it will continue to be right where it is. He also stated that if someone overbuilt then you would not see the effects until 2015 or beyond. Mr. Yost went onto advise that it takes a minimum of 7—8 years for building and permits with the understanding that you are currently ready to build and there are no delays. If delays occur then it can add two more years to the process. Commissioner Cochran advised that based on the information they have good reason to give some creditability to the budgeting and estimating process to believe that the BWL's 35% of excess capacity will be purchased at a good price. Mr. Yost concurred and went onto state that there is an increase dependence on natural gas but very little of it is used to make energy. In the Midwest, the amount of energy produced from national gas is less than 5% of the total energy requirements and only a small part of it is used to produce electricity. In Michigan as 2004, 16% of energy was produced by gas, which is driving up the retail price. Mr. Yost also reported that the Michigan Public Service Commission recently concluded a 1-year capacity needs forum process and identified the need for new coal units to meet base load generation. Commissioner James asked a series of questions, which included 1) what were the simulation model values based upon, 2) how accurate were previous forecasts, 3) have they reviewed their projections to determine how comparable they are to actual results, and 4) what is the differential attributed to? Mr. Yost responded by indicating that there is a modeling program based on every power plant in the region, which adds the loads from all utilities to create a dispatch model that Special Board Mtg October 30,2006 Page 9 of 25 can simulate the sale of the electricity on an economic dispatch basis. The theory is based on the assumption that everyone is purchasing the least expensive source of power available at anyone time. He went onto state that the model looks at every year and inputs new generation as needed to balance capacity requirements and adjust for the fuel price index. Mr. Yost also stated that they normally review the last two years to see how close they were and what actually occurred. The numbers predicted for 2005 are $10-15 per kW lower than the actual wholesale market. He also reminded everyone to keep in mind that the wholesale market does not include all generation capacity, as all excess capacity is not placed on the market. Mr. Yost further explained that the wholesale market is not driven because everyone needs to input their exact cost or slightly above to dispatch. He went onto state that in his opinion the market is not fully traded and very little of the full generation is being used in the Midwest region. Mr. Yost also stated that if you were deciding between replacement or continuation of units then you would want those figures to be based on very conservative estimates. Commissioner Graves asked that if you had to choose one that had the potential of costing more than the forecast, would that be environmental compliance? Mr. Yost agreed and stated that that is because it drives the entire market up. However, electricity is driven up by coal, and so if the BWL has more environmental compliance then so does everyone else. He went onto state that as a keynote point, there are no rules that mandate the retirement of a generating unit because it is not meeting environmental requirements (see page 24). The question was asked as to the implications of the industrial MACT and financial ramifications relative to cost and mandating a plant closing? Mr. Yost responded by stating that the industrial MACT is a new rule that only affects the Moores Park units. It is directed at industrial boilers only. He also advised that environmental cost could make a plant inoperable. However, he pointed out that it is not mandated; it is simply an economic policy decision. Therefore, no one will tell you to close a plant but you will have to decide how to handle the situation. Commissioner James asked if there is an estimate for cost compliance? Mr. Yost responded by stating that the final report provides a detailed breakdown of the cost associated with level 1 - 3 compliance (see page 27). Commissioner Graves asked if the cost of biomass in the UP is essentially a function of demand (see page 29)? Mr. Yost stated that it is a function of delivery, collection and transportation. It is also a function of other uses such as whether or not you can sell it as mulch. If so, then it has a higher market value than if it were sold as fuel. Special Board Mtg October 30,2006 Page 10 of 25 Commissioner Calkins asked if the estimate includes the cost of meeting all the clean air requirements? Mr. Yost said yes and added that the busbar cost is embedded in the figure as well as the operations and maintenance costs associated with fuel. He went onto emphasize that this is based on large wind farms that have economies of scale and if you can buy into a large wind farm and possess ownership interest then it can be very competitive. Mr. Yost further explained that it is not only a way of meeting a renewable resource but it can actually reduce your present value revenue requirements. He also stated that one must recognize that you cannot use it as a large part of your generation because it is not a reliable source. However, it suggests that if there is a renewable portfolio then one could make a policy decision to participate, not on a RFP basis but as an owner. Commissioner Calkins asked why do they see either one or two wind generation units? Mr. Yost explained that it could still be economical because you would not have to tie into the transmission system. Whereas, the disadvantage of a large wind system is that they have to tie in the transmission system and there are significant costs associated with that task. He would not say that it is not economical to do one or two if you had the wind resources in this area. However, it might make sense to keep it within the system. Mr. Yost also explained that when noticing one unit here or there, it is often done by individuals who decided to install that source of power or it maybe a prototype for a larger system. Commissioner James asked how long has turbine technology been used for that source of energy? Mr. Yost reported that the economical ones with size and efficiency have been in use for less than 10 years. However, in the 1970's people started installing wind turbine generation. Commissioner Graves further expounded and stated that there were large farms in California during the 1980's. Commissioner James then asked at what point does it make sense to switch? And also, have they completed an analysis to say at what point it is feasible? Mr. Yost explained that you could not completely switch because it is unreliable and you would need a secondary source. He went onto state that it is a technology similar to a hydro unit whereas, sometimes the river flows and sometimes it does not. Wind generation acts in a similar manner but it can still be very economical as a blend with the overall portfolio. Mr. Yost answered the second question by stating that a 5-10% level could blend into an overall utility portfolio. Anything above that figure would require additional backup generation and the economies of scale are lost or decrease. Special Board Mtg October 30,2006 Page l l of 25 Mr. Yost continued the presentation and went onto point out that today's ratepayers benefit from lower costs due to coal fired generating units in operation since 1954 and 1985 respectively. He further stated that without the benefit of excess generation sales then ratepayers would have additional revenue requirements. Mr. Yost also posed a question in which he asked should all of the excess energy sales over the next 20 years go to benefit today's customer or should it be used to lay future groundwork. He further reported that he is not recommending one course of action over another, as that is a policy issue for the Board. Commissioner Cochran asked if we make the capital investment to control the emissions then can we sell the allowances? Mr. Yost agreed and stated that in the case of levels 1 —3 and to the extent that there was other compliance that was credited back, then when they say 8% more on a present value basis level 3 versus level 1, then that includes any benefit that came from the sell of allowances. Integrated Resource Plan: Policy Assumptions Mr. Cook explained that the IRP report is an analysis that provides input as into how to address and assess some of the issues into helping make long-term decisions. The next question that the BWL needs to ask is what are we going to do about it? Mr. Cook went onto report that there were some policy assumptions that they had to make in putting the plan together and they would like to obtain the Board's thoughts on the assumptions and see if they concur. He went onto state that the IRP did not look at retiring the steam system but in continuing operations and maximized the current assets. Mr. Cook also stated that it did not look at retiring the steam business, as that is a separate piece of analysis, which is forthcoming. He went onto report that the policy is essentially predicated on the following assumptions. • The BWL will continue to support a steam utility. • The BWL will continue to supply its capacity requirements through ownership. • Electric and Steam generation assets or any ownership interest in them will not be sold. * Cook -based on informal indication from the Board • Electric and Steam generation assets will be retained and maintained to levels* supporting a reliable supply for: ❖ Retail demand plus reserve requirements to the extent they remain the source of lowest production cost Cook- to meet customers load plus ample reserve requirements ❖ Sales into the electric wholesale market to the extent that excess capacity sales cover variable costs and contribute to BWL fixed costs. Cook—will continue to sell excess capacity to the extend that it benefits our incumbent customers • Wholesale Power Sale Risk will be mitigated through a Board approved Risk Management Policy and implementation of associated procedures and practices Special Board Mtg October 30,2006 Page 12 of 25 • BWL will install environmental equipment as economically justified compared to purchased allowance cost and comply through both equipment and allowance purchase. (This is how the BWL has historically complied.) • The BWL will include a portion of its generation portfolio as renewable Cook—believe the State of Michigan may develop requirements that may or may not affect the BWL. However, it may state that we have to have a percentage of the BWL's portfolio as renewable. The BWL has a modest green power program that has been well received and we believe that this would be a continuation of that policy. • Funding of Energy Efficiency and Demand Side Management initiatives will be allocated where program costs are offset by tangible cost savings Cook— 130 mW's of excess capacity means that the only way we can breakeven is to sell it to someone else. There is no incentive for the BWL at this point to develop a demand side management program unless it pays for itself. • These Policy Assumptions will be reviewed periodically and revised as needed *Subject to Board resolution 2006-8-5 Mr. Cook went onto state that the policy assumptions are the underpinnings of the action plan. They recognize that there are some issues with the asterisk (*) items that are subject to the steam utility resolution. However, those items were outside the scope of the RFP. Commissioner Calkins asked if staff had decided not to consider closing Moores Park? Mr. Cook responded by stating that they did not say they would not close it. They stated that they would not sell it to obtain cash. If there is no need for capacity then that is a different issue which needs to be addressed. Commissioner Calkins then stated that the fact that they have excess steam capacity does not really mean anything; it just sits there? Mr. Cook replied that it sits but there are associated fixed costs, which is why the alternative that Sargent&Lundy suggested in retiring the steam assets essentially saves them 37% on the revenue requirements. It represents the reduction of the asset and all of the operation and maintenance costs. Mr. Cook went onto explain that they have 300% more capacity than needed, if they are going to cut cost then there are few ways to achieve that goal. One of which is by retiring Moores Park. Commissioner Calkins went onto ask what is the 37% savings in terms of dollars? Mr. Cook stated that he had not yet calculated that figure and would have to provide him a response. He went onto state that the big picture indicates a savings of 37% but they need to determine what that means tangibility relative to this year or the next. Right now Special Board Mtg October 30,2006 Page 13 of 25 they are confirming the high level analysis of Sargent &Lundy. However, a part of the action plan would be to seek deeper analysis. Commissioner Calkins indicated that he was comfortable with what has been presented thus far. Mr. Cook went onto state that if the Commissioners do not agree with the policy assumptions then there is further work to be done. However, they wanted to make sure that they are meeting the Commissioners requirements. Integrated Resource Plan: Recommendations and Action Plan Doug Wood, Director of Engineering reported Sargent&Lundy's recommendations that came about as a result of the IRP. 1. Over the next 5 to 10 years, continue status quo electric generation operations and maximize the value of the excess generating capacity Wood—advised that they delayed $2.9 million from fiscal year 2007 capital budget; funds are still available to maintain reliability and compliance. However, there are some costs that were delayed for another year. Commissioner Cochran asked what would the BWL delay with the $2.9 million? Dick Peffley, Interim General Manager advised that there were some upgrades for life extension, igniters and other items that he was comfortable in delaying until they could determine where they want to be. Mr. Cook further stated that they wanted to make sure that any investments made are prudent relative to their long-term interests. 2. Fully evaluate the option to retire the Moores Park Units 3. Implement a comprehensive condition assessment program for the Eckert, Erickson, and Moores Park units 4. Evaluate selective additions of emission controls but use emission allowance purchases as the primary means of complying with CAIR and CAMR 5. Consider ownership or long term power purchase from large wind power projects and other renewable portfolio power projects 6. Consider the option of adding new generating facilities within the next 10 years to address the need for better long-term balance in the age and technology mix of the BWL generating fleet 7. Review costs and parameters of active industry Demand Side Management (DSM) and Energy Efficiency programs for applicability and feasibility 8. IRP Communications Plan 9. Obtain BWL Commissioner Approval Special Board Mtg October 30,2006 Page 14 of 25 Commissioner Cochran stated that in looking at 8-10 year opportunity for wholesale sales, it would be nice to have another 500 mW to put on the market. He went onto ask staff to think about preparing a cost study, obtain the last 3-years of that cycle, and determine if sales could pay for the investment. Commissioner Calkins advised that he was for moving ahead. Commissioner Graves asked Commissioner Cochran to further expound on his request to staff. Commissioner Cochran went onto explain there is an 8-10 year period in which the wholesale market will be extremely good for those with excess capacity. He further explained that if the BWL could build another plant within seven years then there maybe a 3-year time span in which all of the output could be sold on the wholesale market. Therefore, sales might generate enough revenue to pay for building the plant. Mr. Cook went onto state that if we look at that option then it would effectively mean that we are installing capacity solely for the wholesale market, which is speculative. He went onto state that he is not saying that it is good nor bad,but just recognize that it is what it is and secondly, that if in doing that we would be beat the market then others would be doing the same thing. Mr. Cook went onto state that essentially we would have to accomplish this task better than anyone else to be successful. Commissioner Graves replied by stating that his only concern is that we are going to expend staff resource time on this task. He went onto state that he believes that this should follow the completion of the studies that have already been requested. Commissioner Graves further explained that the cost study should come after the issues surrounding steam and Moores Park. Commissioner Cochran concurred and stated that he assumed that it would be a small effort in the accomplishment of what was just presented. He also added that he did not want to add yet another study, as this was not what he was trying to accomplish. Commissioner Graves replied that that was his only concern. Commissioner Calkins stated that it could also be integrated into the issue of whether or not to close a plant and thereby, allow the new facility to act as your next resource for generation. Mr. Cook reported that it does provide more options in moving forward relative to new generation and speculation in the next 10 years whereas; you would be hedged to some extent. Commissioner Cochran stated that he was thankful to the individuals that decided to build Erickson 20— 30 years ago as we are currently enjoying its benefits. Special Board Mtg October 30,2006 Page 15 of 25 Commissioner Calkins advised that he would presume that we would move this to the next board meeting. Mr. Cook replied that it was brought before the Board as information. However, they would like some indication that this was what they are looking for and the direction in which they would like to move. Commissioner Calkins stated that he would like the caveat added about steam relative to Moores Park, as the asterisk in the presentation did not advise him of anything. Commissioner Graves stated that basically this is not an action item coming before the Board so much as an informational item and an approval of the policy assumptions. Mr. Cook responded by stating that they are policy assumptions and a blessing that the action plan is in the Commissioners opinion an appropriate method of moving forward. Motion by Commissioner Calkins, seconded by Commissioner James to move the Integrated Resource Plan to the full Board. Carried unanimously. There being no further business, the Committee of the Whole adjourned at 7:43 p.m. Respectfully submitted, Robert Cochran, Acting Chair Committee of the Whole Motion by Commissioner Cochran, seconded by Commissioner James to approve the report as presented. Action: Carried unanimously. esolution 2006-1 D-3 AD HOC COMMITTEE October 17,2006 The Ad Hoc Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 11:30 p.m. on Tuesday, October 17, 2006. Commissioner James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves and Semone James. Staff Present: Amy Cavanaugh, General Counsel and Brandie Ekren, Associate Attorney Special Board Mtg October 30,2006 Pape 16 of 25 Public Comment There were no public comments. Discuss Possible Changes to the Rules of Procedure The Commissioners met to review and discuss possible changes to the Rules of Procedure. They also discussed the fact that the last amended (March 28, 2006) document has not been approved by City Council. Therefore, in an effort to avoid a lengthy delay between proposed amendments and approval, it was suggested that each Commissioner contact their respective Councilmember counterpart to encourage the implementation of said changes. The suggested changes below represent an effort to improve the guidelines that govern the Commissioners, provide additional clarity, enhance voting privileges and establish more equity. 1. Hiring Consultants—No individual Commissioner should have the authority to hire or contact outside consultants or counsel without the express support of the Board. At the onset of the contract or hiring decision, the Board should decide which designated Commissioner would have the responsibility of maintaining contact with the respective individual or firm. All questions or points of clarity should be addressed to the Board prior to directing them to the consultant/counsel to help reduce repetitive questions, maintain cost relative to billed time, and give Board members the opportunity to either address the issue or expand the content of the question. Intermittent communication will be handled by the designated Commissioner, final reports or opinions will be given to the Board as a whole and any subsequent questions will be directed to the Board prior to re- contacting the consultant or counsel. 2. Commissioner Calkins' recommendations—Commissioner Calkins originally suggested adding a section that would speak to the removal of officers. Amy Cavanaugh, General Counsel responded to his initial inquiry in a memo dated October 11, 2006. However, the response mistakenly spoke to the issue of removing a Commissioner and not an officer. Nevertheless, to address the original question, it was suggested that verbiage be added which specifically addressed the removal of an office during midterm. The language would essentially give confirmed Commissioners the authority to introduce a motion to remove an officer from his or her position by a majority vote. Voting Rights (Performance Reviews) - Commissioner Calkins originally proposed that a sitting Commissioner must be on the Board for a minimum of 8-months prior to participating in the employee performance review process. After much discussion, it was agreed that instead they would recommend that any confirmed Commissioner should recognize their limited exposure to an employee and consider abstaining from voting on that respective employee's contract renewal. 3. Majority Voting—The Commissioners discussed the issue of whether or not certain topics should require majority voting of the confirmed Commissioners in order for the motion to pass. It was suggested that voting based on a specific number of votes (e.g. Special Board Mtg October 30,2006 Page 17 of 25 requiring five votes when there are only six confirmed members) as opposed to majority of the confirmed Board could gridlock the process and hamper addressing difficult decisions. It was further stated that certain items of sufficient relevance to the BWL should continue to require majority voting of the confirmed members due to the nature of the subject matter. 4. Chair Appointments—The Commissioners discussed committee chair appointments and whether or not the process should change from its existing practice. The discussion centered on developing a system that would create more equity and avoid exclusionary practices. During the discussion, it was suggested that every Commissioner should have a nonexclusive voluntary committee assignment to help balance the workload and responsibilities. It was also stated that perhaps there is value in collecting the Commissioner's areas of interests prior to Board elections. After lengthy discussion, a few suggestions were made relative to changing the process of appointing committee chairs. a. Chair would appoint the Nominating Committee Chair only and all other committee Chair assignments would be by Board vote and election or, b. The Chair would not have the authority to appoint a Committee Chair. All Committee Chair assignments would be by Board vote and election only. 5. Committee Voting Privileges —The Commissioners expressed concerned over their lack of authority to vote at a committee meeting for which they were not appointed. Some members stated that if an individual reviews the packet, attends committee meetings and have an expressed interest in certain topics then they should have the right to vote at that respective meeting. The Commissioners recognized that there is opportunity to vote on said topic(s) at the Regular Board meeting. However, this attempts to allow voting privileges prior to its movement to the full Board. 6. Procedures for Public Hearings—There was some discussion regarding the regulation of public comment. Ms. Ekren noted that regulating speech is a non-advisable activity. However, the Chair has the authority to maintain peace and order throughout the meeting. 7. Procedures for Public Hearings—See Comments on Rules of Procedure For Ad Hoc Committee memo, section 3a, dated October 11, 2006. Ms. Ekren noted that there is a policy statement, which requires the General Manager to develop and implement procedures for rate hearings. However, there exist no direction from the Commissioners and this would be an appropriate topic in the Rules of Procedures. The Commissioners were in agreement with Ms. Cavanaugh and Ms. Ekren's recommendation and suggested that they draft language pertaining to the topic for further review. Recommendation - "Procedures for public hearings: We suggest that the Commissioners add a section that delineates the items such as scheduling, conduct of hearings (i.e. time limits, etc.), ex parte communications, and whether additional hearing opportunities are necessary if the Commission is inclined to approve rates other than those proposed at the public hearing." Special Board Mtg October 30,2006 Page 18 of 25 8. Procedures for Public Hearings— See Comments on Rules of Procedure For Ad Hoc Committee memo, section 3b, dated October 11, 2006. The Commissioners were in agreement that language should be added to the existing Rules of Procedure regarding Ad Hoc committees and their respective appointments or elections. Recommendation—"Ad hoc committees: There are currently no rules about ad hoc committees in the Rules. We would like to see a section added that discusses how these committees are appointed and who chairs the ad hoc committee." 9. Procedures for Public Hearings—See Comments on Rules of Procedure For Ad Hoc Committee memo, sections 3c—3e dated October 11, 2006. The Commissioners were receptive to Ms. Cavanaugh and Ms. Ekren's recommendations and suggested that they draft language pertaining to each respective topic for further review. c. Recommendation—"We would like to add provisions relating to amending the agenda or adding or deleting items from the agenda." d. Recommendation—"Conflict of interest: We would like to add a section on how we would handle conflicts of interest. For example, if a Commissioner has a conflict, he or she should reveal the interest, not participate in the Board discussion on that issue, and refrain from discussing the matter with any other Board member or staff." e. Recommendation— "Section 12.1 of the current Rules of Procedure need to be modified. It currently says, in part, that "Failure to [attend meetings] 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." The Charter gives the authority to remove Commissioners for cause to the City Council, not the Mayor. Therefore, this section should be modified to change the reporting to City Council. The Commissioners charged Ms. Cavanaugh and Ms. Ekren with the responsibility of drafting language for each suggested change to accommodate the above recommendations. Once complete a draft copy will be sent to the committee for further review and discussion. There being no further business, the Ad Hoc Committee adjourned at 1:33 p.m. Respectfully submitted, Semone James, Chair Ad Hoc Committee Motion by Commissioner James, seconded by Commissioner Rios to receive the report as presented. Special Board Mtg October 30,2006 Page 19 of 25 Action: Carried unanimously. Commissioner Smith entered the meeting at 5:56 p.m.and presided over the remaining agenda items. MANAGER'S RECOMMENDATIONS esolution 2006-I0- Ratification of IBEW Local 352 Union Contract WHEREAS, on October 13, 2006 the Board of Water and Light and IBEW Local 352 entered into a Tentative Agreement on a successor to the 2003-2006 collective bargaining agreement; WHEREAS, the terms and conditions of the Tentative Agreement are in accordance with the direction and authority that was delegated to the Board's negotiating team by the Board of Commissioners; and WHEREAS, the Tentative Agreement was submitted by the IBEW Local 352 negotiating team to the MEW membership for its approval and was ratified on October 18, 2006. RESOLVED, that the attached "Final Tentative Agreement" (dated and signed October 13, 2006) is hereby approved. RESOLVED FURTHER, that the Chair and Corporate Secretary are hereby authorized to sign the Agreement incorporating the settlement changes. -------------------- October 13, 2006 Final Tentative Agreement 1. Extend Collective Bargaining Agreement, Attachments and MOUs by a term of twenty-four (24) months. All provisions to remain in effect until Midnight, October 31, 2008. As outlined in Article XV, page 46, of the CBA, except as follows: a) Effective November 1, 2006: A 1% across the board increase in basic wage rates as listed in Attachments A and Al. b) Effective November 1, 2007: A 3% across the board increase in basic wage rates as listed in Attachments A and Al. 2. The Union agrees to participate with the Employer on a joint BWL Health Task Force. The Task Force will be comprised of representatives appointed by the Union and the Employer and may also include non-bargaining unit employees and other facilitators or experts to assist the work of the Task Force. The Task Force Special Board Mtg October 30,2006 Page 20 of 25 is to become informed and make recommendations to management about the following issues: a) The design of health insurance plans b) Health and wellness programs c) Health care cost containment challenges and strategies d) Other issues related to health and health insurance that the Task Force may deem appropriate. 3. The parties may discuss other matters of interest pursuant to Article XI, Section 10 (Special Conferences). IBEW Local 352 By: Joseph D. Davis Dated: , 2006 Its Business Manager Lansing Board of Water& Light By: Robin Smith Dated: 12006 Its Chair Lansing Board of Water &Light By: Rhonda Jones Dated: , 2006 Its Secretary Motion by Commissioner Cochran, seconded by Commissioner Rios to adopt Resolution 2006-10-4 for the Ratification of the IBEW Local 352 Union Contract. Discussion: Commissioner Rios stated that there was a lot of discussion in executive session regarding the union contract. He then asked Dick Peffley, Interim General Manager to publicly explain why he supports the new contract. Mr. Peffley responded by stating that he believes the two year negotiated contract extensive allows them to move forward. He further stated that Joseph Davis, Business Manager of IBEW Local 352 and Rick Daly, Labor Relations Manager have agreed to look at the contract over the course of the next two years. Mr. Peffley also explained that they have to look at healthcare issues and as a result a group of individuals were sent to attend a Michigan State University seminar entitled, "Negotiating Healthcare Without Bloodshed." He went onto state that he has decided to take it a step further by looking at the possibility of bringing an instructor onsite to educate everyone about the issues. Mr. Peffley also reported that they have a two-year window in which to address these issues Special Board Mtg October 30,2006 Page 21 of 25 as opposed to trying to address the whole contract in its entirety. He also stated that they put forth a fair raise that was supported by the union and they also agreed to talk about healthcare and other issues that need clarification. Mr. Peffley went onto state that the labor piece was very important to him in moving the workforce forward and he thinks that that goal was accomplished. Commissioner Rios went onto address Rick Daly and advised that the approach he had taken was a very good one. He then asked Mr. Daly to briefly comment on the healthcare aspect. Mr. Daly reported that they attended the "Healthcare Without Bloodshed" conference at the MSU School of Labor and Industrial Relations. There were approximately 40 participants and the BWL was well presented by himself, two management and five IBEW bargaining unit representatives. He went onto state that he was impressed with the sincerity and interest demonstrated by labor's attendance and especially that of the local IBEW representative. Mr. Daly stated that this gave him confidence that they may be able to begin to make some progress in the area of healthcare costs, plan design, and wellness programs. He went onto state that the process starts with learning because you cannot say what you agree or disagree with without first knowing where the issues lie. Mr. Daly also stated that he thinks that they have taken the first step together in understanding the problem. Commissioner Calkins stated that he would like to attend the meeting for staff on the healthcare issue when such a meeting takes place. Mr. Peffley replied by stating that he will notify all of the Commissioners as to when the meeting will take place. He went onto state that he was thinking out of the box in terms of bringing the instructor to the BWL as opposed to sending additional people to the seminar due to the associated expense. Commissioner Smith responded by asking Mr. Peffley to ensure that the Board is notified of the upcoming sessions. She also stated that this shows the kind of forward thinking that other company's look to do by actually bringing facilitators in for discussions instead of going onsite, which can be expensive. Commissioner Smith went onto state that she was very impressed with the fact that both sides are looking at the issue. She further stated that anytime conferences are called "Healthcare Without Bloodshed", then that is an indication of the fight that lies ahead. However, she went onto state that the more understanding we have while at the table together the better it will help to facilitate this process. Action: Carried unanimously. UNFINISHED BUSINESS None. Special Board Mtg October 30,2006 Page 22 of 25 RESOLUTIONS esolution No. 2006-10- APPROVAL OF INTERIM GENERAL MANAGER'S EMPLOYMENT AGREEMENT RESOLVED, that the Board of Commissioners approves the attached employment agreement with the Interim General Manager, Richard Peffley. -------------------------------------- Motion by Commissioner Calkins, seconded by Commissioner Rios to adopt Resolution 2006-10-5 for the approval of the Interim General Manager's Employment Agreement. Action: Carried unanimously. esolution No. 2006-10- APPROVAL OF CORPORATE SECRETARY'S EMPLOYMENT AGREEMENT RESOLVED, that the Board of Commissioners approves the attached employment agreement with the Corporate Secretary, Rhonda Jones. --------------------------------------- Motion by Commissioner Calkins, seconded by Commissioner Rios to adopt Resolution 2006-10-6 for the approval of the Corporate Secretary's Employment Agreement. Action: Carried unanimously. MANAGER'S REMARKS Dick Peffley provided a handout that listed the number of months without a lost time injury based on reporting areas from high to low risk. He also stated that staff has been directed to prepare an update on where the BWL stands relative to the National Safety Council report issued over a year ago. Mr. Peffley went onto state that the lost time injury report is a preview of what the BWL has done thus far. He also explained that a lost time injury is when an employee is hurt and misses' work due to that injury. The report stipulates that in the moderate and low risk categories the BWL is at 39+months without anyone losing time for an injury incurred while on the job site. He also reported that the 39+represents' the timeframe in which the graphs were created. Mr. Peffley then went onto state that they could map a longer period of time but that it was relatively easy to obtain the reported data. He also stated that a few of the high-risk areas such as, Electric System Operations, Electric Metering, and Erickson Station also have 39+ months without a lost time injury, which is a very impressive record. Mr. Peffley went Special Board Mt- 0 October 30,2006 Page 23 of 25 onto state that they will continue to work on reducing their first aids and medicals, which means that the employee did not lose work time. He also stated that they are following the National Safety Council recommendations in which they are proactively rewarding people for safety and also working to correct areas with low safety numbers. Commissioner Smith asked if they are following the National Safety Council's recommendations? Mr. Peffley responded by indicating yes and stated that they have applied a lot of the safety recommendations and an update will be forthcoming. He then proceeded to discuss the Balanced Scorecard and how the figures are prepared and calculated. Mr. Peffley went onto explain that staff created the Scorecard and typically one would prefer half of the measures to be up and half of them down, which is an indication that you have correctly developed your measures. He went onto state that if you are meeting all of your goals then they are probably too easy and if they are all down then you have set yourself up to fail. Mr. Peffley explained that the BWL has followed the Scorecard measures for three years in which they have been slightly massaged but not entirely changed. He also reported that the current Scorecard as of September 2006 reflects the best efforts that the BWL has ever accomplished. There are a total of 15 measures, 11 of which are up and 4 are down. He also stated that the message is getting to employees and he would eventually like to expand it downward and gain the input of the entire organization. Mr. Peffley also stated that this is impressive for the workforce and the budget is starting to reflect it as well. Commissioner Rios asked what timeframe does the document represent? Mr. Peffley responded by stating that it is cumulative and represents fiscal year July 1, 2006 through September 2006. He also went onto provide a tree trimming update in which, he stated that they are following through on the items that he had put forth in the letter originally addressed to the Commissioners, City Council and the Mayor's office. Mr. Peffley also reported that a community group of approximately 8 citizens is scheduled to meet on November 13th to obtain their input. Mark Nixon, Communications Director is coordinating the group session. They have also contacted the City of Lansing Forester and are attempting to schedule a meeting for the near future. Commissioner Cochran asked if Pete Baker would be present at the meeting? Mr. Peffley responded by stating that Mr. Baker's supervisor, Alan Carroll will be in attendance. He went onto state that they will be asking permission to put the Revised Six-year Forecast on the next Committee of the Whole agenda. At which point, staff will proceed to report in detail why the BWL will not need to borrow $30,000,000 to fund capital projects for this year or the next. Mr. Peffley went onto state that his forecast will show that the BWL does not need the funds this year and they will not move forward in borrowing the money at this time. Special Board Mt- 0 October 30,2006 Page 24 of 25 Commissioner Smith asked if Mr. Peffley if he would report to the Board why they do not need those monies? Mr. Peffley responded by stating yes and indicating that they will report why it is not necessary to borrow the money at this time. He went onto state that he asked Human Resources to do some research and found that in the last 20 years this is the first time that a union contract has been ratified and approved prior to the expiration date. Mr. Peffley applauded everyone for his or her efforts in this matter. Mark Nixon introduced his newest staff member, Cheval Breggins, Communications & Public Relations Representative. COMMISSIONERS' REMARKS Commissioner Cochran stated that he has been on the Board of Commissioners since March 2006 and there has been a lot of turmoil and stress which is now gone. He went onto state that a lot of the problems have been fixed and there is a great attitude among the employees and a much more positive atmosphere. He also stated that the workers never had a problem; it was the rest of them. Commissioner Cochran further explained that he is happy to be a Commissioner now and it is pleasant to see smiles and talk to the employees. He also stated that he is hearing an air of hope and renewed enthusiasm. Commissioner Cochran went onto state that one thing they all need to guard against are the agendas that surround us but are not a part of us and that has to do with politics of the upcoming elections. He went onto state that he hopes it does not affect them and that they continue as a team. Lastly, Commissioner Cochran closed by thanking staff and employees for allowing him to be a part of their process. Commissioner Smith thanked Mark Nixon and other staff that attended the City Council session in which the BWL was commended for Public Power Week efforts. She went onto state that for the past three years the Board has requested that the BWL acknowledge utility week celebrations in some form or another. Commissioner Smith commended Mr. Nixon for being at the BWL for less than a year and yet picking up on the urgency of the request. She further stated that she and other Commissioner's had the opportunity to handout some of the thank you bags, which were well received. Commissioner Smith continued by stating that she received a phone call from Jennie Grau who had received letters from Dick Peffley and herself regarding Ms. Grau's tree trimming concerns. She stated that after their conversation, Ms. Grau was very pleased with the response she received, the urgency given to the subject, and the proactive plan. Ms. Grau also expressed her surprise in receiving a phone call from the Commissioner relative to taking an interest in her concerns. Commissioner Smith also explained that during her first year on the Board, tree trimming was a major issue for many in her ward. However, over history she has seen that staff has tried to be very responsive to the community and she is pleased that they have been invited to be a part of the solution. Commissioner Smith also reported that Ms. Grau was especially pleased with the Board's response and their invitation to her to participate in the community discussion. Special Board Mtg October 30,2006 Page 25 of 25 Commissioner Smith also asked staff to report back to the Board on the status of the diversity initiatives. She went onto state that they had opportunity to attend the recent NAACP dinner and thanked the BWL for sponsoring two tables. Commissioner Smith also stated that they have a commitment to diversity and she would like to see it on a higher level so that they know where we are and if it is permeating throughout the organization. She also stated that she knows that there are initiatives out there and she has spoken to Shan Shaw about many of them. However, this will allow everyone to know what the BWL is doing in regards to the above. EXCUSED ABSENCES On motion by Commissioner Rios and seconded by Commissioner Cochran, that the absences of Commissioners Graves and Rodocker be excused. Carried unanimously. PUBLIC COMMENTS Joseph Davis stated that completing the contract negotiations took a great deal of weight off of the BWL. He went onto state that they have to be mindful that there are issues that need to be worked through. However, the greatest part is that they will be in a position to address those issues together. Mr. Davis also stated that the idea is to look forward and not backwards in working together and making this the best organization possible. He also stated that there are issues that he intends to commit to in addressing to help alleviate those items. Mr. Davis went onto thank the Commissioners for putting up with the last two years and much of the staff for working long hours on prior issues. He closed by stating that the 24-month contract allows them time to address other issues and help strive to make the BWL a better organization. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Cochran, the meeting adjourned at 6:29 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk November 8, 2006 Preliminary—Subject to Board Approval on November 28, 2006 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEL,TIN( .; LANSING BOARD OF WATER AND LIGHT .�:• ti 4 Monday, October 30, 2006 t The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Semone James, Santiago Rios, and Robin Smith(teleconferenced 5:47 p.m.). Absent: Commissioners Joseph Graves and Julee Rodocker. The Secretary declared a quorum present. Vice Chair Rios asked all to rise for the Pledge of Allegiance to the Flag. Vice Chair Rios called the meeting to order at 5:46 p.m. APPROVAL OF MINUTES By motion of Commissioner Cochran, seconded by Commissioner Calkins the minutes of the September 26, 2006 regular meeting were unanimously approved. PUBLIC COMMENT Joseph Davis, Business Manager of the IBEW Local 352 spoke to the issue of the recently ratified collective bargaining agreement scheduled for discussion under Manager's recommendations. He also expressed his desire for the Commissioners to complete the process during the Special Board meeting. A letter of resignation was received from Commissioner Ronald C. Callen, effective September 26, 2006. Received and placed on file. A letter was received from Fred Whiting, dated September 26, 2006 regarding the estimated billing process. Special Board Mtg October 30,2006 Page 2 of 25 Received and referred to management. A resolution was received from Lansing City Council designating October 1, 2006 as Public Power Week. Received and placed on file. A letter was received from Donald Hillman, Ph.D., dated October 17, 2006 regarding the electrical pollution of our environment. Received and placed on file. A letter was received from Nancy Parsons Mahlow, dated October 17, 2006 regarding tree-trimming concerns. Received and referred to management. A letter was received from Jennie Grau, dated October 18, 2006 regarding tree-trimming concerns. Received and referred to management. COMMITTEE REPORTS esolution 2006-10-1 COMMITTEE OF THE WHOLE REPORT October 6, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 11:30 a.m. on Friday, October 6, 2006. Commissioner Rios called the meeting to order at 11:48 a.m. and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Joseph Graves, Semone James (arrived at 1 1:46 a.m.), Santiago Rios, Julee Rodocker and Robin Smith. Absent: Commissioner Calkins Public Comment There were no public comments. Coal and Rail Contract Ron Ishimoto, Manager of Fuel Procurement gave a presentation on BWL fuel supply contracts and its associated pricing. The presentation reviewed the process undertaken to Special Board Mtg October 30,2006 Page 3 of 25 secure a new contractual agreement as well as the pricing strategy implemented to help reduce costs. It was also indicated that Arch Coal was the only supplier willing to negotiate, as others wanted to lock-in a set price. Mr. Ishimoto reported that the BWL secured a price of$12.00 per ton, which will result in a savings of$3.33 per ton or$.39 per kWh. Commissioner Smith asked what parameters are in place to allow the BWL to terminate the contract? Mr. Ishimoto responded by stating that there are several items within the contract that allow them the opportunity to back out if needed. Some of those items include quality (coal does not meet spec) and failure to deliver, among others. Dick Peffley, Interim General Manager further explained that delays in coal delivery from Union Pacific (Origin Rail Transportation) have been a bottleneck in the past. The contract stipulates that as long as they deliver 1.5 million tons a year then they are not in default of the contract. However, if Union Pacific is delayed in delivering the coal then the BWL is protected within the contract. Therefore, we would not be in breach of failing to buy from Arch Coal if there is a problem with the rail. Commissioner Rios recommended moving the presentation to the full Board not for purposes of approving it contractually but to communicate the cost savings to the employees and general public. Charles Moore, Interim Internal Auditor stated that he calculated a$9,000,000 calendar year savings. He went onto ask how this will affect rates? Bill Cook, Senior Vice President of Operations, explained that the savings will be directly passed onto the customers in the form of an energy cost adjustment for both steam and electricity. The savings will be reflected in the February billing dependent upon when the actual invoice is received. Commissioner Graves stated that they had projected 4% and went onto asks what are we currently projecting? Mr. Cook responded that stating that he would have to check and get back with Commissioner Graves as the initial projection was based on fiscal year 2007. After further discussion, it was suggested that the cost savings for the average residential customer be communicated to the public to help relay the relevance of this project and its cost savings ramifications. A copy of the presentation is on file if needed. Update on Organizational Changes The discussion centered on the topic of whether or not the Interim General Manager should make organizational changes. Special Board Mtg October 30,2006 Page 4 of 25 Commissioner Rios stated that when Mr. Peffley was appointed as the Interim General Manager he was given all the powers, authority, and duties of a General Manager. He went onto state that in his opinion he has all the authority that comes with that position including making whatever personnel and organizational changes deemed necessary as well as the authority to bring forth issues to the Commissioners with whatever needs Board approval. Commissioner Graves went onto stated that he did not disagree with Commissioner Rios' statement. However, he is concerned with the level of risk involved in having an Interim General Manager change organizational structure. Mr. Peffley reported that he did not have any other pending changes for the future. He presently has the team in place that he would like to work with and they are moving forward with the current group. Collective Bargaining Agreement On motion by Commissioner Smith, seconded by Commissioner Cochran to go into executive session to discuss the strategy and negotiation sessions connected with the negotiation of a collective bargaining agreement, protected by the Open Meetings Act (OMA) exemption MCL 15.268 (c). (12:09 p.m.). The roll was called. Yeas: Commissioners Cochran, Graves, James, Rios, Rodocker and Smith. Nays: None Absent: Commissioner Calkins Carried unanimously. Contract Discussions for Interim General Manager and Corporate Secretary The Commissioners continued in executive session to discuss a legal opinion with Amy Cavanaugh, General Counsel, protected by the Open Meetings Act exemption MCL 15.268(h). The Committee of the Whole meeting reconvened in open session at 1:08 p.m. Commissioner Rios advised that Ms. Cavanaugh would draft contracts for approval and discussion with the Interim General Manager and Corporate Secretary. Moved by Commissioner Cochran, seconded by Commissioner Snuth, to move the employment agreements for the Interim General Manager and Corporate Secretary to the full Board for recommendation and approval. Special Board Mt- October 30,2009 Page 5 of 25 Other The Commissioners discussed the topic of BWL issued cell phones. It was stated that language within the Rules of Procedure under Reimbursement of Expenses addresses Members of the Board business expenses, which can be reimbursed upon submission of a receipt(s) to the BWL. After further discussion, it was suggested by the Interim Internal Auditor that all Board expenses be submitted to the Executive Committee for review on a monthly basis. There being no further business, the Committee of the Whole adjourned at 1:30 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tern Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Calkins to receive the report as presented. Action: Carried unanimously. esolution 2006-I0-2 COMMITTEE OF THE WHOLE REPORT October 10, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 5:30 p.m. on Tuesday, October 10, 2006. Commissioner Cochran called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James and Julee Rodocker. Absent: Commissioners Santiago Rios and Robin Smith. Public Comment There were no public comments. Discuss a Legal Opinion Moved by Commissioner Graves, seconded by Commissioner James to go into executive session to discuss a legal opinion presented by Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (5:30 p.m.). The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James and Rodocker. Special Board Mt- October 30,2006 Page 6 of 25 Nays: None Absent: Commissioners Santiago Rios and Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner James that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole meeting reconvened in open session at 5:58 p.m. Integrated Resource Plan (IRP) Presentation Bill Cook, Senior Vice President of Operations introduced Robert Presnak, Senior Vice President and John Yost, Principal Consultant with Sargent & Lundy, LLC Consulting Group. Sargent & Lundy, LLC were charged with the responsibility of assessing the BWL steam and electric utility and providing recommendations based on their study findings. Mr. Yost proceeded to review the presentation that included load and demand forecasts, supply option development and evaluations, resource plan development and analysis, as well as environmental and other planning issues. Throughout the presentation the Commissioners raised several questions, some of which include the following: Commissioner Graves asked Mr. Yost what type of other work does Sargent & Lundy conduct and have they provided the BWL with these types of services in the past? Mr. Yost responded by stating that they are primarily a power-engineering firm that specializes in nuclear engineering, fossil power and renewable energy, and transmission engineering in addition to consulting work. Commissioner Cochran asked which were the least expensive resources? Mr. Yost stated that they did not review just the economics of the coal plant. They also looked at larger coal plants and their economies of scale assuming that the BWL could work with other partners to build a facility. Commissioner James asked if they had determined at what point the BWL would have to replace the units; at what point is it no longer optional to continue to make repairs? Mr. Yost responded by stating that that is an economic decision. However, they have determined that based on the figures there is not a need until the year 2030. At its current rate, the BWL could continue to utilize the equipment for the next 20—30 years and it would be economical. Mr. Yost went onto state that when considering retirement due to Special Board Mt.- October 30,2006 Page 7 of 25 the age of the units one should start within the next 10— 15 years or by the year 2020. He also stated that economically the units could function for 50 years provided the parts are continually replaced. However, by 2030 the BWL will need to start replacing the generating units. He also stated that large costs are generally the driving factor in retirement. Commissioner James asked what other uses are there for back-up gas boilers (see page 16)? Mr. Yost explained that if the BWL opted out of the steam business then there would be no other use for gas boilers as there is a small resale value and the analysis was based on the assumption that the electric and steam utility would continue. Commissioner Graves asked if the purchase of gas boilers is economical (see page 16)? Mr. Yost reported that initially they looked at the viable options and then tried to determine if they were economical. He went onto state that the BWL would only purchase a gas boiler for reliability purposes (not resale value). Commissioner Graves went onto state that based on the presentation thus far it would appear that it is best to continue operating Moores Park. Mr. Yost continued with the presentation and advised that there is a savings in discontinuing the use of Moores Park. He also stated that the economic evaluations are based on cumulative present value, which takes into account the stream of revenues and costs between the present and the year 2030 and converts it to an equivalent lump sum dollar. This is done to allow for cost and investments that occur in different years. The discount rate used was 5%. Mr. Yost went onto explain that without excess wholesale market sales then the revenue requirements from BWL retail customers may increase. In regards to revenue requirements, anything with a 10% differential is the noise level of the accuracy of a long-term plan given all of the uncertainties (see page 17). He further explained that it is important to note that there is a large surplus value. Mr. Yost went onto report that the assets provide economics that are significantly better than the overall wholesale market. Primarily because the BWL units are coal fired which indicates low fuel costs and debt service due to their age, depreciation, and non-existent balance. He further expounded that the retirement of Eckert units 1 — 3 affects electric only whereas, the retirement of Moores Park has little affect on electric but the benefit of retirement alters the steam system and reduces the cost of excess capacity. Commissioner Cochran asked why does the regional market price increase in the year 2015 (see page 18)? Mr. Yost responded by stating that 1) there is significant need for base load generation in Michigan and the Midwest in 2010 but most of the projects cannot aboard until 2015. He went onto state that one will see significant influx of generation during that time period Special Board Mt.- October 30,2006 Pale 8 of 25 and 2) the new the Clean Air Interstate Rule and the Clean Air Mercury Rule will have significant impact on the cost of power. Commissioner Cochran went onto ask why would the cost increase occur with the influx of new systems going online? Mr. Yost explained that coal plants are a long-term investment with capital recovery costs and fixed costs. Therefore, the first several years average a higher cost of service. He went onto state that the wholesale markets perspective going forward is good from now through the year 2030. Mr. Yost also explained that the wholesale market price has been depressed because utilities have been able to meet their generation needs throughout the year, which allowed them to presumably meet their load requirements. He also stated that most utilities want to add base load generation. Commissioner Cochran asked how many years do they estimate that this will continue to be the case? How long will the bull market for excess sales continue to last? Mr. Yost responded by stating that assuming utilities add generation according to their needs then it will continue to be right where it is. He also stated that if someone overbuilt then you would not see the effects until 2015 or beyond. Mr. Yost went onto advise that it takes a minimum of 7 — 8 years for building and permits with the understanding that you are currently ready to build and there are no delays. If delays occur then it can add two more years to the process. Commissioner Cochran advised that based on the information they have good reason to give some creditability to the budgeting and estimating process to believe that the BWL's 35% of excess capacity will be purchased at a good price. Mr. Yost concurred and went onto state that there is an increase dependence on natural gas but very little of it is used to make energy. In the Midwest, the amount of energy produced from national gas is less than 5% of the total energy requirements and only a small part of it is used to produce electricity. In Michigan as 2004, 16% of energy was produced by gas, which is driving up the retail price. Mr. Yost also reported that the Michigan Public Service Commission recently concluded a 1-year capacity needs forum process and identified the need for new coal units to meet base load generation. Commissioner James asked a series of questions, which included 1) what were the simulation model values based upon, 2) how accurate were previous forecasts, 3) have they reviewed their projections to determine how comparable they are to actual results, and 4) what is the differential attributed to? Mr. Yost responded by indicating that there is a modeling program based on every power plant in the region, which adds the loads from all utilities to create a dispatch model that can simulate the sale of the electricity on an economic dispatch basis. The theory is based on the assumption that everyone is purchasing the least expensive source of power available at anyone time. He went onto state that the model looks at every year and Special Board Mtg October 30,2006 Page 9 of 25 inputs new generation as needed to balance capacity requirements and adjust for the fuel price index. Mr. Yost also stated that they normally review the last two years to see how close they were and what actually occurred. The numbers predicted for 2005 are $10-15 per kW lower than the actual wholesale market. He also reminded everyone to keep in mind that the wholesale market does not include all generation capacity, as all excess capacity is not placed on the market. Mr. Yost further explained that the wholesale market is not driven because everyone needs to input their exact cost or slightly above to dispatch. He went onto state that in his opinion the market is not fully traded and very little of the full generation is being used in the Midwest region. Mr. Yost also stated that if you were deciding between replacement or continuation of units then you would want those figures to be based on very conservative estimates. Commissioner Graves asked that if you had to choose one that had the potential of costing more than the forecast, would that be environmental compliance? Mr. Yost agreed and stated that that is because it drives the entire market up. However, electricity is driven up by coal, and so if the BWL has more environmental compliance then so does everyone else. He went onto state that as a keynote point, there are no rules that mandate the retirement of a generating unit because it is not meeting environmental requirements (see page 24). The question was asked as to the implications of the industrial MACT and financial ramifications relative to cost and mandating a plant closing? Mr. Yost responded by stating that the industrial MACT is a new rule that only affects the Moores Park units. It is directed at industrial boilers only. He also advised that environmental cost could make a plant inoperable. However, he pointed out that it is not mandated; it is simply an economic policy decision. Therefore, no one will tell you to close a plant but you will have to decide how to handle the situation. Commissioner James asked if there is an estimate for cost compliance? Mr. Yost responded by stating that the final report provides a detailed breakdown of the cost associated with level 1 - 3 compliance (see page 27). Commissioner Graves asked if the cost of biomass in the UP is essentially a function of demand (see page 29)? Mr. Yost stated that it is a function of delivery, collection and transportation. It is also a function of other uses such as whether or not you can sell it as mulch. If so, then it has a higher market value than if it were sold as fuel. Commissioner Calkins asked if the estimate includes the cost of meeting all the clean air requirements? Special Board Mtg October 30,2006 Page 10 of 25 Mr. Yost said yes and added that the busbar cost is embedded in the figure as well as the operations and maintenance costs associated with fuel. He went onto emphasize that this is based on large wind farms that have economies of scale and if you can buy into a large wind farm and possess ownership interest then it can be very competitive. Mr. Yost further explained that it is not only a way of meeting a renewable resource but it can actually reduce your present value revenue requirements. He also stated that one must recognize that you cannot use it as a large part of your generation because it is not a reliable source. However, it suggests that if there is a renewable portfolio then one could make a policy decision to participate, not on a RFP basis but as an owner. Commissioner Calkins asked why do they see either one or two wind generation units? Mr. Yost explained that it could still be economical because you would not have to tie into the transmission system. Whereas, the disadvantage of a large wind system is that they have to tie in the transmission system and there are significant costs associated with that task. He would not say that it is not economical to do one or two if you had the wind resources in this area. However, it might make sense to keep it within the system. Mr. Yost also explained that when noticing one unit here or there, it is often done by individuals who decided to install that source of power or it maybe a prototype for a larger system. Commissioner James asked how long has turbine technology been used for that source of energy? Mr. Yost reported that the economical ones with size and efficiency have been in use for less than 10 years. However, in the 1970's people started installing wind turbine generation. Commissioner Graves further expounded and stated that there were large farms in California during the 1980's. Commissioner James then asked at what point does it make sense to switch? And also, have they completed an analysis to say at what point it is feasible? Mr. Yost explained that you could not completely switch because it is unreliable and you would need a secondary source. He went onto state that it is a technology similar to a hydro unit whereas, sometimes the river flows and sometimes it does not. Wind generation acts in a similar manner but it can still be very economical as a blend with the overall portfolio. Mr. Yost answered the second question by stating that a 5-10% level could blend into an overall utility portfolio. Anything above that figure would require additional backup generation and the economies of scale are lost or decrease. Mr. Yost continued the presentation and went onto point out that today's ratepayers benefit from lower costs due to coal fired generating units in operation since 1954 and 1985 respectively. He further stated that without the benefit of excess generation sales then ratepayers would have additional revenue requirements. Mr. Yost also posed a Special Board Mfg October 30,2006 Page I 1 of 25 question in which he asked should all of the excess energy sales over the next 20 years go to benefit today's customer or should it be used to lay future groundwork. He further reported that he is not recommending one course of action over another, as that is a policy issue for the Board. Commissioner Cochran asked if we make the capital investment to control the emissions then can we sell the allowances? Mr. Yost agreed and stated that in the case of levels 1 — 3 and to the extent that there was other compliance that was credited back, then when they say 8% more on a present value basis level 3 versus level 1, then that includes any benefit that came from the sell of allowances. Integrated Resource Plan: Policy Assumptions Mr. Cook explained that the IRP report is an analysis that provides input as into how to address and assess some of the issues into helping make long-term decisions. The next question that the BWL needs to ask is what are we going to do about it? Mr. Cook went onto report that there were some policy assumptions that they had to make in putting the plan together and they would like to obtain the Board's thoughts on the assumptions and see if they concur. He went onto state that the IRP did not look at retiring the steam system but in continuing operations and maximized the current assets. Mr. Cook also stated that it did not look at retiring the steam business, as that is a separate piece of analysis, which is forthcoming. He went onto report that the policy is essentially predicated on the following assumptions. • The BWL will continue to support a steam utility. =r • The BWL will continue to supply its capacity requirements through ownership. • Electric and Steam generation assets or any ownership interest in them will not be sold. 'r Cook - based on informal indication from the Board • Electric and Steam generation assets will be retained and maintained to levels* supporting a reliable supply for: Retail demand plus reserve requirements to the extent they remain the source of lowest production cost Cook- to meet customers load plus ample reserve requirements ❖ Sales into the electric wholesale market to the extent that excess capacity sales cover variable costs and contribute to BWL fixed costs. Cook—will continue to sell excess capacity to the extend that it benefits our incumbent customers • Wholesale Power Sale Risk will be mitigated through a Board approved Risk Management Policy and implementation of associated procedures and practices • BWL will install environmental equipment as economically justified compared to purchased allowance cost and comply through both equipment and allowance purchase. (This is how the BWL has historically complied.) • The BWL will include a portion of its generation portfolio as renewable Special Board Mtg October 30,2006 Page 12 of 25 Cook—believe the State of Michigan may develop requirements that may or may not affect the BWL. However, it may state that we have to have a percentage of the BWL's portfolio as renewable. The BWL has a modest green power program that has been well received and we believe that this would be a continuation of that policy. • Funding of Energy Efficiency and Demand Side Management initiatives will be allocated where program costs are offset by tangible cost savings Cook— 130 mW's of excess capacity means that the only way we can breakeven is to sell it to someone else. There is no incentive for the BWL at this point to develop a demand side management program unless it pays for itself. • These Policy Assumptions will be reviewed periodically and revised as needed Subject to Board resolution 2006-8-5 Mr. Cook went onto state that the policy assumptions are the underpinnings of the action plan. They recognize that there are some issues with the asterisk (*) items that are subject to the steam utility resolution. However, those items were outside the scope of the RFP. Commissioner Calkins asked if staff had decided not to consider closing Moores Park? Mr. Cook responded by stating that they did not say they would not close it. They stated that they would not sell it to obtain cash. If there is no need for capacity then that is a different issue which needs to be addressed. Commissioner Calkins then stated that the fact that they have excess steam capacity does not really mean anything; it just sits there? Mr. Cook replied that it sits but there are associated fixed costs, which is why the alternative that Sargent & Lundy suggested in retiring the steam assets essentially saves them 37% on the revenue requirements. It represents the reduction of the asset and all of the operation and maintenance costs. Mr. Cook went onto explain that they have 300% more capacity than needed, if they are going to cut cost then there are few ways to achieve that goal. One of which is by retiring Moores Park. Commissioner Calkins went onto ask what is the 37% savings in terms of dollars? Mr. Cook stated that he had not yet calculated that figure and would have to provide him a response. He went onto state that the big picture indicates a savings of 37% but they need to determine what that means tangibility relative to this year or the next. Right now they are confirming the high level analysis of Sargent & Lundy. However, a part of the action plan would be to seek deeper analysis. Commissioner Calkins indicated that he was comfortable with what has been presented thus far. Special Board Mt- October 30,2006 Page 13 of 25 Mr. Cook went onto state that if the Commissioners do not agree with the policy assumptions then there is further work to be done. However, they wanted to make sure that they are meeting the Commissioners requirements. Integrated Resource Platt: Recommendations and Action Platt Doug Wood, Director of Engineering reported Sargent & Lundy's recommendations that came about as a result of the IRP. 1. Over the next 5 to 10 years, continue status quo electric generation operations and maximize the value of the excess generating capacity Wood— advised that they delayed $2.9 million from fiscal year 2007 capital budget; funds are still available to maintain reliability and compliance. However, there are some costs that were delayed for another year. Commissioner Cochran asked what would the BWL delay with the $2.9 million? Dick Peffley, Interim General Manager advised that there were some upgrades for life extension, igniters and other items that he was comfortable in delaying until they could determine where they want to be. Mr. Cook further stated that they wanted to make sure that any investments made are prudent relative to their long-term interests. 2. Fully evaluate the option to retire the Moores Park Units 3. Implement a comprehensive condition assessment program for the Eckert, Erickson, and Moores Park units 4. Evaluate selective additions of emission controls but use emission allowance purchases as the primary means of complying with CAIR and CAMR 5. Consider ownership or long term power purchase from large wind power projects and other renewable portfolio power projects 6. Consider the option of adding new generating facilities within the next 10 years to address the need for better long-term balance in the age and technology mix of the BWL generating fleet 7. Review costs and parameters of active industry Demand Side Management (DSM) and Energy Efficiency programs for applicability and feasibility 8. IRP Communications Plan 9. Obtain BWL Commissioner Approval Commissioner Cochran stated that in looking at 8-10 year opportunity for wholesale sales, it would be nice to have another 500 mW to put on the market. He went onto ask staff to think about preparing a cost study, obtain the last 3-years of that cycle, and determine if sales could pay for the investment. Special Board Mtg October 30,2006 Page 14of25 Commissioner Calkins advised that he was for moving ahead. Commissioner Graves asked Commissioner Cochran to further expound on his request to staff. Commissioner Cochran went onto explain there is an 8-10 year period in which the wholesale market will be extremely good for those with excess capacity. He further explained that if the BWL could build another plant within seven years then there maybe a 3-year time span in which all of the output could be sold on the wholesale market. Therefore, sales might generate enough revenue to pay for building the plant. Mr. Cook went onto state that if we look at that option then it would effectively mean that we are installing capacity solely for the wholesale market, which is speculative. He went onto state that he is not saying that it is good nor bad, but just recognize that it is what it is and secondly, that if in doing that we would be beat the market then others would be doing the same thing. Mr. Cook went onto state that essentially we would have to accomplish this task better than anyone else to be successful. Commissioner Graves replied by stating that his only concern is that we are going to expend staff resource time on this task. He went onto state that he believes that this should follow the completion of the studies that have already been requested. Commissioner Graves further explained that the cost study should come after the issues surrounding steam and Moores Park. Commissioner Cochran concurred and stated that he assumed that it would be a small effort in the accomplishment of what was just presented. He also added that he did not want to add yet another study, as this was not what he was trying to accomplish. Commissioner Graves replied that that was his only concern. Commissioner Calkins stated that it could also be integrated into the issue of whether or not to close a plant and thereby, allow the new facility to act as your next resource for generation. Mr. Cook reported that it does provide more options in moving forward relative to new generation and speculation in the next 10 years whereas; you would be hedged to some extent. Commissioner Cochran stated that he was thankful to the individuals that decided to build Erickson 20 — 30 years ago as we are currently enjoying its benefits. Commissioner Calkins advised that he would presume that we would move this to the next board meeting. Special Board Mfg October 30,2006 Page 15 of35 Mr. Cook replied that it was brought before the Board as information. However, they would like some indication that this was what they are looking for and the direction in which they would like to move. Commissioner Calkins stated that he would like the caveat added about steam relative to Moores Park, as the asterisk in the presentation did not advise him of anything. Commissioner Graves stated that basically this is not an action item coming before the Board so much as an informational item and an approval of the policy assumptions. Mr. Cook responded by stating that they are policy assumptions and a blessing that the action plan is in the Commissioners opinion an appropriate method of moving forward. Motion by Commissioner Calkins, seconded by Commissioner James to move the Integrated Resource Plan to the full Board. Carried unanimously. There being no further business, the Committee of the Whole adjourned at 7:43 p.m. Respectfully submitted, Robert Cochran, Acting Chair Committee of the Whole Motion by Commissioner Cochran, seconded by Commissioner James to approve the report as presented. Action: Carried unanimously. esolution 2006-10-3 AD HOC COMMITTEE October 17, 2006 The Ad Hoc Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 11:30 p.m. on Tuesday, October 17, 2006, Commissioner James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves and Semone James. Staff Present: Amy Cavanaugh, General Counsel and Brandie Ekren, Associate Attorney Public Comment There were no public comments. Special Board Mtg October 30,2006 Page 16 of 25 Discuss Possible Changes to the Rules of Procedure The Commissioners met to review and discuss possible changes to the Rules of Procedure. They also discussed the fact that the last amended (March 28, 2006) document has not been approved by City Council. Therefore, in an effort to avoid a lengthy delay between proposed amendments and approval, it was suggested that each Commissioner contact their respective Councilmember counterpart to encourage the implementation of said changes. The suggested changes below represent an effort to improve the guidelines that govern the Commissioners, provide additional clarity, enhance voting privileges and establish more equity. 1. Hiring Consultants—No individual Commissioner should have the authority to hire or contact outside consultants or counsel without the express support of the Board. At the onset of the contract or hiring decision, the Board should decide which designated Commissioner would have the responsibility of maintaining contact with the respective individual or firm. All questions or points of clarity should be addressed to the Board prior to directing them to the consultant/counsel to help reduce repetitive questions, maintain cost relative to billed time, and give Board members the opportunity to either address the issue or expand the content of the question. Intermittent communication will be handled by the designated Commissioner, final reports or opinions will be given to the Board as a whole and any subsequent questions will be directed to the Board prior to re- contacting the consultant or counsel. 2. Commissioner Calkins' recommendations—Commissioner Calkins originally suggested adding a section that would speak to the removal of officers. Amy Cavanaugh, General Counsel responded to his initial inquiry in a memo dated October 11, 2006. However, the response mistakenly spoke to the issue of removing a Commissioner and not an officer. Nevertheless, to address the original question, it was suggested that verbiage be added which specifically addressed the removal of an office during midterm. The language would essentially give confirmed Commissioners the authority to introduce a motion to remove an officer from his or her position by a majority vote. Voting Rights (Performance Reviews) - Commissioner Calkins originally proposed that a sitting Commissioner must be on the Board for a minimum of 8-months prior to participating in the employee performance review process. After much discussion, it was agreed that instead they would recommend that any confirmed Commissioner should recognize their limited exposure to an employee and consider abstaining from voting on that respective employee's contract renewal. 3. Majority Voting—The Commissioners discussed the issue of whether or not certain topics should require majority voting of the confirmed Commissioners in order for the motion to pass. It was suggested that voting based on a specific number of votes (e.g. requiring five votes when there are only six confirmed members) as opposed to majority of the confirmed Board could gridlock the process and hamper addressing difficult decisions. It was further stated that certain items of sufficient relevance to the BWL Special Board Mtg October 30,2006 Page 17 of 25 should continue to require majority voting of the confirmed members due to the nature of the subject matter. 4. Chair Appointments—The Commissioners discussed committee chair appointments and whether or not the process should change from its existing practice. The discussion centered on developing a system that would create more equity and avoid exclusionary practices. During the discussion, it was suggested that every Commissioner should have a nonexclusive voluntary committee assignment to help balance the workload and responsibilities. It was also stated that perhaps there is value in collecting the Commissioner's areas of interests prior to Board elections. After lengthy discussion, a few suggestions were made relative to changing the process of appointing committee chairs. a. Chair would appoint the Nominating Committee Chair only and all other committee Chair assignments would be by Board vote and election or, b. The Chair would not have the authority to appoint a Committee Chair. All Committee Chair assignments would be by Board vote and election only. 5. Committee Voting Privileges —The Commissioners expressed concerned over their lack of authority to vote at a committee meeting for which they were not appointed. Some members stated that if an individual reviews the packet, attends committee meetings and have an expressed interest in certain topics then they should have the right to vote at that respective meeting. The Commissioners recognized that there is opportunity to vote on said topic(s) at the Regular Board meeting. However, this attempts to allow voting privileges prior to its movement to the full Board. 6. Procedures for Public Hearings —There was some discussion regarding the regulation of public comment. Ms. Ekren noted that regulating speech is a non-advisable activity. However, the Chair has the authority to maintain peace and order throughout the meeting. 7. Procedures for Public Hearings — See Comments on Rules of Procedure For Ad Hoc Committee memo, section 3a, dated October 11, 2006. Ms. Ekren noted that there is a policy statement, which requires the General Manager to develop and implement procedures for rate hearings. However, there exist no direction from the Commissioners and this would be an appropriate topic in the Rules of Procedures. The Commissioners were in agreement with Ms. Cavanaugh and Ms. Ekren's recommendation and suggested that they draft language pertaining to the topic for further review. Recommendation - "Procedures for public hearings: We suggest that the Commissioners add a section that delineates the items such as scheduling, conduct of hearings (i.e. time limits, etc.), ex parte communications, and whether additional hearing opportunities are necessary if the Commission is inclined to approve rates other than those proposed at the public hearing." 8. Procedures for Public Hearings—See Comments on Rules of Procedure For Ad Hoc Committee memo, section 3b, dated October 11, 2006. The Commissioners were in Special Board Mtg October 30,2006 Page 18 of 25 agreement that language should be added to the existing Rules of Procedure regarding Ad Hoc committees and their respective appointments or elections. Recommendation—"Ad hoc committees: There are currently no rules about ad hoc committees in the Rules. We would like to see a section added that discusses how these committees are appointed and who chairs the ad hoc committee." 9. Procedures for Public Hearings— See Comments on Rules of Procedure For Ad Hoc Committee memo, sections 3c—3e dated October 11, 2006. The Commissioners were receptive to Ms. Cavanaugh and Ms. Ekren's recommendations and suggested that they draft language pertaining to each respective topic for further review. c. Recommendation—"We would like to add provisions relating to amending the agenda or adding or deleting items from the agenda." d. Recommendation—"Conflict of interest: We would like to add a section on how we would handle conflicts of interest. For example, if a Commissioner has a conflict, he or she should reveal the interest, not participate in the Board discussion on that issue, and refrain from discussing the matter with any other Board member or staff." e. Recommendation— "Section 12.1 of the current Rules of Procedure need to be modified. It currently says, in part, that "Failure to [attend meetings] 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." The Charter gives the authority to remove Commissioners for cause to the City Council, not the Mayor. Therefore, this section should be modified to change the reporting to City Council. The Commissioners charged Ms. Cavanaugh and Ms. Ekren with the responsibility of drafting language for each suggested change to accommodate the above recommendations. Once complete a draft copy will be sent to the committee for further review and discussion. There being no further business, the Ad Hoc Committee adjourned at 1:33 p.m. Respectfully submitted, Semone James, Chair Ad Hoc Committee Motion by Commissioner James, seconded by Commissioner Rios to receive the report as presented. Action: Carried unanimously. Commissioner Smith entered the meeting at 5:56 p.m. and presided over the remaining agenda items. Special Board Mtg October 30,2006 Page 19 of 25 MANAGER'S RECOMMENDATIONS esolution 2006-10- Ratification of IBEW Local 352 Union Contract WHEREAS, on October 13, 2006 the Board of Water and Light and IBEW Local 352 entered into a Tentative Agreement on a successor to the 2003-2006 collective bargaining agreement; WHEREAS, the terms and conditions of the Tentative Agreement are in accordance with the direction and authority that was delegated to the Board's negotiating team by the Board of Commissioners; and WHEREAS, the Tentative Agreement was submitted by the IBEW Local 352 negotiating team to the IBEW membership for its approval and was ratified on October 18, 2006. RESOLVED, that the attached "Final Tentative Agreement" (dated and signed October 13, 2006) is hereby approved. RESOLVED FURTHER, that the Chair and Corporate Secretary are hereby authorized to sign the Agreement incorporating the settlement changes. -------------------- October 13, 2006 Final Tentative Agreement 1. Extend Collective Bargaining Agreement, Attachments and MOUs by a term of twenty-four (24) months. All provisions to remain in effect until Midnight, October 31, 2008. As outlined in Article XV, page 46, of the CBA, except as follows: a) Effective November 1, 2006: A I% across the board increase in basic wage rates as listed in Attachments A and Al. b) Effective November 1, 2007: A 3% across the board increase in basic wage rates as listed in Attachments A and A l. 2. The Union agrees to participate with the Employer on a joint BWL Health Task Force. The Task Force will be comprised of representatives appointed by the Union and the Employer and may also include non-bargaining unit employees and other facilitators or experts to assist the work of the Task Force. The Task Force is to become informed and make recommendations to management about the following issues: Special Board Mlo October 30,2006 Page 20 of 25 a) The design of health insurance plans b) Health and wellness programs c) Health care cost containment challenges and strategies d) Other issues related to health and health insurance that the Task Force may deem appropriate. 3. The parties may discuss other matters of interest pursuant to Article XI, Section 10 (Special Conferences). IBEW Local 352 By: Joseph D. Davis Dated: , 2006 Its Business Manager Lansing Board of Water & Light By: Robin Smith Dated: , 2006 Its Chair Lansing Board of Water & Light By: Rhonda Jones Dated: 12006 Its Secretary Motion by Commissioner Cochran, seconded by Commissioner Rios to adopt Resolution 2006-10-4 for the Ratification of the IBEW Local 352 Union Contract. Discussion: Commissioner Rios stated that there was a lot of discussion in executive session regarding the union contract. He then asked Dick Peffley, Interim General Manager to publicly explain why he supports the new contract. Mr. Peffley responded by stating that he believes the two year negotiated contract extensive allows them to move forward. He further stated that Joseph Davis, Business Manager of IBEW Local 352 and Rick Daly, Labor Relations Manager have agreed to look at the contract over the course of the next two years. Mr. Peffley also explained that they have to look at healthcare issues and as a result a group of individuals were sent to attend a Michigan State University seminar entitled, "Negotiating Healthcare Without Bloodshed." He went onto state that he has decided to take it a step further by looking at the possibility of bringing an instructor onsite to educate everyone about the issues. Mr. Peffley also reported that they have a two-year window in which to address these issues as opposed to trying to address the whole contract in its entirety. He also stated that they put forth a fair raise that was supported by the union and they also agreed to talk about healthcare and other issues that need clarification. Mr. Peffley went onto state that the Special Board MI.- October 30,2006 Pa.e 21 of 25 labor piece was very important to him in moving the workforce forward and he thinks that that goal was accomplished. Commissioner Rios went onto address Rick Daly and advised that the approach he had taken was a very good one. He then asked Mr. Daly to briefly comment on the healthcare aspect. Mr. Daly reported that they attended the "Healthcare Without Bloodshed" conference at the MSU School of Labor and Industrial Relations. There were approximately 40 participants and the BWL was well presented by himself, two management and five IBEW bargaining unit representatives. He went onto state that he was impressed with the sincerity and interest demonstrated by labor's attendance and especially that of the local IBEW representative. Mr. Daly stated that this gave him confidence that they may be able to begin to make some progress in the area of healthcare costs, plan design, and wellness programs. He went onto state that the process starts with learning because you cannot say what you agree or disagree with without first knowing where the issues lie. Mr. Daly also stated that he thinks that they have taken the first step together in ZD understanding the problem. Commissioner Calkins stated that he would like to attend the meeting for staff on the healthcare issue when such a meeting takes place. Mr. Peffley replied by stating that he will notify all of the Commissioners as to when the meeting will take place. He went onto state that he was thinking out of the box in terms of bringing the instructor to the BWL as opposed to sending additional people to the seminar due to the associated expense. Commissioner Smith responded by asking Mr. Peffley to ensure that the Board is notified of the upcoming sessions. She also stated that this shows the kind of forward thinking that other company's look to do by actually bringing facilitators in for discussions instead of going onsite, which can be expensive. Commissioner Smith went onto state that she was very impressed with the fact that both sides are looking at the issue. She further stated that anytime conferences are called "Healthcare Without Bloodshed", then that is an indication of the fight that lies ahead. However, she went onto state that the more understanding we have while at the table together the better it will help to facilitate this process. Action: Carried unanimously. UNFINISHED BUSINESS None. RESOLUTIONS esolution No. 2006-10- Special Board Mtg October 30,2006 Page 22 of 25 APPROVAL OF INTERIM GENERAL MANAGER'S EMPLOYMENT AGREEMENT RESOLVED, that the Board of Commissioners approves the attached employment agreement with the Interim General Manager, Richard Peffley. -------------------------------------- Motion by Commissioner Calkins, seconded by Commissioner Rios to adopt Resolution 2006-10-5 for the approval of the Interim General Manager's Employment Agreement. Action: Carried unanimously. esolution No. 2006-I0- APPROVAL OF CORPORATE SECRETARY'S EMPLOYMENT AGREEMENT RESOLVED, that the Board of Commissioners approves the attached employment agreement with the Corporate Secretary, Rhonda Jones. --------------------------------------- Motion by Commissioner Calkins, seconded by Commissioner Rios to adopt Resolution 2006-10-6 for the approval of the Corporate Secretary's Employment Agreement. Action: Carried unanimously. MANAGER'S REMARKS Dick Peffley provided a handout that listed the number of months without a lost time injury based on reporting areas from high to low risk. He also stated that staff has been directed to prepare an update on where the BWL stands relative to the National Safety Council report issued over a year ago. Mr. Peffley went onto state that the lost time injury report is a preview of what the BWL has done thus far. He also explained that a lost time injury is when an employee is hurt and misses' work due to that injury. The report stipulates that in the moderate and low risk categories the BWL is at 39+months without anyone losing time for an injury incurred while on the job site. He also reported that the 39+ represents' the timeframe in which the graphs were created. Mr. Peffley then went onto state that they could map a longer period of time but that it was relatively easy to obtain the reported data. He also stated that a few of the high-risk areas such as, Electric System Operations, Electric Metering, and Erickson Station also have 39+ months without a lost time injury, which is a very impressive record. Mr. Peffley went onto state that they will continue to work on reducing their first aids and medicals, which means that the employee did not lose work time. He also stated that they are following the National Safety Council recommendations in which they are proactively rewarding people for safety and also working to correct areas with low safety numbers. Special Board Mt; October 30,2006 Page 23 of 25 Commissioner Smith asked if they are following the National Safety Council's recommendations? Mr. Peffley responded by indicating yes and stated that they have applied a lot of the safety recommendations and an update will be forthcoming. He then proceeded to discuss the Balanced Scorecard and how the figures are prepared and calculated. Mr. Peffley went onto explain that staff created the Scorecard and typically one would prefer half of the measures to be up and half of them down, which is an indication that you have correctly developed your measures. He went onto state that if you are meeting all of your goals then they are probably too easy and if they are all down then you have set yourself up to fail. Mr. Peffley explained that the BWL has followed the Scorecard measures for three years in which they have been slightly massaged but not entirely changed. He also reported that the current Scorecard as of September 2006 reflects the best efforts that the BWL has ever accomplished. There are a total of 15 measures, 11 of which are up and 4 are down. He also stated that the message is getting to employees and he would eventually like to expand it downward and gain the input of the entire organization. Mr. Peffley also stated that this is impressive for the workforce and the budget is starting to reflect it as well. Commissioner Rios asked what timeframe does the document represent? Mr. Peffley responded by stating that it is cumulative and represents fiscal year July 1, 2006 through September 2006. He also went onto provide a tree trimming update in which, he stated that they are following through on the items that he had put forth in the letter originally addressed to the Commissioners, City Council and the Mayor's office. Mr. Peffley also reported that a community group of approximately 8 citizens is scheduled to meet on November 13th to obtain their input. Mark Nixon, Communications Director is coordinating the group session. They have also contacted the City of Lansing Forester and are attempting to schedule a meeting for the near future. Commissioner Cochran asked if Pete Baker would be present at the meeting? Mr. Peffley responded by stating that Mr. Baker's supervisor, Alan Carroll will be in attendance. He went onto state that they will be asking permission to put the Revised Six-year Forecast on the next Committee of the Whole agenda. At which point, staff will proceed to report in detail why the BWL will not need to borrow $30,000,000 to fund capital projects for this year or the next. Mr. Peffley went onto state that his forecast will show that the BWL does not need the funds this year and they will not move forward in borrowing the money at this time. Commissioner Smith asked if Mr. Peffley if he would report to the Board why they do not need those monies? Mr. Peffley responded by stating yes and indicating that they will report why it is not necessary to borrow the money at this time. He went onto state that he asked Human Special Board Mtg October 30,2006 Page 24 of 25 Resources to do some research and found that in the last 20 years this is the first time that a union contract has been ratified and approved prior to the expiration date. Mr. Peffley applauded everyone for his or her efforts in this matter. Mark Nixon introduced his newest staff member, Cheval Breggins, Communications & Public Relations Representative. COMMISSIONERS' REMARKS Commissioner Cochran stated that he has been on the Board of Commissioners since March 2006 and there has been a lot of turmoil and stress which is now gone. He went onto state that a lot of the problems have been fixed and there is a great attitude among the employees and a much more positive atmosphere. He also stated that the workers never had a problem; it was the rest of them. Commissioner Cochran further explained that he is happy to be a Commissioner now and it is pleasant to see smiles and talk to the employees. He also stated that he is hearing an air of hope and renewed enthusiasm. Commissioner Cochran went onto state that one thing they all need to guard against are the agendas that surround us but are not a part of us and that has to do with politics of the upcoming elections. He went onto state that he hopes it does not affect them and that they continue as a team. Lastly, Commissioner Cochran closed by thanking staff and employees for allowing him to be a part of their process. Commissioner Smith thanked Mark Nixon and other staff that attended the City Council session in which the BWL was commended for Public Power Week efforts. She went onto state that for the past three years the Board has requested that the BWL acknowledge utility week celebrations in some form or another. Commissioner Smith commended Mr. Nixon for being at the BWL for less than a year and yet picking up on the urgency of the request. She further stated that she and other Commissioner's had the opportunity to handout some of the thank you bags, which were well received. Commissioner Smith continued by stating that she received a phone call from Jennie Grau who had received letters from Dick Peffley and herself regarding Ms. Grau's tree trimming concerns. She stated that after their conversation, Ms. Grau was very pleased with the response she received, the urgency given to the subject, and the proactive plan. Ms. Grau also expressed her surprise in receiving a phone call from the Commissioner relative to taking an interest in her concerns. Commissioner Smith also explained that during her first year on the Board, tree trimming was a major issue for many in her ward. However, over history she has seen that staff has tried to be very responsive to the community and she is pleased that they have been invited to be a part of the solution. Commissioner Smith also reported that Ms. Grau was especially pleased with the Board's response and their invitation to her to participate in the community discussion. Commissioner Smith also asked staff to report back to the Board on the status of the diversity initiatives. She went onto state that they had opportunity to attend the recent NAACP dinner and thanked the BWL for sponsoring two tables. Commissioner Smith also stated that they have a commitment to diversity and she would like to see it on a Special Board Mt- October 30,2006 Pa,-e 25 of 25 higher level so that they know where we are and if it is permeating throughout the organization. She also stated that she knows that there are initiatives out there and she has spoken to Shan Shaw about many of them. However, this will allow everyone to know what the BWL is doing in regards to the above. EXCUSED ABSENCES On motion by Commissioner Rios and seconded by Commissioner Cochran, that the absences of Commissioners Graves and Rodocker be excused. Carried unanimously. PUBLIC COMMENTS Joseph Davis stated that completing the contract negotiations took a great deal of weight off of the BWL. He went onto state that they have to be mindful that there are issues that need to be worked through. However, the greatest part is that they will be in a position to address those issues together. Mr. Davis also stated that the idea is to look forward and not backwards in working together and making this the best organization possible. He also stated that there are issues that he intends to commit to in addressing to help alleviate those items. Mr. Davis went onto thank the Commissioners for putting up with the last two years and much of the staff for working long hours on prior issues. He closed by stating that the 24-month contract allows them time to address other issues and help strive to make the BWL a better organization. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Cochran, the meeting adjourned at 6:29 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk November 8, 2006 Approved by the Board: October 30, 2006 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, September 26, 2006 I cj- The Board of Commissioners met in the Boardroom of the Administrative Offices, 12 .�- Haco Drive, Lansing, Michigan. + Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, Julee Rodocker, and Robin Smith. Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 5:46 p.m. APPROVAL OF MINUTES By motion of Commissioner Calkins, seconded by Commissioner Graves the minutes of the July 25, 2006 regular meeting were unanimously approved. By motion of Commissioner Calkins, seconded by Commissioner Graves the minutes of the August 14-15, 18, 24, and September 1, 2006 special meeting were unanimously approved. PUBLIC COMMENT THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT AND ANYONE WISHING TO COMMENT ON ANY MATTER NOT ON THE AGENDA MAY DO SO IMMEDIATELY PRIOR TO ADJOURNMENT. Mike Brown, President of Capital Area United Way expressed his gratitude to the leadership and employees of the BWL for their support of the United Way campaign each year. CAUW increased its goal by$200,00 to $5,700,000 for the year and the BWL has also increased its target goal by$5,000. He went onto state that the needs of the Regular Board Mtg September 26,2006 Page 2 of 34 community have increased and therefore he hopes for a successful campaign. Lastly, Mr. Brown thanked Dick Peffley, Interim General Manager for his comments and stated that he looks forward to another great year of partnership with the BWL. Commissioner Smith welcomed new Commissioner, Julee M. Rodocker. COMMUNICATIONS None. COMMITTEE REPORTS esolution 2006-9-1 Board of Water and Light Commissioners August 10, 2006 Council President Harold Leeman called the joint meeting to order at 4:05 p.m. The meeting was held at 124 West Michigan Avenue, City Council Conference Room, loth Floor, City Hall, Lansing. Councilmember's Present: Sandy Allen, Joan Bauer, Kathie Dunbar, Brian Jeffries, Tim Kaltenbach, Harold Leeman, Randy Williams, and Carol Wood. Commissioners Present: Gary Calkins, Robert Cochran, Joseph Graves, Semone James (arrived 4:53 p.m.), Santiago Rios, Robin Smith. Absent: Ron Callen. (Note: 2°d Ward Vacancy exists.) City Staff Present: Jack Roberts Chief City Attorney, City Attorney Brigham Smith, Randy Hannan Assistant Chief of Staff, and Diane Bitely Interim Administrative Secretary. BWL Staff Present: General Manager Sanford Novick, Sr. Vice President of Operations Bill Cook, Sr. Vice President of Finance and Administration Dennis McFarland, General Counsel Amy Cavanaugh, Mark Nixon Communications Director, Corporate Secretary Rhonda Jones, and Calvin Jones Governmental Affairs Analyst. The purpose for the joint meeting was for the BWL to present an update to the City Council on the topics listed below. Packets of information derived from the Commissioners and presented to Council were handed out during the meeting on the request of Board Chair Robin Smith that involved special issues of concern relative to the BWL. 1. Budget Process—Board Chair Smith explained the budget process and advised Council of the measures that BWL staff and Commissioners go through in helping to create a budget. She further advised Council that management initially proposed a 35% Regular Board Mtg September 26,2006 Page 3 of 34 steam rate increase in addition to other potential cost reduction measures that the Commissioners were not willing to consider at the time. The cost reduction suggestions included plant sales, increased health care premiums, and no employee raises, among others. After further budget discussions, the Commissioners recommended a 65% steam rate increase based on the information available to them. However, in the interim and prior to the Commissioners recommendations, some major account customers were communicating with the BWL and staff advised that they were going to recommend a 35% steam rate increase. Board Chair Smith further explained that they expressed concern to management in considering such a high rate increase when they felt that other cost cutting measures, which could be implemented had not been sought out. She further stated that the BWL attempts to keep its utilities separate thereby; one utility does not subsidize the other. Commissioner Calkins advised that during the budget review process, the Commissioners had opportunity to discuss the impact of the proposed 35% steam rate increase and its implications. He went onto state that steam business customers were under the impression that the steam rate would increase by 35% based on managements' previous discussions and recommendation. However, after much discussion, the Commissioners agreed to recommend a 65% rate increase based on budgetary and organizational needs. At which time, Commissioner Calkins further stated that a 100%+ steam rate increase would not be out of the scope of recommendations if it were based on the cost of doing business. Commissioner Graves stated that he concurred with Commissioner Calkins perspective of the rate and budget process discussions regarding steam. He further explained that they had access to a computer software program that allowed them to run scenarios and obtain estimated revenue information based on the parameters that they had chosen. Commissioner Graves also advised that his primary concern is that of the electric ratepayer. He felt that the 1.5% electric rate increase was feasible for residential customers and expressed concern regarding the maintenance of low rates for that specific customer base. Commissioner Graves further explained that the lack of cost cutting measures in other areas help to result in the 65% steam rate increase proposal. Commissioner Rios stated that during the rate deliberations, they heard from several customers who advised the Board of the severe impact that a 65% steam rate increase would have on their respective business. Some of those customers included Lansing Community College, Michigan Catholic Conference, LEPFA, apartment managers and downtown local churches. He further stated that management did not provide them with adequate information to make sound decisions and thus the process was very difficult in accessing their options. Commissioner Rios also stated that the pending steam rate increase will not resolve the issues as they actually need 135% rate increase to fully address the problems at hand. He also explained that they were not aware of the exit fees associated with the GM plant closing and the possibility of claiming up to $18,000,000. Additionally, there were no discussions of how the GM payout would affect the pending rate steam increase. Commissioner Rios went onto state that there was no clear managerial direction or any consideration for BWL customers. He also advised that the Regular Board Mtg September 26,2006 Page 4 of 34 Commissioners did not want to entertain the idea of selling plants nor laying off workers, which also effects the steam proposal as they did not consider those options as viable cost cutting measures. Commissioner Cochran stated that a cost of service study should be done every year to provide information prior to rate change deliberation. Councilmember Wood asked what was the vote on the 65% steam rate increase? Commissioner Graves responded to Councilmember Wood's question by stating that it was unanimous. Board Chair Smith commented that a cost of service study was completed for electric and water. She went onto advise Council that they had previously attended an APPA conference to learn more about the process and search for different options. Board Chair Smith further explained that the steam rate was not based on a current cost of service study and that GM plays a roll in determining how they proceed. Councilmember Wood asked the question, what is different now as opposed to March 2006 when the last meeting with GM occurred? Commissioner Rios responded by stating that at the time they were concerned that GM would file for bankruptcy and so there were sensitivities involved in that situation. However, discussions have since progressed in that area. Councilmember Allen asked whether or not the rate increase would be 65%? Board Chair Smith responded by explaining that she could not say whether the rate would increase or decrease. However, she went onto explain that the rate deliberations are scheduled for August 15th and a decision would be forthcoming. Councilmember Allen asked if the Commissioners had considered offering early retirement packages as a means to cut costs? She also asked if the BWL had thought about increasing its rate to franchise areas? General Manager, Sanford Novick responded by stating that they had not considered increasing its franchise rates as the BWL is currently under contract and the electric and water utilities do not subsidize steam. Councilmember Kaltenbach asked what does the 65% steam rate increase represent in dollar figures? Senior Vice President of Finance and Administration, Dennis McFarland responded by stating that it represented $4,000,000 proportionally. Regular Board Mtg September 26,2006 Page 5 of 34 The Commissioners went onto advise Council that keeping the utilities separate requires the budgetary monies to come from another source. There was a plan to convert customers to another resource, which has since reduced the number of steam users. They further explained that GM is not in violation of their agreement. They have an option of paying a lump sum amount or amortizing over a period of time. Therefore, the BWL expects payment within 3.5 years. Council stated that the meeting was scheduled to bring the two groups together so that they may work as a team. They also expressed concern over the level of negativity coming from the BWL as a whole. A suggestion was made to look at partnering with the City to save money on healthcare. Councilmember Wood asked the BWL who decided to handout the document and its associated contents. Board Chair Smith responded by stating that it was compiled at the last minute as they were still trying to determine what was going to appear on the agenda. Commissioner Graves went onto state that he did not have a chance to review the packet nor have input as to what was contained within it. 2. Internal Auditor. Board Chair Smith reported that the Internal Auditor position has been open since January 2006. She went onto state that since that time they have hired a search firm to look for a permanent auditor and they will hire an Interim Internal Auditor to temporarily assist the Board. 3. Human Resources Review. Vice Chair Rios reported that the Executive Committee has made a recommendation and will bring it before the full Board for a vote next week. He went onto state that it is an audit of the human resource department and the Board of Water and Light in general. Commissioner Rios also stated that the information obtained from the audit would also be used to look at future practices. 4. BWL Commissioner Vacancies. Board Chair Smith stated that they have seven Commissioners on an eight person Board thus she is requesting an update on the status of filing the vacancy. She went onto comment that it makes it difficult to fully function as a Board when you take into consideration vacations, work schedules and things of that nature. Council President Leeman stated that the issue is currently before the Committee of the Whole. He went onto state that one of the council person's missed the interview process and they are attempting to bring that individual up to date. Commissioner Graves expressed concern over the candidates' response to a specific question relative to the evaluation of the General Manager that was asked during the interview process. Regular Board Mtg September 26,2006 Page 6 of 34 Commissioner Rios responded by stating that it was a mute point since the General Manager's evaluation will occur next Monday. Commissioner Graves then stated that it was not mute because in his opinion the response exhibited a level of naivety regarding the situation and in general. Randy Hannan, Assistant Chief of Staff stated that Julee Rodocker had been a candidate for 70 days and they are still waiting for Council's decision. Councilmember Dunbar responded to Commissioner Graves comment by stating that most candidates would have stated that they could participate in the evaluation process, as they would have been expected to start working right away. Commissioner Calkins disagreed and stated that he did not participate when he first became a Board member because he did not feel that he had adequate knowledge to make a decision of that nature regarding someone's career. Councilmember Jeffries stated that he thinks Council is struggling with what is needed to compliment the Board of Commissioners at this time. Therefore, it is difficult to make a decision. Board Chair Smith responded by stating that she was asked to present to Council a concept of an ideal candidate, which she thought to be someone who is diverse, financially knowledgeable and represents the community. Commissioner Graves stated that his ideal candidate would have strong finance, accounting and human resource skills. Commissioner Cochran stated that regardless of why the nomination is being held up, they still need another Commissioner to help decrease the workload and enable them to make legal decisions. Council President Leeman advised that the Mayor's request to trade Commissioner Rios and Commissioner Callen's ward position was declined. He went onto state that the re- appointment of Commissioner Rios has not been brought before Council at this time. Councilmember Dunbar indicated that she did not feel that the current Commissioner nominee has a set agenda. She went onto state that she believes that someone with an institutional background can still be effective. Councilmember Dunbar also stated that she further believes that anyone who comes before Council right now will be highly scrutinized. Commissioner Cochran expressed concerned that the meeting was moving into potential litigation issues and thus he decided to leave (6:00 p.m.). Regular Board Mtg September 26,2006 Page 7 of 34 5. Management. Councilmember Jeffries requested a response to the packet handed out during the meeting from BWL management and anyone else who may have input on the subject matter. After further discussion, it was suggested that the information presented was slanted and did not represent the sentiment of the entire Board. Although, other Commissioners indicated that it was representative of some of the issues that had been brought to their attention. Commissioners Calkins and Graves also expressed concern that this was the first time that they had seen the document and thus they did not have opportunity for input nor review. Commissioner Rios expressed concern that Council would attempt to advise the Commissioners on how to evaluate the General Manager. Councilmember Jeffries indicated that that was not their intention. He went onto state that Council did not want to weigh in on the subject matter. However, they did want to know what to expect, as they will have to deal with the fallout of the situation, such as in the matter of former General Manager, Joseph Pandy. Commissioner Graves stated that in November 2005 the General Manager was given good remarks but he received the performance review in January 2006. Therefore, since that time something has occurred to change the overall sentiment. Councilmember Bauer indicated that she understands the magnitude of Commissioner appointments and how it affects the City and its residents. Councilmember Wood went onto state that that is why full consideration is taken into account which results in further scrutiny of any potential Commissioner candidates. Following discussion, it was agreed that joint City Council and BWL Commissioner meetings are beneficial to both parties to express concerns and maintain dialogue. 6. Public Comment. BWL retiree expressed concern over hearing that BWL retiree benefits should be increased by 5%, which he felt was significant. He also stated that the $40,000,000 fund set aside for retiree health benefits should be put to use on their behalf as he understands that it is specifically set aside for health care use only. GM retiree stated that the GM shutdown was well known ahead of time, except for the fact that it closed 6-months earlier than originally announced. He went onto state that the shutdown information should have been taken into consideration during the budget planning process. Board Chair Smith stated that all of the information in the document handed out earlier in the meeting is of public record. She went onto apologize for not giving opportunity to the Commissioners to review said document. Regular Board Mtg September 26,2006 Page 8 of 34 The meeting adjourned at 6:30 p.m. Motion by Commissioner Cochran, seconded by Commissioner James to receive the Joint City Council/BWL Commissioner Report as presented. Action: Carried unanimously esolution 2006-9-2 COMMITTEE OF THE WHOLE REPORT August 30,2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 8:00 a.m. on Wednesday, August 30, 2006. Commissioner Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran (teleconferenced at 8:18 a.m.,physically arrived at 8:40 a.m.), Joseph Graves, Semone James, Santiago Rios, Julee Rodocker and Robin Smith. Absent: Commissioners Gary Calkins and Ronald Callen Public Comment There were no public comments. STRATEGIC PLAN FOR STEAM BUSINESS AND BUDGET MONITORING The Commissioners had lengthy discussion on the process to be used in creating a strategic plan, rate strategy and budget monitoring for the steam business relative to the 3-part motion passed on August 15, 2006 for the next three to five years. Dick Peffley, Interim General Manager stated that Bill Cook, Vice President of Operations and Dennis McFarland, Vice President of Finance and Administration met with the former General Manager prior to his resignation to discuss the motion and its implementation. As such, Mr. Cook summarized managements' thoughts on the topic which include the following: • The first step will be to communicate the completed results of the Integrated Resource Plan (IRP) to the Commissioners, which is scheduled to take place on October loth pending vendor confirmation. The IRP is a document developed over the last 8-months which looked at forecasted loads, production facilities, operating records, production capability, environmental concerns, potential regulations, renewables and conservation. The information contained within the IRP provides a snapshot of those issues with respect to the steam and electric facilities. One such item that the IRP highlighted is the 280% excess capacity on the steam system and the possibility of reaching a 37% reduction in revenue Regular Board Mt-. September 26,2006 Page 9 of 34 requirements, if production were shifted to Eckert, and Moores Park were retired. The IRP also includes recommendations on things that could be done to allow steam production to be shifted to Eckert. • Policy Ramifications—There are policy implications associated with any plan to move forward. There is a list of 12 assumptions by which to make a recommendation and those policy considerations will need Board approval. • Develop three to four different steam scenarios that would take into account best and worse case scenarios for Moores Park as well as the inclusion of potentially shifting load to Eckert. • General Motors initially told the Board of Water and Light that Plants 1 and 6 would close in 2008 but that date was moved up by 1.5 years. They never alluded to the closing of Plants 2 and 3, which represented an additional 12-15% of the steam load. There are current internal studies taking place that are looking at Eckert and Moores Park, as well as determining where the load solidifies to ensure that there is enough production. • A steam-marketing plan was created in 2001/02 that interviewed developers to determine the potential steam utility growth in the downtown area. Management is going to attempt to update the marketing plan in the next several months. However, they do not anticipate that it has significantly changed since the previous analysis. • Steam Abandonment—a study was conducted approximately 2-years ago that determined steam revenue per block. As a result, a project began in which certain unproductive portions of the steam system were disconnected to help bring the steam system into a more viable economic picture, which will also be a part of the strategy discussion. • Managements' analysis of the above matters, which include GM's projected usage, will be complete and ready for presentation at a committee meeting November 2006. Commissioner Graves asked whether or not the strategy would include getting out of the steam business. Mr. Cook responded by stating that they never assumed that the BWL would get out of the steam business. Mr. McFarland then stated that getting out of the steam business would require a separate piece of analysis. By November, they could provide `structured analysis' that presents the issues, policy concerns and possible options. However, they would not be prepared to present a clear plan within 90-days of how to get out of the steam. A decision of that nature would take more time to help ensure its completeness and accuracy. Commissioner Rios stated that he believes the analysis should start with the implications associated with abandoning the steam utility, which includes policy and financial Regular Board Mtg September 26,2006 Page 10 of 34 ramifications and using this as a foundation to determine a possible strategy. He went onto state that a part of getting out of the steam business may be to sell portions of it or perhaps convert our present customers to an alternative source. Commissioner Rios stated that he did not know if that is the case but perhaps they should operate from that point of view. Mr. McFarland stated that they are going to try and address the issue by using the assumption of staying in the steam business and then utilizing the scenarios in terms of knowing that the steam rates are always capped in terms of what we could charge our existing customers relative to the cost of gas. Commissioner Rios stated that there maybe policy, customer service, and political reasons why they should not get out of the steam business. However, he stated that he thinks they should first begin to look at this from a strictly financial perspective and add the other considerations to help determine a plan. Mr. McFarland stated that they are two parallel tracks. The first one deals with the scenarios previously mentioned in which we develop the best plan possible based on what is available and the other is in which we determine how to abandon the steam business. Commissioner Smith stated that abandoning the steam business must be the first question we address. She went onto state that they could not base their decisions on GM as there are too many changes. However, the notion must be, are we going to be a steam provider or not, if we are then we must take into consideration the political and financial ramifications. Commissioner Smith went onto state that it would be beneficial for them to know the results of the 2001/02 growth plan as there are parallel tracks. However, the most important one is whether or not to remain in the steam business. Mr. Cook stated that he also thinks that it has to be on two tracks because in order to decide to stay in the steam business then you have to decide what it will take to do so. Commissioner Rios stated that they are receiving criticism for staying in a business that does not make financial sense and those are the questions that they have to address. He went onto indicate that they need to be able to state, here are the reasons why we cannot abandon the steam business. Commissioner Cochran asked if we have explored other opportunities such as building an ethanol plant across the river on the vacant GM land and if anyone has spoken to other steam utilities to inquire about something of this nature. Mr. Cook stated that they have spoken to other district heating and steam utilities for opportunities to add load but they have not targeted alternative uses to date. Mr. McFarland indicated that the other part of the equation to the steam issue is how to recoup the investment already present in the steam business. He went onto state that one Regular Board Mtg September 26,2006 Page 11 of 34 must look at recovering from existing customers based on competitive rates versus how much can be recovered from selling the facility or for the BWL to pay to abandon it. Mr. McFarland also stated that if we cannot fully recover the cost of the investment from steam customers then as a public power entity what may occur is that our other customers would eventually have to absorb those costs. Commissioner Rios stated that he is currently looking at the problem from a deficit standpoint even'with the 35% rate increase. He went onto state that part of the strategy has to be how much the ratepayer can bear and determining that respective limit and whether or not it is less expensive to do something different. Commissioner Rios also stated that we are in a situation where we have to decide whether we are going to move forward or not and to address the issue from a realistic viewpoint. He also indicated that it is probably not feasible for the BWL to ask its other customers to pay for a lost leader. Commissioner Smith stated that the Board might have to revisit the issue of cross- subsidization as a means to possibly address the issues of recouped losses and cash flow. She also stated that one of the downtown customers advised her that had they known the steam rate was going to increase by 65%, then they would have probably looked at other alternatives or carriers and this may be true for other major steam users as well. Commissioners Graves stated that he agreed with Commissioner Rios' characterization of where they are today in respect to steam. He went onto state that he could not support allowing electric customers to subsidize the steam utility. Commissioner Cochran stated that they have a responsibility to the citizens and all aspects of the city including the business, growth and health environment which may mean spreading steam cost to the electric utility; if it would benefit the city as a whole. He went onto state that he did not think the Board should narrowly focus on itself. Commissioner Graves stated that he understood the relevant impact that Commissioner Cochran is referring to in regards to downtown and he recognizes that the BWL is a part of the marketing and expansion of the area. However, in his judgment he is not going to ask a low and medium income family to subsidize the Radisson, the Chamber or GM. Commissioner Smith stated that she understood the point that Commissioner Graves was making in that if subsidizing steam causes electric rates to increase then that is not the scenario she is promoting. Commissioner James asked if the cost of converting to an alternative source would be included in the analysis. Mr. Peffley stated that he would make sure that it is included in the report. Mr. McFarland stated that the resolution also specifically speaks to the GM termination fees. He went onto state that they have had some preliminary discussions regarding the accounting for the current year. However, due to the sensitive nature of the negotiations Regular Board Mtg September 26,2006 Page 12 of 34 it is difficult to discuss the issue without comprising the process. Mr. McFarland confirmed that the BWL has billed GM for$17 million, $8 of which is fairly firm and$9 million of which, is currently under dispute by GM. Therefore, the best-case scenario would be to receive $17 million. After a lengthy discussion, the Commissioners agreed to seek a legal opinion from Amy Cavanaugh, General Counsel as to whether or not they can further discuss the issue within the confines of an Executive Session. Budget Monitoring • Mr. McFarland provided a status report as to the BWL's current standing since the budget was approved: • The budget was filed with the City of Lansing as of May 2006, which showed a $36,000 net income across all the utilities. • We lost $1.9 million with the reduction of the steam rate increase. • Sold excess SO2 emission credits for$1.1 million, which was a pending item with an original estimate of$3 to $5 million that was not calculated into the budget. • Administration changes made to the Blue Cross, Blue Shield medical program should result in an estimated savings of$500,000. It is not a contractual savings but overhead costs that should be realized throughout the year. • Some items not included in the budget are the Human Resource audit and the former General Manager's payout. • Wholesale sales in June and July are approximately $300,000 to $400,000. • Best estimate to date is a net income loss of approximately$500,000 not including wholesale sales, due to the monthly variance that can fluctuate throughout the year. Mr. Peffley stated that a significant portion of this fiscal year's shortfall has been made up and they are looking at other opportunities for continued improvement. Mr. Cook went onto to state that they are scrutinizing every position that is being filled at the BWL to ensure its necessity and timeliness. Mr. Peffley went also stated that things look much better now than they did when the a- part motion was initially passed. Commissioner Rios indicated that he was glad to hear this information because the intent of the 3-part motion was to receive this type of information on a month-to-month basis so that they can keep abreast of the financial matters at hand. Mr. McFarland clarified that the present estimate loss of$500,000 comprises all four utilities (electric, water, steam and chilled water). However, if you look at them individually, electric will profit$4 million, water will lose $700,00, steam will lose $1.2 million, and chilled water will lose $700,000, which speaks to the issue of subsidization. After further discussion, it was agreed that staff would provide the Commissioners with detailed monthly financial reports that take into consideration any significant pending Regular Board Mtg September 26,2006 Page 13 of 34 items that will impact the budget. The report will also include a present estimate with reconciliation on the budget on a year-to-date basis as well as detailed information relative to each utility. The end result of providing such information will be to eliminate any budget item surprises at fiscal year end. Commissioner James asked why the BWL was not a part of the bid for the Mason project? Mr. Cook responded by stating that we made a proposal, which stated that Mason would be responsible for our cost of service and the piping to connect to us. He went onto state that they provided what they felt was a fair offer and Mason decided to do the project themselves. Mr. Cook also stated that they are currently dealing with an under market value sale to Delta Township that they are trying to renegotiate. In the meantime, Michigan State has expressed an interest in taking our water and the East Lansing Meridian Water Authority wants to renew their contract. Mr. Cook also indicated that we have a commodity that people want. However, we have to ensure that the pricing is correct and we do not want to take long-term commitments of building capacity on their behalf unless they are going to reimburse our customers. Commissioner Rios asked how far off were the terms with Mason? Doug Wood, Director of Engineering responded by stating that we were actually pretty close but he thought that Mason just wanted to have control over their own water supply. Additionally, they are not going to condition their water to have soft water. Therefore, price may have been the driving factor in their decision. Commissioner Smith stated that it is beneficial for them to have this type of information to help obtain the contract in Mason as well as others like it. Mr. Cook stated that Delta Township is not the only under-market value contract that we currently have and they have been working hard to clean those up. To date we are receiving incremental costs but it does not cover the cost of service. He went onto state that one can sell at incremental cost for a short period of time but the Delta contract is perpetual and you cannot continue to do so indefinitely. Mr. Cook also stated that the critical issue at hand right now is Delta Township, as the BWL is requesting a significant rate increase of 50% - 100% to bring the agreement up to the cost of service. Mr. Cook also added that they told Delta Township that we were providing services that they are not paying for and as such they advised them to either pay for the services or install the infrastructure. Delta Township decided to build a water tower at the corner of Snow Road and Michigan Avenue at a cost of$5 million to address the issue. Commissioner Graves stated that he did not think that Lansing customers should subsidize the suburbs. Mr. Peffley added that the systems are not going to subsidize the suburbs. Regular Board Mtg September 26,2006 Page 14 of 34 Mr. Cook added that if we are going to sign a 5-year contract on incremental costs plus margin, then we could create revenue to leverage our assets. However, if we are going to do this over a 30 to 40 year period where the township assumes some of the risks then you could probably look at a cost of service type analysis. He went onto to state that he agreed with Commissioner Graves in context. The Commissioners agreed that perhaps curtailing our sales pitch to include the benefits of our water quality would encourage the purchase of said product relative to projects such as Mason's. Commissioner Rios also encouraged utilizing the relationships that Calvin Jones, Governmental Analyst has with the townships to help with this process as we have a marketable product with the capacity to serve area communities. Commissioner Graves stated that they had received a six-year financial forecast that projected structural problems with the budget over time. He went onto to state that he would like Mr. Peffley to review the material to see if he concurs with the projections, as he is convinced the problem is real but he wants to know Mr. Peffley agrees. Commissioner Graves also stated that they are entering into the bargaining process and he thinks it best that they know as much as possible to help determine if this would make the stated problems any better or worse. Commissioner Cochran made a friendly amendment and requested that in addition to reviewing the projections, Mr. Peffley also revisit the assumptions made in the six-year forecast and access their validity. Commissioner Rios recommended that the Finance Committee work with Mr. McFarland in regards to Commissioner Graves and Cochran's request. GUIDELINES FOR INTERIM GENERAL MANAGER Commissioner Rios stated that they need to workout some details and recommendations from the Executive Committee. However, he asked the Commissioners to make a few comments regarding Mr. Peffley in a roundtable format and they are as follows: Commissioner Rios asked Mr. Peffley to feel the liberty to two explore new areas and take action. He went onto state that Mr. Peffley has the Board's support and they recognize that he has tough decisions ahead of him and extends his support of positive action to move to the next level. Commissioner Rios also complimented Mark Nixon, Director of Communication on the handling of the lead water report and he went onto state that he needs Mr. Peffley's recommendations whether he thinks the Board of Commissioners will like them or not. He also went onto state that he values Mr. Peffley's honesty and directness. Commissioner Smith asked to receive Mr. Peffley's recommendations based on his operational experience. She also stated that she saw him as stabilizer and bridge, which she feels is very critical in the weeks to come and in also giving the BWL direction. Regular Board Mtg September 26,2006 Page 15 of 34 Lastly, Commissioner Smith advised Mr. Peffley that communication is key and she also complimented Mr. Nixon on his handling of the recent lead water report. Commissioner Rodocker stated that she is happy to be here and is looking forward to learning about the BWL. She went onto to state that Mr. Peffley seemed very approachable and genuine and she is looking forward to getting his recommendations and working with him. Commissioner Graves stated that he did not want to reiterate what had already been said. However, he is also looking forward to working with and supporting Mr. Peffley. Commissioner James also expressed that she was looking forward to working and supporting Mr. Peffley. She also advised Mr. Peffley to let them know what he needs from the Commissioners as he has been here longer than they have and will probably be so long afterwards. Mr. Peffley stated that he appreciated the question and will need the Board to keep that sentiment in mind as they have some difficult decisions ahead of them. He also stated that he would seek the Commissioners guidance as they move forward. Commissioner Cochran asked Mr. Peffley to keep the openness and humility that he currently possesses. He also asked the Commissioners to give Mr. Peffley a little time to get accustomed to the position and not to expect miracles from him. Commissioner Cochran also stated that he thinks that the BWL's public image is in good hands under Mr. Nixon's direction. Commissioner Rios stated that National Public Power Week in October is a good opportunity to tell people what is going on at the BWL. Mr. Nixon stated that he would like to discuss his communication ideas with the Commissioners after the Customer Survey presentation is conducted. The meeting adjourned at 9:35 a.m. Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Graves, seconded by Commissioner James, to receive the Committee of the Whole report as presented. Action: Carried unanimously. Regular Board Mtg September 26,2006 Page 16 of 34 esolution 2006-9-3 HUMAN RESOURCE COMMITTEE September 5, 2006 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 8:30 a.m. on Tuesday, September 5, 2006. Commissioner Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochan and Julee Rodocker. Absent: Commissioners Joseph Graves and Santiago Rios. Public Comment There were no public comments. ESTABLISH PARAMETERS FOR HUMAN RESOURCE AUDIT The Commissioners met to discuss the human resource audit. Commissioner Cochran stated that he did not want to establish predetermined goals and targets for the audit. Michael Goree, Growth Strategies Consulting, Inc. indicated that he would work with Rhonda Jones, Corporate Secretary and the Human Resource department to gather the research information that he needs in which to begin. The first step in the process would be to request documentation relative to the Board of Water and Light, which includes items such as the organizational chart, strategic plan, union contract, Board minutes, annual report, and safety records in addition to others. Mr. Goree will request and review approximately 30 documents prior to initiating any discussion with employees, management and union representation. He also stated that it is ok for employees to contact him directly and that their conversations will remain confidential. His schedule is flexible and he will make himself available to speak to employees either before or after their respective work hours. Commissioner Cochran indicated that the hiring procedure is an area of interest to the Commissioners. At which time,Mr. Goree advised that as long as he has access to the Board of Water and Light's written materials and employees then he would be able to make a sound analysis. Commissioner Cochran also advised Mr. Goree that all of the items on the proposal list have equal weight. The target completion date is 60 days and if it appears that the project is moving outside of the original scope then Mr. Goree will bring that to the attention of the Board prior to its occurrence. Although, the process will be open and nothing hidden, Mr. Goree may contact Amy Cavanaugh, General Counsel for clarification relative to the Open Meetings Act. He will also provide verbal updates to the Board on a regular basis at their discretion. However, the final report will be a written document. Regular Board Mtg September 26,2006 Page 17 of 34 The meeting adjourned at 9:18 a.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner Cochran, seconded by Commissioner Rios, to receive the Human Resource Committee Report as presented. Action: Carried unanimously esolution 2006-9- EXECUTIVE COMMITTEE September 14, 2006 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 8:00 a.m. on Thursday, September 14, 2006. Commissioner Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins (teleconferenced), Robert Cochran, Semone James (teleconferenced),Santiago Rios and Robin Smith. Public Comment There were no public comments. CHARLES BLOCKETT & ASSOCIATES—INTERNAL AUDITOR SEARCH The Commissioners met with Charles Blockett of Charles Blockett, Jr. & Associates, Inc. to discuss the hiring search process for the Internal Auditor position. Mr. Blockett provided a copy of key activity dates and candidate profile questions. The activity dates provide an estimated timeframe in which to fill the position and the profile questions are intended to give the Commissioners and management an opportunity to convey their ideal candidate attributes. In addition to the above, Mr. Blockett will provide candidates with as much information about the Board of Water and Light as possible to ensure that they are familiar with the organization. Commissioner Calkins stated that Glenn Holloway, former Internal Auditor expressed an interest in returning to his former position as his present employer is downsizing. Commissioner Smith confirmed that she had received an email from Mr. Holloway indicating that he is interested in returning to the Board of Water and Light as the Internal Auditor provided the Commissioners are receptive to the idea. Mr. Blockett stated that he is amendable to modifying his contract if the Commissioners choose to bypass the Regular Board Mtg September 26,2006 Page 18 of 34 national search process and return Mr. Holloway to his former position. The Commissioners agreed that they could allow for the consideration of Mr. Holloway as a candidate without special consideration and recommended moving forward with the national search as originally planned. Mr. Blockett proceeded to state that there would be six weeks of postings and the interviews would preferably be conducted by December 251h. Prior to then the candidate list would need to be reduced to ten individuals by November 21". Mr. Blockett went onto state that he recommends forming an advisory committee of current employees who would have the opportunity to participate in the interview process of the aforementioned candidates' with his assistance. After discussion, it was decided that the Executive Committee would forward the internal auditor hiring search information to the Committee of the Whole as a recommendation to accept Charles Blockett's proposal as presented. INTERIM GENERAL MANAGER EMPLOYMENT AGREEMENT The employment agreement for the Interim General Manager position was presented and discussed. Dick Peffley, Interim General Manager further explained the fourth item on said agreement that addresses the provisions for minimally returning him to his former once his current assignment has ended. As such, Mr. Peffley introduced an amendment to the original proposal that essentially request a four-year agreement as the Director of Production at market rate with performance based wage increases, that would take effect if he is not appointed as the permanent General Manager. The Commissioners discussed the issue and were supportive of Mr. Peffley's amendment including the salary wage and membership to the University Club as held by former General Manager's. However, to ensure that the agreement language did not conflict with existing Board practice and also did not create a barrier to change for production, Amy Cavanaugh, General Counsel was directed to work with outside counsel to determine the appropriate employment language. CORPORATE SECRETARY EMPLOYMENT AGREEMENT Ms. Cavanaugh began by stating that she has been working with Rhonda Jones, Corporate Secretary relative to her employment agreement. They have reached consensus on the language and clarified all other questions and concerns. However, Ms. Jones presented an amendment to the proposal regarding a severance agreement. The Commissioners had not received an updated draft copy of the employment agreement nor the proposal. After discussion, the Commissioners directed Ms. Cavanaugh to draft a legal opinion and to also seek outside counsel regarding the matter. After discussion, the Executive Committee decided to refer the employment agreement matters for both the Interim General Manager and the Corporate Secretary to the Committee of the Whole. Regular Board Mtg September 26,2006 Page 19 of 34 The meeting adjourned at 9:15 a.m. Respectfully submitted, Robin Smith, Chair Executive Committee Motion by Commissioner Calkins, seconded by Commissioner Rios, to receive the Executive Committee Report as presented. Action: Carried unanimously esolution FINANCE COMMITTEE COMMITTEE REPORT September 21, 2006 A meeting of the Finance Committee of the Board of Water and Light was held at the Executive Offices, Lansing, at 3:00 p.m., Thursday, September 21, 2006. Finance Committee Chair Semone James, called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran (altemate), Gary Calkins, Semone James, and Robin Smith. Commissioner Julee Rodocker was also present. PUBLIC COMMENT There was no public comment. EXTERNAL AUDITOR PRESENTATON FOR FISCAL 2006 Senior Vice President of Finance and Administration Dennis McFarland reported that the external auditor, Plante & Moran conducted an audit of the BWL Enterprise Fund for the fiscal year end June 30, 2006. Mr. McFarland proceeded to introduce Plante & Moran representatives, Douglas Rober, Partner and Scott Wallas, Associate in charge of conducting the onsite audit. Mr. McFarland advised the Commissioners that they would need to act on two resolutions after the audit presentation. The first of which is the accounting treatment for the General Motors (GM) costs and the second of which is the acceptance of the financial statements and filing of said statements and the audit results with the City of Lansing. Mr. Rober began to discuss the audit, the high-level information relative to the BWL activities for the year, the management letter and the required communication letter relative to the finance committee. He went onto state that they performed audits on and issued unqualified opinions provided that the Board approved the status of the FAS 71 Regular Board Mtg September 26,2006 Page 20 of 34 treatment of the GM cost of the BWL Enterprise Fund and the three Employee Benefit Plans, which includes Defined Contribution Benefit Plan, Defined Benefit Plan and the Retiree Benefit Plan and Trust (VEBA). Mr. Rober further stated that the primary objective of the audit is to test the financial information of the BWL that has occurred during the year in order to issue an opinion. The critical component relates to internal controls, which primarily addresses process controls and those individuals involved in the process and the segregation of the two items, which provides a safeguard between the assets and ensures proper recording. He also explained that internal controls are the responsibility of the BWL to initiate, observe and control. Copies of the management and audit committee letters were included in the Finance Committee packet. Furthermore, copies of the presentation were handed out during the meeting that highlighted certain aspects of the audit. The audit committee letter speaks to the responsibility of the auditor and management. Whereas, the management letter specifically speaks to auditor comments, recommendations and management responses. Those topics of interest include the following: • Coal Inventory Controls • Contingencies and Disputes • Internal Controls—SAP • Inventory Obsolescence Reserve • Capital Assets • Custody of Checks Mr. Roper further explained that in conjunction with an audit, there is a concept of materiality, which is a threshold financial dollar amount in which a financial statement could be misstated but would not be significant enough to affect a reader's judgment. He went onto state that the BWL has a number of accounting policies in conjunction with financial practices. There are three items of interest that Mr. Rober brought to the attention of the Commissioners and are also noted and addressed in the financial statements. 1) Significant Accounting Policies Note 6 of the financial statements regarding the adoption of SFAS No. 71 in accounting for a new landfill site requiring environmental remediation. Note 6 of the financial statements regarding the adoption of the SFAS No. 71 in accounting for the General Motors termination fees and related steam asset impairment. Note 15 of the financial statements regarding the adoption of GASB 45 to account for various postretirement medical benefits. 2) Management Judgments and Accounting Estimates Significant estimates that BWL used in relation to its accounting policy in relation to the landfill cost and the General Motors termination fees. Regular Board Mtg September 26,2006 Page 21 of 34 3) Audit Adjustments An adjustment was made to record a liability to General Motors in the amount of approximately $1,900,000 associated with prior overbillings of steam service due to metering issue. Mr. Roper stated that the settlement liability amount was $600,000 effective June 30, 2006. An adjustment was made to record a $400,000 reserve for obsolete inventory. Mr. McFarland went onto state that it is BWL policy to obtain Board approval when they apply FAS 71 in regards to recognizing revenue and expense relative to the GM contractual termination fees. Mr. Roper also reported that management decided not to make adjustments on invoices that arrived after June 30, 2006, which totaled approximately$200,00. Mr. McFarland responded by stating that there is normally some amount of paperwork that is received after the due date, as such, they decided to record the amount in the 2007 fiscal year. Commissioner James asked what was the auditor's recommendation? Mr. Roper responded by stating that they would recommend that it be recorded in the proper period. Commissioner Smith asked if there are any issues to the auditors' knowledge that have not been addressed? The auditors responded by stating, not to their knowledge. Mr. McFarland then reported that there is still one outstanding issue, namely coal procurement. He went onto reiterate that it is Board policy that they receive prior approval when applying FAS 71 on a perspective basis. Mr. McFarland explained that that if they did not use FAS 71 then they would need to recognize an income of $17,000,000 and an expense of$12,000,000 from GM. Mr. Roper advised that if the auditor letter were going to be used for an offering (bonds) then the BWL would need to seek prior approval from Plante & Moran in regards to the use of their name. He further stated that there was no disagreement with management in how the accounting at the BWL is handled. Mr. Wallas reviewed the contents of the presentation handout that included operating expenses, significant fuel costs, operating income (loss), kilowatt hours generated versus purchased, and bond debt service requirements. Regular Board Mtg September 26,2006 Page 22 of 34 After said review, Mr. McFarland explained that the BWL's early adoption of GASB 45 requires the company to fund an unfunded liability for healthcare. He went onto further state that the unfunded liability is $173,000,000, which must be fully funded within 30 years. Mr. Wallas continued to review the presentation and went onto refer to the coal inventory controls referenced in the management letter. He stated that it has been a reoccurring issue from year to year. However, several changes were made, an outside vendor was brought into review the contracts and after several discussions with employees and management they feel that they will be able to change the comment assuming that the information supports what they expect to find. Mr. Wallas went onto state that the comments are relative to the emergency coal situation and not the regular coal purchase process. Mr. Rober further explained that coal is a significant item of cost for the BWL which means that it should have significant controls so that no one person or a small group of persons have significant control over procuring, purchasing, approving nor the recording of coal. In the past, it appeared to them that the process was too concentrated and the comments have appeared on the audit for a couple of years. During the current year, the internal control process has been improved which strengthen the control process. However, while conducting their audit they did not see the same internal review level specifically related to coal purchases made outside of the typical contract. Mr. Rober went onto state that if they can obtain the documentation support to show that the coal purchases did have levels of review and approval that were not concentrated in that particular group then the draft copy of the letter can be revised. If the information they locate supports what they expect to find then they would change the management comment for this associated topic. Mr. McFarland reported that they are in the process of establishing a formal risk management policy and the installation of the new SAP will improve existing controls. Commissioner Smith asked the auditors how would the Board know if the safeguards are in place? She also asked if they would provide concrete information to let the Board know that it is in place? Mr. Rober responded by stating that his comments do not address what Mr. McFarland is referring to. However, the goal is to make sure that outside coal purchases are reviewed outside of the person who ordered the coal. Charles Moore, Interim Internal Auditor asked if prior years show that someone ordered the coal, approved it and paid for said purchase? Mr. Wallas responded by stating yes, that that appeared to be the problem in the past. Mr. Moore then asked who was supposed to approve the process? Mr. Wallas responding by stating that it appears that Sanford Novick, former General Manager approved the purchase due to the nature of the situation. Regular Board Mtg September 26,2006 Page 23 of 34 Mr. Moore then went onto ask that in the normal process who should approve the process? Mr. Wallas explained that Ron Ishimoto — issues the bid, an outside consultant reviews and approves the contracts, then it proceeds through the following individuals for final approval: Plant Manager — Director— General Counsel — Vice President of Operations — General Manager. Mr. Moore asked if it was a good market rate or an acceptable rate? Mr. Wallas stated that as an external auditor that is not something that they would normally assess as they are not coal experts, which is why the outside consultant was hired to review that process. Mr. Peffley responded by stating that they received 8 — 10 bids for the small amount of coal that they purchased. The Purchasing Department evaluated the bids and they did receive a good market rate. Commissioner Calkins asked why the documentation was not available? Mr. Wallas stated that it might have been but they did not look far enough but it is probably available. Following lengthy discussion, it was agreed that the establishment of a formal risk management policy and the installation of the new SAP would improve existing controls. Provided the Commissioners have reasonable assurances that the safeguards are in place and functioning properly. It was also recommended that management should ensure that any potential liability issues are readily recorded. It was further suggested that with the new SAP project, a change in software would require extensive documentation. Therefore, this would be an excellent opportunity for the BWL to review all of its controls and determine how SAP affects them both operationally and financially. In addition to the above, Mr. Moore suggested to Mr. McFarland that the Commissioners receive a monthly progress report on the implementation of the SAP program. Commissioner James responded by asking when would management start presenting status reports to the Board? Mr. McFarland replied by stating that they would begin to do so once the deliverables are complete which should be within 2-weeks. He went onto state that the SAP project is currently in the design phase. Commissioner James asked about the status of the budget? Mr. McFarland reported that they are currently $6,000 under budget. He went onto explain that he currently receives weekly reports full of jargon and operational lingo that would need translating to be of any relevance to them. Regular Board Mtg September 26,2006 Page 24 of 34 Mr. Moore then advised that if the Commissioners received the reports and found them to be too much information then they can advise Mr. McFarland of such and perhaps reduce the reporting to a monthly basis. Upon further discussion, it was agreed that Mr. McFarland would provide the past 6- weeks worth of SAP activity reports with a cover letter that summarized the contents of the information. It was also agreed that a presentation of the project would be forthcoming and the Commissioners would continue to receive the weekly reports until further notice. Amy Cavanaugh, General Counsel, mentioned that she and Brandie Ekren, Associate Attorney is working to compile a list of BWL policies. The policy review will take place in approximately 2-weeks and implementation will take longer. She proceeded to state that they would make recommendations to the Vice Presidents and see if there is agreement to implement said recommendations. Commissioner Smith responded by stating that she is concerned that the lack of policy is what leads to lawsuits and other issues. Upon further discussion, it was explained that the comment regarding the Custody of Checks was not an indication of improper use. It is simply a risk, which they do not believe appeared on last year's audit comments. Gennie Eva, Manager of Financial Services confirmed that the auditor recommendation has been implemented. Mr. Rober advised that for future audits they can recommend a list of previous audits and whether or not the item has been addressed. Commissioner Calkins stated that in the past with other auditors, they were made aware of deficiencies and able to correct them while the auditors were still present. Therefore, the comments were made within the auditor letter to reflect the corrections. Commissioner Smith advised that if it is within the scope of Plante & Moran's work then she would like them to check and see if custody of checks was a previously noted item. After further discussion the following recommendations were made: Moved by Commissioner Calkins, seconded by Commissioner Smith to bring forth a recommendation to the full Board for the Board of Water and Light management to implement all of the auditor recommendations. Carried unanimously. Moved by Commissioner Smith, seconded by Commissioner Calkins to bring forth a recommendation to the full Board to accept the statement of financial accounting standards (SFAS) #71 establishing deferred recognition of GM termination fees and a regulatory asset for related steam system impairment. Carried unanimously. Regular Board Mtg September 26,2006 Page 25 of 34 Moved by Commissioner Smith, seconded by Commissioner Rodocker to bring forth a recommendation to the full Board to submit the fiscal year 2006 Audited Financial Statements for the Board of Water and Light Enterprise Fund as having been reviewed and hereby accepted as presented. Carried unanimously. On motion by Commissioner Smith, seconded by Commissioner Calkins, the Finance Committee adjourned at 5:06 p.m. Respectfully submitted Semone James, Chair Finance Committee Motion by Commissioner James, seconded by Commissioner Rios, to receive the Finance Committee Report as presented. Action: Carried unanimously esolution 2006-9- COMMITTEE OF THE WHOLE REPORT September 26, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 3:30 p.m. on Tuesday, September 26, 2006. Commissioner Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Ron Callen (arrived at 3:35 p.m.), Robert Cochran, Joseph Graves (arrived at 3:40 p.m.), Semone James, Santiago Rios (arrived at 3:55 p.m.), Julee Rodocker and Robin Smith. Absent: None. Public Comment There were no public comments. MICHAEL GOREE—UPDATE ON HUMAN RESOURCE AUDIT Mr. Goree reported that he has received very good support without question from Human Resources, the union, and many others. He has met with 200 employees thus far and is scheduled to meet with Customer Service on October 5tn and 6tn Commissioner Cochran advised the Commissioners that he requested Mr. Goree to attend the Committee of the Whole meeting because everyone is interested in his report. Regular Board Mtg September 26,2006 Page 26 of 34 CHARLES BLOCKETT—DISCUSS INTERNAL AUDITOR SEARCH PROPOSAL Mr. Blockett indicated that the interviews for the Internal Auditor position would take place in mid-December. He also stated that four items have been handed out to the Commissioners thus far, which include the timeline, candidate profile,job announcement, and the print media. He went onto state that anyone who applies for the position will receive a copy of the job announcement, which will also appear online with different websites. The Commissioners discussed the possibility of ensuring that candidates have utility experience due to the learning curve relative to utility regulations and the length of time the current position has been vacant. After further discussion, Mr. Blockett recommended that the Commissioners avoid limiting their candidate pool and it was agreed that they could give more weight to those with utility experience. MPPA CONFIDENTIALITY AGREEMENT Bill Cook, Senior Vice President of Operations indicated that there are up to four developers who are interested in building generation in Michigan. However, they cannot have open discussions with the MPPA unless its participating members sign a confidentiality agreement. As such, anything stamped confidential by MPPA and provided to the BWL will be kept confidential. Nevertheless, this will not prevent the Board of Commissioners from having discussion on the topic. Moved by Commission Calkins, seconded by Commissioner Cochran, to move the MPPA Confidentiality Agreement to the full Board for approval. Carried unanimously. UPDATE ON ORGANIZATIONAL CHANGES Dick Peffley, Interim General Manager reported that Jack Hill, Director of Safety is scheduled to retire but will remain with the BWL until May 2007. He also reported that Pete Thelen, Engineer is also scheduled for retirement and has agreed to remain with the BWL for an additional year in effort to avoid loosing key staff members during pivotal safety issues. Mr. Peffley went onto report that the incident rate has decreased by 25% and workers compensation has decreased by 40% respectively. He also stated that Mary Dwyer has recently accepted the position of Manager, Environmental Engineering. Mr. Peffley went onto explain that this is not a newly created but a position that was scheduled for posting within the next 2-weeks. He further stated that upon his conversation with Ms. Dwyer, she agreed that it was best for the BWL. Commissioner Graves asked if the Environmental Department is being minimized or if the BWL will lose something due to the transfer? Mr. Peffley responded by stating that the BWL still have vital people in the area and Nick Burwell is critical to the organization. Regular Board Mtg September 26,2006 Page 27 of 34 Commissioner Graves asked Mr. Peffley if he was going to speak to the issue of the Chief Financial Officer? Amy Cavanaugh, General Counsel responded by stating that Dennis McFarland, former Vice President of Finance and Administration has asked that if the Commissioners address him that it be done in closed session. Mr. Peffley advised the Commissioners that the interim status would remain in effect until he knows how quickly the General Manager process will proceed. Commissioner Rios, Chair Pro Tern entered the meeting at 4:02 p.m. and assumed the roll of Chair for Committee of the Whole meeting. DISCUSS THE SELECTION PROCESS FOR THE GENERAL MANAGER POSITION Commissioner Cochran reported that in a phone conversation with Michael Goree, it was suggested that the Commissioners enter this process thoughtfully, carefully and transparent. He is not recommending that they wait for the completion of his report but perhaps they may want to give the organization time to absorb recent changes. Commissioner Graves suggested that they should not delay the process and in fact they should move quickly to initiate it, which he thought previously took 6-months. Commissioner Smith stated that the previous search took 7-9 months and that she does not think that there is any harm in creating and shaping the process. Commissioner Calkins stated that he does not support the Interim General Manager making a lot of decisions because the new General Manager will want their own person such as, in the Chief Financial Officer. He went onto agree that they should proceed expeditiously. Moved by Commissioner Graves, seconded by Commissioner Calkins, to write and create a Request for Proposal (RFP) for the hiring search firm for the General Manager position. Carried unanimously Upon further discussion, Commissioner Smith advised that she would like direction from the Human Resource Department in posting the RFP. CONTRACT DISCUSSIONS FOR INTERIM GENERAL MANAGER AND CORPORATE SECRETARY Moved by Commissioner Smith, seconded by Commissioner Cochran to go into executive session to discuss a legal opinion presented by Melissa Jackson of Foster, Regular Board Mtg September 26,2006 Page 28 of 34 Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (4:30 p.m.). The roll was called. Yeas: Commissioners Calkins, Callen, Cochran, Graves, James, Rios, Rodocker and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Smith, seconded by Commissioner Cochran, that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole meeting reconvened in open session at 5:28 p.m. Moved by Commissioner Smith, seconded by Commissioner Cochran, to table the Interim General Manager and Corporate Secretary contract discussions and to send it to a later Committee of the Whole meeting. Carried unanimously. The meeting adjourned at 5:30 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Calkins, seconded by Commissioner Graves, to receive and accept the recommendations of the Committee of the Whole report as presented. Action: Carried unanimously. MANAGER'S RECOMMENDATIONS esolution 2006-9- FISCAL YEAR 2006 AUDITED FINANCIAL STATEMENTS RESOLVED, That the fiscal year 2006 Audited Financial Statements for the Board of Water and Light Enterprise Fund have been reviewed and are hereby accepted as presented. Regular Board Mtg September 26,2006 Page 29 of 34 FURTHER RESOLVED, That the Corporate Secretary is hereby directed to file a copy of the fiscal year 2006 Audited Financial Statements of the Board of Water and Light Enterprise Fund and the report on auditing procedures with the State Treasurer as required by the Uniform Budgeting and Accounting Act (Public Act 2 of 1968, as amended). -------------------- Motion by Commissioner Callen, seconded by Commissioner Rios, to adopt Resolution 2006-9-7 for the fiscal year 2006 audited financial statements. Action: Carried unanimously. esolution 2006-9- STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) #71 ESTABLISHING DEFFERED RECOGNITION OF GM TERMINATION FEES AND A REGULATORY ASSET FOR RELATED STEAM SYSTEM IMPAIRMENT WHEREAS General Motors (GM) issued a termination notice of their Steam Service Agreement and this resulted in termination fees being billed to GM. WHEREAS a consequence of the termination notice and GM no longer accepting service at several plants an impaired asset has been recognized. RESOLVED, that the Board of Commissioners, as the regulatory body of the Board of Water and Light (BWL), approve that the GM termination fees billed be recognized and a corresponding regulatory deferred liability be established. In addition, the related steam asset impairment is recorded and a corresponding regulatory deferred asset under Statement of Financial Accounting Standards (SFAS) No. 71 be established. Staff Comments: During fiscal year 2006 GM issued a termination notice on the Steam Service Agreement covering Plant#1 and the Plant#6 complex. As a result of this termination notice, three separate termination clauses in the agreement were put into effect. These termination fees resulted in a$17,542,491 receivable being recorded. Generally accepted accounting principles (GAAP) require the BWL to record in sales this amount for FY06. As a consequence of GM issuing a termination notice and no longer taking steam service at several plants, the BWL has an impaired asset. A new accounting standard (GASB 42) requires that this impaired asset be written off to depreciation expense during FY06. The utilization of SFAS #71 would allow for these sales and expenses to be amortized and recognized into rates over a period of time. -------------------- Motion by Commissioner Cochran, seconded by Commissioner James to adopt Resolution 2006-9-8 regarding the statement of financial accounting standards (SFAS) Regular Board Mtg September 26,2006 Page 30 of 34 #71 establishing deferred recognition of GM termination fees and a regulatory asset for related steam system impairment. Action: Carried unanimously. BWL Resolution#2006-9-9 kesolulion 2006-9- Resolution Regarding Confidentiality of information relating to the Michigan Public Power Agency (MPPA) investigation into New Base Load Generating Projects in Michigan WHEREAS, the Lansing Board of Water and Light ("BWL")is a member of the Michigan Public Power Agency("Agency");and WHEREAS,the BWL has or will receive information and documents from the Agency and its consultants and other professionals on or related to the construction of new base load generation with respect to the sale of electricity,and which contain specific pricing or other confidential or proprietary information, which the Agency and the BWL desire to keep confidential and exempt from the any public disclosure requirements. NOW THEREFORE,BE IT RESOLVED THAT: 1. The BWL finds and determines that pursuant to 2000 PA 141 (Section 10y(12)) and 1976 PA 442 (Section 13(1)(d)), it is in its best interest to keep and maintain all contracts, records and reports received and to be received, in connection with the construction of a new base load generation confidential, as such information pertains to the sale of electricity and contains specific pricing or other confidential or proprietary information which the Agency and consultants request, and the BWL desires to keep, confidential and exempt from any public disclosure requirements. 2. All board members, administration, staff and the BWL's FOIA coordinator shall keep such information confidential, unless required by law and otherwise directed by a court of competent jurisdiction. --------------------------------- Back_ground: Development of several prospective base load electric generating stations are now being seriously pursued in Michigan by Wolverine Power Cooperative, M & M's Great Lakes Energy Park at Alma, Consumers Energy and Detroit Edison. MPPA, on behalf of interested members desires to receive additional detailed information associated with these projects. In order to do so, MPPA must enter into confidentiality agreements. As such,MPPA attorneys have recommended that each of MPPA member's governing body pass the aforementioned resolution at their earliest convenience. Regular Board Mt- 0 September 26,2006 Page 31 of 34 --------------------------------- Recommended by: William Cook, Senior Vice President of Operations-Date Approved by: Richard Peffley,Interim General Manager-Date Date resolved by Board Action: Motion by Commissioner Rios, seconded by Commissioner Graves to adopt Resolution 2006-9-9 pertaining to the resolution regarding confidentiality of information relating to the Michigan Public Power Agency(MPPA) investigation into New Base Load Generating Projects in Michigan. Action: Carried unanimously UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS esolution 2006-9-1 EXTERNAL AUDITOR RECOMMENDATIONS RESOLVED, That on September 21, 2006 that Plante &Moran presented the Commissioners with an external auditor report for fiscal year 2006 and made certain recommendations for managerial implementation. FURTHER RESOLVED, That management is hereby directed to implement all of the external auditor's recommendations within the management letter. ----------------------- Motion by Commissioner Calkins, seconded by Commissioner Rios, to adopt Resolution 2006-9-10 regarding the implementation of the external auditors' recommendations. Action: Carried unanimously. MANAGER'S REMARKS Dick Peffley, Interim General Manager spoke regarding the recent organizational changes made at the BWL. He stated that Jack Hill was recently named Director of Regular Board Mtg September 26,2006 Page 32 of 34 Safety, as he was previously the Director of Environmental, Industrial and Safety. The change in scope will allow Mr. Hill to focus his efforts solely on safety, which is a number one priority for the BWL. Mr. Hill is scheduled to retire but has agreed to remain with the BWL for an additional 5-months to assist in the transition of that respective department. Secondly, the Environmental Department will be folded into the Engineering Department thereby, allowing them to look for synergies within the two groups. Third, Mary Dwyer has assumed the new position of Manager, Environmental Engineering reporting to Doug Wood, Director of Engineering. Ms. Dwyer has an extensive background in environmental issues. Mr. Peffley went onto state that Ms. Dwyer has asked to accept this task and they are prepared to support her in this new endeavor. In the interim, Sheryl Hudson is the Acting Human Resource Director and she will be active in searching for a permanent Director. Lastly, with the recent departure of Dennis McFarland, Senior Vice President of Finance and Administration, Sue Flores has agreed to assume some of Mr. McFarland's responsibilities. A title change has not taken place at this time but they will be working with those issues in the near future. COMMISSIONERS' REMARKS Commissioner Calkins reminded Commissioner Rios that they were going to make a comment regarding the contractual review of the employment contracts for their respective employees. Commissioner Rios responded by stating that the Committee of the Whole tabled the issue as they were unable to complete the discussion regarding the employment contracts for the Interim General Manager and Corporate Secretary. He went onto state that they will schedule another meeting in the near future to complete their discussions and make a recommendation regarding their respective contracts. Please refer to the Committee of the Whole report under Committee Reports from September 26, 2006. Commissioner Callen began to read a prepared statement that indicated his displeasure with the contractual matters involving former General Manager, Sandy Novick, perceived interference by City government, and speculation regarding the vacant General Manager position. Amidst disagreement with some of the Commissioners regarding what can be stated during a Board meeting, Commissioner Callen shorten his statement and began to read into the official record his letter of resignation effective immediately. As such, Commissioner Callen began to read the following, "With great regret, I resign my position as a Commissioner of the Lansing Board of Water and Light. It has been my honor to represent the citizen owners of the Board." A copy of the letter is on file and will be entered as public record. Commissioner Rios complimented Mr. Peffley and his staff on the unsolicited BWL employee phone calls and emails that speak highly of the work that they are doing. He also complimented Mark Nixon, Communications Director on the positive press that the BWL has received during the last month. Regular Board Mtg September 26,2006 Page 33 of 34 Commissioner Graves commented that he was saddened to hear that Commissioner Callen found it necessary to resign from the BWL Board of Commissioners. He went onto state that he enjoyed working with Commissioner Callen and especially appreciated his experience with the Public Service Commission and his thoughtful and informed perspective on many issues. Commissioner Graves also stated that even though Commissioner Callen's remarks were sufficiently interrupted he would support much of what was said. He went onto state that it was no secret that there were differences of opinion regarding the former General Manager and comments made by the Mayor from the podium are of public record. Commissioners Graves closed by stating that he wished Commissioner Callen well and would be sorry to see him go. Commissioner Calkins stated that he would like to echo the fact that he has also enjoyed working with Commission Callen and found him to be knowledgeable in the area of utilities and often relied on his knowledge a number of occasions. He went onto state that he would be sorry to see Commissioner Callen leave but that he appreciates the time that he has spent on the Board of Commissioners. Commissioner Cochran explained that in regards to Mr. Peffley, during the past 12-days and in speaking to the employees he has found it to be very positive. He went onto state that he recognizes that it may come to an end but for a beginning it has been very good. Commissioner Cochran complimented Mr. Peffley on taking actions that he believed necessary to improve and run the operation to the best of his ability. He went onto state that he supports and encourages him and recognizes that staff will be working hard. Commissioner Smith extended a heartfelt welcome to Mr. Peffley and commended him on the work that he has performed thus far. She also commended Commissioner Rodocker on the work and time that she has committed to the Board, the impressive level of input, and the many future years to come of her successful work and service to the Board. Commissioner Smith went onto say goodbye to Commissioner Callen and thanked him for grooming and mentoring her as Chair. She went onto state that she had called upon Commissioner Callen on many instances to gain insight and information relevant to his perception. Commissioner Smith went onto wish Commissioner Callen well in his future endeavors. EXCUSED ABSENCES None. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Rios the meeting adjourned at 6:30 p.m. Regular Board Mm September 26,2006 Page 34 of 34 /s/Rhonda Jones, Corporate Secretary File with Lansing City Clerk October 3, 2006 Approved by the Board: September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Friday, September 1, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins (teleconferenced at 8:01 a.m.), Ron Callen, Robert Cochran, Joseph Graves (arrived at 8:14 a.m.), Semone James (teleconferenced at 8:02 a.m.), Santiago Rios (arrived at 8:10 a.m.), Julee Rodocker, and Robin Smith. Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 8:05 a.m. PUBLIC COMMENTS None. COMMUNICATIONS None. EXECUTIVE SESSION On motion by Commissioner Callen, seconded by Commissioner Cochran to go into executive session to discuss the strategy and negotiation sessions connected with the negotiation of a collective bargaining agreement, protected by the Open Meetings Act (OMA) exemption MCL 15.268 (c). (8:07 a.m.). The roll was called. Special Board Mtg. Page 2 of 3 September 1,2006 Yeas: Commissioners Calkins, Callen, Cochran, Graves (arrived at 8:10 a.m.), James, Rios (arrived at 8:14 a.m.), Rodocker and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Rios, seconded by Commissioner Cochran, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 9:06 a.m. UNFINISHED BUSINESS Motion by Commissioner Rios, seconded by Commissioner Callen to authorize management to negotiate with the Union on the adjusted parameters presented in executive session. Action: Carried unanimously RESOLUTIONS None. MANAGER REMARK'S None. COMMISSIONER REMARK'S None. MOTION OF EXCUSED ABSENCES None. PUBLIC COMMENTS None. ADJOURNMENT Special Board Mtg. Page 3 of 3 September 1,2006 On motion by Commissioner Cochran, seconded by Commissioner Callen, the special meeting adjourned at 9:09 a.m. /s/ Rhonda Jones, Corporate Secretary Filed with City Clerk September 12, 2006 Approved by the Board: September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEEIPVG LANSING BOARD OF WATER AND LIGHT Thursday, August 24, 2006 c-� , i� rn � The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins (arrived at 4:10 p.m.), Ron Callen, Robert Cochran, Joseph Graves (teleconferenced at 4:10 p.m.), Semone James, Santiago Rios, and Robin Smith. (Note: 2nd Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 4:04 p.m. PUBLIC COMMENTS None. COMMUNICATIONS None. EXECUTIVE SESSION On motion by Commissioner Cochran, seconded by Commissioner James to go into executive session to discuss a legal opinion with Steve Schultz of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act (OMA) exemption MCL 15.268(h). (4:10 p.m.). The roll was called. Yeas: Commissioners Calkins, Callen, Cochran, Graves, James, Rios, and Smith. Special Board Mtg Page 2 of 4 August 24,2006 Nay: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Callen, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 5:15 p.m. UNFINISHED BUSINESS Motion by Commissioner James, seconded by Commissioner Rios to move to approve the proposed separation agreement and mutual complete release presented to the Board by our attorney and to authorize the Chair to execute the agreement on behalf of the Board. Action: Carried unanimously Commissioner Smith went onto read a prepared statement that said, "The Board of Commissioners of the Lansing Board of Water and Light announces today that it has reached a separation agreement with General Manager, Sanford Novick. Under the terms of the agreement, Mr. Novick resigns effective at the close of business today. Mr. Novick's resignation brings to a close another chapter in the Board's history. The Lansing Board of Water and Light is the largest municipally owned electric utility in Michigan and among the 30th largest in the United States. We have a lot to be proud of. It is now time for the Board to look to the future with great hope and take on the challenges that face us. We have a lot to do in the coming months to serve our customers. We look forward to finding a new General Manager who can assist this Board in addressing the challenges we face and also lead our employees in providing the kind of service our customers deserve." Commission Graves stated that he thought it necessary to appoint an Interim General Manager. He went onto state that he immediately thought of the two current Vice Presidents either of which he is very comfortable with but preferred Bill Cook due to his experience and length of time at the BWL. On motion by Commissioner Graves, seconded by Commissioner Callen to appoint Bill Cook as Interim General Manager. Special Board Mtg Page 3 of August 24,2006 Discussion: Commissioner Rios stated that it is a turning point at the BWL and that we are moving in a new direction. He went onto state that he supports Dick Peffley and found him to be very capable as he is the current Director of Operations. Commissioner Callen stated that he has great respect for Mr. Peffley but he supports Bill Cook due to his previous Assistant General Manager experience. Commissioner Calkins also stated that he supports Bill Cook due to his experience. Commissioner Cochran stated that he believed that all three candidates are qualified for the position but that he supports Mr. Peffley as the Interim General Manager. Commissioner Smith stated that she has great respect for all three candidates. However, at this time she is recommending Mr. Peffley for the position as Interim General Manager. On motion by Commissioner Rios, seconded by Commissioner Smith a recommendation was made to appoint Dick Peffley as the Interim General Manager. Action: Carried unanimously Commissioner Rios suggested that Mr. Peffley met with the Executive Committee to set some guidelines while he is in the position of Interim General Manager. Commissioner Graves recommended that the meeting be conducted with the Committee of the Whole to allow all of the Commissioners opportunity to participate in the meeting. Commissioner Smith made a friendly change to the motion to state that the meeting with Mr. Peffley will be held with the Committee of the Whole. Action: Carried unanimously RESOLUTIONS None. MANAGER'S REMARKS Dick Peffley, BWL employee and newly appointed Interim General Manager stated that he was at a lost for words and completely shocked regarding his Special Board Mtg Page 4 of 4 August 24,2006 unexpected appointment. Mr. Peffley went on to state that he would do whatever was needed for as long as they needed him in fulfilling this role at the BWL. COMMISSIONERS' REMARKS None. MOTION OF EXCUSED ABSENCE None. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Rios, seconded by Commissioner Cochran, the special meeting adjourned at 5:29 p.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk September 5, 2006 5EP-07-2006 13:21 HD OF WRTER LIGHT 1 517 7026855 P.02i05 Preliminary—Subject to Board Approval on September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Friday, August 18, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James), Santiago Rios, and Robin Smith. (Note: 2"d Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the Special Meeting to order at 2:02 p.m. PUBLIC COMMENTS Mr. Cook, BWL ratepayer expressed his disappointment regarding the current state of affairs at the BWL and Commissioner leadership. He also stated that there are people at the BWL who are no longer effective and if so then perhaps they should leave. He went onto state that Lansing used to be the foundry capital of the world and technology ushered in and things changed. Mr. Cook also stated that residents are blessed to have a customer-owned utility and he would gladly donate to 'Pennies for Power' if the Board would support its customers. Ifield Joseph, past vice chair and former commissioner stated that he is watching the Board's actions and helping to keep the issues in the public eye. He also stated that he had sent a memo earlier that day in support of the General Manager, Mr. Joseph went onto state that he felt that the General Manager must be given the space and opportunity to do his job. He concluded by stating that r--- -- ---I a a •=1 1 CZ1 7 7f.11JGOC�1 P.02 SEP-07-2006 13:21 HD OF WRTER LIGHT 1 517 7026655 P.03i05 although the Mayor appointed the newer Commissioners, the ratepayers are the owners and thereby, the true bosses of the institution. Chuck Slammer stated that he was concerned that it appears to be too many chiefs and not enough Indians. He went onto to state that he looked at the organizational chart and believed that the BWL needed more workers, first line supervisors and fewer managerial barriers. Mr. Slammer also stated that he essentially wants to make sure that his water tastes right and that the electricity is on. He went onto state that the BWL should get out of the steam business. Mr. Slammer also stated that he was very disappointed in how the BWL is operating and that the focus should be on providing water and electricity. Commissioner Callen stated that he was asked to deliver a message from Mark Fales, BWL employee of 36-years who was unable to attend the Board meeting. Commissioner Callen went onto state that Mr. Fales would like the Board to know that he supports the General Manager and has great respect for him and asks that the Board renew his contract. COMMUNICATIONS Letter from former commissioner Ifield Joseph dated August 18, 2006 in support of the General Manager. Received and placed on file. CLOSED SESSION Moved by Commissioner Smith, seconded by Commissioner Rios to go into closed session to discuss a legal opinion presented by Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (2:15 p.m.). The roll was called. Yeas: Commissioners Calkins, Callen, Cochran, Graves, James, Rios and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith, that the Special Board meeting return to open session. Carried unanimously. --- -- ---- • . --. r, -1--- P Gl-� 5EP-07-2006 13:21 ED OF WATER LIGHT 1 517 7026655 P.04i05 The Special Board meeting reconvened in open session at 3:42 p.m. UNFINISHED BUSINESS Motion by Commissioner Rios, seconded by Commissioner Graves to move to authorize the Executive Committee to work with legal counsel in considering a resolution of a matter relating to the employment of the General Manager. Action: Carried unanimously RESOLUTIONS None. MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Graves stated that they operate as a Board and not individuals. He went onto state that he was concerned about the manner in which outside counsel was contacted without prior discussion involving the entire Board. Commissioner Rios stated that historically the Board traditionally works together and many of the Commissioners have taken opportunity to meet with the General Manager as individuals on numerous occasions. He also went on to state that he supported the Chair in contacting outside counsel to gain a legal opinion regarding the matter at hand. Commission Callen asked Amy Cavanaugh, General Counsel whether or not a single Commissioner is allowed to take action that incurs cost to the Board without their prior approval. Ms. Cavanaugh stated that she was not prepared to answer such a question and would need time to research the issue and would provide a response to Commissioner Callen's question at a later date. MOTION OF EXCUSED ABSENCE None. PUBLIC COMMENTS None. nrn nn nnnr c 1 �'I 7 7ri17C.RS� P.04 SEP-07-2006 13:22 BD OF WATER LIGHT 1 517 7026655 P.05/05 ADJOURNMENT On motion by Commissioner Smith, seconded by Commissioner Rios, the special meeting adjourned at 3:57 p.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 30, 2006 TOTAL P.05 �FP—Ll7-7Gl[aF, 1 1 :S1 1 517 7026B55 P.05 SEP-07-2006 13:21 BD OF WRTER LIGHT 1 517 7026655 P.01i05 Lansing Board of Water • Light Fmc To: Chris Swope From: Rhonda Jones, Corporate Secretary C/o: City Clerk's Office Lansing Board of Water and Light Fax: 377-0068 Date: August 30,2006 Phone: 483-4130 Pages: 5 Re: Preliminary Board of Commissioners' CC: Special Meeting Minutes from 8-18-06 ❑ Urgent ❑ For Review ❑ Please Comment ❑ Please Reply ❑ Please Recycle -Comments: Good Aftemoon Chris, Please see the attached document that contains a preliminary copy of the minutes from the Board of Commissioners' Special Board Meeting held on August 18, 2006. If you have any questions or concems then please feel free to contact me at your earliest convenience. Thank you and have a great day! Sincerely, , Rhonda Jones Corporate Secretary Board of Water& Light Office: (517)702-6033 Cell: (517) 930-4420 Email: riones@lbwl.00m SEP-07-2006 11:50 1 517 7026B55 P.01 Approved by the Board: September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETG N C-n CD ,Aj LANSING BOARD OF WATER AND LIGHT C7 Friday, August 18, 2006 n ro cn The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James), Santiago Rios, and Robin Smith. (Note: 2nd Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the Special Meeting to order at 2:02 p.m. PUBLIC COMMENTS Mr. Cook, BWL ratepayer expressed his disappointment regarding the current state of affairs at the BWL and Commissioner leadership. He also stated that there are people at the BWL who are no longer effective and if so then perhaps they should leave. He went onto state that Lansing used to be the foundry capital of the world and technology ushered in and things changed. Mr. Cook also stated that residents are blessed to have a customer-owned utility and he would gladly donate to `Pennies for Power' if the Board would support its customers. Ifield Joseph, past vice chair and former commissioner stated that he is watching the Board's actions and helping to keep the issues in the public eye. He also stated that he had sent a memo earlier that day in support of the General Manager. Mr. Joseph went onto state that he felt that the General Manager must be given the space and opportunity to do his job. He concluded by stating that Spccia(Board Mt- Page 2 of 4 August 18,2006 although the Mayor appointed the newer Commissioners, the ratepayers are the owners and thereby, the true bosses of the institution. Chuck Slammer stated that he was concerned that it appears to be too many chiefs and not enough Indians. He went onto to state that he looked at the organizational chart and believed that the BWL needed more workers, first line supervisors and fewer managerial barriers. Mr. Slammer also stated that he essentially wants to make sure that his water tastes right and that the electricity is on. He went onto state that the BWL should get out of the steam business. Mr. Slammer also stated that he was very disappointed in how the BWL is operating and that the focus should be on providing water and electricity. Commissioner Callen stated that he was asked to deliver a message from Mark Fales, BWL employee of 36-years who was unable to attend the Board meeting. Commissioner Callen went onto state that Mr. Fales would like the Board to know that he supports the General Manager and has great respect for him and asks that the Board renew his contract. COMMUNICATIONS Letter from former commissioner Ifield Joseph dated August 18, 2006 in support of the General Manager. Received and placed on file. EXECUTIVE SESSION Moved by Commissioner Smith, seconded by Commissioner Rios to go into executive session to discuss a legal opinion presented by Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (2:15 p.m.). The roll was called. Yeas: Commissioners Calkins, Callen, Cochran, Graves, James, Rios and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith, that the Special Board meeting return to open session. Carried unanimously. Special Board Mt-- Page 3 of 4 August 18,2006 The Special Board meeting reconvened in open session at 3:42 p.m. UNFINISHED BUSINESS Motion by Commissioner Rios, seconded by Commissioner Graves to move to authorize the Executive Committee to work with legal counsel in considering a resolution of a matter relating to the employment of the General Manager. Action: Carried unanimously RESOLUTIONS None. MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Graves stated that they operate as a Board and not individuals. He went onto state that he was concerned about the manner in which outside counsel was contacted without prior discussion involving the entire Board. Commissioner Rios stated that historically the Board traditionally works together and many of the Commissioners have taken opportunity to meet with the General Manager as individuals on numerous occasions. He also went on to state that he supported the Chair in contacting outside counsel to gain a legal opinion regarding the matter at hand. Commission Callen asked Amy Cavanaugh, General Counsel whether or not a single Commissioner is allowed to take action that incurs cost to the Board without their prior approval. Ms. Cavanaugh stated that she was not prepared to answer such a question and would need time to research the issue and would provide a response to Commissioner Callen's question at a later date. MOTION OF EXCUSED ABSENCE None. PUBLIC COMMENTS None. Special Board Mtg Page 4 of 4 August 18,2006 ADJOURNMENT On motion by Commissioner Smith, seconded by Commissioner Rios, the special meeting adjourned at 3:57 p.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 30, 2006 Approved by the Board: September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEE-ftNG,a LANSING BOARD OF WATER AND LIGHT �J2 c: t � c� f`;'1 Tuesday, August 15, 2006 = c-) CO r7 7 ;1, The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James (arrived at 5:45 p.m.) and Santiago Rios. (Note: 2"d Ward Vacancy exists.) Absent: Commissioner Robin Smith. The Secretary declared a quorum present. Vice Chair Rios asked all to rise for the Pledge of Allegiance to the Flag. Vice Chair Rios called the Special Meeting to order at 5:35 p.m. PUBLIC COMMENTS Joseph Davis, Business Manager of IBEW Local 352 stated that he represents the employees of the BWL, CUC in Delta and Lansing Grand River. Mr. Davis expressed his concern over the 65% steam rate increase proposal and the over simplification of the issue. Mr. Davis went onto state that he attempted to estimate whether or not a 25% increase in employee premiums as suggested by management would cover the steam shortfall and he found that they did not. Mr. Davis also stated that the Sunday editorial implied that if employee cost sharing had been implemented then the solution to this problem would have been simple. However, Mr. Davis stated that the article did acknowledge that the BWL is the only city agency in which employees share in the cost of paying premiums. Mr. Davis also stated that the City is experiencing an $11 million deficit and they are utilizing their rainy day fund and other avenues to address those issues. He went onto state that during contract negotiations the union tries to work with BWL management to achieve an equitable plan for all parties involved. Mr. Davis recommended that based on public meetings the Board should consider implementing a rate increase that would occur over the next 3 - 5 years to allow downtown businesses the opportunity to plan for such a change. Board Meeting Page 2of 41 August 15,2006 Hank Zurburg, First Presbyterian Church, finance committee member stated that their points of interest regarding the steam rate increase had already been expressed by others. However, he wanted his concerns placed on the official record as they did not have opportunity to present something earlier. COMMUNICATIONS Letter dated August 14, 2006 from Tom Marlow, Manager of Delivery Services in support of the General Manager. Received and placed on file. Letter dated august 15, 2006 from Phyllis Mellon, Chief Deputy Director, State of Michigan in regards to the request for additional information regarding the proposed rate increase. Received and placed on file. Letter dated August 15, 2006 from former commissioner Tim Haggert in support of the General Manager. Received and placed on file. COMMITTEE REPORTS esolution-2006-8- COMMITTEE OF THE WHOLE REPORT August 15, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 3:00 p.m., Tuesday, August 15, 2006. Commissioner Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Joseph Graves, Semone James, Santiago Rios and Robin Smith. Absent: Commissioners Gary Calkins and Ronald Callen Public Comment There were no public comments. INTERVIEW FOR INTERIM INTERNAL AUDITOR POSITION Board Meeting Page 3of 41 August 15,2006 The first interview was conducted with Charles Moore of C.L. Moore & Associates, P.C. Mr. Moore presented his organization and a question/answer period followed the interview. The second session took place with Kirk Balcom and Mary McCune of Rehmann Robson. Both individuals presented their organization and a question/answer period followed the interview. Upon conclusion of the interviews the Commissioners discussed the presentations and qualifications of both candidates. After discussion, it was decided that the Committee of the Whole would bring forth a recommendation to the full Board for a vote on Tuesday, August 15, 2006 at 5:30 p.m. to award the RFP for the Interim Internal Auditor to C.L. Moore & Associates, P.C. Respectfully submitted, Santiago Rios, Chair Pro Tern Committee of the Whole As part of the report, Commissioner Rios stated that both Interim Internal Auditor candidates provided a comprehensive response to the Board's request and both responded well to all of the interview questions. Motion by Commissioner Rios, seconded by Commissioner Graves to accept the report as presented. Action: Carried unanimously UNFINISHED BUSINESS RATE INCREASE DELIBERATIONS General Manager, Sandy Novick reminded the Commissioners and the public that the BWL proposed the electric and steam rate changes on June 16, 2006 with a filing as appropriate with City Clerk in Lansing. Mr. Novick also stated that notices were filed in the Lansing State Journal on July loth and published notices appeared in the City Pulse on July 12th and July 26th. He also stated that information regarding the increases has been available to the public, including information that was printed in the "Connections" monthly bill insert that is sent to all BWL customers. The public hearing occurred on August 1, 2006 in which three customers spoke to the Board regarding the electric rate change, two of which expressed concern while one encouraged the increase as a means to encourage conservation. Mr. Novick went onto state that staff discussed the conservation issue and suggested that it maybe an issue that they discuss in the future; not raising rates for conservation but conservation in general. Board Meeting Page 4of 41 August 15,2006 Furthermore, Mr. Novick also stated that staff is continuing to review operating expenses and the impact of GM's decrease on all the utilities is still being felt which was incorporated in the recommendation regarding increased environmental expenditures on north Lansing landfill. Mr. Novick stated that it was evident of their attempt to catch up on the overhauls from the BWL's generating equipment. He also stated that there is $1.2 million exposure on Eckert unit#5 and as a result they are still reviewing that information and taking into account the statements made at the public hearing. Mr. Novick further stated that staff would still recommend to the Commissioners a 1.5% increase for the electric as was initially proposed. Commissioner Rios stated that for clarity purposes each rate increase should be dealt with separately. He went onto propose an electric rate increase recommendation from management with respect to the rate increase. Please see the Electric and Steam Rate Increase section under Resolutions for the actual wording of the resolution and further details. Commissioner Calkins stated the BWL received a minimal number of people opposing the electric rate increase. He went onto state that with the evaluation he still thinks that is an appropriate figure and therefore continues to recommend it. Mr. Novick stated that twelve customers came and spoke in regards to the steam rate increase, one also came this evening and eight letters were received from downtown businesses expressing their concerns. Mr. Novick went onto state that the beauty of public power is the public hearing process and the opportunity for customers to be heard. He stated that oftentimes, if you go through the public service commission and Consumers Energy wants to have a rate increase and you live in North Michigan then it is not as easy to be heard. Mr. Novick also stated that the beauty of public power is that we are a part of the community, in the community and people came and expressed their concerns. Commissioner Callen stated that you do not need an attorney to come here for this process. Mr. Novick then said that he agreed and also stated that the public comments were clear and consistent. Based on the comments, Mr. Novick stated that staff divided them into two categories; one is clearly that the customers want a transition time for the rate adjustments to be spread out over a period of time at smaller increments than initially proposed. Mr. Novick stated that the second category involved a long-term strategic plan that gives a sense of direction regarding the steam system, associated costs, and the resulting rates based on those costs. He went onto state that staff has been working on that very thing, with the completion of the integrated resource plan, management will soon come before the Commissioners with a series of policy discussions that can be used to develop long range plans. Mr. Novick also stated that they would do whatever they could to be creative in searching for additional cost savings in the near term and being responsive to the community in spreading out the impact. He also stated that they recognize the value of the steam Board Meeting Page 5of 41 August 15,2006 system to the downtown development and it is definitely a plus to all the utilities for the downtown area to revitalize itself. Mr. Novick went onto state that they have tried to move toward a financially independent utility and there are some other benefits in keeping steam alive. He also stated that they have heard from the community and they provided some great insight and management will be responsive to whatever the Commissioners decide to do. Commissioner Rios passed the Chair to Commissioner Cochran at 5:54 p.m. Commissioner Rios asked to be recognized by the Chair in order to bring forth a motion at that time. He then went onto state that from his perspective Mr. Novick accurately described what he thought was very honest and open public input. Commissioner Rios also stated that they have a responsibility to hear and respond to the utility and the public in a responsible manner and he thought that Mr. Novick's comments spoke to that fact. As such, Commissioner Rios introduced the following motion: esolution-2006-8-� Motion by Commissioner Rios, seconded by Commissioner Calkins to accept the three- part motion in regards to steam rate increase as follows: 1. That the proposed steam rate increase be adjusted down to a 35% increase. 2. That management be directed to develop a strategic plan/process for the BWL's steam business to minimally include: a. comprehensive 3-5 year business plan for the BWL's steam business which incorporates: response to cost of study issues raised by the State of Michigan, appropriate elements of the integrated resource plan, collection from GM for early termination of contract, a plan to further reduce costs, a plan to develop additional efficiencies in the operation including scaling back, analysis and plan for business growth potential, and considers the option of getting out of the steam business entirely; and b. rate increase strategy over the next 3-5 years that makes the steam business financially independent and this plan be completed within the next 90 days. 3. That management immediately begin to monitor and make recommendations to this Board on a monthly basis, on necessary adjustments to the BWL budget to make up the approximately$1.8 million difference in the projected revenue from the steam rate increase, which will include reductions in costs, increased efficiencies, utilization of reserves and/or credits, and any other reasonable measure to protect the integrity of the budget. And within the next 90 days present a financial plan/process and recommendations for the balance of the year base on actual financial performance to date, which can also serve as the foundation for planning next year's budget. Discussion: Commissioner Callen stated that some of Commissioner Rios suggestions are extremely complex. He also stated that he could not fathom the total impact of what was being said but some things did come to mind, 1) some of what Commissioner Rios is asking for will appear in the IRP, 2) there is inconsistency between lowering the steam Board Meeting Page 6of 41 August 15,2006 rate increase to 35% and the proposal since they have discussed making the steam utility independent and 3) he is interested in a stepwise rate increase similar to what the General Manager mentioned and the public proposed. Commissioner Callen went onto state that he was not sure if that was in Commissioner Rios proposal or not, therefore, he stated that he did not feel prepared to vote on something that complex. Commissioner Rios stated that as an attorney he stated his motion a little different than Mr. Novick but he believes that it is relatively the same. The only difference is that he placed parameters on his proposal. Commissioner Calkins asked staff to respond to the 90-day timeframe mentioned in the motion. Mr. Novick stated that he believed the aforementioned timeframe is close to the time staff would come before the Board as normal course for long-range financial plans. He went onto state that he would certainly feel very comfortable coming to the Board on a monthly basis with year-to-date information to see where we are and what is going to happen in order to make adjustments in a timely fashion. Mr. Novick also stated that the timeframe is inline with the overall plan for the steam system, which is a process that they are already starting to plan. Commissioner Rios stated that he did say within 90-days but some of the work is already done such as the HR plan and he knows that Mr. Novick has already looked at some of the other questions. Mr. Novick stated they can make good progress and the IRP has a customer advisory group, which they will want to include. He also stated that he did not know if they could provide a definitive plan in 90-days but that he thought they could certainly commit to do their best to move forward. Commissioner Rios stated that he called it a plan/process because part of it is a process while the plan is developing the outline and determining what we are going to do and how are we going to do it. The motion carried by the following vote: Voting Aye: Calkins, Cochran, Graves, James, Rios Voting Nay: Callen Absent: Smith Further Discussion After the Vote: Commissioner Callen stated that he wanted to explain his vote and further stated that he was still unclear as to the extent and penetration of the motion just read. He went onto state that the 35% rate increase may make sense but it does seem to be consistent with trying to make the utility independent but perhaps in the motion Commissioner Rios was referring to intent rather than a guarantee. Board Meeting Page 7of 41 August 15,2006 Mr. Novick addressed Commissioner Callen by stating that that has been the Boards policy for some time now but we assume that you recognize that it is a slow process and will certainly be so for steam and chilled water as opposed to the others. He went onto state that they may reach those goals in a year and then the next year there maybe some slippage. However, Mr. Novick stated that we should continue to strive for the goal even if it is not achieved in the short term of this proposal, which would not be any different than what they have been doing all along. Commissioner Callen stated that he had another question in which he asked, where do we stand in terms of responding to public concern over what he calls a `stepwise' introduction of the steam rate increase. Commissioner Calkins stated that he believed Commissioner Rios' motion discussed the fact that if we progress we would look at progression rate increases. Commissioner Callen then asked if the progression would be through the 35% steam rate increase. Commissioner Rios responded by stating that the 35% steam rate increase has been approved, effective September 1, 2006. He then went onto state that they have asked management to develop a 3-5 year amortization plan of reaching independence as part of their objective and goal. Commissioner Callen then stated that he now felt comfortable with the plan. Commissioner Cochran returned the Chair back to Commissioner Rios at 6:04 p.m. RESOLUTIONS esolutio�W2006-& PROPOSED RESOLUTION INTERIM INTERNAL AUDITOR SELECTION WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and interviewed each candidate for the Interim Internal Auditor position on August 15, 2006; and WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and discussed each candidate's presentation and credentials after the interviews on August 15, 2006. RESOLVED, That the Committee of the Whole recommends that the Request for Proposal (RFP) award for the Interim Internal Auditor be granted to C.L. Moore & Associates, P.C. Board Meeting Page Sof 41 August 15,2006 Motion by Commissioner Rios, seconded by Commissioner Calkins to accept the recommendation of the Committee of the Whole to hire C.L. Moore & Associates, P.C. as the Interim Internal Auditor. Action: Carried unanimously esolution-2006-8- ELECTRIC AND STEAM RATE INCREASES WHEREAS,the staff of the BWL, in the course of its financial planning process, has determined that the electric and steam utilities will experience significant revenue shortfalls in Fiscal Year 2007 and beyond; and WHEREAS, such revenue shortfalls are caused primarily by the combination of very modest revenue growth over the last four years, rising costs due to higher labor, health care, maintenance and environmental costs as well as overall inflation, and reduced steam consumption due to GM plant closings; and WHEREAS, the last general rate increase in the electric utility occurred in July 2005 and the last general rate increase in the steam utility occurred in January 2003; and WHEREAS, the staff of the BWL has proposed a general increase of 1.5% for the electric utility effective September 1, 2006, and an increase of 65% for the steam utility effective September 1, 2006; and WHEREAS, notice of the proposed increases were communicated to all customers by mail on July 13, 2006,public notice was made on June 16, 2006, and a public hearing was held on August 1, 2006, to receive comments on the proposed increases; and WHEREAS, the Board of Commissioners has considered the comments of the public as well as the recommendations made by BWL and concluded that a 35% for industrial and commercial steam was appropriate. RESOLVED, That the electric and steam rate schedules listed below and detailed in the attached rate schedules be adopted and made effective for electric and steam consumption on or after September 1, 2006. ELECTRIC: (Attachment A) Residential Service-Rate 1 General Service- Rate 3 Large General Srvice-Rate 4 Primary Service-Rate 5 Municipal Water Pumping Service-Rate 7 Large Capacity Service-Rate 8 Outdoor Lighting Service-Rate 9 Traffic Light Service-Rate 1 I Space Conditioning and Electric Water Heating Service-Rate 12 Residential Senior Citizen - Rate 21 Board Meeting Page 9of 41 August 15,2006 Street Lighting Service- Rate 31 Street Lighting Service-Rate 32 STEAM: (Attachment B) General Service-Rate 1 Industrial Service-Rate 2 General Service-Rate 3 Residential Service-Rate 5 Fuel Cost Adjustment Motion by Commissioner Rios, seconded by Commissioner Graves to accept the resolution as presented with modification to the steam rate to reflect a 35% increase. Action: Carried unanimously Board Meeting Page I Oof 41 August 15,2006 ATTACHMENT A RESIDENTIAL ELECTRIC SERVICE RATE NO. 1 Availability-This rate is available to any single-family or multifamily dwelling of 4 units or less when the entire electric requirements are supplied at one point of delivery through one meter. Service to appurtenant buildings may be taken through the same meter. Service under this rate is not available to any single-family or multifamily dwelling unit of 4 units or less when a portion of the dwelling unit is used for commercial, industrial,or resale purposes unless the wiring is so arranged that service for residential and non-residential purposes are metered separately. Nature of Service-The service is alternating current,60 hertz,single phase, 120/240 nominal volts. Monthly Rate - Shall be computed in accordance with the following charges: 9/1/06 Basic Service $4.45 Per customer per month Charge Commodity Charge Summer Billing Months of June through October $.0659 Per kWh for the first 500 kWh $.0703 Per kWh for all over 500 kWh Winter Billing Months of November through May $.0659 Per kWh for the first 500 kWh $.0686 Per kWh for all over 500 kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adiustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise fees,or any other charges against the Board of Water and Light(BWL)property,or its operation,or the production and/or sale of electric energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delaved Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Auxiliary Power Provision-Domestic customers desiring electric service as an auxiliary source of power to wind or solar powered generating equipment may take service under this rate schedule under special agreement with the BWL. The customer shall pay the charges set forth above. A customer taking auxiliary power under this rate shall pay all reasonable costs associated with any alteration of BWL equipment required for proper operation of the customer's generating equipment in parallel with the BWL system. A customer may elect to sell energy to the BWL at the rate of$.022/kWh delivered. Customers selling energy to the BWL shall pay a charge of$6.40 per month or part thereof instead of the above Basic Service Charge. Rules and Regulations - Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1, 2006 Board Meeting Page I 1 of 41 August 15,2006 GENERAL ELECTRIC SERVICE RATE NO.3 Availability-This rate is available to any customer desiring secondary voltage service for any purpose when supplied at one point of delivery through one meter. The limitation to secondary-voltage service may be waived in instances where the character of the electric load at the premises served has changed substantially. This rate is not available for emergency or standby service. Nature of Service-The service is alternating current,60 hertz,single phase or three phase. The secondary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service $15.68 per customer per month Charge Commodity Charge Summer Billing Months of June through October $.0773 per kWh Winter Billing Months of November through May $.0744 per kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license fees,franchise fees,or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Metering-Where the BWL elects to measure the service on the primary side of the transformers,the metered kWh thus measured will be reduced by 3%for billing purposes to adjust for transformer losses. Where the customer receives service through more than one meter,the consumption as registered by the different meters will not be combined for billing purposes,but will be computed and billed separately. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Auxiliary Power Provision-Customers desiring electric service as an auxiliary source of power to wind or solar powered generating equipment may take service under this rate schedule under special agreement with the BWL. The customer shall pay the charges set forth above. A customer taking auxiliary power under this rate shall pay all reasonable costs associated with any alteration of BWL equipment required for proper operation of the customer's generating equipment in parallel with the BWL system. A customer may elect to sell energy to the BWL at the rate of$.022/kWh delivered. Customers selling energy to the BWL shall pay a charge of$25.00 per month or part thereof instead of the above Basic Service Charge. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective:September 1,2006 Board Meeting Page 12of 41 August 15,2006 LARGE GENERAL ELECTRIC SERVICE RATE NO.4 Availability-This rate is available to any customer desiring secondary voltage for any purpose when the electrical requirements are supplied at one point of delivery through one metering installation and the billing demand is 15 kW or more. The limitation to secondary-voltage service may be waived in instances where the character of the electric load at the premises served has changed substantially. This rate is not available for standby or emergency services. Nature of Service-The service is alternating current, 60 hertz,single phase or three phase. The secondary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service $33.45 per customer per month Charge Capacity Charge $9.15 Per kW for all kW of Maximum Demand Commodity Charge Summer Billing Months of June through October $.0412 Per kWh Winter Billing Months of November through May $.0377 Per kWh eactive Power Char gel $0.0083 per kvarh in excess of 50%of total kWh. The Reactive Power Charge shall be applicable to customers who have reactive kilovar hour(kvarh)metering installed in accordance with BWL Rules and Regulations regarding power factor. Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise fees,or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand-The billing demand shall be the kW supplied during the 15-minute period of maximum use during the month. Metering-Where the BWL elects to measure the service on the primary side of the transformer,the metered kW and kWh quantities thus measured will be reduced by 3% for billing purposes to adjust for transformer losses. Where the customer receives service through more than one metering installation, the consumption as registered by the different metering installations will not be combined for billing purposes,but will be computed and billed separately. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Board Meeting Page 13of 41 August 15,2006 Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference, Adopted:August 15,2006 Effective: September 1,2006 Board Meeting Page 14of 41 August 15,2006 PRIMARY ELECTRIC SERVICE RATE NO.5 Availabilitv-This rate is available to any customer desiring primary voltage service when the electrical requirements are supplied at one point of delivery through one metering installation(except as provided below for Multiple Delivery Point Aggregation)and the billing demand is 100 kW or more. This rate is not available for standby or emergency service. Nature of Service-The service is alternating current,60 hertz,three phase. The primary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges: 9/1/06 Basic Service $83.64 per customer per month Charge Capacity Charge $7.42 Per kW for all kW of On-Peak Billing Demand, plus $2.46 Per kW for all kW of Maximum Demand Commodity Charge Summer Billing Months of June through October $0.036 Per kWh for all kWh during the On-Peak Period, 2 plus $0.032 Per kWh for all kWh during the Off-Peak 7 Period, plus Winter Billing Months of November through May $0.034 Per kWh for all kWh during the On-Peak Period, 5 plus $0.032 Per kWh for all kWh during the Off-Peak Period 7 eaetive Power Charge $0.0083 per kvarh in excess of 50%of total kWh The Reactive Power Charge shall be applicable to customers who have reactive kilovar hour(kvarh)metering installed in accordance with BWL Rules and Regulations regarding power factor. Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees,or any other charges against the Board's property,or its operation,or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand On-Peak Billing Demand: The On-Peak Billing Demand shall be the kW supplied during the 15- minute period of maximum use during the On-Peak Period during the month. Maximum Demand: The Maximum Demand shall be the kW supplied during the 15-minute period of maximum use during the month whether on-peak or off-peak. Board Meeting Page 15of 41 August 15,2006 Schedule of on-peak and off-peak periods-The On-Peak Period shall be from 10:00 a.m.until 6:00 p.m., Monday through Friday. All other hours shall comprise the Off-Peak Period. Adopted:August 15,2006 Effective: September 1,2006 Board Meeting Page 16of 41 August 15,2006 PRIMARY ELECTRIC SERVICE RATE NO.5 Multiple Delivery Point Aggregation-The 15-minute period demands of multiple delivery points of a customer may be summed for determination of the total On-Peak Billing Demand under the following conditions: (a)the Maximum Demand at each delivery point must equal or exceed 100 kW;(b)the total On- Peak Billing Demand shall not be less than 4,000 kW;and(c)the customer shall agree to a service contract with the BWL for the customer's full electrical service requirements at the aggregated delivery points for a period of not less than five(5)years. Aggregation shall be applicable for determination of the On-Peak Billing Demand only. All other charges,including the Basic Service Charge and Maximum Demand,shall apply to each delivery point independently. Metering-When the BWL elects to measure the service on the secondary side of the transformers,the metered kW and kWh quantities thus measured will be.increased by 3%for billing purposes to adjust for transformer losses. Where the customer receives service through more than one meter installation,consumption as registered by the different meter installations will not be combined for billing purposes,but will be billed and computed separately except as provided for in Multiple Delivery Point Aggregation. Equipment Supplied by Customer-The customer shall be responsible for furnishing,installing and maintaining all necessary transforming,controlling and protective equipment required for service beyond the BWL primary-voltage delivery point. At the sole option of the BWL,a customer may lease such transformers or other equipment from the BWL under terms established by the BWL. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 Board Meeting Page 17of 41 August 15,2006 MUNICIPAL WATER PUMPING ELECTRIC SERVICE RATE NO.7 Availability-This rate is available to any political subdivision or agency of the State of Michigan desiring service for potable water pumping and associated potable water production equipment when the entire electrical requirements are supplied at one point of delivery through one meter. This rate is not available for emergency, standby,or auxiliary service. Nature of Service-The service is alternating current,60 hertz,three phase. The secondary or primary voltage is determined by the BWL. Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service Charge $10.45 Per customer per month Commodity Charge $.0586 Per kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adiustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license fees,franchise fees,or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Metering-Where the BWL elects to measure the service on the primary side of the transformers serving the customer,the metered kWh thus measured will be reduced 3%for billing purposes to adjust for transformer losses. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 Board Meeting Page 18of 41 August 15,2006 LARGE CAPACITY ELECTRIC SERVICE RATE NO.8 Availability-This rate is available to any customer desiring primary voltage service when: (a)the electrical requirements are supplied at one or more points of delivery as provided below for Multiple Delivery Point Aggregation; (b)where the total On-Peak Billing Demand is 25,000 kW or more;and(c)the customer agrees to a service contract with the BWL for the customer's full electrical service requirements at the applicable delivery points for a period of not less than ten(10)years. This rate is not available for standby or emergency service. Nature of Service-The service is alternating current,60 hertz,three phase. The primary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges: 9/1/06 asic Service Char e $261.36 per delivery point per month lCapacity Charge $8.36 per kW for all kW of On-Peak Billing Demand,plus $1.57 per kW for all kW of Maximum Demand Commodity Summer Billing Months of June through October Char e $0.0314 per kWh for all kWh during the On-Peak Period, plus $0.0272 per kWh for all kWh during the Off-Peak Period,plus Winter Billing Months of November through May $0.0301 per kWh for all kWh during the On-Peak Period, plus $0,0272 per kWh for all kWh during the Off-Peak Period eactive Powe $0,0083 Per k varh in excess of 50%of total kWh Char e Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adiustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise tees,or any other charges against the Board's property,or its operation,or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand On-Peak Billing Demand: The On-Peak Billing Demand shall be the total kW supplied to all applicable delivery points during the 15-minute period of maximum use during the On-Peak Period during the month. (See Multiple Delivery Point Aggregation.) Maximum Demand: The Maximum Demand for each delivery point shall be the kW supplied during the 15-minute period of maximum use during the month whether on-peak or off-peak. Adopted:August 15,2006 Effective: September 1,2006 Board Meeting Page 19o[41 August 15,2006 LARGE CAPACITY ELECTRIC SERVICE RATE NO.8 Schedule of on-peak and off-peak periods-The On-Peak Period shall be from 10:00 a.m.until 6:00 p.m., Monday through Friday. All other hours shall comprise the Off-Peak Period. Multiple Delivery Point Aggregation-The 15-minute period demands of multiple delivery points of a customer shall be summed for determination of the total On-Peak Billing Demand under the following conditions: (a)the Maximum Demand determined at each delivery point must equal or exceed 1,000 kW;and (b)the total On-Peak Billing Demand shall not be less than 25,000 kW. Aggregation shall be applicable for determination of the On-Peak Billing Demand only. All other charges,including the Basic Service Charge and Maximum Demand,shall apply to each delivery point independently. Metering-When the BWL elects to measure the service on the secondary side of the transformers,the metered kW and kWh quantities thus measured will be increased by 3%for billing purposes to adjust for transformer losses. Where the customer receives service through more than one meter installation,consumption as registered by the different meter installations will not be combined for billing purposes,but will be billed and computed separately except as provided for Multiple Delivery Point Aggregation. Equipment Supplied by Customer-The customer shall be responsible for furnishing,installing and maintaining all necessary transforming,controlling and protective equipment required for service beyond the BWL primary-voltage delivery point. At the sole option of the BWL,a customer may lease such transformers or other equipment from the BWL under terms established by the BWL. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective:September 1,2006 Board Meeting Page 20of 41 August 15,2006 OUTDOOR LIGHTING SERVICE RATE NO. 9 Availability - This rate is available to any customer located within the Board of Water and Light (BWL) service area for dusk to dawn lighting of customer's premises. The BWL furnishes and maintains all lights. The installation will overhang private property from existing or new poles set at points accessible to BWL construction and maintenance equipment. This rate is not available for purposes of street, highway, or public thoroughfare lighting. Monthly Rate - Shall be computed in accordance with the following charges. Luminaires on Overhead Mast Arm on existing BWL poles High Pressure Sodium 9/1/06 100 W $9.45 250 W $15.94 400 W $17.04 Mercury Vapor' 175 W $9.91 400 W $17.04 Floodlighting Luminaires on Bracket Arm on existing BWL poles High Pressure Sodium 100 W $13.50 250 W $16.92 400 W $19.81 Metal Halide 400 W $24.62 1000 W $42.58 1500 W $59.10 In the event additional facilities or rearrangement of existing facilities is required, the BWL shall install, operate and maintain such facilities for the following monthly charges. Rates apply to existing luminaires only and are not open to new business. Board Meeting Page 21 of 41 August 15,2006 Type of Facilities 9/1/06 35-foot wood poles including span of $12.15 Per pole overhead secondary extension 37-foot concrete pole including span of $17.78 Per pole overhead secondary extension Other facilities, hand set poles, or rearrangement of existing facilities 1.67% of estimated cost Adopted: August 15,2006 Effective: September 1, 2006 Board Meeting Page 22of 41 August 15,2006 OUTDOOR LIGHTING SERVICE RATE NO. 9 Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the Board's property, or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill that 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 Electric Service incorporated herein by this reference. Service Contract - A written service agreement shall be entered into to take BWL service for a term of years determined as follows: (a) One year, if additional facilities are not required, or (b) Three years, if additional facilities are required (c) Five years, for metal halide lamps or if monthly charges calculated at 1.67% of estimated cost, (d) Ten years, if special contractual arrangements are made. In the event the customer discontinues service before the end of the agreement term, the established rate for the remaining portion of the agreement shall immediately become due and payable. The BWL will replace lamps or make repairs when practicable after the customer has reported that the installation requires servicing. Such replacements and repairs will be made during regular working hours. The BWL may refuse or restrict the service provided in this rate to seasonal type customers and/or may require such customers to pay for the service annually in advance where the permanency of the customer is doubtful or has not been demonstrated by the customer. If relocation, including adjustment, of the outdoor protective light or relocation of other facilities used in connection with the light is desired by the customer during the term of the contract, the BWL will provide this service, if feasible, at the customer's expense. Adopted: August 15,2006 Effective: September 1, 2006 Board Meeting Page 23of 41 August 15,2006 TRAFFIC LIGHT SERVICE RATE NO. 11 Availability-This rate is available to any political subdivision or agency of the State of Michigan desiring unmetered secondary service for operating traffic lights installed on streets or highways for traffic control and guidance. Nature of Service-The service is alternating current,60 hertz,single phase, 120/240 nominal volts Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service Charge $2.09 Per customer per month Commodit Char E $.0324 Per watt of active load per month The actual labor, material, miscellaneous and indirect charges experienced maintaining and relamping traffic signals during the preceding month. Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise fees,or any other charges against the Board's property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Determination of Active Load-The active load of flasher lamps or cyclically operated traffic control lamps shall be 50%of total wattage of all lamps used during one complete cycle of operation. The active load of continuous, non-intermittent steady burning lamps shall be 100%of the total wattage of all lamps used. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that 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 Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 Board Meeting Page 24of 41 August 15,2006 SPACE CONDITIONING AND ELECTRIC WATER HEATING SERVICE RATE NO. 12 Availabilitv-This rate is available to any customer desiring service for commercial/industrial space conditioning and/or electric water heating furnished through a separate meter to which no other electrical device except electric space heating,electric air conditioning,humidity control equipment or electric water heating equipment may be connected. Electric space heating will be considered to include heating by light system provided the primary means of space heating at the time of maximum heating requirements will be furnished by the lighting system with the balance of the heating requirements furnished by supplementary electric heating equipment. This rate is not available to new applications for heat for light systems received after March 1, 1979. This rate is not applicable to the use of electricity for electric air conditioning unless the customer has permanently installed electric space heating equipment and uses it as the principal source of space heating,or to the use of electricity for occasional or seasonal substitute for another method of water heating. Nature of Service-The service is alternating current,60 hertz,single phase at Board of Water and Light(BWL) available secondary voltage. Three phase service will be furnished at BWL option. Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 dsic Service $20.91 Char e Comfnodi Summer Billing Months of June through October Char e $.0886 per kWh Winter Billing Months of November through May $.0550 per kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adiustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bill shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license fees,franchise fees,or any other charges against the BWL property,or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted: August 15,2006 Effective: September 1,2006 Board Meeting Page 25of 41 August 15,2006 RESIDENTIAL ELECTRIC SERVICE, SENIOR CITIZEN RATE NO.21 Availability-This rate is available to any single family or multifamily dwelling of 4 units or less when the entire electric requirements are supplied at one point of delivery through the same meter. The customer must be 65 years of age and head of the household being served. Service to appurtenant buildings may be taken through the same meter. Service under this rate is not available to any single family or multifamily dwelling of 4 units or less unit when a portion of the residence or dwelling unit is used for commercial,industrial,or resale purposes unless the wiring is so arranged that service for residential and non-residential purposes are metered separately. Customers taking service under this rate shall provide evidence of age and contract with the Board of Water and Light(BWL)to remain on this rate for at least twelve(12)months. Nature of Service-The service is alternating current,60 hertz,single phase, 120/240 nominal volts. Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 asic Service $4.45 har e Commod* $.0476 per kWh for the first 300 kWh Char a $.0803 per kWh for the next 200 kWh $.1077 per kWh for all over 500 kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adiustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adiustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license fees,franchise fees,or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted: August 15,2006 Effective: September 1,2006 Board Meeting Page 26of 41 August 15,2006 STREET LIGHTING SERVICE BOARD OWNED SYSTEMS RATE NO. 31 Availability - Available to any political subdivision or agency of the State of Michigan for street lighting service for any system consisting of one or more luminaires where the BWL has an existing distribution system with secondary voltage available. Luminaires may be installed with no limitations as to spacing between luminaires. Where an overhead line extension is required to serve one or more luminaires, the BWL will furnish 350 linear feet of line extension per luminaire served from such extension. A special agreement will be required if more than 350 linear feet of line extension per luminaire is required. Nature of Service - The BWL will furnish, install, own, operate, and maintain all equipment comprising the street lighting system, and supply the unmetered energy. The BWL reserves the right to furnish service from either a series or multiple system or both. Annual Rate- The annual rate per luminaire with fixture and setting, payable in twelve (12) monthly installments, shall be as follows; High Pressure Sodium Luminaire 9/1/06 70 W $71 100 W $80 150 W $93 250 W $114 400 W $145 1000 W $297 Mercury Vapor Luminaire' 100 W $76 175 W $91 250 W $107 400 W $137 1000 W $260 Metal Halide Luminaire 175 W $159 250 W $181 400 W $183 1000 W $355 1500 W $545 Rates apply to existing luminaires only and are not open to new business except where the BWL elects,at the customer's request,to install additional luminaires within an area already served by a mercury vapor lighting system. Board Meeting Page 27of 41 August 15,2006 Induction Luminaire 85 W $76 165 W $92 Adopted: August 15,2006 Effective: September 1, 2006 Board Meeting Page 28of 41 August 15,2006 STREET LIGHTING SERVICE BOARD OWNED SYSTEMS RATE NO. 31 Annual Rate (continued) plus an additional annual charge, depending on type of installation, of: 9/1/06 Wood Pole— Overhead Service None Wood Pole—Underground Service $82 Concrete Pole—Overhead Service $130 Concrete Pole—Underground $130 Service Post Top $82 Historic— Single Top $269 Large Historic—Dual Top $787 Small Historic—Dual Top $559 Wall/Tunnel—8760 hours $114 Wall/Tunnel—4200 hours $69 Bollard $267 Customer Contribution - The annual rates are based on fixtures normally stocked by the BWL, and installed utilizing normal construction techniques. The BWL may, at its option, upon customer request install a street lighting system not covered by the rates below. The customer, after installation, will be required to make a one time contribution equal to the difference between the actual installed cost and the BWL estimated installed cost of a standard installation. The annual unit charge for each luminaire will then be as stated below. Unit Replacement -The BWL may, at its option, upon customer request replace existing street light units. After installation, the customer shall make a one time contribution equal to the undepreciated value of the unit plus the cost of removal. Special Terms and Conditions -The BWL reserves the right to make special contractual arrangements as to termination charges, contributions in aid of construction, term or other special considerations when the customer requests service, equipment or facilities not normally provided under this rate. Tax Adjustment -Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL property, or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Board Meeting Page 29of 41 August 15,2006 Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill that 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 Electric Service incorporated herein by this reference. Adopted: August 15,2006 Effective: September 1, 2006 Board Meeting Page 30of 41 August 15,2006 STREET LIGHTING SERVICE CUSTOMER OWNED SYSTEMS RATE NO. 32 Availability - Available to any political subdivision or agency of the State of Michigan for street lighting service for any system consisting of one or more luminaires where the BWL has an existing distribution system available. Nature of Service - The BWL will connect the customer's equipment to BWL lines, furnish the control equipment, supply the unmetered energy, control the burning hours of the lamps, provide normal replacement of luminaire refractors, control devices and lamps. The customer will furnish, install and own all equipment comprising the street lighting system, including, but not limited to the overhead wires or underground cables between luminaires and the supply circuits extending to the point of attachment with the BWL . All maintenance and replacement of the customer's equipment except normal lamp and glass replacement shall be paid by the customer. The BWL reserves the right to furnish service from either a series or multiple system or both. Annual Rate- The annual rate per luminaire, payable in twelve (12) monthly installments, shall be as follows: High Pressure Sodium Luminaire 9/1/06 70 W $37 100 W $47 150 W $59 250 W $79 400 W $112 1000 W $265 Mercury Vapor Luminaire3 175 W $55 250 W $72 400 W $102 1000 W $225 Incandescent Luminaire4 2500 L $75 4000 L $119 6000 L $144 Maintenance Charge - The actual labor, material, miscellaneous and indirect charges experienced maintaining street light units during the preceding month. 3 Rates apply to existing luminaires only and are not open to new business except where the BWL elects,at the customer's request,to install additional luminaires within an area already served by a mercury vapor lighting system. 4 Rates apply to existing luminaires only and are not open to new business. Board Meeting Page 31 of 41 August 15,2006 Combined Rates - The annual rate for units consisting of more than one luminaire shall be the appropriate combination of individual unit charges above. Adopted: August 15,2006 Effective: September 1, 2006 Board Meeting Page 32of 41 August 15,2006 STREET LIGHTING SERVICE CUSTOMER OWNED SYSTEMS RATE NO. 32 Special Terms and Conditions - The BWL reserves the right to make special contractual arrangements as to termination charges, contributions in aid of construction, term or other special considerations when the customer requests service, equipment or facilities not normally provided under this rate. Tax Adiustment -Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL property, or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill that 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 Electric Service incorporated herein by this reference. Adopted: August 15,2006 Effective: September 1, 2006 Board Meeting Page 33of 4l August 15,2006 ATTACHMENT B 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 distribution system with a maximum gauge pressure of fifteen pounds per square inch (15 psi). Steam services at gauge pressures above 15 psi but 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 9/1/0 6 Basic Service $ per customer per month Charge 9.45 Commodity Billing Months of June through Charge November $ per 1000 lbs. for the first 200,000 lbs. 9.38 $ per 1000 lbs. for all 1000 lbs. over 9.92 200,OOO lbs. Billing Months of December through May $ per 1000 lbs for the first 200,000 lbs. 9.52 $10.0 per 1000 lbs. for all 1000 lbs. over 6 200.000 lbs. Surcharge - A surcharge of ten (10) percent shall be added to the above rates for steam service supplied upon customer's request for service at gauge pressure above 15 psi but not exceeding 100 psi. Fuel Cost Adiustment-This rate is subject to a Fuel Cost Adjustment factor added to the above charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Amine Treatment Adiustment - The amine treatment adjustment allows for the monthly adjustment of rates to reflect the actual cost incurred due to amine feed. The factor shall be applied to each 1000 pounds (lbs) billed. The factor shall consist of 1.124 times the weighted average amine cost per 1000 lbs treated during the previous month. Board Meeting Page 34of 41 August 15,2006 Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, 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 the revenue received does not adequately compensate the BWL for the cost of furnishing service. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill which is not paid on or before the due date. Reconnect Charge - A reconnect charge shall be added to any account which discontinues and reconnects service at the same address within a twelve (12) month period. The reconnect charge is specified in the BWL Rules and Regulations for Steam Service. Rules and Regulations - Service under this rate is subject to the BWL Rules and Regulations for Steam Service which are incorporated herein by this reference. Adopted: August 15, 2006 Effective: September 1, 2006 Board Meeting Page 35of 41 August 15,2006 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 plant wall at a minimum gauge pressure of 250 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 BWL facilities. Monthly Rate: 9/1/06 Demand Charge: $1.08 per pound per hour (lb/hr) for all lb/hrs of contract demand $ .95 per pound per hour (lb/hr) for all lb/hrs exceeding contract demand Commodity $5.24 per thousand pounds (Mlb) Charge: Fuel Cost Adjustment-This rate is subject to a Fuel Cost Adjustment factor added to the above charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Minimum Charge: Monthly Demand Charge above. Tax Adjustment: Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, or any other charges against the BWL's property. or its operation, or the production and/or sale of steam, to offset any 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/hrs) supplied during the 15 minute period of maximum use during 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, shall be 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 are incorporated herein by this reference. Adopted: August 15, 2006 Effective: September 1, 2006 Board Meeting Page 36of 41 August 15,2006 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 transmission 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 BWL facilities. This service may include both firm and curtailable service. Monthly Rate - Per contract terms. Fuel Cost Adjustment-This rate is subject to a Fuel Cost Adjustment factor added to the charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Amine Treatment Adiustment- Per contract terms. Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Minimum Charge - Per contract terms. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be 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 are incorporated herein by this reference, unless superceded by the terms and conditions of the customer contract. Adopted: August 15, 2006 Effective: September 1, 2006 Board Meeting Page 37of 41 August 15,2006 RESIDENTIAL STEAM SERVICE RATE NO. 5 Availabilitv-This rate is available to any single-family or multifamily dwelling of 4 units or less when the entire service requirements are supplied at one point of delivery through one meter. Service under this rate is not available to any single-family or multifamily dwelling unit of 4 units or less when a portion of the dwelling unit is used for commercial,industrial,or resale purposes unless the service is so arranged that residential and non-residential purposes are metered separately. Nature of Service - Saturated steam up to a maximum gauge pressure of 15 psi. Steam services at gauge pressures above 15 psi but not exceeding 100 psi, when available, may be supplied at the option of the BWL or upon request by the customer. Monthly Rate 9/1/0 6 Basic Service $7.00 per customer per month Charge Commodity Billing Months of June through Charge November $6.95 per 1000 lbs. for the first 200,000 lbs. $7.35 per 1000 lbs. for all 1000 lbs. over 200,000 lbs. Billing Months of December through May $7.05 per 1000 lbs for the first 200,000 lbs. $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 request for service at gauge pressure above 15 psi but not exceeding 100 psi. Fuel Cost Adjustment-This rate is subject to a Fuel Cost Adjustment factor added to the above charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Amine Treatment Adjustment- The amine treatment adjustment allows for the monthly adjustment of rates to reflect the actual cost incurred due to amine feed. The factor shall be applied to each 1000 pounds (lbs) billed. The factor shall consist of 1.124 times the weighted average amine cost per 10001bs treated during the previous month. Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Board Meeting Page 38of 4l August 15,2006 Minimum Charge - The Basic Service Charge included in the rate except that Special Minimum Charges shall be billed when the revenue received does not adequately compensate the BWL for the cost of furnishing service. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill which is not paid on or before the due date. Reconnect Charge - A reconnect charge shall be added to any account which discontinues and reconnects service at the same address within a twelve (12) month period. The reconnect charge is specified in the BWL Rules and Regulations for Steam Service. Rules and Regulations - Service under this rate is subject to the BWL Rules and Regulations for Steam Service which are incorporated herein by this reference. Adopted: August 15, 2006 Effective: September 1, 2006 Board Meeting Page 39of 41 August 15,2006 FUEL COST ADJUSTMENT The Fuel Cost Adjustment permits the monthly adjustment of rates for the costs of fuel incurred in supplying steam to customers. All general and industrial service rates are subject to the Fuel Cost Adjustment. In applying the Fuel Cost Adjustment the applicable rate per Mlb shall be increased or decreased by the amount of the current Fuel Cost Adjustment. The following definitions and procedures will be followed in calculating the monthly Fuel Cost Adjustment. Definitions Fuel Cost Adjustment- the amount per Mlb by which the applicable rates shall be adjusted for billing in each month. Fuel Costs - those costs incurred in supplying steam. Such costs include fuel burned. The cost of fuel burned shall include the delivered cost of fuel (base cost, escalations, premiums/penalties, transportation, demurrage), outside lab fees and other outside costs related to fuel procurement, and fuel additives such as freeze proofing. Over/Under Recovery - the difference between actual Fuel Costs for prior months and the amount of fuel cost recovered by means of the Base Cost of Fuel and the Fuel Cost Adjustment. The Over/Under Recovery shall be added to the Fuel Costs for purposes of computing the Fuel Cost Adjustment for each month. Base Cost of Fuel - the average Fuel Cost included in the fuel rates of the various rate schedules. Such amount shall not be recovered by means of the Fuel Cost Adjustment. The current Base Cost of Fuel is $3.2131 per thousand pounds of steam (Mlb) sold. Procedures Estimated Fuel Cost shall be projected for a twelve-month period. Any amount of Over/Under Recovery (positive or negative) shall be added to the Fuel Cost to determine the total cost basis for the Fuel Cost Adjustment. The total cost basis shall be divided by the projected total billed sales for the twelve-month period resulting in the average Fuel cost per Mlb. The Base Cost of Fuel shall be subtracted from the average Fuel cost to result in the Fuel Cost Adjustment. The Fuel Cost Adjustment shall be reviewed and, as necessary, revised periodically in accordance with the provisions of this schedule, but not less frequently than every twelve months. Adopted: August 15, 2006 Effective: September 1, 2006 Board Meeting Page 40of 41 August 15,2006 MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Cochran stated that he agreed with the General Manager and Commissioner Rios in that public comment was an eye opener for him during this process. He also stated that the general public did not come to rant and rave but were present with conviction to plead their case. Commissioner Cochran also stated that it had an effect on him and he was glad to have had opportunity to go through the process. Mr. Novick stated that he misspoke when he indicated that management did not have any resolutions. He then stated that the Commissioners needed to approve the amended electric and steam rate increase resolution that will reflect a 35% steam rate increase so that the correct sheets can be put into place. For further details please see Electric and Steam Rate Increases under Resolutions. Commissioner Callen stated that he would have appreciated 24-hour advance notice so that he may assess it on his own. Commissioner Rios stated that he could appreciate his point of view but that the rate deliberation is a time set aside to discuss any items relative to the rate increase. He also stated that his resolution was something that he did independently and since they did not discuss their approach during the Committee of the Whole meeting he understood his comment. Commissioner Callen stated that he also wanted to make another comment in regards to Mr. Novick's earlier statement regarding the advantages of being a public power company. He went onto state that he did not think that the public realized the advantages of being a public utility as he worked for the MPSC for 25 years and saw the complexity of the process. Commissioner Callen also stated that the rate process oftentimes, involved up to 30 attorneys, 12 parties and corrections made up to 18 months later. MOTION OF EXCUSED ABSENCE Motion by Commissioner Rios, seconded by Commissioner Calkins to excuse the absence of Commissioner Robin Smith. Action: Carried unanimously PUBLIC COMMENTS None. Board Meeting Page 41 of 41 August 15,2006 ADJOURNMENT On motion by Commissioner Graves, seconded by Commissioner Cochran the meeting adjourned at 6:20 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 24, 2006 Approved by the Board: September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT co o Monday, August 14, 2006 c-, co M The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James (arrived at 9:16 a.m.), Santiago Rios, and Robin Smith. (Note: 2nd Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the Special Meeting to order at 9:02 a.m. 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 A letter dated July 27, 2006 from a BWL employee in support of the General Manager. Received and placed on file. Special Board Mtg Page 2 of I I August 14,2006 A letter dated July 29, 2006 from Jack Hill, Director of Environmental, Health and Safety in support of renewing the General Manager's contract. Received and placed on file. A letter dated August 4, 2006 from former commissioner Nancy Duncan asking for renewal of the General Manager's contract. Received and placed on file. A letter dated August 8, 2006 from retiree Ron Brynes responding to unsigned letter from a BWL retiree. Received and placed on file. A letter dated August 10, 2006 from Bill Maier, BWL employee in support of renewing the General Manager's contract. Received and placed on file. A letter dated August 10, 2006 from Gail Peterson, BWL employee in support of renewing the General Manager's contract. Received and placed on file. COMMITTEE REPORTS Resolution-2006-8- EXECUTIVE COMMITTEE MEETING August 1, 2006 The Executive Committee met on Tuesday, August 1, 2006 at 4:00 p.m. to discuss two items — Interim Internal Auditor and Human Resource Audit Parameters. Present: Commissioners Smith, Calkins, Cochran, and Rios. Public Comment There were no public comments. INTERIM INTERNAL AUDITOR Special Board Mtg Page 3 of 11 August 14,2006 At the executive committee meeting the Commissioners discussed the interview and selection process of the Interim Internal Auditor. It was determined that they will interview (schedule permitting) the two candidates on Tuesday, August 15tn at 3:00 and 4:00 p.m. prior to the rate deliberation meeting. Commissioner Rios handed out a scope of work, which he suggested could be used as a guide in defining specific tasks for this project. The Commissioners will also review previous Internal Auditor, Glen Holloway's list of unresolved items as a template for determining the projects that the Interim Internal Auditor may address and also as a basis for creating scenario questions during the interview. The scenario questions will be provided to the candidates prior to the interview so that they may have a chance to think about the answer and respond. During the discussion the Commissioners suggested contacting the Purchasing Department to ensure that their process is compliant with current purchasing policy. The Commissioners also asked about the financial implications of hiring an Interim Internal Auditor, as this position was not included in the budget. General Manager, Sandy Novick answered by stating that the Commissioners will be over budget, as a salary for this position was not taken into consideration. HUMAN RESOURCE AUDIT PARAMETERS The Commissioners discussed the presentations of both candidates, Bee Tree Consulting, Ltd. and Growth Strategies Consulting, Inc. After discussion, it was decided that the Executive Committee would bring forth a recommendation to the Board for a vote on Monday, August 14, 2006 to award the RFP for the HR Audit to Growth Strategies Consulting, Inc. Respectfully submitted, Robin Smith, Chair Executive Committee Motion by Commissioner Smith, second by Commissioner Graves to approve the report as presented. Action: Carried unanimously. RESOLUTIONS Resolution 2006-8- PROPOSED RESOLUTION HUMAN RESOURCE AUDIT SELECTION Special Board Mtg Page 4 of I l August 14,2006 WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and interviewed each candidate for the Human Resource Audit on July 24, 2006; and WHEREAS, the Executive Committee of the Board of Commissioners of the Board of Water and Light met and discussed each candidate's presentation and credentials on August 1, 2006. RESOLVED, That the Executive Committee recommends that the Request for Proposal award for the Human Resource Audit be granted to Growth Strategies Consulting, Incorporated. Motion by Commissioner Smith, second by Commissioner Rios to approve the resolution as presented. Action: Carried unanimously Sandy Novick, General Manager will have management contact Growth Strategies Consulting, Incorporated and advise them of the RFP selection, Commissioner Smith concurred. Resolution 2006-8- GENERAL MANAGER'S PERFORMANCE EVALUATION Commissioner Smith stated that they did not have a resolution to present at this time. However, she instead asked that each Commissioner present their evaluation of General Manager, Sandy Novick in a roundtable format. Commissioner Cochran stated that there have been issues with the relationships involving the Board, the City of Lansing and the Mayor. There were repeated attempts by the Union to resolve issues involving the Call Center. Additionally, the Union agreed to volunteer their time at a firing range but was asked by Mr. Novick how they would address workmen's comp insurance. Commissioner Cochran stated that shortly thereafter, Mr. Novick advised him that the BWL is self-insured and the Director of Human Resources, Mary Dwyer confirmed it a few days later. Commissioner Cochran stated that issues of this nature cause irritation within the organization. Commissioner Cochran also stated that after speaking with the FBI regarding the recording and/or monitoring issues in the Call Center, Mr. Novick stated that he was unaware of the matter; only later to find out that he had accepted credit for Call Center improvements. Commissioner Cochran stated that he believes leadership begins at the top and when issues such as sexual harassment and intimidation arise they are a reflection of the leader. He also thought it poor Special Board M[g Page 5 of l I August 14,2006 judgment to use a potential plant sell as a financial consideration. Moreover, he also stated that he did not understand the theory behind maintaining the utilities as separate entities and believes we need to work as partners with the residents, City, and State to build a viable economic environment. Commissioner Cochran stated that the results of the Safety Council were not presented by management but by the union and believes that management is presenting selective information to the Board. Commissioner Callen asked to review history in which he stated that the situation with the former General Manager was intolerable because it involved a number of items that were unacceptable and this is not the current case. Commissioner Callen went onto say that when the General Manager position was posted they received approximately 100 applicants and Sandy Novick was selected. Upon Mr. Novick's entry into the BWL it was his idea to prioritize safety, develop an organizational diversity program, and an employee incentive plan in addition to the items requested by the Commissioners that included employee development, training, specific assignments, and strategic planning. Commissioner Callen stated that although, there are problems, some things are being done well and others need improvement. He also went onto state that the Commissioners appear to be focusing on the negative without any attention to the positive changes that have occurred. Namely, leadership of the MPPA issues, long-term planning, succession planning, management training, introduction of the Safety Council evaluation, frequent financial analysis, balanced scorecard measures, meetings with the union, "Breakfast with Sandy", City Council meetings, IRP results, and the current IT program. Commissioner Callen also stated that improvements are necessary and needed and he feels that the Commissioners should focus on that aspect. He also agrees that although, the BWL is not an authority on economic development we can certainly make a positive impact. Commissioner Callen also stated that he does not believe that firing the General Manager makes sense at this time and feels that BWL has not reached that point. Commissioner Graves asked if they would be given opportunity to discuss one another's comments. Commissioner Smith responded by stating that they would conduct a roundtable that will allow each Commissioner to present their evaluation; after which time the General Manager would be allowed to make comments and they will decide on how to proceed from there. Commissioner Graves then went onto to state that the Commissioners and the General Manager agreed on a very specific performance evaluation effective February 1, 2006. The current evaluation period in question is for six-months. Commissioner Graves then stated that some of the comments being made are not based on the objectives. He also said that he used the performance Special Board Mtg Page 6 of I I August 14,2006 objectives as a basis to write his evaluation and some of the comments have already been spoken. However, some of the items referenced in his evaluation include the completion of the IRP, six-year financial forecast, and the invitation to the Safety Council to review BWL practices of which the Council commended the BWL and stated that it would take seven years to turn things around. Commissioner Graves also stated that Mr. Novick constantly references the need for safety and its improvement. He also gives Mr. Novick high remarks for communication and believes that he is 97% on target with the agreed upon objectives. Commissioner Graves stated that the performance objectives were given six-months ago and believes that the evaluation should cover a one year period. Commissioner James stated that she has not been with the BWL for very long. However, she stated that in this short period of time she has made some distressing observations. Areas of concern involve employees' lack of trust for staff and middle managers that act inappropriately without fear of corrective measures. Commissioner James stated that she lacks confidence in what she sees especially, in the financial areas. She asked management to decrease cost and as a result the number of contractors were reduced and based on this occurrence it appears that there maybe some 'fluff' in the budget. Commissioner James also stated that it was not clearly indicated to the Commissioners that a 35% steam rate increase had been placed on the table. Therefore, they were not adequately aware of the ramifications of increasing the steam rate to 65%. There is a lack of communication with the General Manager. Commissioner James stated that she asked for the negative media to stop and it did not, including comments made by the Commissioners. She also stated concerns regarding the cost overrun with the Blackstart project and feels that there needs to be some accountability within the organization. Commissioner Calkins stated that he looked at the performance objectives as did others and recognize that they are only six-months into the evaluation period. There is a need to look at finances first and build on improving them. Safety improvements have been made and the incident rate has been reduced by 25%. Commission Calkins suggested that they evaluate Mr. Novick based on what they agreed to and that they consider setting new or additional objectives that can be re-reviewed at the end of six-months which will cover an actual year. Commissioner Calkins went onto state that the comments made thus far have been on issues important to the Commissioners but not on the list of objectives. He believes that those items can be reviewed but does not think that they are worthy of terminating the General Manager. Commissioner Rios stated that he has several issues with the General Manager which include the FBI investigation and the actual truth of what occurred, financial concerns regarding the memo sent by Dennis McFarland, Vice Special Board Mtg Page 7 of I I August 14,2006 President and the two-man versus three-man bucket issue that concerns safety. He also stated that he has concerns regarding the validity of the information presented by management. Commission Rios then stated that he often finds that he must do more research to get to the truth. Therefore, his evaluation does not support Mr. Novick at this time. Additionally, Commissioner Rios stated that he believes that there are two issues before them today, the first of which is the performance evaluation and the second one is contract renewal. Commissioner Smith stated that she believes the evaluation should include a list of accomplishments and areas of improvement. She also stated that she has issues with the following areas that include, safety of which she commends Mr. Novick for commissioning the report. However, it was used theoretically and not fully implemented. Commissioner Smith also stated concerns regarding union issues, lack of managerial philosophy, the implementation of performance objectives, Blackstart project cost overruns, the fallacy in that the steam rate was presented as an either or situation and trust issues. Commissioner Smith then stated that it is her decision not to reappoint Mr. Novick as the General Manager. Commissioner Smith asked Mr. Novick if he would like to take the opportunity to respond to the evaluation presented before him today. Mr. Novick responded by stating that per his contract he is supposed to receive a written summary of the comments, which he has not received thus far. Therefore, he would like a copy so that he may review it. Commissioner Rios recommended that Mr. Novick be given a copy of the summary and the Special Meeting would break for up to one hour to allow him opportunity to review said material. Commissioner Graves suggested giving Mr. Novick ample time to receive and review the evaluation. Commissioner Callen stated that one hour of review time is not sufficient and suggested giving Mr. Novick several days to review the document in all fairness to him. Motion by Commissioner Smith, second by Commissioner Rios, supported by Commissioner Cochran to give the General Manager four days to review the performance evaluation materials and respond which is equivalent to the time given to the Commissioners to review one another's evaluations. Action: Carried unanimously Special Board Mtg Page 8 of I I August 14,2006 COMMISSIONER REMARKS Commissioner Graves asked to respond to some of the comments previously mentioned and stated that he did not believe a full and complete discussion could take place without Mr. Novick having input. However, he went onto state that low employee morale should not be judged as there is nothing scientific to support its findings. The union survey only represents 15% of the bargaining base and does not include non-bargaining employees. Commissioner Graves then suggested that items of concern be added to Mr. Novick's objectives and be addressed at that time. Commissioner Graves also stated that if he recalls correctly, management made an expenditure prior to the Board's issuance of said budget. He believes that that would answer the question of the cost overrun in regards to the Blackstart project. Commissioner Graves stated that he was going to read into hearing an excerpt from discussion notes taken by former Corporate Secretary, Mary Sova in regards to a meeting that he had with former Internal Auditor, Glenn Holloway. General Counsel, Amy Cavanaugh advised that the session in question was not considered a meeting since Commissioner Graves was the only Commissioner present. However, the minutes produced from that meeting were introduced during a closed session because they were of a personal matter. Therefore, Ms. Cavanaugh stated that she would need time to determine whether or not an excerpt of the memo could be introduced during an open session. Commissioner Graves went onto state that someone chose to include a copy of that memo in Mr. Novick's evaluation and several Commissioners have made references to the comments made in the memo. Commissioner Callen stated that he wanted to clarify his characterization of the current and former General Manager as the Chair did not represent his comments correctly. Commissioner Callen also stated that he wanted to make it clear that the current situation with the General Manager is nothing like the previous situation that they addressed with the former General Manager. He went onto state that he sees opportunity to straighten out the FBI issues and alleged lack of communication. He also agrees that the union survey represents a small body of people and feels that management support of the Mr. Novick is important and should be taken into consideration. Commissioner Callen also stated that he was applauded by Mayor Bernero's presentation during a previous Board meeting. Commissioner Smith asked that the Commissioners continue to direct their comments towards Mr. Novick's evaluation. Special Board Mtg Page 9 of I 1 August 14,2006 Commissioner Callen agreed and then went onto say that he believed that Mayor Bernero's accusations against Mr. Novick were unsubstantiated. Commissioner Cochran made a minor correction by stating that 137 out of 430 bargaining employees participated in the survey, which is approximately 37%, not 15%. He also went onto to state that management advised customers that the rate increase would be 35% but that was not presented to the Board. Commissioner Cochran also stated that the two-man versus three-man bucket situation is still occurring and yet he was advised that the linemen needed a raise and that has not taken place at this time. Commissioner Calkins stated that a lot of the issues are in reference to human resource concerns and he wondered why comments are being made regarding those issues being that a human resource firm is scheduled to address those matters. He also stated that management proposed the 35% steam rate increase and he did not accept that figure; others had different ideas and some did not. Commissioner Calkins went onto state that he is willing to take responsibility for recommending the 65% steam rate increase and believe that others are also. He also stated that he believes all of the cost overruns were not based on poor management but on expenditures as previously stated. Commissioner Calkins also indicated that while working at the State of Michigan he evaluated a lot of employees and allowed them the opportunity to make corrections. He did not understand how the Commissioners could recommend terminating the contract without allowing for corrective action. Commissioner Rios reiterated that there are two issues before the Commissioners that include evaluation and contract renewal. He does not believe that Mr. Novick is exhibiting the leadership skills needed to move forward. He also stated that he found it disappointing for Commissioners to speak ill of the Union and the Mayor. Commissioner Rios went onto state that Mr. Novick does not have the full support of the Board and therefore, he cannot see how they can move forward during these difficult times. Commissioner Smith stated that she does not believe that the Commissioners are trying to redesign the evaluation. The union had a vote of no confidence and the Board acknowledges management's support of the General Manager. Commissioner Smith then stated that she was encouraged to see some of the Commissioners acknowledge issues that have been previously presented to them. Commissioner Smith gathered consensus and reached agreement with the Commissioners to schedule another Special Meeting on Friday, August 18, 2006 at 2:00 p.m. in the Boardroom of the Administrative Offices, 1232 Special Board Mtg Page 10 of I 1 August 14,2006 Haco Drive, Lansing, Michigan. The additional Special Meeting will allow Mr. Novick opportunity to review and respond to his evaluation and continue discussion. Commissioner Callen stated that he would check his calendar and confirm the special meeting time and date with the Corporate Secretary. Commissioner Graves stated that in Commissioner Smith's opening remarks you talked about the steam rate deliberations but in the newspaper she indicated that she would recuse herself from voting. He then asked Commissioner Smith if she is allowed to make comments. Commissioner Smith answered by stating that she has scheduled a meeting with the Ethics Board to get obtain a decision from them as to whether or not she can participate in the rate discussions. Commissioner Calkins then asked Commissioner Smith if she is allowed to discuss the budget process at all? Commissioner Smith responded by stating that the question before the Ethics Board is whether or not she can participate in the rate deliberations. The issue of making statements is somewhat mute as the rate deliberation hearing is upon us. On request by General Counsel, Amy Cavanaugh, the Commissioners and the Corporate Secretary entered into closed session to discuss her opinion regarding the conflict of interest. Closed session began at 10:59 a.m. Open session resumed at 11:15 a.m. MOTION OF EXCUSED ABSENCES None. PUBLIC COMMENTS Max Zemer, BWL retiree and former business manager of IBEW Local 352 stated that during his 20 years of experience with management they developed a good working relationship. Although, there were disagreements the relationship they maintained allowed them to work through those issues and unfortunately it appears that that process has changed. In the past, during his leadership they never used an attorney to address issues with BWL and now he sees that the union currently has an attorney on retainer fee. Special Board Mtg Page I I of I 1 August 14,2006 On a separate issue, Mr. Zemer went onto say that in a previous meeting one of the Commissioners asked for information relative to the budget. As such, he wanted to know if that information has been received as the public has a right to know due to the significance of the amount. Ron Brynes, BWL retiree stated that he wanted to repeat some of the information that he presented at the Joint City Council/BWL Commissioner meeting because Commissioners Cochran and James left before his public comment. Mr. Brynes went onto say that the BWL promised retirees healthcare for life and he does not understand why it has been suggested that retiree premiums be increased when the BWL has approximately $40 million dedicated for this sole purpose. According to the IRS the money cannot be touched and he feels that it should be used to address the needs of BWL retirees. ADJOURNMENT On motion by Commissioner Smith, second by Commissioner Cochran the meeting adjourned at 11:42 a.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 23, 2006 Approved by the Board: September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS'REGULAR MEETMIG N LANSING BOARD OF WATER AND LIGHT n Tuesday, July 25, 2006 The Board of Commissioners met in the Boardroom of the Administrative 04ftces,' 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, and Robin Smith. (Note: 2"d Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES By motion of Commissioner Calkins, seconded by Commissioner Callen the minutes of the May 23, 2006 regular meeting were unanimously approved. By motion of Commissioner Calkins, seconded by Commissioner Callen the minutes of the May 23, July 11-12, and July 18, 2006 special meeting were unanimously approved. Commissioner Smith welcomed new Corporate Secretary, Rhonda Jones. WAIVER TO ORDER OF BUSINESS There being no objection, Chair Smith announced that the order of business was being modified to accommodate guests. MANAGER'S RECOMMENDATIONS Page 2 Board Meeting July 25,2006 Resolution 2006--7-- A. City's Grant of Two Easements to the Stadium District Project RESOLVED, The Board of Commissioners hereby approves the City's grant of two easements, Easement for Ingress/Egress and Associated Improvements and Easement for Garbage Receptacles, to Stadium District Partners, LLC, as permitted by the Lansing City Charter (8-403(.5)). Background: The Board of Commissioners in accordance with the City Charter is responsible for approving easements that affect property being utilized by the Lansing Board of Water and Light. Brandie Ekren, Associate Attorney, presented an overview of the City's proposed grant. The City of Lansing entered into a buy/sell agreement for the Stadium District Partners, LLC. As a part of that agreement, easements are necessary from both sides. The City would like to grant two easements to Stadium District Partners, LLC. Ms. Ekren, with the concurrence of the General Manager, recommended that the Board of Commissioners approve said grant. The Board of Commissioners has been advised of the necessity of such a resolution and had an opportunity to discuss its merits. Motion by Commissioner Rios, seconded by Commissioner Calkins, to adopt Resolution 2006-7-3 regarding the City's Grant of Two Easements to the Stadium District Project. Action: Carried unanimously. Resolution 2006-7- B. Declaring Intent to Reimburse Project Expenditures with Bond Proceeds and Authorizing Publication of Notice of Intent to Issue Bonds. Dennis McFarland, Senior Vice President of Finance and Administration, presented a reimbursement resolution to use for all capital expenditures. The reimbursement resolution would allow the Board of Water and Light to avoid using operating dollars for capital projects. The bond proposal provides flexibility in financing capital projects. Mr. McFarland, with the concurrence of the General Manager, recommended that the Board of Commissioners adopt the reimbursement resolution with bond proceeds. Page 3 Board Meeting July 25,2006 The Board of Commissioners has been advised of the necessity of such a resolution and had an opportunity to discuss its merits. Motion by Commissioner Rios, seconded by Commissioner Calkins, to adopt Resolution 2006-7-4 for Declaring Intent to Reimburse Project Expenditures with Bond Proceeds and Authorizing Publication of Notice of Intent to Issue Bonds. Action: Carried unanimously PUBLIC COMMENTS Joseph Davis, Business Manager of IBEW Local 352, addressed the Board in regards to the union survey being presented later that evening and the issues facing the Board of Water and Light. Mr. Davis asked that the Commissioners focus on the entire survey and not just specific items. He also stated that employees are deeply concerned about the organization and desire to address the issues and move forward in a positive manner. He is not advocating the removal of any individual, as that authority is the responsibility of the Commissioners. However, it is his charge to bring union membership concerns to the Commissioners in an effort to work together to resolve those concerns for the betterment of the organization. Commissioner Graves asked if completed copies of the survey results were available. Mr. Davis responded that they would be forthcoming upon the arrival of Mr. Joe Ross, Communications and Research Inc. Ron Byrnes, BWL retiree, advised the Board that he had responded to City Council, the Commissioners and the Mayor in regards to an anonymous letter sent by a BWL retiree. He asked the Commissioners not to give a letter any significant creditability when the author does not sign it. James Hooker, BWL employee and member of IBEW Local 352 stated that according to the Grand Ledge Independent newspaper, the BWL delivered a bill to Delta Township in the amount $460,000. According to the article the charges were regarding pole relocation fees. However, per the article when inquires were made of the BWL no one returned their calls. Mr. Hooker felt that it was unacceptable for something of this nature to occur from a utility that wants to be the only utility that its customers will accept. Mr. Hooker also stated that in the past few months, Joe Davis, Business Manager of IBEW had come under personal attack from current employees, fellow IBEW members and a former Commissioner. He is incensed over these attacks and finds it absurd that things of this nature are being orchestrated in light of our new public relations appointment, a former Lansing State Journal employee. He finds Mr. Davis' character to be exemplary and above reproach. Page 4 Board Meeting July 25,2006 He hopes that the Commissioners will look at the media and take into account some of items being reported. COMMUNICATIONS Two letters were received from an anonymous BWL Retiree dated May 6, 2006 and July 24, 2006, both expressing concerns for the BWL. Received and placed on file. A letter was received from Ron Byrnes, BWL Retiree dated July 13, 2006 regarding a prior letter from another BWL retiree. Received and placed on file. A letter was received from BWL Management dated July 14, 2006 urging the reappointment of Sanford Novick, General Manager. Received and placed on file. A letter was received from Judith Gapp dated July 18, 2006 requesting the relocation of BWL's utility poles from the current storage area near the Lansing river trail to a different location. Commissioner Smith indicated that the letter had been received and forwarded to Management. General Manager, Sanford Novick commented that they were already in the process of contacting Ms. Gapp and had left messages regarding her concerns. Management is in the process of researching possible ways to accommodate the request if feasible. Commissioner Rios had also received an email from Ms. Gapp regarding this matter, which was forwarded to management. Commissioner Cochran was on the river trail 10-days ago and had a conversation with City employees who patrol the trail for safety purposes and trash pick. They also made mention of the poles location as well as trash accumulating along the fence line on the Board of Water and Light's side of the property. COMMITTEE REPORTS Resolution 2006-7- NOMINATING COMMITTEE REPORT Commissioners Present: Ron Callen, Robert Cochran and Semone James. The Nominating Committee met on June 20, 2006 at 9:30 a.m. to review Commissioner survey responses for consideration of Board officer nominations. Page 5 Board Meeting July 25,2006 The Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2006-07: Chair: Robin Smith Vice Chair: Santiago Rios There being no further business, the meeting adjourned at 9:40 a.m. Respectfully submitted, NOMINATING COMMITTEE Semone James, Chair Motion by Commissioner James, second by Commissioner Cochran, to approve the report as presented. Discussion: Commissioner Callen expressed concern over the issue of repeating the Chair position. Although, he considers Commissioner Smith a personal friend, he does not support the concept of failing to rotate officers. He believes that everyone is capable of doing the work and as such should be given opportunity to do so. Commissioner Callen also stated that it violates rule 9.2.3 in the Rules of Practice which states that the commissioners should endeavor quote, unquote to rotate the chairmanship. Commissioner Calkins stated that he would not vote to re-elect Commissioner Smith as Chair because he does not support her management style. He also believes that the Chair position should be rotated and that all of the Commissioners are capable of handling the position. Commissioner Rios stated that he wholeheartedly supports Commissioner Smith as Chair. He is pleased with her leadership and the direction of the board. He feels that it is important to maintain continuity during a time in which many important issues will be addressed. He supports Commissioner Smith repeating as Chair and has accepted the nomination for Vice Chair. Commissioner Smith indicated that it is not a violation of the rules to repeat as Chair. In fact, the Board has had periods in which the Chair served for multiple years. Commissioner Graves stated that he took exception to the Chair nomination primarily due to the issue of repeating a 3rd term. He does not believe that there are any valid reasons, continuity included, that the Chair position should not be rotated. Although, he did not submit his name for consideration he is confident that everyone is capable of serving in that capacity. Per Mr. Graves, if you review years past, one would see that there have been periods in which a Chair served for one year or several. Nevertheless, he believes that it is only fair that Page 6 Board Meeting July 25,2006 each sitting Commissioner have equal opportunity to set the agenda and manage the business of the Board. Commissioner Cochran stated that he believes Commissioner Smith is not following the agenda of others; she addresses conflicting topics, and works to do what is in the best interest of BWL. Therefore, he supports Commissioner Smith continuing as Chair. Commissioner Smith indicated that the Board of Commissioners has a process that is utilized in the nomination and election of officers. Any individual interested in serving can submit their name to the Nomination Committee at which time the committee brings forth their recommendation. Commissioner Graves asked the Nominating Committee to explain their rationale for recommending that someone serve for multiple years. Commissioner James answered the question by indicating that it is not in the best interest of the Board to move officers in light of the current decisions that need to be addressed. She is pleased with Commissioner Smith's ethics and level of professionalism. She also appreciates her avoidance in making malicious statements to the media. Commissioner James believes that Commissioner Smith is extremely professional and handles the business of the Board accordingly. Commissioner Cochran pointed out that two names were submitted for consideration to hold the position and the Nominating Committee made its selection sefisitat+en of the two. Following lengthy discussion, a roll call vote was taken and the motion to appoint Commissioner Smith as Chair and Commissioner Rios as Vice Chair carried. The motion carried by the following vote: Voting Aye: Cochran, James, Rios, Smith Voting Nay: Callen, Calkins, Graves Absent: None Resolution-2006-7- COMMITTEE OF THE WHOLE REPORT June 27, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 10:00 a.m. on, Tuesday, June 27, 2006. Commissioner Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Page 7 Board Meeting July 25,2006 Calkins, Ron Callen, Bob Cochran, Joseph Graves, Jr., Semone James, Santiago Rios, and Robin Smith. PUBLIC COMMENT There were no public comments. GENERAL MANAGER'S PERFORMANCE REVIEW AND PROCESS The Commissioners had lengthy discussion on the process to be used for General Manager Sanford Novick's performance review. The previous year's evaluation form, as well as a form that Commissioner Rios obtained at the APPA Conference, and the BWL Balanced Scorecard were discussed. Commissioner Graves suggested considering the process to be used for all three board appointed positions at this time, and not just that of the general manager. The general manager will have the opportunity to do a self-evaluation and each of the commissioners will also evaluate him; a meeting will be held to review each point of view. BOARD RETREAT AND STRATEGIC PLANNING Discussion was held on holding a board retreat. Commissioner Rios handed out a copy of a power point presentation on governance boards role in strategic and financial planning from the APPA National Conference held recently in Chicago. Commissioners were all invited to submit topics for the retreat agenda. Suggested topics include: Evaluating commissioners performance as a board • Define commissioner's role as a board versus management • How the board interacts with management in accomplishing in setting and accomplishing objectives for the organization • Key items that need to be addressed • How commissioners should be functioning as a board • How commissioners should interact with management The name of Jeff Tarbert was suggested as a possible facilitator for the retreat because of his years of experience working with boards. The Executive Committee with meet to work on developing the scope and framework for the board retreat so that the facilitator has a framework from which to work from. RECOMMENDATIONS ON ITEMS IN THE MAYOR'S LETTER, DATED MAY 25, 2006 Discussion was held on Mayor Virg Bernero's letter dated May 25, 2006. Most of the items have been responded to — call monitoring has been suspended, items related to Mr. Kus have been sealed. The only items left for discussion are hiring freezes and the number of board meetings to be held during the year. The board meeting schedule is set each year and the schedule is determined by the commissioners. Several years ago, the commissioners agreed to meet bi- Page 8 Board Meeting July 25,2006 monthly with committee meetings being held the alternate months. The city charter states that the board has to meet and the board votes annually on the meeting schedule. In responding to the mayor letter, a letter will be sent by stating the items have been addressed and the only pending item is the number of board meetings and this will be addressed in the upcoming board retreat. The letter will also state that 54 meetings have been held during the past two years to discuss current issues. REVIEW BID TABULATION AND PROPOSALS FOR PROVIDER OF TEMPORARY INTERNAL AUDITOR SERVICES Two bids were received for the provider of temporary internal audit services. Discussion was held on the two firms and whether to go ahead and hire a temporary internal audit firm or concentrate on hiring a full time internal auditor. A list of items that the temporary internal audit firm needs to address has to be established prior to hiring a firm. The suggestion was made that the executive committee determine recommended areas of involvement. In addition to financial concerns, the internal auditor needs to look at safety, production and performance issues also. Respectfully submitted, Santiago Rios Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Graves, to receive the Committee of the Whole Report as presented. Action: Carried unanimously. Resolution-2006-7- EXECUTIVE COMMITTEE MEETING J U LY 17, 2006 The Executive Committee met on Monday, July 17, 2006 at 9:00 am to discuss two items — City's Grant of Two Easements to the Stadium District Project and Review of Bid Tabulation and Proposals for Provider of a Human Resources Audit. Present: Commissioners Smith, Calkins, Graves and Rios. CITY'S GRANT OF TWO EASEMENTS TO THE STADIUM DISTRICT PROJECT At the executive committee meeting the Commissioners considered, (in accordance with the City Charter) whether they would approve the City's grant of two easements to Stadium District Partners LLC. The Board of Commissioners Page 9 Board Meeting July 25,2006 recommended the two easements to the Board meeting for approval provided the easements were edited to include language, which articulated their approval was as an accommodation to the City and assumed no liability. The Commissioners also wanted to add more specific language relative to the notification of a breach of the terms of the easement. The Commissioners also inquired about whether or not parking study had been conducted which would evaluate the developments impact on parking. David Christian (the undersigned engineer for the Stadium District) advised that he would try to obtain a copy of that study for the BWL's reference. REVIEW BID TABULATION AND PROPOSALS FOR PROVIDER OF A HUMAN RESOURCES AUDIT Robert Forester, Material and Services Management Department, presented information on the two bids that were received relative to the provider of the Human Resources Audit. Ten requests for proposal were mailed and two bidders responded. After reviewing the bid tabs, the commissioners requested that Bob Forester set up a meeting for the vendors to make a presentation to the board. Two times were suggested —Tuesday, July 25 at 4:OOPM prior to the Board Meeting or Monday, July 24 at 9:00. Bob Forester will contact the vendors to set the time. JOINT MEETING WITH CITY COUNCIL AND BOARD OF WATER AND LIGHT COMMISSIONERS Discussion was held on the tentative meeting scheduled on July 18 between City Council and Board Commissioners to discuss litigation. After a conference call with Melissa Jackson from Foster, Swift, it was determined that Amy Cavanaugh, BWL Legal Counsel, will contact Brigham Young, City Attorney, to determine the legal issues to be discussed. Respectfully submitted, Robin Smith, Chair Motion by Commissioner Graves, seconded by Commissioner Callen, to receive the Executive Committee Report as presented. Action: Carried unanimously Resolution-2006-7-8 COMMITTEE OF THE WHOLE REPORT Page 10 Board Meeting July 25,2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 2:00 p.m., Tuesday, July 18, 2006. Commissioner Smith called the meeting to order and asked the acting secretary to call the roll. The following members were present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Jr., Semone James, Robin Smith. Commissioner Santiago Rios entered the meeting at 2:15 p.m. Public Comment Mr. Joe Davis, Business Manager for IBEW Local 352 discussed contract negotiations. He stated that the union would like to keep the current language but look at having more partnership language and would also like to work on Book B to the contract. He stated the union had performed an employee survey that he would like to present to the Commissioners. Commission Smith stated they would discuss it at and an Executive or Committee of the Whole Meeting. Moved by Commissioner Smith, seconded by Commissioner Calkins that the Board convene in closed session to discuss negotiations of a collective bargaining agreement. Approved by roll call vote: Yes: Commissioners Calkins, Callen, Cochran, Graves, James and Smith Nays: None Absent: Commissioner Rios Moved by Commissioner Calkins, seconded by Commissioner Smith, to return to open session (4:35 p.m.) Adopted unanimously. Rick Daly will be the chief Negotiator. No action was taken. Respectfully submitted, Santiago Rios Committee of the Whole Page 11 Board Meeting July 25,2006 Motion by Commissioner Rios, seconded by Commissioner Cochran, to receive the Committee of the Whole report as amended. Action: Carried unanimously Resolution-2006-7-0 COMMITTEE OF THE WHOLE REPORT July 24, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 9:00 a.m., Monday, July 24, 2006. Commissioner Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Ron Callen, Bob Cochran, Joseph Graves, Jr., Santiago Rios, and Robin Smith. Absent: Semone James Public Comment Mr. Joe Davis, Business Manager for IBEW Local 352 expressed his appreciation to the Board of Commissioners for going forth with the HR audit. He hopes that the audit will be conducted in an autonomous manner. Mr. Davis also indicated that the IBEW union survey results were complete and that he would like to add this late item to the next Board Meeting agenda. The presentation should take approximately 15 — 20 minutes and will be conducted by the third party surveyors. Following discussion the Commissioners agreed that the item be added as new business at the next Board Meeting scheduled for July 25, 2006. CONDUCT FACE-TO-FACE INTERVIEWS WITH VENDORS FOR HUMAN RESOURCES AUDIT The first interview was conducted with Ed Nesvig and Carleen Nelson-Nesvig of Bee Tree Consulting Ltd. Presentation materials were reviewed and a question/answer session followed. The second interview took place with Michael S. Goree of Growth Strategies Consulting, Inc. Mr. Goree explained his presentation and a question/answer session also followed. Page 12 Board Meeting July 25,2006 The Commissioners agreed to schedule a Special Meeting on August 14, 2006 at 9:00 a.m. to award the RFP to the respective vendor and to thereafter, conduct the General Manager's performance evaluation. Pubic Comment Mr. Joe Davis, Business Manager for IBEW Local 352 indicated that he has a lot invested in having the truth revealed as he is accountable to 430 bargaining employees. He also stated that he is always looking out for the best interest of the BWL. The meeting adjourned at 11:15 a.m. Respectfully submitted, Santiago Rios, Chair Pro Tern Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Calkins, to receive the Committee of the Whole Report as presented. Action: Carried unanimously Resolution-2006-7-1 COMMITTEE OF THE WHOLE REPORT July 25, 2006 The Board of Water and Light's Committee of the Whole met at the Executive Offices, 1232 Haco Drive, Lansing, Michigan, on Tuesday, July 25, 2006 at 4:00 p.m. Commissioner Rios called the meeting to order and asked the Secretary to call the roll. The following Commissioners were present: Gary Calkins, Ron Callen, Robert Cochran, Semone James, and Robin Smith. Absent: Commissioner Joseph Graves Public Comment There were no public comments. CITY'S GRANT OF TWO EASEMENTS TO THE STADIUM DISTRICT PROJECT Page 13 Board Meeting July 25,2006 Associate Attorney, Brandie Ekren asked the Board of Commissioners to consider approving the City's grant of two easements to Stadium District Partners, LLC as permitted by the Lansing City Charter. Representatives of Stadium District Partners, LLC, Attorney, John Fifarek of Lasky, Fifarek and Hogan and Engineer, David Christian of DC Engineering, were present to answer questions in regards to the project. The Board of Commissioners recommended the two easements, as edited, to the Board meeting for approval. Motion by Commissioner Calkins, seconded by Commissioner Smith, to move the item to the July 25, 2006 Board agenda under Manager's Recommendations. Action: Carried unanimously DECLARING INTENT TO REIMBURSE PROJECT EXPENDITURES WITH BOND PROCEEDS AND AUTHORIZING PUBLICATION OF NOTICE OF INTENT TO ISSUE BONDS General Manager, Sanford Novick asked the Board of Commissioners to consider approving bond proceeds that will be used for capital improvements. The permit allots for an issuance of up to $40 million bonds while fiscal year 2007 only calls for a $35 million issue. The general terms can be up to 40 years with an interest rate as high as 10%. The bond amount and interest rate allows flexibility in how the bond will be used. Motion by Commissioner Calkins, seconded by Commissioner Smith to move the item to the July 25, 2006 Board agenda under Manager's Recommendations. Action: Carried unanimously The meeting adjourned at 4:15 p.m. Respectfully submitted, Santiago Rios, Chair ProTem Committee of the Whole Discussion: Refer to information under Manager's Recommendations. UNFINISHED BUSINESS None. NEW BUSINESS Page 14 Board Meeting July 25,2006 Joe Ross of Communications and Research, Inc. was introduced by Joseph Davis, Business Manager of IBEW Local 352 to present the results of the Union Member Survey. Commissioner Smith requested that copies of the survey be circulated to the Commissioners and the management team. Mr. Ross then proceeded to state that he hoped the results would be used as a catalyst for discussion and to shed light on the opinions of union members within recent months. Commissioner Rios asked Mr. Ross to share some of his background information with the Commissioners. Mr. Ross stated that he is a partner at Communications and Research Inc., which is a public relations and research firm that has been in business for 18 years. They specialize in surveys for market research, economics, employment and workforce growth. They have worked with the Federal Reserve, colleges, Chamber of Commerce, local units of government and state government. Leaders of the BWL Local 352 asked their consultants, the Rossman Group in early June to write and distribute a survey to the union membership. The survey was posted online with a testing service and members were notified via a promotional flier, union stewards handed out copies and they were also sent to each union member. In addition, employees were encouraged to visit the site or fill out a paper copy. Strict scientific survey procedures were not adhered to primarily because the respondents were not randomly selected. Mr. Ross stated that it is important to note that 147 responses were received of a possible 415 eligible union employee participants. In his opinion, this provides a good compass rating of thoughts relative to BWL management. The Rossman Group collected the data and asked Communications and Research Inc. to condense the information into a two page executive summary. Commissioner Graves asked Mr. Ross to provide more detail into what was meant by "a thoughtful manner", and to also speak to the statement regarding a "compass reading of management" in light of the fact that according to Mr. Ross the survey is not "statistically valid". Mr. Ross stated that there were two types of surveying and one is scientific. People are randomly selected and then called to voluntarily participate in a survey. This is considered extremely valid. For example, the research work that he does with the Federal Reserve can be differentiated and voter survey's can be boiled down to +/- 3 or 4% of 6% provided it is still a volunteer survey, which makes it very valid. Commissioner Graves then responded by asking how were members made aware of the opportunity to participate in the survey? Mr. Ross proceeded to read a statement of the survey results that included information regarding their methodology. Page 15 Board Meeting July 25,2006 Commissioner Graves expressed concern over the lack of scientific precautions taken to avoid duplicate entries and prevent those ineligible to participate from taking the survey. Commissioner James asked why Commissioner Smith's name was left out of the Commissioner evaluations being that a statement was made in regards to her. Kelly Rossman of the Rossman Group stated that there were some open ended questions in which Commissioner Smith's name could have appeared in the response. Jim Dravenstatt, BWL employee, stated that he answered the questionnaire online and her name was listed with the other Comissioners. Commissioner Rios stated that the survey was scanned and sent to the Commissioners but they had not received an original copy. As a point of clarity, Commissioner Smith requested that a complete copy of the original survey be forwarded to the Commissioners as she has neither seen a copy nor received one. Commissioner Smith thanked Mr. Ross for presenting the report. She also thanked the union for using a third party to gather and issue the information and for their courage in sharing their opinions. Per Commissioner Smith, all information is useful in helping the Board to fulfill its obligations. Mr. Davis commented that although the numbers are difficult to hear they wanted to stress that these do represent the perceptions of those employees who responded. He went onto to state that he understood questioning of the methodology and validity of the survey but he would like to move on by addressing these issues in a productive manner. Commissioner Rios also thanked the union for providing this information that he believes will be helpful in making the BWL a more efficient and productive work environment. He also stated that they have been dealing with perception issues for over 2-years and that is one of the reasons why they unanimously agreed to conduct the HR Audit, which will allow them to address those issues. A copy of the survey results and Mr. Ross' credentials are filled with the permanent minutes in the Corporate Secretary office. RESOLUTIONS Resolution-2006-7-1 BOARD OF WATER AND LIGHT Page 16 Board Meeting July 25,2006 RESOLUTION HONORING TIM HAGGART WHEREAS, it is a pleasure to extend this expression of our thanks and best wishes to Tim Haggart for his service as a Commissioner of the Board of Water and Light. This Board wishes to acknowledge his many contributions to the Board of Water and Light, the City of Lansing and its citizens, and WHEREAS, Tim Haggart was appointed to the Board of Commissioners in July 2001 as an at-large member and was later reassigned to the second ward in 2005. During his tenure on the Board he briefly served as Chair Pro Tern and also chaired the Human Resources Committee from 2002 through 2004, and the Nominating Committee in 2003. He also served as a member of the Board's special committee to address water main construction issues associated with water customer choice in 2002, and WHEREAS, Tim Haggart's commitment to excellence in public service has provided the Board of Water and Light with outstanding leadership through a period of time when the utility industry is experiencing unprecedented changes. Through these times, Tim Haggart has exhibited the highest standards of citizenship, dedication and unselfishness in all policy-making responsibilities necessary to the proper operation of the utility. RESOLVED, That the members of the Board of Water and Light Commissioners hereby honor and commend Tim Haggart upon leaving this Board after nearly five years of distinguished service. In Regular Session this 25th day of July, 2006, we sincerely wish Tim continued success in all endeavors. Resolution-2006-7-1 LANSING BOARD OF WATER AND LIGHT RESOLUTION HONORING MARY E. SOVA WHERE AS, It is with deep appreciation that we offer tribute to Mary E. Sova as she brings to a close an outstanding career at the Board of Water and Light, retiring with over 26 years of dedicated service. The members of this Board extend our thanks to a committed employee who always went above and beyond when assisting the Board of Water and Light Board of Commissioners, and WHEREAS, Mary E. Sova joined the Board of Water and Light in 1980 in its Human Resources Department. She was promoted that same year to the position of Secretary to the Secretary of the Board, and was then promoted in 1981 to her current position as Corporate Secretary; and WHEREAS, Mary has played an integral part over the years in making sure that the members of this Board were adequately prepared for every meeting. Her expertise in recordkeeping and retrieval was superb, and her knowledge of Board Page 17 Board Meeting July 25,2006 of Water and Light policy and procedures was an invaluable asset to the Committee members. She also served as a positive interface with City Council and City Hall; and WHEREAS, Mary's deep commitment and devotion to the Board of Water and Light and the Board of Commissioners has been well demonstrated by the countless hours she has contributed to the Board. She was always able to balance her responsibilities with professionalism and politeness. Her hard work, professionalism, and sensitivity to the needs of the Board have won her the respect and admiration of all who have had the good fortune of knowing her. RESOLVED That the Board of Water and Light Commissioners hereby offer this expression of tribute to commend and thank Mary E. Sova for her notable contributions to the Board of Commissioners and to the Board of Water and Light. In regular session this 25th day of July, 2006, we extend to Mary and her family our best wishes for the future and wish much happiness to Mary as she begins this new chapter in her life. Motion by Commissioner Cochran, seconded by Commissioner Callen, to formally approve both resolutions. Action: Carried unanimously MANAGER REMARKS General Manager, Sandy Novick reported that BWL was recognized by the American Public Power Association at their annual meeting in Chicago this past June as the recipient of their Community Service Award. Mr. Novick stated that BWL is the only organization in Michigan to ever receive such an honor and it is with the help and hard work of those here tonight that has allowed us to accomplish such a goal. It is an indication of some of our other community- oriented events such as the Chili-Cook-off, Silver Bells, and 15 Children's Museum just to name a few. Things of this nature have a positive impact on the community and this award is recognition of that effort. COMMISSIONERS' REMARKS Commissioner Smith announced that it was recently learned that former Board Commissioner, Jack Sebolt, recently passed away. Mr. Sebolt served on the Board from 1977 to 1995. On behalf of the Board, Commissioner Smith extended their sympathy to Mr. Sebolt's family and son, Brian Sebolt, current BWL employee. Commissioner Cochran stated that there is a product called beraxe 20 20 mule team borax that maybe used to capture mercury out of the flues that may allow us to avoid spending millions to clean the stacks. It is the element boron one of the borides, and the iRfinity hoc as in affinity for heavy metals that form Page 18 Board Meeting July 25,2006 hard compounds, which could stay in the fly ash. rather than t'Gk*R`v W t4e h"Y Commissioner Calkins pointed out that according to the bylaws it is customary to elect executive committee members upon the solicitation of officers. Motion by Commissioner Rios, seconded by Commissioner Graves, to elect Commissioners Calkins and Commissioner Cochran to the Executive Committee. Action: Carried unanimously Commissioner Smith thanked the Board for re-electing her to Chair as she tries to continue to serve with dignity and compassion. Commissioner Smith went on to appoint Commissioner James as the Finance Chair and Commissioner Cochran as the Human Resource Chair. Per Commissioner Smith, the other committee members will be notified of their assignments at a later date. EXCUSED ABSENCE None. PUBLIC COMMENTS Max Zemer, BWL retiree, commented that approximately one year ago he requested that the BWL conduct an employee survey due to low employee morale. Since that was not done then the union survey is the only available information to date. John Joseph Castillo, hired as a consultant by the union with 30 years of experience with the Michigan Department of Civil Rights, congratulated the Commissioners on receiving the community service award. He went on to state that the union participated in the 24th Annual Tournament of Friendship on July 14, 2006. The group is an organization formed 24 years ago to forge a relationship between minorities and the Michigan State Police Department. Several agencies participate and help raise college scholarship funds. Per the union's request, Mr. Castillo extended an invitation to the Commissioners and the general public to join them for a reception at the Clarion Hotel on July 26th to welcome the new Director of the Michigan Department of State Police. Tracy Tolbert, BWL employee, union Recording Secretary, and Lansing resident stated that she is currently on a leave of absence due to breast cancer. Ms. Tolbert states that she recently sent the Board of Commissioners a letter indicating that the BWL is a good organization to work for but that there is room for improvement. Ms. Tolbert thanked General Manager, Sandy Novick for the "Breakfast with Sandy" opportunities that allow employees to speak their mind. She also commended him for recognizing employees' statements as concerns Page 19 Board Meeting July 25,2006 and not as complaints. Ms. Tolbert stated that she wants to make sure that everyone realizes that it is their responsibility to work towards making the organization the best it can be. Cathryn Coffee, BWL union employee, resident of 1811 Lorraine stated that Joe Davis speaks for the entire union and she would like his words taken into consideration. Ms. Coffee also stated that she also took the union survey online and believes that the results are accurate. Joe Wolfe, BWL retiree, former Assistant General Manager and Director of Operations stated that the expressed union member attitudes were a surprise to him. While complaints are generally common, the high volume surprised him the most. Mr. Wolfe stated that he was employed in the utility industry for 45 years and always believed that the BWL was a good place to work. He went on to state that if employees do not agree then perhaps they should start looking for other employment. He did not hear any specifics about what needed to be changed. However, he believes that there is a feeling that things need improvement and the BWL needs to find out why that feeling exists. Mr. Wolfe expressed his sympathy for the loss of Jack Sebolt as they were good friends and went onto to express his thanks for being given the opportunity to speak. Duane Williams, BWL employee did not know the results of the survey prior to this evening. However, he felt that the results were accurate. It also stated that it is best to investigate while nepotism exists, problems with the safety program and general overall misperceptions. Commissioner Rios agreed with Mr. Williams and asked that everyone work together to clear up any misperceptions that are not accurate. He also stated that in regards to the statement about Mark Nixon, he considers him to a person of integrity and professionalism. Commissioner Rios also stated that he had worked with Mr. Nixon on the editorial board of the Lansing State Journal and found it to be quite enlightening. He went on to say that whatever is printed in the newspaper is being sent in by someone and that should stop. There is a perception that the Mayor or City Council is manipulating the Commissioners and that is not true. Commissioner Rios also reported that Mayor Bernero did not appoint him nor did he work on his campaign. Commissioner Smith also stated that she has worked with three administrations and was appointed by Mayor Hollister and her commitment has been to the BWL. If you review her voting record then the minutes will reflect a commitment to the BWL and the community. Commissioner Cochran stated that on the day Mayor Bernero came to address the Board, three hours prior he asked Commissioner Cochran to resign, even Page 20 Board Meeting July 25,2006 though Mayor Bernero was the individual who had initially appointed him. He told the Mayor no and yet he is still a Commissioner. Some things they agree on and some they do not; however, Commissioner Cochran said he took an oath to serve community and intends to honor that oath. ADJOURNMENT On motion by Commissioner Rios, seconded by Commissioner Callen, the meeting adjourned at 7:00 p.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 4, 2006 EXHIBIT 1 BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN RULES OF ADMINISTRATIVE A TIV PROCEDURE AS AMENDED 3/28/06"%z I. MEETINGS 1.1 Regular Meetings 1.1.1 The Board of Water and Light (BWL) Commissioners shall hold regular bi-monthly meetings on the fourth Tuesday of the month 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 each regular bi-monthly meeting to be held in the calendar year shall be adopted by the Board during November of 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 mem Members of the Board 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 Conflicting Times All regular Board meetings shall be scheduled to avoid conflicting with regular meetings of the Lansing City Council. - 1 - 1.5 Committee of the Whole Meetings 1.5.1 The Board may convene as a Committee of the Whole upon call by the Vice Chair or any two Beard i„e.,,' members of the Board. 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 closed to the public only for those purposes permitted under 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 annually in a newspaper of general circulation in Ingham County at least three days prior to the time of the regularly scheduled meeting in January. At the regularly scheduled meetings in November 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 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 a majority of the attending Beaf menibers-members of the Board are present at the location designated in the public notice. -2- 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 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 4�-Except as may be required by law or by section 10 310.1.4, 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. 4.3 The Board speaks througli resolutions. A member of the Board shall-matey speak on the Board's behalf in accordance with its resolutions. See 18.2.3. V. VOTING 5.1 Roll Call Vote A roll call vote shall be required for holding a closed meeting as specified byes the Open Meetings Act or upon request of any Board member_; fr 1, 1 7:,,., closed or; s .Mora,-,,,;,,0 1 by the Cliaf of the i2 l fo lieldin, b, ^ 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. -3 - VI. ANNUAL ORGANIZATION The Board shall organize at its first regular meeting following July 1" or as soon thereafter as is reasonably convenient, by selecting one of its members as Chair and, one of its members as Vice Chair andoiie of itsmeiiiber-s as Chaii- 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 an ea officio member of all committees of the Board, unless the Chair is an official member of a Committee. If the Chair is an official member of a Committee, she or lieflIty shall possess all voting privileges. 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. The Vice Chair shall also preside over meetings of the Committee of the Whole. 7.3 Past Chair The Past Chair shall assume the duties of the Chair when neither the Chair nor the Vice Chair is present. 7.3 rhaiF Pro Teffl The GhaiF Wo Te,,, shall peFfOnii all the ditties aad liaye all the p &f the, Chair- the 1setiee of the Cliair atid V' ! 1 the C1 D T eiii slu,.,ll all p sid meetings of tl, G \al'tt f the Whole. u u� e � VIII. CHARTER POSITIONS 8.1 Director, Secretary and Internal Auditor -4- The Board shall,,at its first regular meeting following July 1St of each year, or as soon as practicable thereafter, ^r as seen thefe.,fte f as may be appoint a Director, an Internal Auditor and a Secretary. The Director shall also be known as the General Manager, and shall be the 11igllest executive officer of the Board of Water and Light. Tlie Secretary shall also be known as the Corporate Secretary. The Internal Auditor shall also be known as the Director of Internal Audits. These positions shall be contract positions, shall report directly to the Board of Commissioners, and shall serve at the pleasure of the Board of Coingiissioners. whe shall also be known as the Gefter-ll Manager. TliD'reetAr shall be the exeetitive officer of the IZ. a fd of\al.,ter and Tight and he difeetl. responsible to the Bed heDifeeterhlll seB,e for the fiscal year Or until a sil ppointed, .,hiehe„er last o 8.2 Se et The Board shall .,t its first regular-r, eetitig following i„ly 1" of eaeh year-, or-as seen-thereaftel as may e, appoint a Secret The shall also kffie `n as the Ger-per-ate Seer-Gttary. he Seeretar-y shall be responsible to the BeaFd and shall seB,e far the f:.,ea yearor- .,t:l , appointed, whiehever- last e 8.—inter^liter The Board shall at its first regular e .,„lr„ eetiiig following, i„ly 'of eaeh , The e F f or as seen thefeafter-as may be, appoint«TCemar-Audi ) ,•ll,,, shn1l al h 1 tetFies an .The hitem l�ici`iter v�ici-}0=�1Y1-a�-tl�E-��i-ccccoeFr6�¢ and shall r eft rl:reetl„ to the Beafd and shall sefve far the f;.eal yeaf er- r t:l f 8.2_ Unless otherwise determined by the Board of Commissioners, contract rReviews for of-the Charter Position employeeseepimets shall commence no later than sixty(60) days prior to the end of the fiscal year and be completed no later than the start of the next fiscal year. 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 -5- 9.2.1 9 2.1 The following standing committees shall be appointed the Chair: Finance Nominating Human Resources 9.2.2 The Finance Committee shall have oversight responsibility for financial performance measures and audits, capital expenditures and returns, bond indebtedness and credit rating, annual O&M budget, gate review, and the investment policies of the retirement plans. 9.2.3 The Nominating Committee shall at its first regular meeting following July lst of each year, nominate a slate of officers at its annual organizational meeting 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. 9.2.4 The 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, and employee benefits_, i ,t „l l.•1111i111 sT. 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 or as otherwise specified in these Rules. 9.3 Appointment of Standing Committees -6- 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 Chair, Vice Chair and most immediate Past Chair and one (1) Commissioner elected by the Board, whose term shall be concurrent with the terms of the Officers. If no Past Chair is present on the Board, the Board shall elect a second Executive Committee member.The Executive Committee shall eensist of the Board Chair-, Chair, (`iai Pro Tem and e e (1). (''.,,,,missione elected by the L2oai-.1 .,hose te,-,,, shall he eeneaffent . the terms of the Officers The Nominating Committee shall not consist of any members who intend to run for an officer Position. 9.4 Sub-Committees Authorized The standing Executive Committee shall establish such sub-committees as deemed necessary. 9.5 Quorum for Committee Meetings A quorum for a standing committee shall be t-wethree. 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. 9.7 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 17.5.18.5. 9.8 Committee Resolutions Committee reports recommending 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_ins -7- 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 2. Approval of Minutes 3. Public Comments on agenda items shall be limited to three (3) minutes unless waived at the discretion of the Chair 4. Communications 5. Committee Reports 6. Manager's Recommendations 7. Unfinished Business 8. New Business 9. Resolutions 10. Manager's Remarks 11. Remarks by members of the Board. BE)aFd Meiiibe+-- 12. Motion of Excused Absence 13. Public Comments on BWL-related matters shall be limited to three (3) minutes unless waived at the discretion of the Chair 14. Adjournment 10.1.2 In the absence of any objection, the presiding officer shall have the discretion to vary the order of business. 10.1.3 Preparation of Agenda The agenda shall be prepared by the General Manager and be available for distribution three days preceding a regular or special meeting. 10.1.4 Additions to Agenda - 8 - 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 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.-ice sii-o-j-cc*-''ew—et- i'r'rcm'-irci� ivtv-au'vcm7icr',. 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: 1. Roll Call 2. Public comment on agenda items shall be limited to three (3)minutes unless waived at the 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. -9- XII. MEMBERS OF THE BOARD 12.1 Attendance Mach member of the Board shall attend all meetings of the Board in person 01 by tCICcU11feI'el1CC unless otherwise exctised. Each member must attend at l l 'i.v (50) I)L'rccnt of regular or shccial mcctings 01'lhr 110ard an(I II(I� (ill) of :IssI,I1C(I coillllllltec 111ectlllgs dIII"II1L ally Il�cal 1'�':II I ;I:lur� l, �!�� �, �� i!I Ili Ilruu�ht lu thy :Itt�•nli,lll ulth�• \I,I���r a11�1 nl:t� !�� ��r, •111�1-• Itil I�IIi ,� .;! lip, lh�' ..\I;I��ir t•rulll lh� �,Ilic� :u ;lBeard-II,�Itll���rof the Board 1 7 1.1 A tte,,.,. nee r. by members of the Board .,t al meetings f •�.. I ILLL.aauuaavV in�ir� the Board is eneo i ag fs$nc'1l attendance-ram attenr�anee may be by teleeenfer-e 1 s the ♦ 1 1, ll is ».�.... L.aa.... aaauj vv �y VVV1a1V1 VIaVV uo long required LV VV VpVaI LV the pUlJf1V at the loeatien speeified . vL.a.cu and u as uJ v.aLy VI the Vulu 1J 1.J11yJIliLT lly pfesent at the leeation speeified in the nonce of the meeting. All votes taken during eee I tol fore,.ed meeting shall be b 11 11 LV IVV V 12.1.1 Attendance in person by members of the Board at all meetings of the Board and Committees is encouraged. If personal attendance is not possible, attendance may be by teleconference or videoconference as long as the member's comments are heard by the entire assembly and not tr.,n4 to . Further, a majority of the Board or Committee must be physically present at the location specified in the notice of the meeting. All votes taken during a teleconference meeting shall be by roll call. Should a member participate in a Closed Meeting in accordance with 1.6, via teleconference or videoconference such member shall affirmativelyingbfqRy state for the record whe that no unauthorized person io ;ge nt at their remote 1,,e tion . nd/ able4o-can hear or view the eontents of-any portion of the Closed Meeting. Telephonic or videoconference participation in Closed Meetings is only permissible if the conversation cannot be overheard by unauthorized individuals. 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. XIV. MINUTES 14.1 Preparation and Filing - 10- The Secretary shall keep minutes of regular and special 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 Inspection 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. CONFIDENTALITY COP4>~rr>>~�t !A rvn>\ M rNI nrrtnt.tc 15.1 Communications the Geiiei- t (`.onset et- the Geneial Mal aggei �Vyheti n;m;�`� 'cv Vety7 rceii.i '' deelassif ed by the Gbai. e Gen t MaiiageF iiiade a F rth pFoceedingsf g withheld when Fequested b a niefWD-ei.-.," t li anjess the it 1 ld f 0 sueh deetti eats is auther-ized by P�ib 1 is et 44. , 1976, OF bt-her l�rei�i�iota ef Members of the Board shall treat all information marked "confidential" or "privileged" accordin ly and shall not release such information to unauthorized individuals, unless disclosure is required by law. All such information shall be returned to the Corporate Secretary or destroy 15.2 Closed Session All written and verbal information obtained and/or discussed in Closed Session shall be confidential and never discussed or shared outside of Closed Session, unless otherwise specified by law. - 11 - 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 known to be in default to the City. 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 Beam ;nzmbefsmembers of the Board must be notified of such amendments mailed at least four (4) days before the amendment is to be voted upon. The affirmative 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 adjournment of a Board meeting, members of the news media may request interviews of B members of the Board. 18.2.3 All policy statements shall be made on behalf of the Board by the Chair. See 4.3.1. 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, and the most immediate Past Cliairrhair Pro T shall assume the office of Vice Chair l tl R .,a 1 l l 1 f a ( 1 - D- T 18.3.2 In the absence of the Chair, Vice Chair and Past Chair Chai1- PFe Teni, a ffemporaryChair-Dfo-T-effl shall be elected who would hold office during the session, s 1 suell Cl E)i- Past (`1 -C - o- T .until the return or election of the Chair, Vice Chair or Past Chair. - 12- 18.4 Freedom of Information It shell be the I)olicy ol'tlhis Board to follow the hrovisions ol'I'ubhc Act 4= _', 1976, as it nriy be amended by Ielgislative enactment eflor judicial decision. 18.5 Resolutions Any BE)afd meinember of the Board may sponsor a resolution. Any resolution may be co-sponsored by other members of the Board. 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. 18.6 Reimbursement of Expenses 18.6.1 Board Member Travel Expenses: The Board recognizes the value of membership and attendance at conferences, workshops and meetings at the state, regional, and national levels that are appropriate and necessary to carry out Board of Water and Light business. As such, the Board encourages: 1. The attendance of its members in at least one out-of--state and one in-state conference seminar per year. 2. Each newly ppointed Mniember of the Board is encouraged to attend a formal workshop on governance as offered by the American Public Power Association. Exeeptio,,s to the above Additional travel must be pre-approved by theB^^M Gliair Executive Committee. Travel expenses shall be reimbursed in accordance with the Board's Travel Expense Policy. 18.6.2 Board Member Miscellaneous Expenses: Members of the Board may incur additional business expenses while representing the Board of Water and Light in the community. Business expenses such as cell phone, business luncheons, and parking are such examples of legitimate business expenses. Upon filing a claim in the prescribed form, each member of the Board shall be reimbursed for reasonable and necessary expenses incurred in the discharge of the Board Member's official duties. The Executive Committee shall review Commissioner expenses on a quarterly basis. 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, 1/23/01, 11/19/02, 3/28/06. - 13 - -'T/'u-- a � LANSING CITY CLERK'S OFFICE CHRIS SWOPE, LANSING CITY CLERK September 11, 2006 City Council President and Members of the Lansing City Council 10th Floor City Hall Lansing, MI 48933 Dear Councilmembers: The Board of Water & Light Rules of Procedure as Amended on March 28, 2006 are attached for your information and review. If I, or my staff, can provide further assistance or information relative to the filing of these procedures, please contact us at 483-4131. Sincerely, Chris Swope City Clerk City of Lansing (517) 483-4131 124 W. Michigan Ave. Lansing, MI 48933-1695 RUG-30-2006 1e: 10 BD OF WATER LIGHT 1 517 7026e55 P.02i05 Preliminary— Subject to Board Approval on September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT r— :� cn cn cn cn3 n Friday, August 18, 2006 Fri c co C� The Board of Commissioners met in the Boardroom of the Administrative Off ces, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James), Santiago Rios, and Robin Smith. (Note: 2"d Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the Special Meeting to order at 2:02 p.m. PUBLIC COMMENTS Mr. Cook, BWL ratepayer expressed his disappointment regarding the current state of affairs at the BWL and Commissioner leadership. He also stated that there are people at the BWL who are no longer effective and if so then perhaps they should leave. He went onto state that Lansing used to be the foundry capital of the world and technology ushered in and things changed. Mr. Cook also stated that residents are blessed to have a customer-owned utility and he would gladly donate to 'Pennies for Power' if the Board would support its customers. Ifield Joseph, past vice chair and former commissioner stated that he is watching the Board's actions and helping to keep the issues in the public eye. He also stated that he had sent a memo earlier that day in support of the General Manager. Mr. Joseph went onto state that he felt that the General Manager must be given the space and opportunity to do his job. He concluded by stating that AUG-30-2006 16:39 1 517 7026e55 P.02 RUG-30-2006 1B: 10 BD OF WRTER LIGHT 1 517 7026655 P.03i05 although the Mayor appointed the newer Commissioners, the ratepayers are the owners and thereby, the true bosses of the institution. Chuck Slammer stated that he was concerned that it appears to be too many chiefs and not enough Indians. He went onto to state that he looked at the organizational chart and believed that the BWL needed more workers, first line supervisors and fewer managerial barriers. Mr. Slammer also stated that he essentially wants to make sure that his water tastes right and that the electricity is on. He went onto state that the BWL should get out of the steam business. Mr. Slammer also stated that he was very disappointed in how the BWL is operating and that the focus should be on providing water and electricity. Commissioner Callen stated that he was asked to deliver a message from Mark Fales, BWL employee of 36-years who was unable to attend the Board meeting. Commissioner Callen went onto state that Mr. Fales would like the Board to know that he supports the General Manager and has great respect for him and asks that the Board renew his contract. COMMUNICATIONS Letter from former commissioner Ifield Joseph dated August 18, 2006 in support of the General Manager. Received and placed on file. CLOSED SESSION Moved by Commissioner Smith, seconded by Commissioner Rios to go into closed session to discuss a legal opinion presented by Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (2:15 p.m.). The roll was called. Yeas: Commissioners Calkins, Callen, Cochran, Graves, James, Rios and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith, that the Special Board meeting return to open session. Carried unanimously. RUG-30-2006 16:40 1 517 7026855 P.03 RUG-30-2006 18: 10 BD OF WRTER LIGHT 1 517 702BB55 P.04i05 The Special Board meeting reconvened in open session at 3:42 p.m. UNFINISHED BUSINESS Motion by Commissioner Rios, seconded by Commissioner Graves to move to authorize the Executive Committee to work with legal counsel in considering a resolution of a matter relating to the employment of the General Manager. Action: Carried unanimously RESOLUTIONS None. MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Graves stated that they operate as a Board and not individuals. He went onto state that he was concerned about the manner in which outside counsel was contacted without prior discussion involving the entire Board. Commissioner Rios stated that historically the Board traditionally works together and many of the Commissioners have taken opportunity to meet with the General Manager as individuals on numerous occasions. He also went on to state that he supported the Chair in contacting outside counsel to gain a legal opinion regarding the matter at hand. Commission Callen asked Amy Cavanaugh, General Counsel whether or not a single Commissioner is allowed to take action that incurs cost to the Board without their prior approval. Ms. Cavanaugh stated that she was not prepared to answer such a question and would need time to research the issue and would provide a response to Commissioner Callen's question at a later date. MOTION OF EXCUSED ABSENCE None. PUBLIC COMMENTS None. AUG-30-2006 16:41 1 517 7026e55 P.04 RUG-30-2006 1B: 12 BD OF WATER LIGHT 1 517 7026655 P.05i05 ADJOURNMENT On motion by Commissioner Smith, seconded by Commissioner Rios, the special meeting adjourned at 3.57 p.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 30, 2006 TOTAL P.05 AUG-30-2006 16:41 1 517 7026B55 P.05 Preliminary— Subject to Board Approval on September 26, 2006 � N j7 c MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETII� LANSING BOARD OF WATER AND LIGHT C--, Thursday, August 24, 2006 m - The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins (arrived at 4:10 p.m.), Ron Callen, Robert Cochran, Joseph Graves (teleconferenced at 4:10 p.m.), Semone James, Santiago Rios, and Robin Smith. (Note: 2"d Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 4:04 p.m. PUBLIC COMMENTS None. COMMUNICATIONS None. CLOSED SESSION On motion by Commissioner Cochran, seconded by Commissioner James to go into closed session to discuss a legal opinion with Steve Schultz of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act (OMA) exemption MCL 15.268(h). (4:10 p.m.). The roll was called. Yeas: Commissioners Calkins, Callen, Cochran, Graves, James, Rios, and Smith. Nay: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Callen, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 5:15 p.m. UNFINISHED BUSINESS Motion by Commissioner James, seconded by Commissioner Rios to move to approve the proposed separation agreement and mutual complete release presented to the Board by our attorney and to authorize the Chair to execute the agreement on behalf of the Board. Action: Carried unanimously Commissioner Smith went onto read a prepared statement that said, "The Board of Commissioners of the Lansing Board of Water and Light announces today that it has reached a separation agreement with General Manager, Sanford Novick. Under the terms of the agreement, Mr. Novick resigns effective at the close of business today. Mr. Novick's resignation brings to a close another chapter in the Board's history. The Lansing Board of Water and Light is the largest municipally owned electric utility in Michigan and among the 30th largest in the United States. We have a lot to be proud of. It is now time for the Board to look to the future with great hope and take on the challenges that face us. We have a lot to do in the coming months to serve our customers. We look forward to finding a new General Manager who can assist this Board in addressing the challenges we face and also lead our employees in providing the kind of service our customers deserve." Commission Graves stated that he thought it necessary to appoint an Interim General Manager. He went onto state that he immediately thought of the two current Vice Presidents either of which he is very comfortable with but preferred Bill Cook due to his experience and length of time at the BWL. On motion by Commissioner Graves, seconded by Commissioner Callen to appoint Bill Cook as Interim General Manager. Discussion: Commissioner Rios stated that it is a turning point at the BWL and that we are moving in a new direction. He went onto state that he supports Dick Peffley and found him to be very capable as he is the current Director of Operations. Commissioner Callen stated that he has great respect for Mr. Peffley but he supports Bill Cook due to his previous Assistant General Manager experience. Commissioner Calkins also stated that he supports Bill Cook due to his experience. Commissioner Cochran stated that he believed that all three candidates are qualified for the position but that he supports Mr. Peffley as the Interim General Manager. Commissioner Smith stated that she has great respect for all three candidates. However, at this time she is recommending Mr. Peffley for the position as Interim General Manager. On motion by Commissioner Rios, seconded by Commissioner Smith a recommendation was made to appoint Dick Peffley as the Interim General Manager. Action: Carried unanimously Commissioner Rios suggested that Mr. Peffley met with the Executive Committee to set some guidelines while he is in the position of Interim General Manager. Commissioner Graves recommended that the meeting be conducted with the Committee of the Whole to allow all of the Commissioners opportunity to participate in the meeting. Commissioner Smith made a friendly change to the motion to state that the meeting with Mr. Peffley will be held with the Committee of the Whole. Action: Carried unanimously RESOLUTIONS None. MANAGER'S REMARKS Richard Peffley, BWL employee and newly appointed Interim General Manager stated that he was at a lost for words and completely shocked regarding his unexpected appointment. Mr. Peffley went on to state that he would do whatever was needed for as long as they needed him in fulfilling this role at the BWL. COMMISSIONERS' REMARKS None. MOTION OF EXCUSED ABSENCE None. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Rios, seconded by Commissioner Cochran, the special meeting adjourned at 5:29 p.m. /s/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk September 5, 2006 RUG-24-200.o lb:05 bU Ur WH I L K L I UH I 1 51'( Preliminary— Subject to Board Approval on September 26, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, August 15, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James (arrived at 5:45 p.m.) and Santiago Rios. (Note: 2"d Ward Vacancy exists.) Absent: Commissioner Robin Smith. The Secretary declared a quorum present. Vice Chair Rios asked all to rise for the Pledge of Allegiance to the Flag. Vice Chair Rios called the Special Meeting to order at 5:35 p.m. PUBLIC COMMENTS Joseph Davis, Business Manager of 1BEW Local 352 stated that he represents the employees of the BWL, CUC in Delta and Lansing Grand River. Mr. Davis expressed his concern over the 65% steam rate increase proposal and the over simplification of the issue. Mr. Davis went onto state that he attempted to estimate whether or not a 25% increase in employee premiums as suggested by management would cover the steam shortfall and he found that they did not. Mr. Davis also stated that the Sunday editorial implied that if employee cost sharing had been implemented then the solution to this problem would have been simple. However, Mr. Davis stated that the article did acknowledge that the BWL is the only city agency in which employees share in the cost of paying premiums. Mr. Davis also stated that the City is experiencing an $11 million deficit and they are utilizing their rainy day fund and other avenues to address those issues. He went onto state that during contract negotiations the union tries to work with BWL management to achieve'an equitable plan for all parties involved. Mr. Davis recommended that based on public meetings the Board should consider implementing a rate increase that would occur over the next 3 - 5 years to allow downtown businesses the opportunity to plan for such a change. AUG-24-2006 14:35 1 517 7026e55 99i P.02 RUG-24-2006 16:06 BD OF WRT6I2 LIUHI 1 51'r Yd,�bb10 r.W/4-' Hank Zurburg, 1"Presbyterian Church, finance committee member stated that their points of interest regarding the steam rate increase had already been expressed by others. However, he wanted his concerns placed on the official record as they did not have opportunity to present something earlier. COMMUNICATIONS Letter dated August 14, 2006 from Tom Marlow, Manager of Delivery Services in support of the General Manager. Received and placed on file. Letter dated august 15, 2006 from Phyllis Mellon, Chief Deputy Director, State of Michigan in regards to the request for additional information regarding the proposed rate increase. Received and placed on file. Letter dated August 15, 2006 from former commissioner Tim Haggert in support of the General Manager. Received and placed on file. COMMITTEE REPORTS esolutuih=200&8`; COMMITTEE OF THE WHOLE REPORT August 15,2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 3:00 p.m., Tuesday, August 15, 2006. Commissioner Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Joseph Graves, Semone James, Santiago Rios and Robin Smith. Absent: Commissioners Gary Calkins and Ronald Callen Public Comment There were no public comments. INTERVIEW FOR INTERIM INTERNAL AUDITOR POSITION AUG-24-2006 14:35 1 517 7026855 99;1 P.03 RUG-24-2006 16:06 HD OF WATER LIGHT 1 517 7026855 P.04i42 The first interview was conducted with Charles Moore of C.L. Moore &Associates, P.C. Mr. Moore presented his organization and a question/answer period followed the interview. The second session took place with Kirk Balcom and Mary McCune of Rehmann Robson. Both individuals presented their organization and a question/answer period followed the interview. Upon conclusion of the interviews the Commissioners discussed the presentations and qualifications of both candidates. After discussion, it was decided that the Committee of the Whole would bring forth a recommendation to the full Board for a vote on Tuesday, August 15, 2006 at 5:30 p.m. to award the RFP for the Interim Internal Auditor to C.L. Moore & Associates, P.C. Respectfully submitted, Santiago Rios, Chair Pro Tem. Committee of the Whole As part of the report, Commissioner Rios stated that both Interim Internal Auditor candidates provided a comprehensive response to the Board's request and both responded well to all of the interview questions. Motion by Commissioner Rios, seconded by Commissioner Graves to accept the report as presented. Action: Carried unanimously UNFINISHED BUSINESS RATE INCREASE DELIBERATIONS General Manager, Sandy Novick reminded the Commissioners and the public that the BWL proposed the electric and steam rate changes on June 16, 2006 with a filing as appropriate with City Clerk in Lansing. Mr. Novick also stated that notices were filed in the Lansing State Journal on July 10`h and published notices appeared in the City Pulse on July 12`h and July 26`h. He also stated that information regarding the increases has been available to the public, including information that was printed in the "Connections" monthly bill insert that is sent to all BWL customers. The public hearing occurred on August 1, 2006 in which three customers spoke to the Board regarding the electric rate change, two of which expressed concern while one encouraged the increase as a means to encourage conservation. Mr. Novick went onto state that staff discussed the conservation issue and suggested that it maybe an issue that they discuss in the future; not raising rates for conservation but conservation in general. AUG-24-2006 14:35 1 517 7026855 99i P.04 RUG-24-2006 16:05 bll OF wH I LK L 1 UH I 1 :)I ( (U,:�bbJJ r.eD/4e Furthermore,Mr. Novick also stated that staff is continuing to review operating expenses and the impact of GM's decrease on all the utilities is still being felt which was incorporated in the recommendation regarding increased environmental expenditures on north Lansing landfill. Mr. Novick stated that it was evident of their attempt to catch up on the overhauls from the BWL's generating equipment. He also stated that there is $1.2 million exposure on Eckert unit#5 and as a result they are still reviewing that information and taking into account the statements made at the public hearing. Mr. Novick further stated that staff would still recommend to the Commissioners a 1.5% increase for the electric as was initially proposed. Commissioner Rios stated that for clarity purposes each rate increase should be dealt with separately. He went onto propose an electric rate increase recommendation from management with respect to the rate increase. Please see the Electric and Stearn Rate Increase section under Resolutions for the actual wording of the resolution and further details. Commissioner Calkins stated the BWL received a minimal number of people opposing the electric rate increase. He went onto state that with the evaluation he still thinks that is an appropriate figure and therefore continues to recommend it. Mr. Novick stated that twelve customers came and spoke in regards to the steam rate increase, one also came this evening and eight letters were received from downtown businesses expressing their concerns. Mr. Novick went onto state that the beauty of public power is the public hearing process and the opportunity for customers to be heard. He stated that oftentimes,if you go through the public service commission and Consumers Energy wants to have a rate increase and you live in North Michigan then it is not as easy to be heard. Mr. Novick also stated that the beauty of public power is that we are a part of the community, in the community and people came and expressed their concerns. Commissioner Callen stated that you do not need an attorney to come here for this process. Mr. Novick then said that he agreed and also stated that the public comments were clear and consistent. Based on the comments, Mr. Novick stated that staff divided them into two categories; one is clearly that the customers want a transition time for the rate adjustments to be spread out over a period of time at smaller increments than initially proposed. Mr. Novick stated that the second category involved a long-term strategic plan that gives a sense of direction regarding the steam system, associated costs, and the resulting rates based on those costs. He went onto state that staff has been working on that very thing, with the completion of the integrated resource plan, management will soon come before the Commissioners with a series of policy discussions that can be used to develop long range plans. Mr. Novick also stated that they would do whatever they could to be creative in searching for additional cost savings in the near term and being responsive to the community in spreading out the impact. He also stated that they recognize the value of the steam AUG-24-2006 14:36 1 517 7026e55 99% P.05 HUU-,:�4-,=MUb lb;U( tIU Ur WH I tK L 1 UM I 1 ::)I ( (U:�bd=0 h'.Fib/4Z system to the downtown development and it is definitely a plus to all the utilities for the downtown area to revitalize itself. Mr. Novick went onto state that they have tried to move toward a financially independent utility and there are some other benefits in keeping steam alive. He also stated that they have heard from the community and they provided some great insight and management will be responsive to whatever the Commissioners decide to do. Commissioner Rios passed the Chair to Commissioner Cochran at 5:54 p.m. Commissioner Rios asked to be recognized by the Chair in order to bring forth a motion at that time. He then went onto state that from his perspective Mr. Novick accurately described what he thought was very honest and open public input. Commissioner Rios also stated that they have a responsibility to hear and respond to the utility and the public in a responsible manner and he thought that Mr. Novick's comments spoke to that fact. As such, Commissioner Rios introduced the following motion: aolutYoi-' 66P Motion by Corrunissioner Rios, seconded by Commissioner Calkins to accept the three- part motion in regards to steam rate increase as follows: 1. That the proposed steam rate increase be adjusted down to a 35% increase. 2. That management be directed to develop a strategic plan/process for the BWL's steam business to minimally include: a. comprehensive 3-5 year business plan for the BWL's steam business which incorporates. response to cost of study issues raised by the State of Michigan, appropriate elements of the integrated resource plan, collection from GM for early termination of contract, a plan to further reduce costs, a plan to develop additional efficiencies in the operation including scaling back, analysis and plan for business growth potential, and considers the option of getting out of the steam business entirely; and b. rate increase strategy over the next 3-5 years that makes the steam business financially independent and this plan be completed within the next 90 days. 3. That management immediately begin to monitor and make recommendations to this Board on a monthly basis, on necessary adjustments to the BWL budget to make up the approximately$1.8 million difference in the projected revenue from the steam rate increase, which will include reductions in costs, increased efficiencies, utilization of reserves and/or credits, and any other reasonable measure to protect the integrity of the budget. And within the next 90 days present a financial plan/process and recommendations for the balance of the year base on actual financial performance to date, which can also serve as the foundation for planning next year's budget. Discussion: Commissioner Callen stated that some of Commissioner Rios suggestions are extremely complex. He also stated that he could not fathom the total impact of what was being said but some things did come to mind, 1) some of what Commissioner Rios is asking for will appear in the TRP, 2) there is inconsistency between lowering the steam AUG-24-2006 14:36 1 517 7026e55 99% P.06 HUU-�4-,: ODUb lb;U( till Ut- WH I t=K L 1 UM I 1 Jl ( (CetDCJJ r-.6(/4G rate increase to 35% and the proposal since they have discussed making the steam utility independent and 3) he is interested in a stepwise rate increase similar to what the General Manager mentioned and the public proposed. Commissioner Callen went onto state that he was not sure if that was in Commissioner Rios proposal or not, therefore, he stated that he did not feel prepared to vote on something that complex. Commissioner Rios stated that as an attorney he stated his motion a little different than Mr. Novick but he believes that it is relatively the same. The only difference is that he placed parameters on his proposal. Commissioner Calkins asked staff to respond to the 90-day timeframe mentioned in the motion. Mr. Novick stated that he believed the aforementioned timeframe is close to the time staff would come before the Board as normal course for long-range financial plans. He went onto state that he would certainly feel very comfortable coming to the Board on a monthly basis with year-to-date information to see where we are and what is going to happen in order to make adjustments in a timely fashion. Mr. Novick also stated that the timeframe is inline with the overall plan for the steam system, which is a process that they are already starting to plan. Commissioner Rios stated that he did say within 90-days but some of the work is already done such as the HR plan and he knows that Mr. Novick has already looked at some of the other questions. Mr. Novick stated they can make good progress and the IRP has a customer advisory group, which they will want to include. He also stated that he did not know if they could provide a definitive plan in 90-days but that he thought they could certainly commit to do their best to move forward. Commissioner Rios stated that he called it a plan slash process because part of it is a process while the plan is developing the outline and determining what we are going to do and how are we going to do it. The motion carried by the following vote: Voting Aye: Calkins, Cochran, Graves, James, Rios Voting Nay: Callen Absent: Smith Further Discussion After the Vote: Commissioner Callen stated that he wanted to explain his vote and further stated that he was still unclear as to the extent and penetration of the motion just read. He went onto state that the 35% rate increase may make sense but it does seem to be consistent with trying to make the utility independent but perhaps in the motion Commissioner Rios was referring to intent rather than a guarantee. AUG-24-2006 14:37 1 517 7026855 P.07 HUU-�4-,: ODUb lb;U( till Ur WH I tK L 1 UM I 1 51 ( Mr. Novick addressed Commissioner Callen by stating that that has been the Boards policy for some time now but we assume that you recognize that it is a slow process and will certainly be so for steam and chilled water as opposed to the others. He went onto state that they may reach those goals in a year and then the next year there maybe some slippage. However, Mr. Novick stated that we should continue to strive for the goal even if it is not achieved in the short term of this proposal, which would not be any different than what they have been doing all along. Commissioner Callen stated that he had another question in which he asked, where do we stand in terms of responding to public concern over what he calls a `stepwise' introduction of the steam rate increase. Commissioner Calkins stated that he believed Commissioner Rios' motion discussed the fact that if we progress we would look at progression rate increases. Commissioner Callen then asked if the progression would be through the 35% steam rate increase. Commissioner Rios responded by stating that the 35% steam rate increase has been approved, effective September 1, 2006. He then went onto state that they have asked management to develop a 3-5 year amortization plan of reaching independence as part of their objective and goal. Commissioner Callen then stated that he now felt comfortable with the plan. Commissioner Cochran returned the Chair back to Commissioner Rios at 6:04 p.m. RESOLUTIONS PROPOSED RESOLUTION INTERIM INTERNAL AUDITOR SELECTION WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and interviewed each candidate for the Interim Internal Auditor position on August 15, 2006; and WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and discussed each candidate's presentation and credentials after the interviews on August 15, 2006. RESOLVED, That the Committee of the Whole recommends that the Request for Proposal (RFP) award for the Interim Internal Auditor be granted to C.L. Moore & Associates, P.C. AUG-24-2006 14:37 1 517 7026855 P.08 RUG-24-2006 16:08 BD OF WRTER LIGHT 1 517 7U26d55 H.UJ/42 Motion by Commissioner Rios, seconded by Commissioner Calkins to accept the recommendation of the Committee of the Whole to hire C.L. Moore & Associates, P.C. as the Interim Internal Auditor. Action: Carried unanimously esolutioi =2006-8-. ELECTRIC AND STEAM RATE INCREASES WHEREAS,the staff of the BWL, in the course of its financial planning process, has determined that the electric and steam utilities will experience significant revenue shortfalls in Fiscal Year 2007 and beyond; and WHEREAS, such revenue shortfalls are caused primarily by the combination of very modest revenue growth over the last four years,rising costs due to higher labor, health care, maintenance and environmental costs as well as overall inflation,and reduced steam consumption due to GM plant closings; and WHEREAS, the last general rate increase in the electric utility occurred in July 2005 and the last general rate increase in the steam utility occurred in January 2003; and WHEREAS, the staff of the BWL has proposed a general increase of 1.5% for the electric utility effective September 1, 2006,and an increase of 35% for the steam utility effective September 1, 2006; and WHEREAS, notice of the proposed increases were communicated to all customers by mail on July 13,2006, public notice was made on June 16, 2006, and a public hearing was held on August 1, 2006,to receive comments on the proposed increases; and WHEREAS,the Board of Commissioners has considered the comments of the public as well as the recommendations made by BWL. RESOLVED, That the electric and steam rate schedules listed below and detailed in the attached rate schedules be adopted and made effective for electric and steam consumption on or after September 1, 2006. ELECTRIC: (Attachment A) Residential Service- Rate 1 General Service-Rate 3 Large General Srvice-Rate 4 Primary Service-Rate 5 Municipal Water Pumping Service-Rate 7 Large Capacity Service-Rate S Outdoor Lighting Service-Rate 9 Traffic Light Service-Rate 11 Space Conditioning and Electric Water Heating Service-Rate 12 Residential Senior Citizen- Rate 21 Street Lighting Service-Rate 31 Street Lighting Service- Rate 32 AUG-24-2006 14:37 1 517 7026855 P.09 RUG-24-2006 16:06 HD OF WRTER LIGHT 1 51'r 'r02bbbb H. 10142 STEAM: (Attachment B) General Service-Rate 1 Industrial Service-Rate 2 General Service-Rate 3 Residential Service-Rate 5 Fuel Cost Adjustment Motion by Commissioner Rios,seconded by Commissioner Graves to accept the resolution as presented with modification to the steam rate to reflect a 35% increase. Action: Carried unanimously AUG-24-2006 14:37 1 517 7026855 99i P. 10 RUG-24-20ab 1b:db till Ut- wH I tN t-1 Uri I l l r rocoa�� r. l i 4G ATTACHMENT A RESIDENTIAL ELECTRIC SERVICE RATE NO.1 Avallability-This rate is available to any single-family or multifamily dwelling of 4 units or less when the entire electric requirements are supplied atone point of delivery through one meter. Service to appurtenant buildings may be taken through the same meter. Service under this rate is not available to any singlefamily or multifamily dwelling unit of 4 units or less when a portion of the dwelling unit is used for commercial, industrial, or resale purposes unless the wiring is so arranged that service for residential and non-residential purposes are metered separately. Nature of Service-The service is alternating current,60 hertz,single phase, 120240 nominal volts. Monthly Rate - Shall be computed in accordance with the following charges: 9/1/06 Basic Service $4.45 Per customer per month Charge Commodity Charge Summer Billing Months of June through October $.0659 Per kWh for the first 500 kWh $.0703 Per kWh for all over 500 kWh Winter Billing Months of November through May $.0659 Per kWh for the first 500 kWh $.0686 Per kWh for all over 500 kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. EnerLy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adiustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise fees,or any other charges against the Board of Water and Light(BWL)property,or its operation,or the production and/or sale of electric energy,to offset any such cost and thereby prevent other customers from being compelled to sham:such local increases. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Appticntinn Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Auxiliary Power Provision-Domestic customers desiring electric service as an auxiliary source of power to wind or solar powered generating equipment may take service under this rate schedule under special agreement with the BWL. The customer shall pay the charges set forth above. A customer taking auxiliary power under this rate shall pay all reasonable costs associated with any alteration of BWL equipment required for proper operation of the customer's generating equipment in parallel with the BWL system. A customer may elect to sell energy to the BWL at the rate of$.022/kWh delivered. Customers selling energy to the BWL shall pay a charge of$6.40 per month or part thereof instead of the above Basic Service Charge. Rules and Reeulations - Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 RUG-24-2006 14:37 1 517 7026855 P. 11 GENERAL ELECTRIC SERVICE RATE NO.3 Availability-This rate is available to any customer desiring secondary voltage service for any purpose when supplied at one point of delivery through one meter. The limitation to secondary-voltage service may be waived in instances where the character of the electric load at the premises served has changed substantially. This rate is not available for emergency or standby service. Nature of Service-The service is alternating current,60 hertz,single phase or three phase. The secondary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service $15.68 per customer per month Charge Commodity Charge Summer Billing Months of June through October $.0773 per kWh Winter Billing Months of November through May $.0744 per kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license fees,franchise fees, or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Metering-Where the BWL elects to measure the service on the primary side of the transformers,the metered kWh thus measured will be reduced by 3% for billing purposes to adjust for transformer losses. Where the customer receives service through more than one meter,the consumption as registered by the different meters will not be combined for billing purposes,but will be computed and billed separately. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Char-e-A S7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Auxiliary Power Provision-Customers desiring electric service as an auxiliary source of power to wind or solar powered generating equipment may take service under this rate schedule under special agreement with the BWL. The customer shall pay the charges set forth above. A customer taking auxiliary power under this rate shall pay all reasonable costs associated with any alteration of BWL equipment required for proper operation of the customer's generating equipment in parallel with the BWL system. A customer may elect to sell energy to the BWL at the rate of S.022/kWh delivered. Customers selling energy to the BWL shall pay a charge of 125.00 per month or part thereof instead of the above Basic Service Charge. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this refert:ncc. Adopted:August 15,2006 Effective: September 1,2006 RUG-24-2006 14:36 1 517 7026855 P. 12 LARGE GENERAL ELECTRIC SERVICE RATE NO.4 Availability-This rate is available to any customer desiring secondary voltage for any purpose when the electrical requirements are supplied at one point of delivery through one metering installation and the billing demand is 15 kW or more. The limitation to secondary-voltage service may be waived in instances where the character of the electric load at the premises served has changed substantially. This rate is not available for standby or emergency services. Nature of Service-The service is alternating current,60 hertz,single phase or three phase. The secondary voltage is determined by the Board of Water and Light(BWL). Mnnthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service $33.45 per customer per month Charge Capacity Charge $9.15 Per kW for all kW of Maximum Demand Commodity Charge Summer Billing Months of June through October $.0412 Per kWh Winter Billing Months of November through May $.0377 Per kWh eactive Power Char $0.0083 per kvarh in excess of 50%of total kWh. The Reactive Power Charge shall be applicable to customers who have reactive kilovar hour(kvarh)metering installed in accordance with BWL Rules and Regulations regarding power factor. Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Erle=Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this refewnce. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license fees, franchise fees,or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand-The billing demand shall be the kW supplied during the 15-minute period of maximum use during the month. Metering-Where the BWL elects to measure the service on the primary side of the transformer,the metered kW and kWh quandties thus measured will be reduced by 3%for billing purposes to adjust for transformer losses. Where the customer receives service through more than one metering installation,the consumption as registered by the different metering installations will not be combined for billing purposes,but will be computed and billed separately. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. AUG-24-2006 14:3e 1 517 7026e55 99% P. 13 Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 RUG-24-2006 14:38 1 517 7026e55 99% P. 14 PRIMARY ELECTRIC SERVICE RATE NO.5 Availability-This rate is available to any customer desiring primary voltage service when the electrical requirements are supplied at one point of delivery through one metering installation(except as provided below for Multiple Delivery Point Aggregation)and the billing demand is 100 kW or more. This rate is not available for standby or emergency service. Nature of Service-The service is alternating current,60 hertz,three phase. The primary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges: 9/1/06 Basic Service $83.64 per customer per month Charge Capacity Charge $7.42 Per kW for all kW of On-Peak Billing Demand, plus $2.46 Per kW for all kW of Maximum Demand Commodity Charge Summer Billing Months of June through October $0.036 Per kWh for all kWh during the On-Peak Period, 2 plus $0.032 Per kWh for all kWh during the Off-Peak 7 Period, plus Winter Billing Months of November through May $0.034 Per kWh for all kWh during the On-Peak Period, 5 plus $0.032 Per kWh for all kWh during the Off-Peak Period 7 eactive Power Charg $0.0083 per kvarh in excess of 50%b of total kWh The Reactive Power Charge shall be applicable to customers who have reactive kilovar hour(kvarh)metering installed in accordance with BWL Rules and Regulations regarding power factor. Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Enerp-y Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees,or any other charges against the Board's property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand On-Peak Billing Demand: The On-Peak Billing Demand shall be the kW supplied during the 15- minute period of maximum use during the On-Peak Period during the month. Maximum Demand: The Maximum Demand shall be the kW supplied during the 15-minute period of maximum use during the month whether on-peak or off-peak. AUG-24-2006 14:38 1 517 7026855 99i P.15 Schedule of on-peak and off-peak periods-The On-Peak Period shall be from 10:00 a-m_until 6:00 p.m., Monday through Friday. All other hours shall comprise the Off-Peak Period. Adopted:August 15,2006 Effective: September 1, 2006 RUG-24-2006 14:39 1 517 7026855 99% P. 16 PRIMARY ELECTRIC SERVICE RATE NO.S Multiple Delivery Point Aeereeation-The 15-minute period demands of multiple delivery points of a customer may be summed for determination of the total On-Peak Billing Demand under the following conditions: (a)the Maximum Demand at each delivery point must equal or exceed 100 kW;(b) the total On- Peak Billing Demand shall not be less than 4,000 kW;and(c)the customer shall agree to a service contract with the BWL for the customers full electrical service requirements at the aggregated delivery points for a period of not less than five(5)years. Aggregation shall be applicable for determination of the On-Peak Billing Demand only. All other charges,including the Basic Service Charge and Maximum Demand,shall apply to each delivery point independently. Metering-When the BWL elects to measure the service on the secondary side of the transformers,the metered kW and kWh quantities thus measured will be increased by 3% for billing purposes to adjust for transformer losses. Where the customer receives service through more than one meter installation,consumption as registered by the different meter installations will not be combined for billing purposes, but will be billed and computed separately except as provided for in Multiple Delivery Point Aggregation_ Equipment_Supplied by Customer-The customer shall be responsible for furnishing,installing and maintaining all necessary transforming,controlling and protective equipment required for service beyond the BWL primary-voltage delivery point. At the sole option of the BWL,a customer may lease such transformers or other equipment from the BWL under terms established by the BWL. Delayed Payment Chartte-A delayed payment charge of 5% of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective:September 1,2006 RUG-24-2006 14:39 1 517 7026855 99% P. 17 MUNICIPAL WATER PUMPING ELECTRIC SERVICE RATE NO.7 Availability-This rate is available to any political subdivision or agency of the State of Michigan desiring service for potable water pumping and associated potable water production equipment when the entire electrical requirements are supplied at one point of delivery through one meter. This rate is not available for emergency, standby,or auxiliary service. Nature of Service-The service is alternating current,60 hem,three phase. The secondary or primary voltage is determined by the BWL. Monthly Rate-Shall be computed in accordance with the following charges. 9/1/06 Basic Service Charge $10.45 Per customer per month Commodity Charge $.0596 Per kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adiustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees. franchise fees,or any other charges against the BWL property, or its operation,or the production and/or sale of electrical energy,to offset any such cost and thmby prevent other customers from being compelled to share such local increases. Metering-When:the BWL elects to measure the service on the primary side of the transformers serving the customer,the metered kWh thus measured will be reduced 3%for billing purposes to adjust for transformer losses. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective:September 1,2006 AUG-24-2006 14:39 1 517 7026855 99% P. 18 LARGE CAPACITY ELECTRIC SERVICE RATE NO.8 Availability-This rate is available to any customer desiring primary voltage service when: (a)the electrical requirements are supplied at one or more points of delivery as provided below for Multiple Delivery Point Aggregation; (b)where the total On-Peak Billing Demand is 25,000 kW or more;and(c)the customer agrees to a service contract with the BWL for the customer's full electrical service requirements at the applicable delivery points for a period of not less than ten(10)years. This rate is not available for standby or emergency service. Nature of Service-The service is alternating current,60 hertz,three phase. The primary voltage is determined by the Board of Water and Light(BWL). Monthly Rate-Shall be computed in accordance with the following charges: 911106 asic Service Char $261.36 per delivery point per month R aci Char $8.36 per kW for all kW of On-Peak Billing Demand, plus $1.57 per kW for all kW of Maximum Demand ommodi Summer Billing Months of June through October ICharg $0.0.314 per kWh for all kWh during the On-Peak Period,plus $0.0272 per kWh for all kWh during the Off-Peak Period,plus Winter Billing Months of November through May $0.0301 per kWh for all kWh during the On-Peak Period, plus $0.0272 per kWh for all kWh during the Off-Peak Period eactive Powe $0.0083 Per k varh in excess of 50%of total kWh bar Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate;rate schedule incorporated herein by this reference. Tax Adjustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise fees,or any other charges against the Board's property,or its operation,or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Billing Demand On-Peak Billing Demand: The On-Peak Billing Demand shall be the total kW supplied to all applicable delivery points during the 15-minute period of maximum use during the On-Peak Period during the month. (See Multiple Delivery Point Aggregation.) Maximum Demand: The Maximum Demand for each delivery point shall be the kW supplied during the 15-minute period of maximum use during the month whether on-peak or off-peak. Adopted:August 15,2006 Effective:September 1,2006 AUG-24-2006 14:39 1 517 702Ge55 99% P. 19 LARGE CAPACITY ELECTRIC SERVICE RATE NO.8 Schedule of on-peak and off-peak periods-The On-Ptak Period shall be from 10:00 a.m.until 6:00 p.m„ Monday through Friday. All other hours shall comprise the Off-Peak Period. Multiple Delivery Point Aeerep-atlon-The 15-minute period demands of multiple delivery points of a customer shall be summed for determination of the total On-Peak Billing Demand under the following conditions: (a)the Maximum Demand determined at each delivery point must equal or exceed 1.000 kW;and (b)the total On-Peak Billing Demand shall not be less than 25,000 kW. Aggregation shall be applicable for determination of the On-Peak Billing Demand only. All other charges, including the Basic Service Charge and Maximum Demand,shall apply to each delivery point independently. Metering-When the BWL elects to measure the service on the secondary side of the transformers,the metered kW and kWh quantities thus measured will be increased by 3%for billing purposes to adjust for transformer losses. Where the customer receives service through more than one meter installation,consumption as registered by the different meter installations will not be combined for billing purposes,but will be billed and computed separately except as provided for Multiple Delivery Point Aggregation. Equipment Supplied by Customer-The customer shall be responsible for furnishing,installing and maintaining all necessary transforming,controlling and protective equipment required for service beyond the BWL primary-voltage delivery point. At the sole option of the BWL,a customer may lease such transformers or other equipment from the BWL under terms established by the BWL. Delayed Payment Char-e-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charze-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Reeulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 AUG-24-2006 14:40 1 517 7026955 99% P.20 OUTDOOR LIGHTING SERVICE RATE NO. 9 Availability - This rate is available to any customer located within the Board of Water and Light (BWL) service area for dusk to dawn lighting of customer's premises. The BWL furnishes and maintains all lights. The installation will overhang private property from existing or new poles set at points accessible to BWL construction and maintenance equipment. This rate is not available for purposes of street, highway, or public thoroughfare lighting. Monthly Rate- Shall be computed in accordance with the following charges. Luminaires on Overhead Mast Arm on existing BWL poles High Pressure Sodium 9/1106 100 W $9.45 250 W $15.94 400 W $17.04 Mercury Vapor 175 W $9.91 400 W $17.04 Floodlighting Luminaires on Bracket Arm on existing BWL poles High Pressure Sodium 100 W $13.50 250 W $16.92 400 W $19.81 Metal Halide 400 W $24.62 1000 W $42.58 1500 W $59.10 In the event additional facilities or rearrangement of existing facilities is required, the BWL shall install, operate and maintain such facilities for the following monthly charges. Rates apply to existing luminaires only and are not open to new business. AUG-24-2006 14:40 1 517 7026e55 99i P.21 54 Preliminary—Subject to Board Approval on July 25, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, May 30, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen (by speakerphone),Robert Cochran, Joseph Graves, Semone James, Santiago Rios, and Robin Smith. (Note: 2r'a Ward Vacancy exists.) Absent: None. '7 The Secretary declared a quorum present. = f�i Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. _i =.. Chairperson Smith called the Special Meeting to order at 8:20 a.m. ram- n.) C7 fV PUBLIC COMMENTS N THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBEJCT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. None. REVISED PROPOSED FISCAL YEAR 2007 BUDGET At the May 23ra regular meeting, the Board directed staff to come back with new budget recommendations for the proposed FY'07 Budget. Staff was asked to review the proposed FY'07 Financial Plan in order to cut expenditures by 10% relative to the original budget proposal recommended by the Finance Committee on May 11, 2006. Reductions in consultants, advertisements,job consolidations, and travel were suggested as possibilities. The Board, however, suggested holding employee health care premium sharing at its current level of 5% and eliminating a proposal for board retirees to begin paying for a portion of their health care premiums. General Manager Novick reported that the proposed budget recommendations were an attempt to address structural operational issues facing the BWL. Senior Vice President of Finance and Administration Dennis McFarland presented an overview of the financial plan originally recommended by the Finance Committee: Special Board Meeting Page 55 May 30, 2006 • Proposed rate increases of 1.5% for the Electric Utility and 60% for the Stearn Utility. • Proposed operating expenses included a reduction of 9 full-time employees—although layoffs are not expected--the financial equivalent of no wage increases for non- bargaining employees, and increasing premium sharing from 5% to 10% for active non- bargaining employees and for retirees to begin paying 5% for their health care premium effective November 1, 2006. • The capital budget includes a$35 capital program to maintain ongoing services to customers and a bond issue of$35 million to fund current and future projects in the electric and water utilities. Mr. McFarland reviewed the projected Income Statement on a consolidated basis and income by utility as imbedded in the recommendation from the Finance Committee. He noted that this is provided as a baseline so that as the Board moves through the budget process, Commissioners will be able to see how income in total and by utility would be affected by any actions considered. Mr. McFarland reviewed a sensitivities chart to guide discussions. The chart listed the following impacts upon the electric rates: SENSITIVITIES: Issue *Electric Rate Impact Net Income Impact,; $1 million—O&M 0.92% $ 1,000,000 1%wage increase—Julyl 0.43% $469,626 Bargaining 0.24% $258,761 Non-Bargaining 0.19% $210,865 5%Premium sharing—Nov. 1 0.43% $470,819 Active Non-Bargaining 0.23% $250,407 Retirees 0.20 $220,412 1% Electric increase* 1.00% $1,090,000 5% Steam Increase* -- $312,000 5% Change in Wholesale Volumes 0.84% $917,000 5% Change in Wholesale Prices 1.76% $1,918,000 10 Full-Time Employees Change 0.77% $833,000 *Incremental Annual Rate Impact, implementation September 1, 2006. A chart with alternative scenarios was presented showing ways the budget would be altered as follows: Page 56 Special Board Meeting May 30,2006 ALTERNATIVE SCENARIOS: Scenario Spend Fund A Eliminate increased Reduce O&M $500,000 Premium sharing ($471,000) B Eliminate increased Reduce O&M $500,000 Premium Sharing ($471,000) Increase Electric Rates 0.5%* = 1% wage Increase ($470,000) $545,000 C Eliminate increased Reduce O&M $500,000 Premium Sharing ($471,000) Increase Electric Rates 1.0%* = 2% Wage Increase ($940,000) $1,090,000 *Incremental Annual Rate Impact, implementation September 1, 2006. Mr. McFarland stated that with the utilization of the above sensitivities, a combination of the scenarios could be considered. Commissioner Rios indicated he was hoping to see further reductions in operating costs beyond $500,000 in O&M as recommended by staff. He expressed disappointment that staff has not provided other options than those presented in the Alternative Scenarios chart, as requested at the last Board meeting. Commissioners Cochran questioned the reluctance to raise electric rates, particularly when the BWL is at least 23.5% lower than the competitor. He noted that escalating fuel and coal costs in addition to non-fuel expenses are significantly impacting utilities. He also noted that with the Steam utility projected to need a 70% rate increase to become self supporting, the proposed increase should be higher than 60%. Additionally, Commissioner Cochran stated that he is uncomfortable with the situation where management is approaching union negotiations in the fall, and the Board has to determine by June l't the amount of money needed for the union settlement in the fall. Management would then use the "pot of money" as the baseline target rather than an opportunity target. He suggested including in the FY'07 Budget a definition of a new term called "Commissioners' Pejoratives" with respect to personnel matters and putting no amount on it. The Board could amend the budget later. Commissioner Graves stated that the electric ratepayers are the Board's primary responsibility. There is a policy statement that states that each utility should be self supporting. Commissioner Graves said for that reason he could not support an electric rate increase higher than the recommended 1.5%. If the Steam utility is being subsidized by the ratepayers, then from his perspective, it is the steam rate that the Board should consider increasing so it is able to stand on its own. The electric ratepayers should not be subsidizing the Steam utility. Chair Smith also echoed Commissioner Graves' comments. She added that the loss of steam load brought on with the recent closures of General Motors Lansing auto plants has necessitated a large steam rate increase. This has created a challenge because of the Board's policy of each utility being self supporting. She noted that staff has been in contact with all steam customers to advise them of the proposed steam rate increase. She spoke on the importance for the Special Board Meeting Page 57 May 30,2006 organization to tighten its belt during these difficult financial conditions. She asked staff to look closer in the "Other"budget category and for their direction on further cost reductions. She further added that the Board has the fiduciary responsibility of assuring that the annual operating and capital budgets are adequate to meet the financial goals of the utility and various contingencies. Commissioner Calkins stated he is a strong believer that it is important for employees and retirees to know what their employer pays for health care insurance and to be aware of spiraling health care cost. He suggested that staff be directed to conduct a review of the health care plan itself to determine if there is a way to reduce costs. Following discussion, Commissioner Calkins offered the following proposal in which to begin discussion and to set the framework of how to fund the following items: (1)no increase to premium sharing for active employees, (2) not introducing premium sharing for the first time for retired employees, (3) and including a 1% payroll increase to at least reduce the impact of inflation. If agreeable with the Commissioners, staff would then be asked to evaluate the impact of his proposal to determine the funding source. Moved by Commissioner Calkins, seconded by Commissioner Rios to revise the major assumptions for the FY 2007 Financial Plan to consider Alternative Scenario B as follows: esotution 2006-5-1 Revisions to FY 2007 Budget Assumptions RESOLVED, • To hold the non-bargaining employee health care premium sharing at its current level of 5%; • Eliminate the proposal for premium sharing for retirees; and • Include a 1% increase in wage and salary accounts of non-bargaining employees. FURTHER RESOLVED, That these benefit increases are subject to the Board determining how they will be funded. Discussion: Commissioners Smith and Callen commented that the health care program the BWL offers its active and retired employees is an excellent one. It carries a heavy financial burden, and like many corporations, it is becoming difficult to meet cost demands. Evaluating wellness options was suggested as one means to lower health care costs. Commissioner Calkins suggested reviewing retiree pensions to identify whose pension benefit rate is a certain amount or less per month to consider in the future as a basis for premium sharing. Action: The motion was adopted by the following vote: Voting Aye: Calkins, Callen (by speakerphone), Cochran, Graves, James, Rios, Smith Voting Nay: None Absent None (Note: 2°a Ward Vacancy exists) The Commissioners discussed the impact of their recommendation to the steam rate. In response to questions raised by the Commissioners, General Manager Novick reported that with current natural gas prices, a 60% steam increase would be competitive. He noted that large customers do Page 58 Special Board Meeting May 30,2006 not have any natural gas heating equipment to expense or depreciate; consequently, steam would still remain competitive with a 65%rate increase for large customers. Following discussion, the Commissioners agreed to a 5%higher steam rate increase than the 60%hike recommended by the Finance Committee. General Manager Novick stated that staff is commitment to find the additional dollars needed to fund the reductions in premium sharing and 1% wage increases from the O&M Budget. Mr. McFarland told the Board that generally staff analyzed the dollars in various departmental budgets for consulting studies across the board where a third party might have been brought in to study such cases as policies and procedures, risk management and other discretionary expenditures that can be deferred until next year. He noted that if things go particularly well this year, some of the consulting expenditures could be reinstated. Commissioner Rios noted that he believes there are substantial cuts that could be made in advertising and communications. He added that he is not opposed to marketing, however, when the BWL is facing a long-term financial crisis, large expenditures in corporate advertising could be reduced. He challenged staff to help guide the Board through the process of policy direction in non-critical expenses. General Manger Novick stated that management welcomes policy direction statements, such as the one Commissioner Rios discussed. Having that kind of structure helps management know where to focus from a priority standpoint. Commissioner Calkins mentioned that it would be helpful if the Board could receive a periodic report regarding savings found in the various responsibility areas throughout FY'07. Commissioner Graves pointed out that at a prior Committee of the Whole meeting, the Commissioners discussed the issue of communications and marketing with regard as to why it is important to market the BWL and how the demographics in customer base is changing. He stated that BWL needs to build a connection with its younger consumer,particularly with the loss of the GM load. It is important for the younger consumer to have the same kind of perspective on the advantages of public power as some of the older customers have. He concurred with Commissioner Rios that as management goes forward to look at other areas for opportunities,but noted the importance of marketing activities to develop a customer-driven business strategy that remains focused on the long-term energy and related needs of the customers. Motion by Commissioner Cochran, seconded by Commissioner Calkins, esolution 2006-5-1 A. IF'Y 2007 Operating and Capital Budgets RESOLVED, that the annual Operating and Maintenance Budget covering Fiscal Year 2007 is hereby approved as presented. RESOLVED, that the Capital Budget for Fiscal Year 2007 is hereby approved as presented. Special Board Meeting Page 59 May 30,2006 RESOLVED, that the forecast for capital expenditures for the Fiscal Years 2007-2012 is hereby accepted as presented. RESOLVED FURTHER, that the Corporate Secretary be directed to make the appropriate filings with the City of Lansing City Clerk's Office and the Mayor's Office in accordance with the Lansing City Charter regarding the above actions. Motion by Commissioner Calkins, seconded by Commissioner Rios, to adopt the FY 2007 Operating and Capital Budgets (attached) Resolution No. 2006-5-14. The motion was adopted by the following vote: Voting Aye: Calkins, Callen (by speakeiphone), Cochran, Graves, James, Rios, Smith Voting Nay: None Absent None (Note: 2°d Ward Vacancy exists) Commissioner Callen excused himself from the speakerphone and meeting at 9:35 a.m. SETTING OF PUBLIC HEARING FOR ELECTRIC AND STEAM RATE INCREASES esolution 2006-5-1 B. Setting of Public Hearing for Electric Rate Increase WHEREAS, over the past several months Board of Water and Light management has been discussing rate strategies with the Commissioners to overcome projected revenue deficiencies in the Electric Utility; WHEREAS, staff has recommended a rate hearing process to adjust electric rates effective September 1, 2006. The rate adjustment is necessary in view of reduced loads and to recover costs from inflationary increases in operating expenses. The amount of the rate increase recommended is 1.5%. The implementation of any rate adjustment will be across-the-board effective September 1, 2006. RESOLVED, that the request for the proposed electric rate increase be made the subject of a public hearing prior to further consideration by the Board of Commissioners. RESOLVED FURTHER, that the Board of Commissioners set a date for a public hearing no later than August 1, 2006 to solicit public input on the proposed electric rate adjustment. The hearing will be held at the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the City Clerk at least 45 days prior to the public hearing, information regarding the proposed electric rate increase with an effective date of September 1, 2006. Staff Comments: Based on the Operating and Maintenance Budgets of $202.2 million and Capital program of $35.5 million, management believes that a revenue requirement adjustment for the electric and steam systems is warranted and needed. Page 60 Special Board Meeting May 30, 2006 Motion by Commissioner Calkins, seconded by Commissioner Rios, to adopt Resolution No. 2006-5-15. Action: The motion was adopted by the following vote: Voting Aye: Calkins, Cochran, Graves, James, Rios, Smith Voting Nay: None Absent Callen' (Second Ward vacancy exists) Notes: 1 Commissioner Callen excused himself from the speaker phone and meeting just prior to this vote. 2 Second Ward Vacancy exists due to resignation of Tim Haggart esolution 2006-5-1 C. Setting of Public Hearing for Steam Rate Increase WHEREAS, over the past several months Board of Water and Light management has been discussing rate strategies with the Commissioners to overcome projected revenue deficiencies in the Steam Utility; and. WHEREAS, staff has recommended a rate hearing process to adjust steam rates effective September 1, 2006. The rate adjustment is necessary in view of reduced loads due to GM plant closings and to recover costs from inflationary increases in operating expenses. The rate case recommendation for steam is a 65% increase allocated across rate schedules and customer classes effective September 1, 2006. RESOLVED, that the request for proposed steam rate increase be made the subject of a public hearing prior to further consideration by the Board of Commissioners. RESOLVED FURTHER, that the Board of Commissioners set a date for a public hearing no later than August 1, 2006 to solicit public input on the proposed steam rate adjustment. The hearing will be held at the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the City Clerk at least 45 days prior to the public hearing, information regarding the proposed steam rate increase with an effective date of September 1, 2006. Staff Comments: Based on the Operating and Maintenance Budgets of $202.2 million and Capital program of$35.5 million, management believes that a revenue requirement adjustment for the electric and steam systems is warranted and needed. Motion by Commissioner Graves, seconded by Commissioner Rios, to adopt Resolution No. 2006-5-16. Action: The motion was adopted by the following vote: Voting Aye: Calkins, Cochran, Graves, James, Rios, Smith Voting Nay: None Special Board Meeting Page 61 May 30, 2006 Absent Callen' Second Ward vacancy exists Notes: 1 Commissioner Callen excused himselff oin the speake7phone and meeting. 2 Second Ward Vacancy exists due to resignation of Tim Haggart FY'07 PERFORMANCE INCREASE MATRIX FOR NON-BARGAINING EMPLOYEES esolution 2006-5-1 G. FY '07 Performance Increase Matrix- Non-Bargaining Unit Employees The Board of Commissioners is responsible for determining the performance increase matrix for the Board of Water and Light's non-bargaining unit employees. The Human Resources Director, with the concurrence of the General Manager, recommended to the Human Resources Conunittee that the Board of Commissioners adopt a new performance increase matrix. The Board of Commissioners has had an opportunity to review and deliberate the merits. RESOLVED, that the Board of Commissioners shall adopt the following revisions to the non- bargaining unit performance increase matrix for Fiscal Year 2007. FURTHER RESOLVED, that the General Manager is authorized to develop any procedures necessary for implementation. Recommended Performance Increase Matrix for Fiscal Year 2007: Appraised Level of Performance Salary Increase Percentage Range Meets or Exceeds Expectations 1% to 7.5% Does not Meet Expectations 0%to 0.9% Motion by Commissioner Cochran, seconded by Commissioner Calkins,to adopt Resolution No. 2006-5-17. Discussion: Commissioner James moved a friendly amendment to add a third category to the Appraised Level of Performance as follows: rRots or-Exceeds Expectations MEETS EXPECTATIONS Does not Meet Expectations (izew language is capitalized) For lack of a second, the motion for a friendly amendment failed. Chair Smith referred this item to the Human Resources Committee for discussion at their next meeting. General Manager Novick explained that the two categories were changed from three to two after a team of employees met to review the appraised level of performance. After many meetings Page 62 Special Board Meeting May 30,2006 and receiving input from numerous employees, it was determined that the two recommended categories were more appropriate because employees thought that they exceeded expectations, and so by having this broader range, the employee committee felt it was more desirable. Action: The motion (Resolution 2006-5-17) was adopted by the following vote: Voting Aye: Calkins, Cochran, Graves, James, Rios, Smith Voting Nay: None Absent Callenl Second Ward vacancy existS2 Notes: t Commissioner Callen excused himself earlier f onz the speakerphone and meeting. 2 Secmid Ward Vacancy exists due to resignation of Tim Haggart RETAINING INTERNAL AUDITOR SERVICES Commissioner Rios stated that since the last Internal Auditor resigned, the Board has not had the benefit of an internal audit function. He asked that this item be placed on the agenda to consider hiring temporary outside internal auditing services to assist the Board with independent reviews and evaluations of the effectiveness and efficiency with which managerial responsibilities are being carried out. He noted that while the outside firm provides temporary internal auditor services, the Board could continue its ongoing process of retaining a search firm to assist with recruitment of a permanent Internal Auditor to report directly to the Board. esolution 20067-5-1 Motion by Commissioner Rios, seconded by Commissioner Cochran, to retain the services of a temporary internal auditor services from an outside firm. This position is to report directly to the Board of Commissioners. Discussion: Human Resources Director Mary Dwyer and Corporate Secretary Mary Sova updated the Board on the status of hiring a search firm to assist the Board with hiring a permanent Internal Auditor. It was reported that a set of questions were sent to the Board to use when interviewing the search firms. Once input is received from the Commissioners, an interview date with the search firms will be scheduled. Commissioner Graves pointed out that once the search firm is retained, it would probably take a couple of months to conduct the search for qualified Internal Auditor candidates. He expressed concern that the scope of the audit has not been defined. Additionally, he stated that it would be preferred if the Internal Auditor has prior utility experience. Commissioner Calkins inquired about the purchasing policy with respect to hiring outside consultants. General Counsel Amy Cavanaugh responded that if the service is over $5,000, it would require an invitation to bid on a Request for Proposal. Commissioner Calkins echoed Commissioner Graves' concerns with regard to not clarifying the audit plan. Commissioner Rios stated that having an internal auditor during the budget discussions would have been helpful for an independent evaluation of the financial and operational controls, for Special Board Meeting Page 63 May 30, 2006 recommendations for improving systems, procedures and controls to produce cost savings or better use of BWL resources. Action: The motion was adopted by the following vote: Voting Aye: Calkins, Cochran, Graves, James, Rios, Smith Voting Nay: None Absent Callenl (Second Ward vacancy exists2) Notes: 1 Commissioner Callen excused hirnself earlier•from the meeting. 2 Second Ward Vacancy exists due to resignation of Tim Haggart GENERAL MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Graves expressed concern with the Mayor's letter, dated May 25, 2006, and received on this date (May 31, 2006) due to the Memorial Day holiday. He noted that the Mayor has raised several issues that he has not taken the opportunity to sit down and discuss with management and some of the Commissioners. Commissioner Graves noted that the Charter is fairly clear with regard to what this Board's responsibilities are. Chair Smith stated that the Mayor's letter would be entered into the record as a communication item. She noted that the issues raised would be addressed later after Management and the Board have an opportunity to discuss them. EXCUSED ABSENCES On motion by Commissioner Calkins and seconded by Commissioner Graves, that the absence of Commissioners Callen be excused. Carried unanimously. PUBLIC COMMENTS Ron Byrnes, BWL retiree, thanked the Board for the time and effort they put into the retiree health care premium proposal. He said that the Retiree Committee looks forward to a dialogue on the retiree issues that were charged to staff. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Calkins, the meeting adjourned at 10:21 a.m. /s/ Mary E. Sova, Corporate Secretary Filed with Lansing City Clerk June 16, 2006 Projected Income Statement (by Utility) CHILLED $(000) ELECTRIC WATER STEAM WATER TOTAL PROJECTED INCOME STATEMENT FY 2007 SALES (mwh, ccf, mlb, ton-hrs) 3,202,477 11,725,381 784,350 8,600,691 Retail 158,480 24,902 11,427 4,589 199,397 Wholesale 39,950 2,338 42,288 OPERATING REVENUE 198,430 27,240 11,427 4,589 241,686 Operation & Maintenance Expense (167.773) (22,736) (9,998) (1,960) (202,467) Depreciation Expense (20,785) 4 701 (1,655) (1,860) (29,001) TOTAL OPERATING EXPENSE (188,558) (27,437) (11,653) (3,820) (231,468) E OPERATING INCOME (Loss) 9,873 (197) (227) 769 10,218 Payment to City (7,798) (1,072) (457) (184) (9,511) E Other Non-Operating Income 2,662 1,529 192 82 4,465 . Other Non-Operating Expense (2,070) (1,095) 95 (1,875) (5,135) F NET INCOME (Loss) 2,666 (836) (587) (1,208) 36 1 Return on Net Assets 1.0% -0.6% -1.8% -4.0% 0.0% Net Fixed Assets 2/28/06 258,134 141,523 33,142 30,503 463,301 Excludes Central Utility Complex revenue, depreciation and debt service. BWL income from CUC included in other income. WATER&LIGHT c I t ash Flow (byUtility)Pro ected ca ........... CHILLED $(000) ELECTRIC WATER STEAM WATER TOTAL PROJECTED CASH FLOW FY 2007 g BEGINNING OPERATING CASH 17,124 2,337 1,151 187 20,798 Sources of Cash Net Income 2,666 (836) (587) (1,208) 36 i Depreciation 20,785 4,701 1,655 1,860 29,001 Working Capital Change 5,000 5,000 Bond Proceeds 7,500 10,000 17,500 SOURCES OF CASH 35,951 13,865 1,068 652 51,537 I TOTAL BEG CASH AND SOURCES 53,076 16,202 2,219 839 72,335 1 z Uses of Cash Debt Principal (2,476) (1,558) (1,164) (1,066) (6,264) Net Capital Expenditures (18,607) (13,617) (2,935) 317 35 476 USES OF CASH (21,083) (15,175) (4,099) (1,383) (41,740) ENDING OPERATING CASH 31,992 1,027 (1,880) (544) 30,595 E E Excludes Central Utility Complex revenue, depreciation and debt service. BM income from CUC included in other income. WATER C LIGHT s SUMMARY ANNUAL CAPITAL ADDITIONS, PLANNED CAPITAL PROJECTS & BONDED CAPITAL PROJECTS FISCAL YEAR 2006-2007 BUDGET Final BOARD OF WATER AND LIGHT Page 1 of 17 Total Expenditures Expenditures Total Fiscal Year 2006-2007 Funding Project As Of Fiscal Year Project Cash Bond Dollars in (000's) Estimates 6/30106 2006-07 Balances Flow Fund CIA Total ELECTRIC Sub-Total Revenue 7,299 0 7,299 0 5,392 0 1,907 7,299 Sub-Total Non-Revenue 24,421 3,720 14,234 6,467 10,518 0 3,716 14,234 TOTAL ELECTRIC 31,720 3,720 21,533 6,467 15,910 0 5,623 21,533 WATER Sub-Total Revenue 9,832 0 9,832 0 0 0 9,832 9,832 Sub-Total Non-Revenue 46,851 9,008 12,293 25,550 12,133 0 160 12,293 TOTAL WATER 56,683 9,008 22,125 25,550 12,133 0 9,992 22,125 STEAM Sub-Total Revenue 338 0 338 0 296 0 42 338 Sub-Total Non-Revenue 2,347 0 2,347 0 2,347 0 0 2,347 TOTAL STEAM 2,685 0 2,685 0 2,643 0 42 2,685 CHILLED WATER Sub-Total Revenue 616 0 616 0 0 0 616 616 Sub-Total Non-Revenue 0 0 0 0 0 0 0 0 TOTAL CHILLED WATER 616 0 616 0 0 0 616 616 COMMON Sub-Total Revenue 1,670 430 1,085 155 1,085 0 0 1,085 Sub-Total Non-Revenue 5,830 1,845 3,705 280 3,705 0 0 3,705 TOTAL COMMON 7,500 2,275 4,790 435 4,790 0 0 4,790 CAPITAL BUDGET SUMMARY Sub-Total Revenue 19,755 430 19,170 155 6,773 0 12,397 19,170 Sub-Total Non-Revenue 79,449 14,573 32,579 32,297 28,703 0 3,876 32,579 TOTAL BUDGET 99,204 15,003 51,749 32,452 35,476 0 16,273 51,749 NOTE: Total FY2007 Budgeted Capital Expenditures = $51,749 less $16,273 (CIA) =$35,476 less $0(Bond Funds) =$35,476 ^ CIA=Contribution in Aid JUL-14-2006 11: 19 BD OF WATER LIGHT 1 517 7026855 P.02iO3 64 Preliminary—Subject to Board Approval 7125106 MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT July 11-12, 2006 The Board of Commissioners met in the Second Floor Conference Room of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James, and Robin Smith. Absent: Commissioner Santiago Rios The Secretary declared a quorum present. Chairperson Smith called the Special Meeting to order on Tuesday, July 11`h at 8:45 a.m. to consider the top candidates for the position of Corporate Secretary of the Board of Water and Li Pt. The Board conducted structured interviews with the first set of four candidates on July 11` and adjourned at 4:00 p.m. Structured interviews were held with the second set of four candidates on July 12`h from 8:45 a.m. to 4:10 p.m. The Commissioners discussed the interview results and the candidates' ratings. Human Resources Director Mary Dwyer reviewed the background checks and the Skill Family Salary Range Report for the Corporate Secretary's position. Action: Following discussion, it was moved by Commissioner Calkins, seconded by Commissioner Cochran, to approve the following resolution: g�`�44-4,Q6(.w.7l APPOINTING A CORPORATE SECRETARY OF THE BOARD OF WATER AND LIGHT RESOLVED, That an offer be extended to Rhonda F. Jones to serve as Corporate Secretary of the Board of Water and Light (BWL), in accordance with Article 5, Section 5-202.2 of the Lansing City Charter, and be it further RESOLVED, That this appointment is effective July 24, 2006 and through the remainder of the fiscal year ending June 30, 2007, or, until a successor is appointed, whichever last occurs, as specified in the Board's Rules of Procedure, and be it further JUL-14-2006 11: 19 BD OF WATER LIGHT 1 517 7026B55 P.03iO3 Page 65 Special rd Meeting Minutes July 12-13,2006 RESOLVED, That an Employment Contract between the Board of Commissioners and Rhonda F. Jones as Corporate Secretary be drafted delineating the employment agreement between the parties,which is to .include the following terms: 1. The term of the agreement shall be July 24, 2006 through and including June 30, 2007, or until a successor is appointed, whichever occurs last. 2. The BWL shall pay the Corporate Secretary an annual base salary as compensation for her services of$77,050. A performance evaluation shall be performed at the end of six (6) months to consider an increase up to five percent (5%). The base salary is subject an annual review by the Board. 3. The Board shall review and evaluate the performance of the Corporate Secretary at least once annually in accordance with specific goals, objectives, and performance standards developed jointly by the Board and the Corporate Secretary. 4. During the employment term, the Corporate Secretary shall be subject to all rules, policies and procedures and entitled to all benefits, including retirement, applicable to the non-bargaining employees of the BWL. Action: Carried unanimously. ADJOURNMENT On motion by Commissioner Smith, seconded by Commissioner Cochran, the special meeting adjourned at 4:45 p.m. /sl Mary E. Sova, Corporate Secretary Filed with Lansing City Clerk July 14, 2006 TOTAL P.03 JUL-14-2006 09:49 1 517 7026855 P.03 i 20 Prehininmy—Subject to Board Approval on.July 25, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday,May 233 2006 i The Board of Commissioners met in the Boardroom of the Admnistrati e Offices, 1232 Haco v Drive, Lansing,Michigan. Present: Commissioners Gary Calkins,Ron Cen Smut rt Cochran, Joseph Graves, Semone James, Santiago Rios, and Robin (Note: 2 d Ward Vacancy exists.) r ,.,b Absent: None. cn c t�� The Secretary declared a quorum present. n c� cn Chairperson Smith asked all to rise for the Pledge of Allegiance to the F ag. _ 4 r`, Chairperson Smith called the meeting to order at 5:30 p.m• r� i_� L� APPROVAL OF MINUTES notion of Commissioner Calkins, seconded by Commissioner Graves the minutes of the By r March 28, 2006 regular meeting were unammously approved. motion of Commissioner Callen, seconded by Commissioner Graves the minutes of the April By mo roved. 18, 2006 special meeting were unammously app PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ONANY OTHER SUBJECT SPEAK TO THE BOARD ON ANY E MEETING. SUBEJCT O NOW, OR AT THE END OF T eral Joseph Davis, Business Manager of IBEW Local 352, addressd the eeB�abe the services of an letters he sent to the Commissioners regarding the union s requestb external Human Resources consultant to assess the en hey of and Human Resources rw with practices,specific policies and delivery and to identify areas for ch g reta d the services of ohn J- re commendations. He reported that IBEW Local 352 has singe concerns that doJnot fall under of Castillo and Associates to assist the union rn addressing contractual issues." One concern employees have is the phone monitoring system in the " Page 21 $oard Meeting May 23, 2006 Customer Service Call Center. Mr. Davis asked for the following information concerningthe phone monitoring system: (1) Who is responsible for the system? 2 monitoring? (3)How ' the monitoring conducted? (4) What is the (u)purpose for thorizes the phone Monitoring phone calls? He asked for prompt development of a policy and procedure on the use Of the teephone monitoring system with input from the union. Mr. Davis urged that discussions concerning health care premium sharing for retirees be done in open dialogue to keep all of them aware of how the decision was made. Mayor Virg Bernero addressed the Board in his capacity as Mayor of Lansing. He stated that he believes there is an apparent lack of "institutional control, managemeiZt oversight and accountability at the Board of Water and Light." He pointed out that after consultation with some Commissioners and numerous BWL employees, he is convinced that all is not well at the BWL. He urged the Board to take swift and certain action to remedy the problems facing the organization. Among issues he specifically referenced were: • The absence of policies governing sensitive human resource functions such as conflict of interest,personal relationships between supervisors and subordinates. • A violation of personal privacy rights by a manager who listened iri on the private conversations of a woman dealing with a personal matter. • A LANSING STATE JOURNAL news report that a management employee was terminate due to an improper relationship with a subordinate. d • The three-person line crew issue, which management was ordered b restore. e y the courts to • Safety concerns raised in a recent National Safety Council report. • A recent employee embezzlement incident involving nearly a half million dollars. • The use of BWL vehicles by contracted employees Mayor Bernero stated that he finds it unacceptable that the Board of a major public corporation convenes for regularly scheduled meetings just six times a year. He urged the Board to meet more frequently, at least on a monthly basis in order to exercise oversight and enforce accountability. He called on the Board to take swift and effective action to investigate the matters outlined above to take necessary corrective actions and to bring the BWL back under public control and accountability. Commissioner Graves responded that many of the Mayor's comments he personally takes offense to because not only is the Mayor indicting the Board in the way business has been conducted, but he is also making sweeping judgments that are not supported in fact. Commissioner Graves said that he is not sure the Board is in the position to analyZe and review the Mayor's remarks without an opportunity to study them in a deliberative way because many of the comments made were general in nature and not specific. Commissioner Graves added that since the Mayor has met with some of the BWL Commissioners, he has not had the opportunity to meet with him. He asked to meet with the Mayor to review issues discussed with other members of the Board. Commissioner Graves further added that when appointed to this Board, he made a personal commitment that he would not leave this Board in any worse shape than Board Meeting Page 22 May 23, 2006 when he found it. He pledged to represent the ratepayers of the City of Lansing by carefully reviewing every allegation brought to this Board and challenging management as well as speaking with IBEW representatives. He said that if other perspectives to the matter have not been brought forward, he would welcome that opportunity. Mayor Bemero responded that he would be more than happy to meet with Commissioner Graves. Commissioner Rios stated that he accepts the Mayor's comments as a challenge for this Board to investigate the situation and to consider a different approach in resolving the problems. He welcomed continued dialogue with the Mayor and indicated that the Commissioners would work cooperatively and show due diligence in pursing these matters further. Commissioner Graves responded that he agrees with Commissioner Rios in some respect, but noted there are other issues where there simply has to be agreement that the concerns are based on factual information. He noted there are times when unanimous agreement is simply not reached, which is within the Commissioners' prerogative. Chair Smith told the Mayor that the Board accepts the challenge regarding concerns presented and assured the Board's commitment to perform due diligence with regard to these matters. She invited the Mayor to stay for the entire meeting to learn more about actions the Board has tried to initiate and plans to take later in the meeting concerning the various issues mentioned. Commissioner Cochran stated that he concurs with Commissioner Rios' continents relative to safety concerns. He said that he and others raised concerns regarding the lack of procedures at the BWL. He affirmed his support to the Mayor for coming before this Board to raise the attention level. Commissioner Cochran stated that in good faith he attempted to solve an issue raised by the union regarding eavesdropping allegations, but apparently got the wrong answers regarding the situation. He supported the Mayor's concerns and promised to work diligently to resolve the situation. David Cluley, retiree with 33 years of BWL service, stated that his wife, Virginia Cluley, is also a former BWL employee. He stated that Mrs. Cluley sent letters to Commissioners Smith, Callen and Rios asking them to review the legal situation involving her case, but no one responded. He alleged that the former Manager of Customer Service, whose employment was recently terminated, was "hand-picked" to take Virginia Cluley's position. Mr. Cluley said he is unable to understand how an investigation can be held when the people making the complaint are not contacted. Ron Byrnes, BWL retiree, expressed concern with the proposed 5% premium sharing recommendation before the Board for consideration. He said trust is not earned with retirees or other groups when they are told one thing by management and a different action is proposed to the Board. Mr. Byrnes said he heard General Manager Novick say over the last 15 months at least five times that if a change in retiree health care premiums is proposed, the retirees would be the first to know and asked for input. Mr. Byrnes read from a document (not available to the Board during the meeting) concerning post-retirement benefits and health insurance coverage an eligible individual would receive with no retiree insurance premium co-pay under the point-of- Page 23 Board Meeting May 23,2006 service plan and the traditional insurance plan. He noted that this contradicts with what the Board is being asked to decide tonight. Mr. Byrnes said that this language is spread out among many BWL documents including the union contract. He noted that lawsuits with respect to retiree co-pays on insurance premiums are coming out in favor of retirees in cases where specific guarantees were made. Trenton Taylor addressed the Board concerning his long-time friendship with David and Virgina Cluley. He noted that they are all best friends. He reported that his wife, Join Taylor, filed a Freedom of Information Act (FOIA) request with the BWL for copies of documents connected to Virginia Cluley's case. The BWL denied her request. She challenged the BWL's denial in Circuit Court, which was upheld in favor of Ms. Taylor and now this matter is going before the Appellate Court. Mr. Taylor criticized the amount of legal fees the BWL has paid to date for several pending legal cases involving former General Manager Joseph Pandy, the Cluleys and the Taylor claim. Mr. Taylor also commented that if he were a member of BWL's management, he would offer to assist with the city's financial problems by releasing some of the BWL's surplus funds. Max Zemer, BWL retiree, stated that he and his family have a combined 100-year history at the BWL. He reported that according to a national news report, states may have to increase their utility costs by 72% to 100% over the next couple of years due to deregulation and utilities divesting themselves of generation. Mr. Zemer referred to a recent scenario discussed at the last Board meeting regarding the feasibility of divesting BWL generation such as its partial share of Belle River's Power Plant and the Eckert Station. He noted that anytime the Board talks about selling major BWL generation, it is an issue of public interest. Mr. Zemer expressed concern at management's attempt to dismantle the BWL and causing unnecessary hardship within the organization. He stated that health care might cost the BWL money, but not nearly as much money as some of the mismanagement mistakes that have taken place in the last couple of years. Mr. Zemer said he would rather see mismanagement issues addressed than asking retirees to start paying part of their health care premiums. Mr. Zemer asked about the direction the BWL is heading: "Will it be a utility as it has been in the past or will it be some kind of a skeleton organization that farms out its work with disregard for its workers?" Roger Jeffers, BWL retiree with over 30 years of service, stated that he was a former chair of the BWL's employee committee on wage and pensions in the 1960's and 1970's when great strides were made to health benefits for employees. He noted that those benefits were negotiated in lieu of wages. The proposal now is to increase premium sharing for non-bargaining employees and retirees having to share 5% of their premium. Mr. Jeffers reminded the Board that retired employees gave up wages to receive improved health benefits. Steve Cronk, a recent BWL employee with 40 years of service, stated that he supports many of Mayor Bernero's remarks, particularly the statement about the lack of institutional control and management oversight. He expressed concern with management's initial proposal relative to retirees being asked to share 5% of their health care insurance premium and 25% premium sharing for non-bargaining employees. He applauded the Commissioners for asking management at the May 11`t' Finance Committee to sharpen their pencils and find ways to reduce costs in order to lower premium sharing from the proposed 25% to 10% for non-bargaining Board Meeting Page 24 May 23,2006 employees, particularly since a 0% wage increase is being recommended. Mr. Cronk noted that retirees are a captive audience with many of them receiving small fixed pensions. Tracy Tolbert, a 25 year BWL employee and currently working in Customer Service, thanked the Board for listening to all the comments made this evening. She reported that telephone monitoring in the Call Center has been in effect for several years, even before the manager that was terminated was brought in. She noted that questions were raised several years ago as to why employees and the public were not notified that calls were being monitored. She pointed out that calls were not recorded, but rather they were monitored. She stated that when phone monitoring procedures are developed, all perspectives should be considered from the customer service representative to the persons approving the policy. Ms. Tolbert stated that it is her hope that management, the union and retirees can all work together towards a common goal. Chair Smith thanked all the speakers for their time to address the Board. She gave assurance that the Commissioners take all matters brought before the Board seriously and promised to perform due diligence with regard to the issues raised. WAIVER TO ORDER OF BUSINESS There being no objection, Chair Smith announced that the order of business was being modified to accommodate several guests. Ingham County Drain Commissioner Paul Lindemann reported that the Groesbeck Drain is located west of Wood Street with Lake Lansing Road running through the center of it and goes north to the railroad and south to about one-third into the northern part of Groesbeck Golf Course and takes in a portion of the northern part of Bancroft Park. He noted that for the last thirty to forty years since the extension of David Street,-now known as Lake Lansing Road, has never had a positive outlet for the storm water. Because of a variety of land use changes that have taken place, the Ingham County Drain Commissioner (ICDC)petitioned about 13 years ago to find a solution and put in a positive outlet for the drain to solve the problem with water recharging into the ground. The first petition consisted of about a $3 million expenditure to run a 36-inch pipe near the corner of Chamberlain and Lake Lansing Roads through the northern part of Lansing down Grand River Avenue through Old Town and discharge it into the Grand River. That part of the project was accomplished about six years ago. Subsequently, a second petition was started to put in a collection system. A few property owners challenged the ICDC's right to be the collection system. This went all the way to the Supreme Court, which took about five years. Ultimately the ICDC prevailed in each case. This permitted the ICDC to obtain all the private and public easements along the route course of the new drain to be installed to collect the water and take it to the 36-inch pipe and onto the Grand River. Mr. Lindemann reported that there are two remaining easements that are left to obtain with one running across the BWL's North Lansing Landfill property and the northern part of the Groesbeck Golf Course. He stated that negotiations started with the BWL about four years ago to acquire the subject easement. He noted that staff has been extremely helpful in putting all the details together and working with his staff on all the numbers and necessary details to pass the final design stage. The bottom line is that an approximate ten acre parcel off the eastern end of the landfill needs to be acquired from the BWL to accommodate the storage. This would involve Page 25 Board Meeting May 23,2006 the construction of a wetland complex with ponds and sinuosity to move the water through the ponds and store it for a short while before it goes into the 3-foot pipe and onto the Grand River. The ponds would serve a multitude of purposes: It will clean and purify the water,provide an ecosystem which will enhance the whole area, and provide regional detention for all the properties including the thirty acres left for the BWL. It would also provide for a positive outlet for everyone else in that area, including the remaining thirty acres to tie into because Lake Lansing Road is scheduled for rebuild next year. Mr. Lindemann noted that the schedule is tight and the ICDC would like to have the ponds built and in the ground prior to the beginning of the construction of the rebuild of Lake Lansing Road. He stated that this project is down to crunch time because when the collector system is put in on Lake Lansing Road, the ICDC will need to have a place to temporarily store the water, and the pond system is ideal. Consequently the equipment must be in the ground sometime around August 2006. Mr. Lindemann thanked BWL staff for their many hours of working with the Ingham County Drain Commission on this issue. BWL General Counsel Amy Cavanaugh presented a summary of the proposed resolution before the Board for consideration. She reported that in accordance with Resolution 2004-9-9, staff negotiated with the ICDC to determine the appropriate terms and conditions necessary to allow the ICDC to install a pond system on the property while protecting the BWL and providing adequate consideration for the transaction. Staff and the ICDC have arrived at mutually agreeable terms. The following resolution was presented for Board consideration: esolution 2006-5-I J. Approval of Sale of a Portion of the North Lansing Landfill Property to the Groesbeck Drain Drainage District RESOLVED, that the Board of Commissioners hereby declares surplus approximately ten acres on the southeasterly portion of the North Lansing Landfill property (the Parcel), leaving approximately thirty acres remaining in BWL hands. FURTHER RESOLVED, that the Board of Commissioners approves the sale of the Parcel to the Groesbeck Drain Drainage District (District) in accordance with the following terms: 1. A purchase price of$200,000; 2. The BWL would grant the District an easement for a 100 foot strip along the property to install a detention system; this easement would allow the BWL to retain ownership of 100 feet within the waste mass; 3. In consideration for the easement, the District would permit the BWL, under defined circumstances, to discharge water meeting an NPDES permit into the Drain for a one- time fee of$100; Board Meeting Page 26 May 23,2006 4. On the easement property, the District will bear all liability and indemnify the BWL against any liability loss or expense arising in any way from the District's use of the easement; 5. There would be no additional detention required on the remaining thirty acres; 6. The District will limit its design to use a pipe in the existing roadbed area so the roadbed could continue to be used as a road in the future. The BWL will give the District a non-exclusive easement to use the road and the District will pay proportionate maintenance costs; 7. The District shall construct and maintain a fence separating the Parcel from the remaining property; 8. The BWL would retain the right to use the Parcel for monitoring wells and electrical and water distribution system in a manner that does not conflict with the District's use; 9. The District will bear the cost of capping the water facility on the Parcel at the main and removing the equipment. The equipment shall be returned to the BWL. FURTHER RESOLVED, that the BWL will obtain a new appraisal on the entire 40 acre North Lansing Landfill property. The new appraisal will take into consideration the impact of the use of the ten acres by the District for wetlands and detention. The new appraisal must demonstrate that the incremental increase in the value of the remaining thirty acres exceeds any incremental increase, exceeding $200,000, in what the ten-acre parcel would be appraised at for highest and best use. If the appraisal does not so demonstrate, the Commissioner's approval is stayed for further evaluation. FURTHER RESOLVED, that a Purchase and Sale Agreement memorializing these terms shall be sent to the Lansing City Council for approval. Motion by Commissioner Calkins, seconded by Commissioner Rios, to adopt Resolution 2006- 5-1 regarding approval of the sale of a portion of the North Lansing Landfill property to the Groesbeck Drain Drainage District. Action: Carried unanimously. COMMUNICATIONS Three letters were received from Joseph D. Davis, Business Manager of IBEW, Local 352, dated May 3, 2006, May 9, 2006 and May 22, 2006 all expressing concern regarding the BWL's telephone monitoring system in the Call Center and requesting an investigation of the matter. Commissioner Rios suggested that the issued raised by the union in the three letters be moved to "New Business" for discussion later in the agenda. There being no objection, the Chair deferred discussion under "New Business." Page 27 Board Meeting May 23,2006 A letter from Commissioner Tim Haggart, dated May 19, 2006 submitting his resignation from the BWL Board of Commissioners effective immediately. Received with regret and placed on file. COMMITTEE REPORTS Resolution 2006-5-2 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing,beginning at 4:00 p.m., Tuesday, March 28, 2006. Chair Pro Tern Joseph Graves, Jr. called the meeting to order and asked the secretary to call the roll. The following members were present: Coininissioners Gary Calkins, Robert Cochran, Joseph Graves, Jr., Tim Haggart, Semone James, Santiago Rios, and Robin Smith. Absent was Commissioner Ron Callen. Public Comment There were no public comments. Opening Remarks Chair Pro Tem Joseph Graves, Jr. opened the meeting with an apology to the Commissioners for appearing to exhibit some impatience by sometimes accelerating the agenda. He acknowledged that moving topics too quickly is not fair to the Commissioners. He emphasized that the Board is faced with major policy issues related to enviromriental concerns, electric retail deregulation, fuel procurement strategies, cost of coal transportation, the integrated resource plan on power supply, the steam supply portfolio, and the Eckert Plant. The Board must focus on its policy role and avoid micromanaging. He stressed the importance for Board and management cooperation on determining the future direction of the BWL. He explained that decisions made with respect to major issues would significantly influence the viability of the organization. He reiterated that his impatience is sometimes driven by that focus. Position of Director of Communications and Renewal of the Lobbyist Contract Commissioner Graves asked Commissioner Rios to provide some background as to why he requested to have the first two items placed on the Committee of the Whole agenda concerning filling the position of Director of Communications and the BWL's lobbyist contract. Commissioner Rios explained that he was surprised to learn of the impending retirement of the Director of Communications at a recent joint meeting with City Council and management's plans to seek a replacement. He said that if anything else, the Board should receive a formal advance notice of impending top management departures. He noted that he was taken aback to learn there is no formal process for the Board to have input on advising and helping with key management employment issues and suggested it is the Board's obligation to see that the organization acts in the best interests of its stakeholders. Further, he said that the Board has a responsibility for fiscal and persormel policies of the BWL. He also expressed concern that the ' Board Meeting Page 28 May 23, 2006 Board was not given an opportunity for input on the renewal of the BWL's governmental affairs contract. Commissioner Rios remarked that with the recent General Motors plant closures, the BWL's income will be significantly impacted. Due to budgetary constraints, the Board is now challenged to determine how assets and funds are directed in order to achieve the organization's goals and strategies, particularly in an environment where this community is being forced to cut back. He suggested that before filling the Communications Director position, the Board should join with management to discuss the functionality of the marketing/communications area to decide whether it is spending too little or too much and, as an alternative, to explore the possibility of hiring an external public relations firm. Discussion Regarding the Lobbyist: Pat Harrington and Adrian Cazal of the lobbying firm of Muchmore, Harrington, Smalley & Associates, Inc. (MHSA) were present to give an overview of activities and services the firm provides to the BWL. Mr. Harrington reported of ongoing day-to-day interactions with BWL staff on public policy matters at local, state and federal levels. They have coordinated numerous meetings and scheduled tours of BWL facilities with state g industry leaders--both on the local and state levels. legislators, members of congress, and amon These meetings have offered excellent opportunities for staff to form good alliances with various groups to exchange viewpoints on major issues related to energy, water, environmental, coal and rail transportation. In addition, weekly and quarterly legislative reports are provided to staff. It was pointed out that staff presentations made at Board meetings are based on analyses provided by the lobbyist and embedded in those presentations. Following discussion, Chair Pro Tem Graves deferred discussion regarding the level of direct involvement the Board should maintain with the lobbyist in conjunction with BWL staff until the next Committee of the Whole meeting. The Commissioners favor receiving quarterly reports, but postponed a decision with respect to how and by whom the information is to be presented. Discussion Regarding Filling the Position of Director of Communications: Commissioner Graves reminded the Commissioners that there was an implied contractual understanding at the time when General Manager Novick was hired relative to direct reports and managing the individuals that report directly to him. Commissioner Smith echoed remarks made by Commissioner Rios regarding the renewal of the lobbyist contract and discussion concerning the direction of the BWL's marketing/communications function. She stated that the issue is about "philosophy" in seeking Board approval for top management hires, not the selection and evaluation of those employees. Commissioner Calkins stated that he does not believe the Board should get involved in hiring key management positions. Commissioner Haggart stated he has always been of the opinion that the Board should not micromanage other than the Board's three direct employees. He indicated, however, that Commissioner Rios has raised good points and he would like to reflect on those issues a bit more. Page 29 Board Meeting May 23,2006 Commissioner James stated that Commmissioner Rios has raised some valid points that should be taken into consideration. She expressed concern with moving forward with the status quo and suggested that it would be in the best public interest to give the issues raised due consideration. Commissioner Cochran said that while there seems to be apparent desire to have discussions about how the Board should proceed in hiring key management positions in the future, this would be a major change in responsibility from the way it has been done in the past. To get involved in the selection process of one key employee at the eleventh hour would be like derailing a train in haste. He urged that more thought be given in terms of changing what the General Manager perceives was essentially an understanding at the time he was hired. Following lengthy discussion, it was moved by Commissioner Calkins, seconded by Commissioner Cochran, that the Board not be involved in filling the position of Director of Communications. Further, that management continue to operate under the current policy and move forward in filling the position. If the Board desires to review actions for future positions, it should be discussed at the next meeting as soon as possible. The motion failed by the following vote: Voting Aye: Calkins, Cochran, Graves Voting Nay: Haggart, James, Rios, Smith Absent Callen Commissioner Graves referred the issue of approval authority for filling top management positions to the next Committee of the Whole meeting. Staff was directed to bring forth the following information: 1. Perspectives on functionality of the marketing/communications area with a report on the benefits of an internal communications department vs. an external public relations firm. Staff recommendations with justification relative to the proposal. 2. Perspectives on the level of the Board's involvement and the direction the Board should provide to the General Manager. On motion by Commissioner Smith, seconded by Commissioner Haggart, the meeting adjourned at 5:20 p.m. Respectfully submitted, Joseph E. Graves, Jr., Chair Pro Tem Committee of the Whole Motion by Commissioner Graves, seconded by Commissioner Calkins, to receive the Committee of the Whole Report as presented. Action: Carried unanimously. Board Meeting Page 30 May 23, 2006 Resolution 2006-5-3 HUMAN RESOURCES COMMITTEE REPORT A meeting of the Human Resources Committee of the Board of Water and Light was held at the Executive Offices, Lansing, at 4:30 p.m.,Monday, April 24, 2006. Committee Chair Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members of the Human Resources Committee were present: Commissioners Santiago Rios, Bob Cochran, Joseph Graves, Jr., and Ron Callen (alternate). Absent was Commissioner Tim Haggart. Public Comment There was no public comment. FY 2007 Non-Bargaining Skill Family Range Adjustments and Performance Increase Matrix Wendy Bradley, Human Resource Consultant for Employee Relations provided the committee with a recap of the market analysis conducted to determine the appropriate skill family range adjustments for non-bargaining employees' (NBE) positions for FY 2007. Ms. Bradley indicated that the BWL annually reviews its skill family ranges for non-bargaining employees in an effort to keep salaries in line with comparable positions in a competitive marketplace. Rates of pay for benchmark jobs in each of the eight skill families were examined in order to offer competitive salary ranges for FY 2007. Range adjustments for each skill family are made in accordance with annual labor market salary movements for that family. Salary survey data were compiled for benchmark jobs in each BWL skill family from a variety of local, regional, and national samples and from utilities similar to the BWL's revenue class, customer service base and number of employees. Data was then compared to current skill family range mid-points. Percentage differences between the survey data and the range mid-points were averaged, and the average percentage difference for each skill family was used as the basis for recommendations for skill family range adjustments. Recommendations for skill family range adjustments are made with the intent of keeping each skill family within ± 10% of the market from one year to the next, which is the industry standard for competitive pay. Ms. Bradley noted that there are no direct cost impacts due to skill family range adjustments. Costs are determined by the performance increase matrix. Ms. Bradley presented an overview of the factors considered in establishing the recommended FY 2007 non-bargaining perfonnance increase matrix. The performance level matrix included internal factors such as the BWL's ability to pay and the budget forecast. External factors included-the state of the economy (CPI), and projections from other utilities and businesses. General Manager Novick reported that although market salary surveys could support an increase, it is recommended that non-bargaining salaries be held level for FY 2007 based on current BWL financial projections and in consultation with Human Resources and senior staff. Management plans to budget an overall 0% salary increase for the FY 2007 salary year. Also, individual variable pay amounts would not be awarded to employees. Page 31 Board Meeting May 23,2006 A detailed competitive compensation report was included with the meeting packet that addresses other factors for consideration, and for general knowledge of compensation for public power utilities. After discussion, the Human Resources Committee took the following action: On motion by Commissioner Callen, seconded by Commissioner Graves, the Human Resources Committee unanimously recommended the Board approve the skill family range adjustments. This item will be placed on the regular meeting agenda under General Manager's Recommendations for Board action on May 23rd. On motion by Commissioner Graves, seconded by Commissioner Rios, the Finance Committee unanimously recommended referring management's recommended FY 2007 non-bargaining performance increase matrix to the Finance Committee for review and deliberation during discussion of the BWL's FY 2007 financial plan on May llth. The Finance Committee's recommendation will be submitted to the Board on May 23`6 Pension and VEBA Performance Senior Vice President of Finance and Administration Dennis McFarland reported on the quarterly performance for the Defined Benefit Plan, Defined Contribution Plan and VEBA Retiree Benefit Plan and Trust for the period through December 31, 2005. He reported that the Defined Benefit plan has $123 million in assets, which is down in excess of$5 million from the previous year due to the payment of one year's worth of defined benefits to pension plan participants and the transfer of funds from the defined benefit plan to the VEBA fund. Mr. McFarland pointed out that anything over and above 125% of the funded ratio in the defined benefit fund is transferred to the VEBA fund. The asset allocation approved by the Pension Fund Trustees is in compliance with the 60-70% asset allocation policy. The complete report presented by Mr. McFarland detailed the asset allocation, rate of return and the defined benefit funding status. The Defined Contribution Plan has assets in the total amount of$116.9 million as of December 31, 2005. Mr. McFarland reviewed the defined contribution plan assets by class and gave an overview of the historical performance of the various funds. He noted that performance has been good across all the fund managers with the exception of two that had a weak performance the last few quarters. The two fund managers have been put on notice for improved performance. The historical performance benchmarks as of December 31, 2005 indicate the defined contribution plan has met or beat the benchmarks from the fixed income and equity side. The VEBA Retirement Plan and Trust has net assets of $35.6 million for the period through December 31, 2005, which is up 43% from the year earlier. The asset allocation, rate of return and post-retirement benefit funding status were discussed in detail. It was pointed out that the actuarial valuation dated February 28, 2005, indicates the unfunded actuarial accrued liability for post-retirement benefit funding is $177.5 million. General Manager Novick noted that the BWL started booking the unfunded liability in 2005. Board Meeting Page 32 May 23,2006 The detailed reports for the Defined Benefit, Defined Contribution, and VEBA are on file in the Corporate Secretary's Office. The quarterly reports were provided for informational purposes. They do not require any committee action. Cafeteria Plan Restatement and Grace Period Associate Attorney Brandie Ekren presented an overview of updates made to the BWL Cafeteria Plan to bring it in line with changes in law and benefits offered in the Plan. The Plan document has been restated to include the benefit changes and changes in applicable laws such as HIPAA, COBRA and the IRS Code) that occurred since August 1, 1987. The document was also amended to include a grace period for the Medical Reimbursement Account as permitted by the IRS Notice 2005-42; whereby the Medical Reimbursement Plan would reimburse participants for expenses incurred during the two-and-half month period after the end of the Plan year. She noted that prior to IRS Notice 2005-42, unused monies were automatically forfeited if the participant did not incur enough claims prior to August 31s" The BWL plan year ends on August 31. As pennitted by IRS Notice 2005-42, participants may incur expenses until November 15 and receive reimbursement with funds contributed during the plan year that ended on August 31. Following discussion, the Human Resources Committee took the following action: On motion by Commissioner Cochran, seconded by Commissioner Callen, the Human Resources Committee unanimously recommended the Board approve the proposed Cafeteria Plan restatement and grace period. This item will be placed on the Board meeting agenda under General Manager's Recommendations on May 23" . Filling the Corporate Secretary Position, Human Resources Director Mary Dwyer gave an overview of the process in place to fill the pending vacancy of the Corporate Secretary position with the retirement of Mary Sova in July 2006. The committee reviewed the job description and job notice. It was agreed to have the Human Resources Department post the position internally and externally simultaneously at the local and regional levels with qualified internal candidates given preference for the position. The committee directed Ms. Dwyer to move forward with the job posting with a status report given to the Board at the regular meeting on May 23rd. The committee agreed to have the General Counsel draft a Business Consultant Agreement should the need arise for the Board and employees of the BWL to consult with Ms. Sova concerning matters relating to the Corporate Secretary's Office during the transition period. Ms. Sova has agreed to participate with a BWL assessment team in the selection process. There being no further business, the Human Resources Committee adjourned at 6:25 p.m. Respectfully submitted, Santiago Rios, Chair Human Resources Committee Motion by Commissioner Rios, seconded by Commissioner Callen, to receive the Human Resources Committee report as presented. Page 33 Board Meeting May 23,2006 Action: Carried unanimously. Resolution 2006-5-4 EXECUTIVE COMMITTEE REPORT The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m., Tuesday, May 9, 2006. Chair Robin Smith called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Joseph Graves, Jr., Santiago Rios, and. Robin Smith, Public Comment No persons spoke. Executive Session Moved by Commissioner Graves, seconded by Commissioner Calkins, to go into executive session to meet with General Counsel Amy Cavanaugh to discuss an attorney-client privileged communication pursuant to MCL 15.268(h). The motion was approved by the following vote: Yeas: Commissioners Calkins, Graves, Rios, and Smith. Nays: None Absent: None Carried unanimously. At approximately 4:55 p.m., Chair Smith reconvened the Executive Committee meeting and announced that no action was taken in closed session. Addition to the Agenda On motion by Commissioner Rios, seconded by Commissioner Graves, on accepting an addition to the agenda to discuss a communication received from IBEW Business Manager Joseph Davis, dated May 9, 2006, regarding BWL telephone monitoring. Carried unanimously. The committee discussed at length the issues raised in Mr. Davis' letter, in which the union inquired about the status of the Board's investigation of the BWL's telephone monitoring procedure. Commissioners Smith and Rios expressed concern that at times people with legitimate concerns have such little confidence in the process which helps resolve problems that they turn to the Board or the press to air their concerns and issues. The issue of trust is something that management and the union need to work on. Commissioner Graves stated that trust is a two-way avenue. Board Meeting Page 34 May 23,2006 General Manager Sandy Novick stated that every complaint is taken seriously and appropriate action is taken. With regard to the allegations of illegal wiretapping at the BWL, Mr. Novick stated that he met with a special agent of the Federal Bureau of Investigation to discuss the allegations. The FBI agent informed BWL management that he had investigated the allegations and discovered no evidence of illegal activity. The committee discussed how employee-related complaints should be brought forward for investigation. Commissioners Calkins and Graves stated that if an investigation of the allegations is the goal of the union, there are internal avenues to lodge complaints through the bargaining contract between the BWL and the union. Human Resources Director Mary Dwyer stated that every effort is made to give employees a safe mechanism to pursue grievances. If an employee has documented evidence that something is being done inappropriately, they can first go through the grievance procedure, which ultimately ends up with an independent arbitrator or special conference. Following discussion, General Manager Novick said he would meet with Mr. Davis to specifically discuss the union's concerns. Mr. Davis will be asked to provide additional information and/or documented evidence that a violation of the law had been committed. Commissioner Calkins suggested a periodic report to the Board on labor relations activities would be helpful to provide the Commissioners with a better perspective of labor issues. General Manager Novick agreed to make such a report available. Status of Search Finn to Recruit the Position of Director of Internal Auditor The committee received a status report on responses received from the RFP for Executive Search Services for recruitment of a Director of Internal Audit. It was reported that three sealed proposals were received. By consensus, the committee requested to interview the three vendors for subsequent recommendation to the full Board. The committee agreed to proceed with the following process: 1. The sealed bids will be forwarded to the Human Resources Department for review and evaluation with staff from Material and Services Resource Center to assure the proposals meet the specifications. 2. Chair Smith will submit initial interview questions to the Human Resources Department for review and supplement with additional questions. 3. A list of proposed interview questions will then be forwarded to the full Board for review and comment. 4. The consultant personally conducting the search will be invited to make a presentation to the full Board on their search approach in delivering top candidates. 5. A question and answer period will follow Page 35 Board Meeting May 23,2006 6. The Board will deliberate and select the top finn. There being no further business, the Executive Committee adjourned at 5:45 p.m. Respectfully submitted, Robin Smith, Chair Executive Cominittee Motion by Commissioner Smith, seconded by Commissioner Rios, to receive the Executive Committee Report as presented. Action: Carried unanimously. Resolution 2006-5-5 FINANCE COMMITTEE REPORT The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 5:30 p.m., Thursday, May 11, 2006. Finance Chair Ron Callen called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Ron Callen, Gary Calkins, Semone James, and Joseph Graves, Jr. Commissioner Bob Cochran was also present. Public Comment No persons spoke. FY 2007 Financial Plan General Manager Sandy Novick reported that the proposed FY 2007 O&M budget is being referred to as the financial plan' for the fiscal year beginning July 1, 2007. This is a step toward a structural change to address financial challenges and revenue deficiencies. Mr. Novick stated that staff will outline the financial projections for FY 2007 and options for the committee's consideration to address future revenue deficiencies and the impact on customers if the shortcomings are addressed exclusively through rate increases. Senior Vice President of Finance and Administration Dennis McFarland stated that as various approaches are discussed to address projected losses, the committee will be asked to consider a variety of options that could be available for keeping the BWL financially solvent. Mr. McFarland presented an overview of the BWL's financial goals: FINANCIAL GOALS: • Maintain credit quality • Ensure adequate liquidity • Maintain rate competitiveness • Efficient and appropriate use of capital • Financially independent utility Board Meeting Page 36 May 23, 2006 Commissioner James entered the meeting at 5:50 p.m. THE SALES FORECAST FOR FY2007 WAS COMPARED WITHFY2006: % '07 Budget Utility FY07 Forecast FY06 Forecast to '06 Budget Electric—Retail 2,227,675 2,345,000 -5.0% Electric—Wholesale 974,802 1,000,000 -2.5% Electric (mwh) 3,202,477 3,345,000 -4.3% Water(cc fl 11,725,381 10,747,000 9.1% Steam(mlb) 784,350 1,092,597 -28.2% Chilled Water(tnhrs) 8,600,691 11,931,000 -27.9% Electric: • Flat residential load and 3% decrease in commercial load anticipated • Industrial forecast is down 16% including GM plant 1, 2, 3 & 6 closings offset by Delta Plant ramp up • Wholesale volumes reflect lower off-peak sales anticipated and additional generation outage hours Water: • Moderate increases in Residential and Commercial loads • Industrial forecast is down 30% due in large part to GM plant closings • Wholesale volumes anticipated to increase 40% due to Delta and the East Lansing Meridian Water Authority increases Steam: • Steam load decrease due to GM Plant 1 and 6 closings— GM load decrease= 59.5% Chilled Water: • Chilled Water forecast revised to reflect historical loads normalized for weather REVENUE ASSUMPTIONS • Water rate increase effective July 1, 2006 at 6.5% • Proposed rate increases effective September 1, 2006: - Electric: 1.5% - Steam: 35% • Chilled Water based on minimum bill levels • Electric Wholesale: 37% increase in budgeted wholesale prices - Margins will be affected by higher fuel costs & MISO fees - Budgeted wholesale margin $5 million in FY 2006 and $12 million in FY 2007 • Water Wholesale: Rates being negotiated OPERATING EXPENSES • Decrease of 9 full-time employees • The financial equivalent of no salary increases • Premium sharing effective November 1, 2006: Page 37 Board Meeting May 23,2006 - The financial equivalent of 25% for active employees and 5% for retirees • Increase in Health Care cost excluding refunds and premium sharing=4.4% • Coal costs per contract to December 2006 - Market prices thereafter CAPITAL EXPENDITURES • Total Capital expenditures = $35 million • Revenue producing capital additions justified by cost/benefit analysis = $7 million • Non-revenue capital, less than annual depreciation expense of$29.0 million • Proposed Bond Issue of$35 million to fund current and future projects Senior Vice President of Operations Bill Cook presented the FY 2007 Capital Budget. The FY 2007 capital budget includes the following assumptions: • Revenue producing capital additions to be justified by a cost/benefit analysis and will be noted as "Revenue Projects." • Remaining capital targeted at less than annual depreciation expense. • Lead service replacement program budgeted at $4,500,000 per year for the period. • CSO related expenses budgeted to coincide with most recent City of Lansing schedule. • Multi-Pollutant Compliance project initiated in FY 2007 to meet upcoming NO,, SO2 and Mercury requirements. • Production facility projects reflect initial response to GM plant closings and integrated resource plan preliminary results. The recommended FY 2007 capital budget in the amount of $35,476,000 was itemized by the four utilities including common facilities. The six-year capital forecast for FY 2007 — FY 2012 was also presented. FY 2007 Operating and Capital Budgets Following lengthy deliberation, the Finance Committee recommended a revision to management's proposed FY 2007 financial plan to include the financial equivalent of health care premium sharing as follows: • Premium sharing effective November 1, 2006: • 10% for active employees • 5% for retirees The Finance Committee took the following action: On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously recommended the Board approve the proposed annual operating and maintenance budget and the capital budget covering FY 2007 as revised. Further, the Corporate Secretary is to file the budgets with the City Clerk and the Mayor's Office in accordance with the Board Meeting Page 38 May 23,2006 Lansing City Charter. A formal resolution regarding these items will be placed on the Board meeting agenda for May 23ra under the General Manager's Recommendations. Rate Adjustinents for Electric and Steam Utilities Following extensive discussion regarding rate strategies to overcome projected revenue deficiencies in the Electric and Steam Utilities, the Finance Committee concluded that rate adjustments are necessary in view of reduced loads and to recover costs from inflationary increases in operating expenses. The rate case recommendation for electric is 1.5%. The implementation of any rate adjustment for electric should be across-the-board effective September 1, 2006. The rate case recommendation for steam is a 60% revenue increase allocated across rate schedules and customer classes to accommodate the increase effective September 1, 2006. On motion by Commissioner James, seconded by Commissioner Graves, the Finance Committee unanimously recommended a rate hearing process to adjust electric and steam rates effective September 1, 2006. A formal resolution relative to setting the public hearings will be placed on the Board meeting agenda for May 23rd under the General Manager's recommendations. Commissioner Cochran left the room at 9:10 p.m. Review FAS 71 Issues Senior Vice President of Finance and Administration Dennis McFarland reported that generally accepted accounting principles require the BWL to record a liability for the estimated future costs of remediation and monitoring of environmental sites. These principles also require the BWL to charge current expenses with the estimated amount of the future cost of remediation. As a regulated utility and by using FAS 71, the BWL's rate-making authority has the ability to defer the recognition of these expenses until they are incurred and future revenues are approved to recover these costs. Mr. McFarland stated that management recommends the approval of FAS 71 treatment for the environmental remediation costs associated with the Comfort Street site. Each future year, BWL will review the estimate and record appropriate adjustments. The Statement of Financial Accounting Standards (SFAS) #71 allows for the BWL to record the estimated liability and a "deferred expense." This deferral permits the BWL to charge operating expense as actual costs are paid. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously recommended the Board approve the SFAS #71 establishing regulatory assets for Comfort Street remediation. This item will be placed on the Board meeting agenda under General Manager's Recommendations on May 23ra Amendments to Rules and Regulations System Integrity & Customer Projects Manager Kellee Christensen reported that each year, staff reviews the Rules and Regulations, including fees and charges, and makes a recommendation to the Board of any proposed changes. Amendments to the Rules and Regulations for Electric, Water, Stearn and Chilled Water utility services include the following: Page 39 Board Meeting May 23,2006 • Revision of Rule 7.1 Responsibility for Payment of Bills, General, to add a statement that the Board may require a billing service agreement. • Revision of Rules 7.4 Responsibility for Payment of Bills, Account Security Deposits to define accrual of interest on billing deposits. • Updated fees and charges for current actual, estimated cost or market conditions. • Several minor housekeeping issues to format and consistency of text. Electric: • Revision of Rule 7.1 Responsibility for Payment of Bills, General, to add statement regarding not discontinuing service to residential, single unit services during the heating season and the use of"Service Limiters" during heating season. • Further definition of revenue credit for residential subdivisions to ensure consistency in application in determining construction deposits in Rule 10.ID.(1) Distributing System Extensions, General, Deposit. Water, Steam and Chilled Water: • There were no significant changes to Water, Steam and Chilled Water utility services. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously recommended the Board approve the proposed amendments to the Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services. FY 2007 Operating and Capital Budgets as attached. Further that the forecast for capital expenditures for the FY 2007-2012 be accepted as presented. This item will be placed on the Board meeting agenda under General Manager's Recommendations on May 23Ta There being no further business, the Finance Committee adjourned at 9:20 p.m. Respectfully submitted, Ron C. Callen, Chair Finance Committee Motion by Commissioner Callen, seconded by Commissioner Graves, to receive the Finance Committee Report as presented. Action: Carried unanimously. GENERAL MANAGER'S RECOMMENDATONS AILED- .REFERRED TO A SPECIAL MEETING SCHEDULED FOR MAY 30,200 A. FY 2007 Operating and Capital Budgets RESOLVED, that the annual Operating and Maintenance Budget covering Fiscal Year 2007 is hereby approved as presented; RESOLVED, that the Capital Budget for Fiscal Year 2007 is hereby approved as presented; Board Meeting Page 40 May 23,2006 RESOLVED, that the forecast for capital expenditures for the Fiscal Years 2007-2012 is hereby accepted as presented; and, RESOLVED FURTHER, that the Corporate Secretary be directed to snake the appropriate filings with the City of Lansing City Clerk's office and the Mayor's office in accordance with the Lansing City Charter regarding the above actions. Staff Comments: General Manager Novick reported that staff recommends an operating and maintenance budget of $202.2 million and a capital program of $35.5 million for Fiscal Year 2007 to maintain ongoing services to customers and maintain and enhance facilities for continued future use. Capital expenditures for the Fiscal Years 2007-2012 are estimated to be $290 million. Discussion: Commissioner Rios stated that he had planned to attend the May llth Finance Committee meeting and apologized that he was unable to do so due to unexpected work commitments. He stated that after spending a great deal of time reviewing budget details, it prompted him to ask for additional information regarding the "Other" budget category. He compared a second set of"Other" details to the first detailed expense report requested earlier and was surprised to see significant discrepancies. He noted that although details, such as travel, are probably itemized somewhere in the budget and dollars are allocated for "Other" expenses, no one can tell him how much is spent for local vs. national travel for each of the responsibility areas. Commissioner Rios stated that he opposes the proposed recommendation to raise premium sharing for employees and asking retirees to share a portion of their health care premiums because he believes the cost will have a minimal impact on the budget. He noted that he continues to have concerns over the equivalent of a $1 million mistake that management reported to the Board at the March 28th meeting due to inadequate controls. He stated that at a time when the BWL is facing dire financial straits, management should consider cutting expenses. Among those suggested are: • Reduce Advertisements • Continue long-term community commitments, but at a maintenance level • Analyze open job positions for opportunities to consolidate responsibilities with other areas in the organization • Reduce travel Commissioner Rios further stated that management should have discussions with retirees before coming to the Board for a determination on premium sharing. For the reasons cited above, he stated there is not enough information from which to make an informed decision on the FY 2007 Budget. As an alternative to raising premium sharing at this time for employees and retirees and increasing electric rates, Commissioner Rios proposed that management be requested to return with a revised proposed budget that reduces the "Other"budget category by at least 10%. Senior Vice President of Finance and Administration Dennis McFarland acknowledged that Commissioner Rios did request, subsequent to the Finance Committee meeting, further detail on the "Other" budget category by E-mail. Consequently, he did not have the opportunity to speak with Commissioner Rios directly. Mr. McFarland said that it was his understanding that Commissioner Rios wanted to understand the types of activities that were in the "Other" Page 41 Board Meeting May 23, 2006 category and types of expenses and how they are spread by department. He noted that not having the advantage of a direct conversation with Commissioner Rios, staff provided Commissioner Rios a detail that accounted for 82% of what was in the "Other" category by business issue. A reconciliation by department by cost element was not provided to the total in the budget that staff sent to him. A full page summary was sent to Commissioner Rios, which provided for 82% to account for 100%. To actually reconcile those numbers, it would involve a 50-page report. Mr. McFarland stated that any kind of across-the-board cut in the "Other" category would effectively expose the BWL to greater operational risk in the near term. The bulk of the budget is to purchase power and fuel and the other bulk is for labor and benefits. A small fraction in the range of 20% to 25% of controllable expenses falls into this category. Mr. McFarland noted that it is not a catch all. Those are essential elements that are required to provide reliability and service. General Manager Novick stated that Commissioner Rios has suggested some good ideas, and that staff considered many of those suggestions initially before bringing the budget to the Finance Committee. Mr. Novick said that if the BWL were in a scenario where it needed to get by for only one year, Commissioner Rios' approach would work well. However, after thorough analysis, it was not determined that management's proposed structural and comprehensive approach was better for the stability of the BWL for the longer term. Commissioner Graves stated it was unfortunate that Commissioner Rios did not take the opportunity to avail himself to the offer that was made by Mr. McFarland after the Finance Committee meeting to review the budget in detail. He said the Finance Committee literally spent considerable amount of time going through various scenarios looking at what management's recommendations were and the available options. Individual Commissioners had concerns with the rate increases and discussed options to "share the pain." He reminded that the following BWL financial goals drove the committee's discussions: • Maintain credit quality • Ensure adequate liquidity • Maintain rate competitiveness • Efficient and appropriate use of capital • Financially independent utility Commissioner Graves further stated that as the Commissioners proceeded in thoroughly debating the options available and evaluating management's recommendation, the committee had the benefit of having staff in the room with a computer model that could take suggested changes to a percent, based on each utility, and then tell the committee in real time what the impact of"x" would be. Commissioner Graves said he also is particularly concerned about the impact on retirees. He added that following due diligence review, he was satisfied that the direction the committee was taking, related to retirees, was the right thing to do. After a difficult and challenging meeting, the Finance Committee settled on a proposal that was considered reasonable and would minimize the impact on ratepayers, employees and retirees as best as possible, considering the BWL's long-term financial dilemma. Commissioner Rios noted that his issue is not that he does not understand the budget. He understands it very well. The point is that he disagrees with it. He has made it clear at past Page 42 Board Meeting May 23,2006 Qs that hith the budget process. aneialsstaits noao e hat the s ard has e was dissatisfied w yet old meetm� performed its due diligence because if the BWL is in dire m him how much is spent on travel. their iligence en Chair Smith stated that it is imperative for Commissioners to Cofmmissione awasp present at the they do not feel comfortable with thing r�ovide reformar or tion requested by Commissioners meeting Staff should make very effort p Commissioner Calkins stated that it is the Board's towarrdi allsttruty ctural change to addr establish a ess Comm with Management provided a proposed financial plan to move tow the financial challenges and revenue deficiencies. This target notedl thatConnm Commisselpful when ioner working cost both the bargaining and non-bargaining employees. H a suggestions are not necessarily out of line and should o tionsrthatwa budgets can be hen c cuttm� gg budget objectives. He said that it is his hope through creative established on a timely basis. need to be considered if General Mana ger Novick stated that Commissioner Rios' ideas migHe indicated that there are targets that are embedded in the proposed hetargets.eb d let they cannott be met, ultimately staff will have to multiple ways to attempt to reach d eal with a short-term approach, or the end result may be a combination of a short and long- enn blend. g ested b co mmissioner Callen stated that he is not a complete ceded before staff can acgreement with several tually establish a Commissioner Rios. He pointed out that a budget t needed coal con tract. There are uncertainties in the budget and a very co t. uncertainty especth to estimate of wholesale sales, particularly, how much the coal wi Q sure that travel is Commissioner Callen stated that he takes confidence of across-the-board uts because they not only actually justified. He noted that he is not in fa erat ions, but also health care. Finally, slice , the "blood vessels and the muscles," of BWL op two Positions in Communications and Customer Service filling ;n�hose posprerogative ons when n filling the t p management. He would not want to bind mane grta certain problems under gcontrol. fact it might be exactly what is needed to bring P oner James stated that she is concerned with what shmillio is bses q g e tsignifi this cantlnas g. Comim which totals $25 She said that the Other budget category, ement to go back and sharpen their gested by Commissioner Rios. She challenged managd deferring any kind of increases in sug pencils to see where cuts might be feasible. She suggested art tional cuts, she would icularlY when a 0% salary increase premium sharing for retirees and employees at this time, p s calling a Special Meeting to review addi is being Proposed. If it mean make herself available. bill runs out $60 Commission er Cochran stated that the electric portion of his BW health care premium sharing A rate increase of 1.5% to his bill would be 90 cents while the act on employees and retirees would be much higher O°�0 salar the yo crease is proposed and map p Cochran said he is concerned when he tells employees that a their health care premium could increase from 5%to 10% for employees and 5% for retirees. Page 43 Board Meeting May 23, 2006 Following lengthy discussion, the question was called on the approval of the proposed Fiscal Year 2007 Operating and Capital Budget. Motion by Commissioner Smith, seconded by Commissioner Rios on the approval of the proposed Fiscal Year 2007 Operating and Capital Budget. The Chair called for a roll call vote. Action: The motion failed by the following vote: Voting Aye: Calkins, Callen, Graves =3 Voting Nay: Cochran, James, Rios, Smith=4 Absent None (Note:2""Ward vacancy exists) Chair Smith announced that a Special Meeting of the Board would be called to consider char es to a Revised Proposed Budget for FY07 for filing with the City of Lansing by June I" g FERRED TO A�SIP�EAL MEETING SCHED ULED FOR MAY 30,200B• Setting oublic Hearing for Electric Rate Increase WHEREAS, over the past several months Board of Water and Light management has been discussing rate strategies with the Commissioners to overcome projected revenue deficiencies in the Electric Utility. WHEREAS, staff has recommended a rate hearing process to adjust electric rates effective September 1, 2006. The rate adjustment is necessary in view of reduced loads and to recover costs from inflationary increases in operating expenses. The amount of the rate increase recommended is 1.5%. The implementation of any rate adjustment will be across-the-board effective September 1, 2006. RESOLVED, that the request for the proposed electric rate increase be made the subject of a public hearing prior to further consideration by the Board of Commissioners. RESOLVED FURTHER, that the Board of Commiss later than August 1, 2006 to solicitloners set a date for a public hearingno public input on the proposed electric rate adjustment. The hearing will be held at the Board of Water and Light offices, 1232 Haco Drive, Lansing. The corporate Secretary is directed to file with the city Clerk at least 45 days prior to the public hearing, information regarding the proposed electric rate increase with an effecti September 1, 2006. ve date of Staff CO7n7M7ltS: Based on the Operating and Maintenance Budgets of $202.2 million and Capital program of$35.5 million, management believes that a reve for the electric and steam systems is warranted and needed. nue requirement adjustment No Action: This item was referred to a Special Meeting scheduled for May 30, 2006. FERRED TO A SPECIAL MEETINGSCIIEDULED FOR MAY30,200 C. Setting of Public Hearing for Steam Rate Increase WHEREAS, over the past several months Board of Water and Light management has been Board Meeting Page 44 May 23, 2006 discussing rate strategies with the Commissioners to overcome projected revenue deficiencies in the Steam Utility. WHEREAS, staff has recommended a rate hearing process to adjust steam rates effective September 1, 2006. The rate adjustment is necessary in view of reduced loads due to GM plant closings and to recover costs from inflationary increases in operating expenses. The rate case recommendation for steam is a 60 percent increase allocated across rate schedules and customer classes effective September 1, 2006. RESOLVED, that the request for proposed steam rate increase be made the subject of a public hearing prior to further consideration by the Board of Commissioners. RESOLVED FURTHER, that the Board of Commissioners set a date for a public hearing no later than August 1, 2006 to solicit public input on the proposed steam rate adjustment. The hearing will be held at the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the city clerk at least 45 days prior to the public hearing, information regarding the proposed steam rate increase with an effective date of September 1, 2006. Staff Comments: Based on the Operating and Maintenance Budgets of $202.2 million and Capital program of$35.5 million, management believes that a revenue requirement adjustment for the electric and steam systems is warranted and needed. No Action: This item was referred to a Special Meeting scheduled for May 30, 2006. esolution 2006-5-6 D. Statement of Financial Accounting Standards (SFAS) #71 Establishing Regulatory Assets for Comfort Street Remediation RESOLVED, that the Board of Commissioners, as the regulatory body of the Board of Water and Light (BWL), approve that the estimated liability related to the BWL's environmental remediation of the Comfort Street site be recorded and a corresponding Statement of Financial Accounting Standards (SFAS)No. 71 regulatory asset be recognized. Staff Comments: Generally accepted accounting principles (GAAP) require the BWL to record a liability for the estimated future costs of remediation and monitoring of environmental sites that no longer have a useful life. GAAP would also require the BWL to charge current expenses with the estimated amount of the future cost of remediation. As a regulated utility and by using FAS71, the BWL's rate making authority has the ability to defer the recognition of these expenses until they are incurred and future revenues are approved to recover these costs. It is management's recommendation that the Board approve FAS71 treatment for the environmental remediation costs associated with this site. Each future year BWL will review the estimate and record appropriate adjustments. SFAS #71 allows for the BWL to record the estimated liability and a "deferred expense." This deferral permits the BWL to charge operating expense as actual costs are paid. c Page 45 Board Meeting May 23,2006 The Comfort Street site is a 60-acre tract of land in the vicinity of Comfort and Sunset Streets in Lansing owned by the BWL. A portion of the site was used by the BWL for fly ash and boiler slag disposal from the late 1950s through the 1970s. The property has not been used since 1978. Recently, soils and groundwater in the vicinity of the Comfort Street site were determined to contain elevated levels of boron. The elevated boron levels are most likely due to the buried coal ash and slag. An engineering feasibility study was recently been completed to evaluate options for addressing the boron impacts in groundwater. The cost for implementation and long-term operation of the strategy is estimated at $8,400,000. Motion by Commissioner Callen, seconded by Commissioner Graves, to adopt Resolution 2006- 5-6 regarding SFAS #71. Action: Carried unanimously. esolution 2006-5- E. Amend Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services RESOLVED, that the amendments to the Rules and Regulations for Electric, Water, Steam and Chilled Water Utility Services be approved as presented, effective July 1, 2006 (see attachments.) Motion by Commissioner Calkins, seconded by Commissioner Callen, to adopt Resolution 2006-5-7 regarding the amended Rules and Regulations for Electric, Water, Steam and Chilled Water. Action: Carried unanimously. esolution 2006-5- F. FY '07 Skill Family Salary Range Adjustments -Non-Bargaining Unit Employees The Board of Connnissioners is responsible for setting salary ranges for the Board of Water and Light non-bargaining unit employees. The Human Resources Director, with the concurrence of the General Manager, has recominended to the Human Resources Committee that the Board of Commissioners approve an adjustment to the skill family salary ranges. The Board of Commissioners has been advised as to the necessity of such an adjustment, and has had an opportunity to discuss its merits. RESOLVED, that the Board of Commissioners shall adopt the �fuic!;cxl adjustment to the non- bargaining unit skill family salary ranges. FURTHER RESOLVED, that the General Manager is authorized to develop all procedures necessary for its implementation. Board Meeting Page 46 May 23, 2006 Staff Comments: Annually, the BWL reviews its skill family ranges for non-bargaining employees in an effort to keep salary ranges in line with comparable positions in the labor marketplace. There are eight skill families in use by the BWL, and range adjustments for each skill family are made in accordance with annual labor market salary surveys. Motion by Commissioner Rios, seconded by Conirnissioner Calkins, to adopt Resolution 2006- 5-8 regarding FY07 Skill Family Salary Range adjustments for Non-Bargaining Employees.. Action: Carried unanimously. FERRED TO A SPECIAL MEETING SCHEDULED FOR MAY 30,2006 G. FY '07 Performance Increase Matrix - Non-Bargaining Unit Employees The Board of Commissioners is responsible for determining the performance increase matrix for the Board of Water and Light's non-bargaining unit employees. The Human Resources Director, with the concurrence of the General Manager, recommended to the Human Resources Committee that, due to the financial situation of the Board of Water and Light, non-bargaining salaries be held level. The Human Resources Committee referred the matter to the Finance Committee. After discussion of the Board of Water and Light's financial plan, the Finance Committee recommends that the Board of Commissioners adopt a budget that holds salaries level for fiscal year 2006-07. The Board of Commissioners has had an opportunity to review and deliberate the merits of the Finance Committee recommendations. RESOLVED, that the Board of Commissioners shall adopt the recommendations of the Finance Committee to keep salaries level for fiscal year 2006-07. FURTHER RESOLVED, that the General Manager is authorized to develop any procedures necessary for implementation. No Action: This item was referred to a Special Meeting scheduled for May 30, 2006. esolution 2006-5- H. Cafeteria Plan Restatement and Grace Period Adoption RESOLVED, that the Board of Commissioners hereby amends and restates the Cafeteria Plan that has been in place since August 1, 1987. Effective September 1, 2005, the Board of Commissioners hereby adopts an amendment to the Cafeteria Plan's Medical Reimbursement Plan, to establish a Grace Period of two and one-half(2 1/2) months immediately following the end of each Plan Year, during which Grace Period a participant may use for qualifying medical care expenses any balance remaining in his/her Medical Reimbursement Plan Balance at the end of the immediately preceding Plan Year, as provided in the Amended and Restated Cafeteria Plan's Medical Reimbursement Plan. Page 47 Board Meeting May 23,2006 FURTHER RESOLVED, effective immediately, the Board of Commissioners hereby adopts the Amended and Restated Medical Reimbursement Plan, Dependent Care Reimbursement Plan, Premium Only Plan, and Cafeteria Plan as set forth in the documents attached to this Resolution. Staff Comments: The Cafeteria Plan Document has been restated to include the benefit changes and changes in applicable laws (such as H1PPA, COBRA & the Internal Revenue Service Code) that have occurred since August 1, 1987. The Cafeteria Plan Document has also been amended to include the proposed adoption of the 2 1/2 month grace period as described in the attached memorandum and documents. Motion by Commissioner Rios, seconded by Commissioner Callen, to adopt Resolution 2006-5- 9 regarding the Cafeteria Plan Restatement and Grace Period Adoption. Action: Carried unanimously. esolution 2006-5-1 I. SAP Contracts —Overview Report Senior Vice President of Finance and Administration Dennis McFarland presented an overview of the SAP and Axon Contracts for the BWL's new Financial System. The cost of the proposed contract with SAP for software licenses and maintenance is $446,000. This includes: • MySAP ERP Licenses for 45 professional users, 300 limited professional users and 10 developer users. • RANT Infonnation Pack • NetWeaver Starter Package • Adobe Forms with 100 forms • Coal Inventory Solution Other SAP issues negotiated were reviewed. The cost for the proposed Axon System Implementation contract is $1,393,000. Terms of the contract include: • Time and Materials • Axon Statement of Work - Very detailed; all important aspects covered • 6-1/2 month project duration • Five phases, each with defined tasks, timelines, and estimated resources: - Project Preparation (2 weeks) - Business Blueprint (6 weeks) - Realization (10 weeks) - Final Preparation(5 weeks) - Go Live and Support (4 weeks) • 10% Holdback of the monthly invoices if project is behind schedule • Project kick-off scheduled for July 17 0 BWL staff 12 full time, 3 to 6 as needed Board Meeting Page 48 May 23, 2006 • Axon staff 10 full time, 1 part time Implementation issues were outlined. An outline with details of the SAP and Axon contracts was provided at the meeting. This report was presented to the Board for information only. No action was required. esolution 2006-57-11 K. Second Alternate Commissioner for MPPA WHEREAS, currently, the Lansing Board of Water and Light (BWL) has delegated a commissioner and an alternate commissioner to the Michigan Public Power Agency (MPPA). These individuals represent the BWL on the MPPA Board of Commissioners. William Cook and Douglas Wood, respectively, have been serving in these capacities. Recently, MPPA amended its bylaws to allow a second alternate commissioner. This commissioner may represent the BWL in the event that the MPPA Commissioner and alternate are both unavailable. RESOLVED, That David Bolan, Bulk Power Manager of the Lansing Board of Water and Light is hereby named as the second alternate commissioner to the Michigan Public Power Agency. Motion by Commissioner Calkins, seconded by Commissioner Rios, to adopt Resolution 2006- 5-11 with regard to .authorizing a second alternate Commissioner for the MPPA. Action: Carried unanimously. The Chair called a brief recess at 7:42 p.m. The meeting reconvened at 7:55 p.m. UNFINISHED BUSINESS Commissioner Rios stated that he would like to respond to the three letters that were received from the IBEW (received under "Communications"). He said that in a more historical sense, whenever a fire alarm goes off, people leave the building. If it happens five or six times in a short period of time, one checks the system to determine whether there is something wrong. Since he has been on this Board, he has had concerns with management and union issues and raised questions several times with the Board. He said a warning was received a while back in June 2005 when the union made a presentation with regard to concerns about the manager that was recently terminated. And again, the attorneys representing the union issued a warning about the same individual. Commissioner Rios further noted that a recent National Safety Council report indicated there are some serious deficiencies in the way the BWL is conducting its safety program. He said that all of these issues are warning signals. The FBI's recent investigation regarding eavesdropping allegations involved several employees being interviewed and the investigation was eventually closed. He expressed concern with the telephone monitoring system in Customer Service and asked if a log is being kept and how it is used. He stated that he has to take the complaints and concerns raised by the union in good faith, and he also has to take management's explanation in good faith. This leaves the Board in a dilemma. Because of those concerns and warning signals, Commissioner Rios said that an independent investigation is Page 49 Board Meeting May 23,2006 warranted to help identify the value of Human Resource policies and their effectiveness and efficiency at the BWL. He offered the following resolution: Motion by Commissioner Rios, seconded by Commissioner James, to approve the following resolution: AUTHORIZING AN EXTERNAL HUMAN RESOURCES AUDIT RESOLVED, That the Board of Commissioners engage the services of an independent human resources consultant to conduct a comprehensive on-site audit of Human Resource policies and procedures at the BWL to identify operational opportunities and make specific recommendation to the Board. FURTHER RESOLVED, That the consultant's review include an investigation report and recommendation of the phone monitoring system. Pending this review, the BWL is to immediately suspend the use of the phone monitoring system in the Call Center. FURTHER RESOLVED, That input from the IBEW be solicited for their recommendation regarding the scope of the Human Resources function to be reviewed. The audit shall be conducted and completed within the next 60 days. Discussion: Commissioner Calkins commented that the HR audit seems to be open-ended. He suggested that the scope of work should be more specific with parameters around it for clarity. Commissioner Graves stated that in light of the fact the General Manager has reported that call monitoring in Customer Service is suspended as of May 23`a until policies and procedures are in place, the scope of the review needs to be discussed. Commissioner Graves offered a friendly amendment to the resolution. He recommended that the matter with regard to the scope of the HR review be referred to the Executive Committee to set boundaries for the audit. Since the phone monitoring system is now suspended,he suggested deleting the following sentence from the resolution: "Pending this review, the BWL is to munediately suspend the use of the phone monitoring system in the Customer Service Call Center." There being no objection, Chair Smith accepted the friendly amendment. Commissioner Cochran stated that he supports Commissioner Rios' proposal to engage the services of an external consultant to conduct an HR review. He noted that there is smoke in the organization that needs to be addressed. Chair Smith concurred with Commissioners Rios and Cochran and indicated that the magnitude of the problems need to be identified and addressed. She said the Board has to be the driver to see that issues are investigated and resolved because there are opportunities for bonding and finding commonalities that will bind the organization together. She also said she would like to see some harmony, not dissonance. Board Meeting Page 50 May 23,2006 Commissioner Callen asked if the FBI investigation into the phone monitoring matter in Customer Service is still ongoing and if any violation of civil rights were found. General Counsel Amy Cavanaugh responded that she spoke with the FBI agent yesterday and he told her that there is no current investigation at the BWL into these issues and that no employee civil rights were found to be violated. Commissioner Callen also stated that the union alleges the fornier Customer Service Manager was the subject of prior complaints for abuse of authority. He asked General Manager Novick if he was aware that such abuses occurred. General Manager Novick responded that the only complaint he was personally aware of is that the former manager and one employee did have a disagreement over a safety issue. Subsequent to that, they met and resolved their differences. Other than that, Mr. Novick said he was not aware that anything was proven. Commissioner Graves stated that there is the issue of what the FBI is telling management and IBEW Business Manager Joe Davis having a different point of view. He said it is his understanding the union initiated the complaint and asked Mr. Davis if he could clarify what the FBI told the union. Commissioner Graves noted that the purpose for his question is to determine whether the union is being told something different than what has been told to management. Mr. Davis responded that the FBI was contacted in May 2004 when a situation happened involving a confrontation between some Customer Service employees and the former manager of Customer Service. He reported that the FBI agent had a conversation with the employees who filed the complaint, which led them to believe that there were some issues of concern. Mr. Davis said this prompted him to move forward to protect the interest of those who made the complaints. Commissioner James expressed concern with what she has been hearing at tonight's meeting. She suggested that employees need to have an advocate to make their complaints known without fear of retribution. She indicated that when the HR audit is conducted, it should include an inquiry as to whether there are other issues within the organization that could anonymously be uncovered so the Board has the opportunity to address them before they make the newspaper. She said one of her goals as Commissioner is to unify this Board so that all parties at the BWL can work together to make this utility the best it can be. She encouraged the union when going forward, to make every effort to resolve issues in-house rather than taking them to the media first. Commissioner Rios supported Commissioner James' comments and noted that he would like to broaden them to include management. He objected to the point-of-view article that was printed in the LANSING STATE JOURNAL, which accused the union of unfounded false statements. As facts have come to light, he does not believe that was a true statement. Commissioner Calkins asked if the friendly amendment clarified that the HR audit was first going to the Executive Committee to develop the scope of the review prior to sending out the RFP. Chair Smith responded that it did. Commissioner Callen pointed out that the General Manager related earlier during this discussion that he knew of only one circumstance when the former manager in question had some kind of Page 51 Board Meeting May 23,2006 disagreement with other employees. In Mr. Davis' latest letter to the Board, he indicates that there were other such circumstances. Commissioner Callen urged management and the union to come together to resolve this matter in the most objective manner and get it behind us. The proposed resolution with the friendly amendment reads as follows. Resolution 2006-6-12 AUTHORIZING AN EXTERNAL HUMAN RESOURCES AUDIT RESOLVED, That the Board of Commissioners engage the services of an independent human resources consultant to conduct a comprehensive on-site audit of Human Resource policies and procedures at the BWL to identify operational opportunities and make specific recommendation to the Board. FURTHER RESOLVED, That the consultant's review include an investigation report and recommendation regarding the phone monitoring system. Pending this_e. iew, the BW is t 4nmediately suspend the use of fhe phene monitofing system in the Call Center-. FURTHER RESOLVED, That the IBEW be given an opportunity to submit their recommendation regarding the scope of the review. FURTHER RESOLVED, THAT THE FINAL SCOPE AND STRUCTURE OF THE REVIEW IS SUBJECT TO REVIEW BY THE EXECUTIVE COMMITTEE PRIOR TO ISSUING THE RFP. The audit shall be conducted and completed within sixty (60) days from the time a consultant is selected. Action: Carried unanimously. NEW BUSINESS None RESOLUTIONS None. GENERAL MANAGER'S REMARKS General Manager Sandy Novick reported COMMISSIONERS' REMARKS Commissioner Rios asked IBEW Business Manager Joe Davis if the union would be interested in submitting a recommendation for the HR review. Mr. Davis who was in the audience nodded in agreement. Board Meeting Page 52 May 23, 2006 Commissioner Graves emphasized the importance of retaining the services of a Human Resources consultant who is independent to ensure an unbiased HR review. Commissioner Callen stated how impressed he was at the character and quality of the 25-Year Awards Dinner. It was nicely done. He stated his disappointment that the Board has not been able to schedule a retreat to discuss important issues facing the utility. He shared his disappointment at Tim Haggart's resignation from the Board and expressed gratitude for Mr. Haggart's many years on the Board. He will be sorely missed. Commissioner Callen thanked Mary Sova who is retiring as Corporate Secretary for her many years of service to the Board. Commissioner Cochran stated that he supports Mayor Bernero's suggestion at changing the frequency of board meetings. He said that the Commissioners should consider regular meetings twice a month and also holding two committee of the whole meetings per month until pending agenda items are caught up. He said there is a lot to do. Commissioner Cochran said he enjoyed the 25-Year Dimler. He noted that there was enough humor and fun at the dinner that helped him get through this evening. He commended all those involved in planning a successful event. Chair Smith reported that thirty employees were inducted into the 25 Year Club bringing the total membersip to 534. Also recognized at the dinner and in attendance were 16 members that are 80 years or older with four members of that group in their 90's. She thanked and acknowledged the following employees involved in coordinating the dinner: • Mary Dwyer, chair • Nancy Kremsreiter • Beverly Bishop • Jerry Mills • Bob Forester • Karen Seefeldt • Jean Gannon • Annie Weller In response to comments regarding the frequency of Board meetings, she noted that the meeting schedule is approved by the Board. This will be an item for discussion at a future Board meeting. With respect to a Board retreat, she indicated there were a couple of attempts to set a date but there were obstacles with some members on the Board. She assured the Board that a date for a facilitated retreat would be set for the near future. Commissioner Smith congratulated Corporate Secretary Mary Sova on her retirement and thanked her for her 26 years of service and cominitment to the BWL. EXCUSED ABSENCES None PUBLIC COMMENTS Max Zemer, BWL retiree, stated that he was a former business manager with IBEW's Local 352 for twenty years. During that period, he attended very few Board meetings because the union and management were able to handle their business in-house and had respect for one another. He noted that something is broken at the BWL and he does not know how it will be fixed. Page 53 Board Meeting May 23,2006 Ron Byrnes, BWL retiree, spoke regarding comments made by Commissioner James about taking care of business in-house. He agreed with Mr. Zemer that something is not working at the BWL. He stated that a 5% premium sharing proposal for retirees will greatly impact their net pension. He said that not all things are equal because there are BWL managers not taking health care benefits through the BWL, however, they receive a monthly payment in lieu of insurance. This is not "sharing the pain." However, taking 5% from a retiree is significant. Mr. Byrnes stated that retirees have brought concerns regarding health insurance to the Board, but there is no response. This leaves no avenue but to address them through the media. Joseph Davis, Business Agent for IBEW Local 352, thanked the Board for inviting the union's input in the HR audit. He stated that he is willing to meet with General Manager Sandy Novick, Human Resources Director Mary Dwyer and HR Manager Rick Daly to work as a team. He noted that when there is someone doing things that jeopardize the well being of employees he represents, he will do whatever is necessary within the law to uphold the beliefs that he holds dearly. None ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Calkins, the meeting adjourned at 8:43 p.m. /s/ Mary E. Sova, Corporate Secretary Filed with Lansing City Clerk June 6, 2006 ELECTRIC FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/2006 7/1/2005 (industry stds/typical) ' Residential Underground Distribution When requested by customer $3.50/ft S3.50/ft $22.90/ft installed For competitive purpose, Extension S7/ft S7/ft S5.07(cable vs.wire proposed fee is equal to (undeveloped lots) (undeveloped lots) only) CECo rate Based on Differential from OH to UG inst. Residential Underground Service— When requested by customer $4.50/ft $4.50/ft S6.29/ft For competitive purpose, green space only. Installation requiring $315 minimum S300 minimum Minimum calculated cost proposed fee is equal to conduit,sidewalk crossing or other of$315 based on typical CECo rate hindrances will be billed at time and calculated cost for small Based on Differential material service run from OH to UG inst. Commercial Underground Distribution When requested by customer $7/ft S7/ft $8.83/ft installed For competitive purpose, Extension S 5 29/ft proposed fee is equal to (cable vs.wire only) CECo rate Based on Differential from OH to UG inst. Commercial Underground Service When requested by customer S650/ft S6.50/ft $8.33/ft For competitive purpose, 400 A or less—green space only S585minimum $580 minimum Minimum calculated cost proposed fee is equal to of$588 based on typical CECo rate. Multi-Dwelling Structure Single Phase S6.50/ft S6.50/ft cost for small service runBased on Differential 800 A or less S585 minimum S580 minimum from OH to UG inst. Transformer kVA Capacity Commercial or Industrial underground services S 10/kVA $10/kVA Typical average UG vs. Fee is charged to offset OH cost is S31.20/kVA difference in UG vs.OH installed on average transformer cost. CECo Transformer price fee is$I0/kVA difference is S11.14/kVA Current and Potential Transformer When requested by customer,401 —1000A $600 ea. S550 ea. S587 ea. Fee is for customer Enclosure option to purchase BWL When requested by customer,>1001A—1200A $1,100 ea. $800 ea. $1,062 ea. standard enclosure When requested by customer,>1201A—3000A $9,000 ea. $8,400 ea. $9,035 ea.(incl. installation) Multiple secondary termination cabinet When requested by customer,up to 3000A $8,500 ea. $8,000 ea. $8,498 ea.(incl. Fee is for customer installation) option to have BWL install cabinet Secondary Service Termination Box BWL installed commercial services requested S650 ea. $500 ea. S660 ea. Fee is for customer by customer with trough system,800 A or less option to have BWL on Multi-Dwelling Structures service point on building to a trough system. KEC 6/14/2006 CADocumencs and Settings\rs\Local Settings\Temporary Internet Files\OLK12D\Electric Fees and Charges 2007 Table Proposed 5-1-06.doc 1 of 4 ELECTRIC FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/2006 7/1/2005 (industry stds/typical) Temporary Service Overhead Install &remove service drop,exceeds 100 ft, At cost At cost N/A Fee based on cost due to 400A or not available degree of uncertainty and complexity 200A or less S375 ea. S350 ea. S382 ea. 201 A to 400A S575 ea. S525 ea. S565 ea. Temporary Underground When requested by customer, S350 ea. S330 ea. $348 ea. Calculated cost (Normal) Connection&disconnection only April 1 —December 14 Temporary Underground When requested by customer, S525 ea. S500 ea S521 ea. Calculated cost (.Winter) Connection&disconnection only December 15—March 31 Secondary Riser Pole Charge When requested by customer Calculated cost Single phase 400 A or less S475 ea. S450 ea. S465 ea. Three phase 400A or less S675 ea. S650 ea. S677 ea. Site Inspection When applicable,per site inspection. S75 ea. S75 ea. S76 ea. Calculated cost Joint Use and Third Party,make ready and At cost At cost N/A Fee based on cost due to engineering degree of uncertainty and complexity Pole Attachment Fees Annual fee S13 per attachment S13 per attachment S13.36 per attachment Calculated cost S260 minimum S260 minimum S258 minimum Application deposit,credited to make ready and S30 per pole S28per pole S29.93 per pole Calculated cost engineering costs S600 minimum S560 minimum S587.76 minimum Joint trench charges To other utilities S2.10/ft if 3 joint S2.10/ft if 3 joint S1.90/ft if 3 joint users Calculated cost,with users users margin S2.70/ft if 2 joint S2.70/ft if 2 joint S2.50/ft if 2 joint users users users S4.10/ft if 1 joint S4.10/ft if 1 joint $3.70/ft if 1 joint user user user Winter charge may also Winter charge may Winter charge may apply also apply. also apply. KEC 6/14/2006 CADocuments and Settingsys',Local Settings\Temporary Internet Files\OLK12D\Electric Fees and Charles 2007 Table Proposed 5-1-06.doc 2 of 4 ELECTRIC FEES and CHARGES , Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis For Charge 7/2006 7/1/2005 (industry stds/typical) Conduit Delivery for Joint Facility Cost per company for conduit delivered to site Calculated cost,with installations for road or drive crossing for installation by 53.90/ft for one 53.50/ft for one $3.94/ft for one company margin. developer's contractor or BWL for utilization company company by Joint user(s) $2.00/ft for two $2.00/ft for two $1.97/ft for two companies in companies in companies in same same conduit same conduit conduit Joint conduit push with BWL Cost per company to utilize separately installed $28/ft one S28/ft one $27.60/ft Calculated cost,with conduit company company margin. S 18/ft rivo S 18/ft two S 18.10/ft companies in same companies in same conduit conduit Joint boring with BWL Cost per company to utilize separately installed S33/ft for one $27/ft for one $32.70/ft Calculated cost,with flexible duct company company margin. S22/ft for two S 18/ft for two 521.80/ft companies in same companies in same duct duct Winter Construction Charge December 15—March 31 S7/ft S7/ft $6.89/ft Calculated cost In addition to the In addition to normal per foot normal charge charge. Connect Fee 7:30 am—5:30 pm weekdays No charge No Charge Fee based on calculated cost to connect-covers After 5:30.pm weekdays or on holidays or $130 $130 S 130 cost of OT call out. weekends Reconnection fee 7:30 am—5:30 pm weekdays Fee based on calculated cost for after hours Non-pay or Limiter Removal S25 S25 reconnect. (Normal hours) After 5:30 pm weekday or on holidays and weekends Non-pay or Limiter Removal(Other $130 $130 S 130 than normal hours) Meter Tampering Any time $130 S130 $130 Cut at Pole Anytime S 150 $150 5142 KEC 6/14/2006 C:\Docurnents and Settingsits'Q ocal Settings\Temporary Internet Files\OLK12D\Electric Fees and Charges 2007 Table Proposed 5-1-06.doc 3 of 4 ELECTRIC FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/2006 7/1/2005 (industry stds/t),pical) Security Deposits—Residential For all new customers unless waived by S72 S68 Based pm 1.5 the Electric conditions stated in Rule 7. average monthly bill. Security Deposits—Commercial & For all new customers unless waived by 1.5 times average 1.5 times average Industrial conditions stated in Rule 7. monthly bill monthly bill Missed appointment,No Show,No After second occurrence S25 per occurrence S25 To cover telephone,fuel, Access Fee labor and follow up costs NTTon Sufficient Funds(NSF)Fee For Non Sufficient Funds on Checks S30 each S20 each Industry Standard To cover bank,labor and Follow-up costs.Based on industry standard. Rate 5 &8 Meter Non-compliance For each month of non-compliance with meter SSO/month SSO/month S79.06/month Calculated cost Charge requirements Meter Calibration Charge When Customer requested meter calibration S75 each S70 each $76.65 each Calculated cost check is within plus or minus 2%accuracy Charges other than published Relocations,damages,etc. At cost At cost Fees to cover other costs due to the level of uncertainty and risk KEC 6/14/2006 CA\Documencs and Setnngs\rs\Local Setdngs�Tempomry Internet Files\OLK12D\Electric Fees and Charges 2007 Table Proposed 5-1-06.doc 4 of 4 WATER FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) Water Main Installation Based on design including fire protection Finn Price Quote,not fine price quote,not N/A Provides price risk coverage. to exceed quote or at to exceed quote or at options for customer cost cost Water Main Front Footage Recovery On 6" $50/ft $45/ft $49/ft Fee based on estimated On 8" $55/ft $55/ft $55/ft cost of improved road On 12" $90/ft $90/ft $89/ft installation escalated to the year 2006 On 16" $120/ft $1 l 5/ft $1 18/ft '/of the charge for either side of street if not previously collected. Fire Hydrant installation When requested by customer Firm price quote Finn price quote NA Fee based on estimated cost due to uncertainties Main-to-Curb Box Stub on previously installed $1,600 per stub $1,500 per stub plus $1,590 per stub Calculated cost water mains plus restoration restoration plus restoration Curb Box-to-Building up to 1"(Trenched) $700 Minimum $675 Minimum $710 Minimum Calculated cost Restoration of sidewalk,curbs and $12/ft in excess $12/ft in excess $12/ft in excess street surfaces is additional of 45 ft. of 45 ft. of 45 ft. Water Services Curb Box-to-Building up to l"(Bored) $1,350 Minimum $1,300 Minimum $1,361Minirnum (Connection Fees Applicable) Restoration of sidewalk,curbs and $30/ft in excess $28/ft in excess of 45 $29/ft in excess of street surfaces is additional of 45 ft. ft. 45 ft. Up to and Incl. 1"service indoor Meter Set $145 $175 $145 Calculated cost Up to and incl. I"service indoor Meter Set— $210 $295 $210 Calculated cost With Spilt Irrigation KEC 6.14`20065,_h906 C:,Doeuments and Ser ines\rs",Local Sektinss.Temoorary Intemet Files'•.OLKI"_'D':N'ater Fees and Chaves 2007 Table Proposed 5-I-06 1 AmA4Rtslesand-Reg+latiens�?00 is;MV;ter�eesaHd-Oiawes a-OP7444le Prepose9s , 06 doe 1 of 7 WATER FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) Water Services Up to and Incl. I"Domestic Service outdoor $1,700 $1,800 $1,708 Calculated cost (Connection Fee applicable) Meter Pit Set Up to and incl. I"Irrigation Service outdoor $,1770 $1,800 $1,770 Calculated cost Meter Pit Set Up to and incl. 1"service outdoor Meter Pit Set S90 labor only $150 labor only $90 Calculated cost—labor —Customer Choice Program only. Material provide by Choice Contractor (Connection Fee applicable) Retrofit up to and Incl. I"existing service to $460 $500 $456 Calculated cost Spilt Irrigation Service Charge for setting meter on a split service after $60 $60 $59 Calculated cost initial installation Greater than I"Main-to-Curb Box Firm price quote Finn price quote N/A Fee based on estimated cost due to uncertainties Greater than I"Service Curb Box-to-Building Firm price quote Firm price quote N/A Fee based on estimated cost due to uncertainties Greater than 1"Service Meter Set Firm price quote Firm price quote N/A Fee based on estimated cost due to uncertainties Greater than I"less than 3"service outdoor $150 labor only $150 $147 Calculated cost—labor Meter Pit Set—Customer Choice Program only.Material provide by Choice Contractor Greater than 1"Service Spilt Irrigation Service Firm price quote Finn price quote N/A Fee based on estimated cost due to uncertainties KEC G�la!201OW3i 0" Document;and utt In rs n, .Lot:al setting��!Mpnran Cnim_uL Files10LK12D'.\"a gi.Tees nirtl ilar us 0!L)Z Lab le_ 5_-1=0G_1_Iocz:`.Roles-and Rew+laHsi}""s— �r-F-hAP ees and-C-harge S Wtr SheelsiWater Feet+:d Eawwge5�_GW-Titble Pmpesed 51 Of.-dee 2 of 7 WATER FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) Winter Construction Charge Water Services,2"and under $14/trench ft $13/trench ft $13.71 /trench ft Calculated Cost. Over 2"distribution and mains Firm price quote Finn price quote December 15—March 31 In addition to normal In addition to normal charge charge Upon occurrence For services: Calculated on replacement of meter 1"and less=$250 Up to 1" _$265 $235 average plus labor 1 '/ _$400 1 ''1 _$615 $373 Frozen Meter Charge $487 2" _$500 2" _$795 plus additional labor plus additional labor &material cost if &material cost if necessary necessary Hydrant Flow Testing When requested by customer $245 ea. $245 ea. $243 ca. Fee based on calculated cost to run test Initial application fee $50 ea $50 ea $50 ea Yearly $25 yearly $25 yearly $25 yearly Bulk Water Permit Fee For commodity used Bulk Water Renewal Fee $1.68/ecfeonnmodity $1.48/ecf+chemical $1.68/ccf Consumption Fee Charge+chemical charge calculated +chemical charge (Filled at Hazel Street Yard Hydrant) charge calculated according to Current current rate for according to Current General Water FY07 General Water Service Service Rate No.2 Rate No.2 Domestic Service Inspection Fee Each inspection visit for 2"or less diameter $60 ea. $60 ea. $60 ea. Calculated cost (Customer Choice Program) services only—no engineering drawing or service evaluation required. KEC 6!14•^_0065A-P-CA6 .1 9 ..•,nn7 T..nnT r,..,.- ... , ' i�:r:,, , 0r i � i1 ( 1 f1E-c�I1C'2t9�(RlE`('FfC5ili1�-(,�18i•••• _. t�E.` 7r •. , e a m�:`. nn r r ��• r •n t Fi c I�D:w•,er Fees and Clmr�-e. _0 TeL le f n. used. I (16 Lduc��.Rt,lesa+ad-Re�ulaHeHs�AO r-f�1=2..�-r-,-«�-.,.,az, C,-T._swim 1t ani_ utl_1.l .._.:Lc.c_1...�.1.....,,_T4.....U_ a1.._..Li(c_.ie lc_'OL -_--1_-..-__'- .._..-- . ._s_......._._.__....ble - .....E .. . ._...... ...._..__ � �Q b�-•,��-,z� Pfop WATER FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) Permit Application Initial request by contractor seeking qualification $250 $250 $250 Last year's calculated (Customer Choice Program) cost is still applicable Fee based on 5 person committee time to evaluate and process Annual Contractor's Qualification Annually $150 $150 $150 Last year's calculated permit fee cost is still applicable (Customer Choice Program) Fee based on 5 person committee time to evaluate and process Engineering,Inspection and On-site mains and Commercial Service Deposit of 5%for Deposit of 5%for Minimum fees are Fee is to collect an Administration inspection,actual cost inspection,actual cost based on minimum initial deposit to cover (Customer Choice Program) of inspection that are of inspection that are calculated costs for BWL Customer Choice less than or exceeding less than or exceeding BWL to administer inspection of 5%or 4% deposit will be deposit will be a 2"service with balance of actual reimbursed or billed. reimbursed or billed. installation. inspection cost to be Additionally a Additionally a Graduated billed or reimbursed nonrefundable 3%for nonrefundable 3%for percentage is based subject to a$1,400 engineering and engineering and on a typical minimum non admin for projects admin for projects expected percentage refundable inspection based on BWL based on BWL of construction fee. (True up of Estimated Estimated project cost. deposit/fees resulting in construction cost of construction cost of +/-$100 actual to M00,000 or less $100,000 or less estimated inspection Deposit of 4%for Deposit of 4%for will not be inspection,actual cost inspection,actual cost billed/refunded) of inspection that are of inspection that are Nonrefundable fees of less than or exceeding less than or exceeding 3%,2%or minimum of deposit will be deposit will be $600 are to cover reimbursed or billed. reimbursed or billed. engineering review Additionally a Additionally a permitting,records nonrefundable 2%for nonrefundable 2%for management,easement engineering and engineering and document and project admin for projects admin for projects oversight. based on BWL based on BWL estimated construction estimated cost of>$100,000 construction cost of $1,400 min non >$I00,000 KEC 6,14r'_CrpC =09( C:'I)nc�m+enls and tiegL zs r:Lnc.il Settn gs Tu ip)rary Inlenet_Filr_ULKI'Q':1+rater Tees and l:harges_20f)7 T�L,Ie Piupos+d s=1__Oti,1,d�cZ l�alesand Re�ulai9e++s E)PC+f_ �C�+erges�Yc+„r s.�+ter-Fees a++�Fl++wes (�B7-Fatale a� � a.. 4of7 WATER FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) construction refundable for inspection and$600 construction min.non refundable inspection and$600 for engineering and min.non refundable admin for engineering and admin Temporary Hydrant Usage for Within BWL service area for construction use Fees are based on Fees are to provide construction,festivals and Per Fee per project $150 $l50 actual cost for proper protection of governmental special use by special 1"RPZ backflow device plus $380 if required. $380 if required. backflow device water supply and to permit. Commodity fee $40/tnonth or portion $30/month or portion and typical collect for water usage thereof thereof commodity use. and/or BWL labor& 2"RPZ backflow device plus $720 if required $720 if required material costs. Commodity fee $120/month or portion $60/month or portion Contractor may use thereof thereof their own backflow device w/proper Other approved backflow prevention device Cost based on Cost based on inspection. estimated usage estimated usage (Recommendation Non-compliance fee $250 deposit $250 deposit of the Bulk Water Committee). Hydrant wrench $40 $40 Water Theft Penalty Fee $500 1 st occurrence $500 1 st occurrence up to$1500.00 2nd up to$1500.00 2nd occurrence occurrence up to$5000.00 3rd up to$5000.00 3rd occurrence and occurrence and revocation of permit revocation of permit Festivals,non-profit or otherwise—includes 1" 1-3 days=$100 1" 1-3 days=$100 rental of RPZ. 4-7 days=$300 4-7 days=$300 8+days=$500 8+days=$500 2" 1-3 days=$250 2" 1-3 days=$250 4-7 days=$500 4-7 days=$500 8+days=$750 8+days=$750 Metered use for approved governmental special Setup and removal Setup and removal use—includes rental of RPZ cost plus Residential cost plus Residential Water Service Rate 1 Water Service Rate 1 commodity charge commodity charge r: ,d-c-4x,r Affable C rl�_imynt,and euni�a ry.Lyc it Setnn;. f n7�uraiy,[ntcntet_Filr_QLKI'L)•,\t'.atei Feu amI C her es?lu)7 Table I rL. . 5.-1-t?6 Ldgc,Z Hles un�-[te�alaHensl2APH f ►l'An7 1 ees-andf��er�es Wcirk S4ieeF �l4�ter-Fees a+ des d 5 of 7 Pm,posed5 t-06-,4dee WATER FEES and CHARGES Charge Description When Applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) Security Deposits—Residential For all new customers unless waived by Based on 1.5 the conditions stated in Rule 7. average monthly bill. Water and City Sewer $80 $71 Water Only $31 $27 Security Deposits—Commercial and For all new customers unless waived by 1.5 times average 1.5 times average Industrial conditions stated in Rule 7. monthly bill. monthly bill_ Connect Fee 7:30 am—5:30 pm weekdays No charge No charge Fee based on calculated cost to connect covers After 5:30 pm weekdays or on holidays and $130 $130 $130 cost for OT call outs. weekends Reconnection fee Fee based on calculated cost to reconnect covers Non-pay(Normal hours) 7:30 am—5:30 pm weekdays $25 $25 $25 cost for OT call outs. Non-pay(Other than normal hours) After 5:30 pm weekday or on holidays and $130 $130 $130 weekends Meter Tampering $130 $130 $130 Missed appointment,No Show,No After second occurrence $25 $25 $25.60 Calculated cost to cover access telephone,fuel,labor and follow up costs Meter Calibration Charge Customer request meter calibration check is $70 ea $70 ea $73 ea Calculated cost for within meter accuracy according to most recent labor and time to publication of Table 5-3 of the AWWA M6 investigate Manual. Non Sufficient Funds(NSF)Fee For Non Sufficient Funds on Checks $30 ca 20 ea Industry standard To cover bank,labor and Follow-up costs. Based on industry standard Charges other than those published Relocations,damages,etc. At cost At cost Fees to cover other costs due to the level of uncertainty and risk KEC 6••14!20065/3i=A0H C;_L�r�r�mlent��mj Jettin�s',r�lLocal Settim,;.c_Tempor@r��_In�entel FiJ�=ULIi I_D1?'ater_Fces.end l_har�e�.s 3t}�.;i7 Tabtc_Prglagsed 5_l-OG 1_di�c�►&fie-�-o;:;;��R-.,;n,n��'��Eis?3A66-fer-:"�.^.T.F<esar�Hargesi�r�-Sheets;�Vuter--Feesai�-faaarges-2NAa-TaHle Ne 3 +��� 6 of 7 WATER FEES and CHARGES Charge Description When applied Proposed Charge Previous Charge Estimated Cost Basis for Charge 7/1/06 7/1/05 (industry stds /typical) KLC r 14'=006440406 C F)uc.umentsandSe[Iii .rs'•Loc.itSettinr>s'�Temporat�._Infeniel.Filrs'd)I.k.I'D'y,vaterteesandChar.es_200.TIble,Prupasu{_5-1Q(i1dgc�7.,.—I'.boles-T+xl--l�egr�laHe���E1E16-(er4�t��7:Fees:�nd�harge��ucjr�k-�eels><Wate�Fees��+act-6aiawde5-2A0��'able RaeyAseg H-lee 7 of 7 w RUG-24-2006 16: 10 BD OF WRTER LIGHT 1 517 7026855 P.22i42 Type of Facilities 9/1/06 35-foot wood poles including span of $12.15 Per pole overhead secondary extension 37-foot concrete pole including span of $17.78 Per pole overhead secondary extension Other facilities, hand set poles, or rearrangement of existing facilities 1.67% of estimated cost Adopted: August 15,2006 Effective: September 1, 2006 cv 1r.—rn—')MMa I n'AM I C�i r2p':)gGc�� P.22 RUG-24-2006 16: 10 BD OF WRTER LIGHT 1 517 7026855 P.23i42 OUTDOOR LIGHTING SERVICE RATE NO. 9 Tax Adiustrnent-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the Board's property, or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charge- A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill that 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 Electric Service incorporated herein by this reference. Service Contract- A written service agreement shall be entered into to take BWL service for a term of years determined as follows: (a) One year, if additional facilities are not required, or (b) Three years, if additional facilities are required (c) Five years, for metal halide lamps or if monthly charges calculated at 1.67% of estimated cost, (d) Ten years, if special contractual arrangements are made. In the event the customer discontinues service before the end of the agreement term, the established rate for the remaining portion of the agreement shall immediately become due and payable. The BWL will replace lamps or make repairs when practicable after the customer has reported that the installation requires servicing. Such replacements and repairs will be made during regular working hours. The BWL may refuse or restrict the service provided in this rate to seasonal type customers and/or may require such customers to pay for the service annually in advance where the permanency of the customer is doubtful or has not been demonstrated by the customer. If relocation, including adjustment, of the outdoor protective light or relocation of other facilities used in connection with the light is desired by the customer during the term of the contract, the BWL will provide this service, if feasible, at the customer's expense. Adopted: Aug= 15, 2006 Effective: September 1, 2006 14:4P 1 S17 ?PPP;RSS P.23 RUG-24-2006 16: 11 BD OF WRTER LIGHT 1 517 7026855 P.24i42 TRAFFIC LIGHT SERVICE RATE NO. 11 Availabil -This rate is available to any political subdivision or agency of the State of Michigan desiring unmetered secondary service for operating traffic lights installed on streets or highways for traffic control and guidance. Nature of Service-The service is alternating current.60 hertz,single phase, 120/240 nominal volts Monthly Rate-Shall be computed in accordance with the following charges. 9/1106 Basic Service Charge $2.09 Per customer per month W�0—mmodity Char 5.0324 Per watt of active load per month The actual labor, material,miscellaneous and indirect charges experienced maintaining and relamping traffic signals during the preceding month. Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Tax Adiustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes,license tees, franchise fees,or any ocher charges against the Board's property,or its operation, or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Determination of Active Load-The active load of flasher lamps or cyclically operated traffic control lamps shall be 50%of total wattage of all lamps used during one complete cycle of opc ation. The active load of continuous,non-intermittent steady burning lamps shall be 100%of the total wattage of all lamps used. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance, excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations lbr Electric Service incorporated herein by this reference. Adopted:August 15, 2006 Effective: September 1, 2006 AUG-24-2006 14:40 1 517 7026855 P.24 RUG-24-2006 16: 11 BD OF WRTER LIGHT 1 517 7026655 P.25/42 SPACE CONDITIONIING AND ELECTRIC WATER HEATING SERVICE RATE NO. 12 Availability-This rate is available to any customer desiring service for commercial/industrial space conditioning and/or electric water heating furnished through a separate meter to which no other electrical device except electric space heating,electric air conditioning,humidity control equipment or electric water heating equipment may be connected. Electric space heating will be considered to include heating by light system provided the primary means of space heating at the time of maximum heating requirements will be fumished by the lighting system with the balance of the heating requirements furnished by supplementary electric heating equipment. This rate is not available to new applications for heat for light systems received after March 1, 1979. This rate is not applicable to the use of electricity for electric air conditioning unless the customer has permanently installed electric space heating equipment and uses it as the principal source of space heating,or to the use of electricity for occasional or seasonal substitute for another method of water heating. Mature of Service-The service is alternating current.60 hertz,single phase at Board of Water and Light(BWL) available secondary voltage. Three phase service will be fumished at BWL option. Monthly Rate-Shall be computed in accordance with the following charges. 911106 [Basic Servic $20.91 IChargd eommodij Summer Billing Months of June through October har $.0886 per kWh Winter Billing Months of November through May $.0550 per kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adjustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax Adjustment-Bill shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees,or any other charges against the BWL property, or its operation, or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed payment Charge-A delayed payment charge of 5%of the unpaid balance.excluding delayed payment charges.shall be added to any bill that is not paid on or before the due date. Application Chatxe-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective: September 1,2006 RUG-24-2006 16: 11 BD OF WATER LIGHT 1 517 7026655 P.26i42 RESIDENTIAL ELECTRIC SERVICE, SENIOR CITIZEN RATE NO.21 Availability-This rate is available to any single family or multifamily dwelling of 4 units or less when the entire electric requirements are supplied at one point of delivery through the same meter. The customer must be 65 years of age and head of the household being served. Service to appurtenant buildings may be taken through the same meter. Service under this rate is not available to any single family or multifamily dwelling of 4 units or less unit when a portion of the residence or dwelling unit is used for commercial, industrial,or resale purposes unless the wiring is so arranged that service for residential and non-residential purposes are metered separately. Customers taking service under this rate shall provide evidence of age and contract with the Board of Water and Light(BWL)to remain on this rate for at least twelve(12)months. Nature of Service-The service is alternating current,60 hertz,single phase, 120/240 nominal volts Monthl, v Rate-Shall be computed in accordance with the following charges. 9/1106 USIC SerilC $4.45 ha e Wommod� $.0476 per kWh for the first 300 kWh $.0803 per kWh for the next 200 kWh haT $.1077 per kWh for all over 500 kWh Minimum Bill-The minimum bill is the basic service charge included in the monthly rate. Energy Cost Adiustment-This rate is subject to an Energy Cost Adjustment factor added to the above energy charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Tax AdLustment-Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees,franchise fees,or any other charges against the BWL property,or its operation,or the production and/or sale of electrical energy,to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charge-A delayed payment charge of 5%of the unpaid balance,excluding delayed payment charges,shall be added to any bill that is not paid on or before the due date. Application Charge-A$7.00 charge shall be added to the first regular bill for all customers turning on service at a service location irrespective of prior service with the BWL. Rules and Regulations-Service under this rate is subject to the BWL Rules and Regulations for Electric Service incorporated herein by this reference. Adopted:August 15,2006 Effective:September 1,2006 �. . P_PF, RUG-24-2006 16:12 BD OF WRTER LIGHT 1 517 7026B55 P.27i42 STREET LIGHTING SERVICE BOARD OWNED SYSTEMS RATE NO.31 Availability - Available to any political subdivision or agency of the State of Michigan for street lighting service for any system consisting of one or more luminaires where the BWL has an existing distribution system with secondary voltage available. Luminaires may be installed with no limitations as to spacing between luminaires. Where an overhead line extension is required to serve one or more luminaires, the BWL will furnish 350 linear feet of line extension per luminaire served from such extension. A special agreement will be required if more than 350 linear feet of line extension per luminaire is required. Nature of Service -The BWL will furnish, install, own, operate, and maintain all equipment comprising the street lighting system, and supply the unmetered energy. The BWL reserves the right to furnish service from either a series or multiple system or both. Annual Rate- The annual rate per luminaire with fixture and setting, payable in twelve (12) monthly installments, shall be as follows; High Pressure Sodium Luminaire 9/1/06 70 W $71 100 W $80 150 W $93 250 W $114 400 W $145 1000 W $297 Mercury Vapor Luminaire2 100 W $76 175 W $91 250 W $107 400 W $137 1000 W $260 Metal Halide Luminaire 175 W $159 250 W $181 400 W $183 1000 W $355 1500 W $545 2 Rates apply to existing luminaires only and are not open to new business except where[he BWL elects,at the customer's request,to install additional luminaires within an area already served by a mercury vapor lighting system. RUG-24-2006 16: 12 BD OF WATER LIGHT 1 517 7026655 P.28/42 Induction Luininaire 85 W $76 165 W $92 Adopted: Augus[ 15,2006 Effective: September 1, 2006 RUG-24-2006 16: 12 BD OF WRTER LIGHT 1 517 7026855 P.29i42 STREET LIGHTING SERVICE BOARD OWNED SYSTEMS RATE NO.31 Annual Rate (continued) plus an additional annual charge, depending on type of installation, of- 91V06 Wood Pole—Overhead Service None Wood Pole—Underground Service $82 Concrete Pole—Overhead Service $130 Concrete Pole—Underground $130 Service Post Top $82 Historic—Single Top $269 Large Historic—Dual Top $787 Small Historic —Dual Top $559 Wall/Tunnel— 8760 hours $114 WalUTunnel—4200 hours $69 Bollard $267 Customer Contribution -The annual rates are based on fixtures normally stocked by the BWL, and installed utilizing normal construction techniques. The BWL may, at its option, upon customer request install a street lighting system not covered by the rates below. The customer, after installation, will be required to make a one time contribution equal to the difference between the actual installed cost and the BWL estimated installed cost of a standard installation. The annual unit charge for each luminaire will then be as stated below. Unit Replacement -The BWL may, at its option, upon customer request replace existing street light units. After installation, the customer shall make a one time contribution equal to the undepreciated value of the unit plus the cost of removal. Special Terms and Conditions -The BWL reserves the right to make special contractual arrangements as to termination charges, contributions in aid of construction, term or other special considerations when the customer requests service, equipment or facilities not normally provided under this rate. Tax Adjustment - Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL property, or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. - - - ---- . .-,r moo•, a �4 AUG-24-2006 16: 12 BD OF WRTER LIGHT 1 517 7026B55 P.30/42 Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill that 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 Electric Service incorporated herein by this reference. Adopted: August 15,2006 Effective: September 1, 2006 RUG-24-2006 16: 12 BD OF WRTER LIGHT 1 517 7026B55 P.31i42 STREET LIGHTING SERVICE CUSTOMER OWNED SYSTEMS RATE NO. 32 Availability - Available to any political subdivision or agency of the State of Michigan for street lighting service for any system consisting of one or more luminaires where the BWL has an existing distribution system available. Nature of Service -The BWL will connect the customer's equipment to BWL lines, furnish the control equipment, supply the unmetered energy, control the burning hours of the lamps, provide normal replacement of luminaire refractors, control devices and lamps. The customer will furnish, install and own all equipment comprising the street lighting system, including, but not limited to the overhead wires or underground cables between luminaires and the supply circuits extending to the point of attachment with the BWL . All maintenance and replacement of the customer's equipment except normal lamp and glass replacement shall be paid by the customer. The BWL reserves the right to furnish service from either a series or multiple system or both. Annual Rate- The annual rate per luminaire, payable in twelve (12) monthly installments, shall be as follows: High Pressure Sodium Luminaire 91V06 70 W $37 100 W $47 150 W $59 250 W $79 400 W $112 1000 W $265 Mercury Vapor Luminaire3 175 W $55 250 W $72 400 W $102 1000 W $225 Incandescent Luminaire4 2500 L $75 4000 L $119 6000 L $144 Maintenance Charge - The actual labor, material, miscellaneous and indirect charges experienced maintaining street light units during the preceding month. Rates apply to existing luminaires only and arc not open to new business except where the BWL elects,at the customer's request, to install additional luminaires within an area already served by a mercury vapor lighting system. `Rates apply to existing luminaires only and are not open to new business. RUG-24-2006 16: 12 BD OF WRTER LIGHT 1 517 702BB55 P.32i42 Combined Rates - The annual rate for units consisting of more than one luminaire shall be the appropriate combination of individual unit charges above. Adopted: August Is,2006 Effective: September 1, 2006 RUG-24-2006 16: 12 BD OF WRTER LIGHT 1 517 7026855 P.33i42 STREET LIGHTING SERVICE CUSTOMER OWNED SYSTEMS RATE NO. 32 Special Terms and Conditions - The BWL reserves the right to make special contractual arrangements as to termination charges, contributions in aid of construction, term or other special considerations when the customer requests service, equipment or facilities not normally provided under this rate. Tax Adiustment- Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL property, or its operation, or the production and/or sale of electrical energy, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Delayed Payment Charlie - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill that 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 Electric Service incorporated herein by this reference. Adopted: August 15,2006 Effective: September 1, 2006 RUG-24-2006 16:13 BD OF WRTER LIGHT 1 517 7026B55 P.34i42 ATTACHMENT B 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 distribution system with a maximum gauge pressure of fifteen pounds per square inch (15 psi). Steam services at gauge pressures above 15 psi but 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 9/1/0 6 Basic Service $ per customer per month Charge 9.45 Commodity Billing Months of June through Charge November $ per 1000 lbs. for the first 200,000 lbs. 9.38 $ per 1000 lbs. for all 1000 lbs. over 9.92 200,000 lbs. Billing Months of December through May $ per 1000 lbs for the first 200,000 lbs. 9.52 $10.0 per 1000 lbs. for all 1000 lbs. over 6 200.000 lbs. Surcharge- A surcharge of ten (10)percent shall be added to the above rates for steam service supplied upon customer's request for service at gauge pressure above 15 psi but not exceeding 100 psi. Fuel Cost Adjustment-This rate is subject to a Fuel Cost Adjustment factor added to the above charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Amine Treatment Adjustment-The amine treatment adjustment allows for the monthly adjustment of rates to reflect the actual cost incurred due to amine feed. The factor shall be applied to each 1000 pounds (lbs) billed. The factor shall consist of 1.124 times the weighted average amine cost per 1000 lbs treated during the previous month. RUG-24-2006 16:13 HD OF WRTER LIGHT 1 517 7026655 P.35i42 Tax Adiustment -Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, 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 the revenue received does not adequately compensate the BWL for the cost of furnishing service. Delayed Payment Charee - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill which is not paid on or before the due date. Reconnect Charge- A reconnect charge shall be added to any account which discontinues and reconnects service at the same address within a twelve (12) month period. The reconnect charge is specified in the BWL Rules and Regulations for Steam Service. Rules and Regulations -Service under this rate is subject to the BWL Rules and Regulations for Steam Service which are incorporated herein by this reference. Adopted: August 15, 2006 Effective: September 1, 2006 O '7C RUG-24-2006 16: 13 BD OF WRTER LIGHT 1 517 7026B55 P.36/42 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 plant wall at a minimum gauge pressure of 250 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 BWL facilities. Monthly Rate. 9/V06 Demand Charge: $1.08 per pound per hour (lb/hr) for all lb/hrs of contract demand $ .95 per pound per hour (lb/hr) for all lb/hrs exceeding contract demand Commodity $5.24 per thousand pounds (Mlb) Charge: Fuel Cost Adjustment-This rate is subject to a Fuel Cost Adjustment factor added to the above charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Minimum Char_Ze: Monthly Demand Charge above. Tax Adiustment: Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, or any other charges against the BWL's property. or its operation, or the production and/or sale of steam, to offset any 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/hrs) supplied during the 15 minute period of maximum use during 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, shall be 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 are incorporated herein by this reference. Adopted: August 15, 2006 Effective: September 1, 2006 RUG-24-2006 16: 13 BD OF WRTER LIGHT 1 517 7026B55 P.37i42 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 transmission 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 BWL facilities. This service may include both firm and curtailable service. Monthly Rate - Per contract terms. Fuel Cost Adjustment-This rate is subject to a Fuel Cost Adjustment factor added to the:charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Amine Treatment Ad.iustment- Per contract terms. Tax Acliustment- Bills shall be increased within the limits of any governmental authority or political subdivision which levies taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. Minimum Charge - Per contract terms. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be 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 are incorporated herein by this reference, unless superseded by the terms and conditions of the customer contract. Adopted: August 15, 2006 Effective: September 1, 2006 AUG-24-2006 16: 14 HD OF WRTER LIGHT 1 517 702SB55 P.38/42 RESIDENTIAL STEAM SERVICE RATE NO. 5 Availability-This rate is available to any single-family or multifamily dwelling of 4 units or less when the entire service requirements are supplied at one point of delivery through one meter. Service under this rate is not available to any single-family or multifamily dwelling unit of 4 units or less when a portion of the dwelling unit is used for commercial, industrial,or resale purposes unless the service is so arranged that residential and non-residential purposes are metered separately. Nature of Service- Saturated steam up to a maximum gauge pressure of 15 psi. Steam services at gauge pressures above 15 psi but not exceeding 100 psi, when available, may be supplied at the option of the BWL or upon request by the customer. Monthly Rate 9/1/0 6 Basic Service $7.00 per customer per month Charge Commodity Billing Months of June through Charge November $6.95 per 1000 lbs. for the first 200,000 lbs. $7.35 per 1000 lbs. for all 1000 lbs. over 200,000 lbs. Billing Months of December through May $7.05 per 1000 lbs for the first 200,000 lbs. $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 request for service at gauge pressure above 15 psi but not exceeding 100 psi. Fuel Cost Adiustment-This rate is subject to a Fuel Cost Adjustment factor added to the above charges and calculated as defined on a separate rate schedule incorporated herein by this reference. Amine Treatment Adiustment- The amine treatment adjustment allows for the monthly adjustment of rates to reflect the actual cost incurred due to amine feed. The factor shall be applied to each 1000 pounds (lbs) billed. The factor shall consist of 1.124 times the 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 taxes, license fees, franchise fees, or any other charges against the BWL's property, or its operation, or the production and/or sale of steam, to offset any such cost and thereby prevent other customers from being compelled to share such local increases. RUG-24-2006 16:14 BD OF WRTER LIGHT 1 517 7026655 P.35i42 Minimum Charge -The Basic Service Charge included in the rate except that Special Minimum Charges shall be billed when the revenue received does not adequately compensate the BWL for the cost of furnishing service. Delayed Payment Charge - A delayed payment charge of 5% of the unpaid balance, excluding delayed payment charges, shall be added to any bill which is not paid on or before the due date. Reconnect Charge- A reconnect charge shall be added to any account which discontinues and reconnects service at the same address within a twelve (12) month period. The reconnect charge is specified in the BWL Rules and Regulations for Steam Service. Rules and Regulations -Service under this rate is subject to the BWL Rules and Regulations for Steam Service which are incorporated herein by this reference. Adopted: August 15, 2006 Effective: September 1, 2006 RUG-24-2006 16: 14 BD OF WATER LIGHT 1 517 7026855 P.40i42 FUEL COST ADJUSTMENT The Fuel Cost Adjustment permits the monthly adjustment of rates for the costs of fuel incurred in supplying steam to customers. All general and industrial service rates are subject to the Fuel Cost Adjustment. In applying the Fuel Cost Adjustment the applicable rate per Mlb shall be increased or decreased by the amount of the current Fuel Cost Adjustment. The following definitions and procedures will be followed in calculating the monthly Fuel Cost Adjustment. Definitions Fuel Cost Adjustment- the amount per Mlb by which the applicable rates shall be adjusted for billing in each month. Fuel Costs - those costs incurred in supplying steam. Such costs include fuel burned. The cost of fuel burned shall include the delivered cost of fuel (base cost, escalations, premiums/penalties, transportation, demurrage), outside lab fees and other outside costs related to fuel procurement, and fuel additives such as freeze proofing. Over/Under Recovery - the difference between actual Fuel Costs for prior months and the amount of fuel cost recovered by means of the Base Cost of Fuel and the Fuel Cost Adjustment. The Over/Under Recovery shall be added to the Fuel Costs for purposes of computing the Fuel Cost Adjustment for each month. Base Cost of Fuel - the average Fuel Cost included in the fuel rates of the various rate schedules. Such amount shall not be recovered by means of the Fuel Cost Adjustment. The current Base Cost of Fuel is $3.2131 per thousand pounds of steam (Mlb) sold. Procedures Estimated Fuel Cost shall be projected for a twelve-month period. Any amount of Over/Under Recovery (positive or negative) shall be added to the Fuel Cost to determine the total cost basis for the Fuel Cost Adjustment. The total cost basis shall be divided by the projected total billed sales for the twelve-month period resulting in the average Fuel cost per Mlb. The Base Cost of Fuel shall be subtracted from the average Fuel cost to result in the Fuel Cost Adjustment. The Fuel Cost Adjustment shall be reviewed and, as necessary, revised periodically in accordance with the provisions of this schedule, but not less frequently than every twelve months. Adopted: August 15, 2006 Effective: September 1, 2006 RUG-24-2006 16: 14 BD OF WRTER LIGHT 1 517 7026855 P.41/42 MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Cochran stated that he agreed with the General Manager and Commissioner Rios in that public comment was an eye opener for him during this process. He also stated that the general public did not come to rant and rave but were present with conviction to plead their case. Commissioner Cochran also stated that it had an effect on him and he was glad to have had opportunity to go through the process. Mr. Novick stated that he misspoke when he indicated that management did not have any resolutions. He then stated that the Commissioners needed to approve the amended electric and steam rate increase resolution that will reflect a 35% steam rate increase so that the correct sheets can be put into place. For further details please see Electric and Steam Rate Increases under Resolutions. Commissioner Callen stated that he would have appreciated 24-hour advance notice so that he may assess it on his own. Commissioner Rios stated that he could appreciate his point of view but that the rate deliberation is a time set aside to discuss any items relative to the rate increase. He also stated that his resolution was something that he did independently and since they did not discuss their approach during the Committee of the Whole meeting he understood his comment. Commissioner Callen stated that he also wanted to make another comment in regards to Mr. Novick's earlier statement regarding the advantages of being a public power company. He went onto state that he did not think that the public realized the advantages of being a public utility as he worked for the MPSC for 25 years and saw the complexity of the process. Commissioner Callen also stated that the rate process oftentimes, involved up to 30 attorneys, 12 parties and corrections made up to 18 months later. MOTION OF EXCUSED ABSENCE Motion by Commissioner Rios, seconded by Commissioner Calkins to excuse the absence of Commissioner Robin Smith. Action: Carried unanimously PUBLIC COMMENTS None. RUG-24-2006 16: 14 BD OF WRTER LIGHT 1 517 7026B55 P.42i42 ADJOURNMENT On motion by Commissioner Graves, seconded by Commissioner Cochran the meeting adjourned at 6:20 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 24, 2006 TOTRL P.42 0 AO RUC-04-2006 14:44 HD OF WRTER LIGHT 1 517 7026855 P.02i21 Preliminary— Subject to Board Approval on September 26, 2006 F;ECG I'VC MINUTES OF THE BOARD OF COMMISSIONERS' REGULAR MEETING20015 AUG -4 Piz 1 ,�r � �t 2� 1c LANSING BOARD OF WATER AND LIGHT r I i' C( Tuesday, July 25, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present, Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, and Robin Smith. (Note: 2 d Ward Vacancy exists.) Absent: None. The Secretary declared a quorum present. Chairperson Smith asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Smith called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES By motion of Commissioner Calkins, seconded by Commissioner Callen the minutes of the May 23, 2006 regular meeting were unanimously approved. By motion of Commissioner Calkins, seconded by Commissioner Callen the minutes of the May 23, July 11-12, and July 18, 2006 special meeting were unanimously approved. Commissioner Smith welcomed new Corporate Secretary, Rhonda Jones. WAIVER TO ORDER OF BUSINESS There being no objection, Chair Smith announced that the order of business was being modified to accommodate guests. MANAGER'S RECOMMENDATIONS A. City's Grant of Two Easements to the Stadium District Project RUG-04-2006 14:44 BD OF WRTER LIGHT 1 517 7026855 P.03i21 Board Meethg Page 2 Jay25•2006 RESOLVED, The Board of Commissioners hereby approves the City's grant of two easements, Easement for Ingress/Egress toStad um District PartnerspLLC, Snts and Easement for Garbage Receptacles, permitted by the Lansing City Charter (8-403(.5)). Bak round: The Board of Commissioners in accordance with the City Charter is responsible for approving easements that affect property being utilized by the Lansing Board of Water and Light. Brandie Ekren, Associate Attorney, presented an overview of the City's proposed grant. The City of Lansing entered into a buy/sell agreement for the Stadium District Partners, LLC. As a part of that agreement, easements are necessary from both sides. The City would like to grant two easements to Stadium District Partners, LLC. Ms. Ekren, with the concurrence of the General Manager, recommended that the Board of Commissioners approve said grant_ The Board of Commissioners has been advised of the necessity of such a resolution and had an opportunity to discuss its merits_ Motion by Commissioner Rios, seconded by Commissioner Calkins, to adopt Resolution 2006-7-3 regarding the City's Grant of Two Easements to the Stadium District Project. Action: Carried unanimously. B. Declaring Intent to Reimburse Project F-xpenditunes with Bond Proceeds and Authorizing Publication of Notice of Intent to Issue Bonds. Dennis McFarland, Senior Vice President of Finance and Administration, presented a reimbursement resolution to use for all capital expenditures. The reimbursement resolution would allow the Board of Water and Light to avoid using operating dollars for capital projects. The bond proposal provides flexibility in financing capital projects. Mr. McFarland, with the concurrence of the General Manager, recommended that the Board of Commissioners adopt the reimbursement resolution with bond proceeds. The Board of Commissioners has been advised of the necessity of such a resolution and had an opportunity to discuss its merits. RUG-04-2006 14:45 BD OF WRTER LIGHT 1 517 7026655 P.04i21 Board Meeting Page 3 July 25,20M Motion by Commissioner Rios, seconded by Commissioner Calkins, to adopt Resolution 2006-7-4 for Declaring Intent to Reimburse Project Expenditures with Bond Proceeds and Authorizing Publication of Notice of Intent to Issue Bonds. Action: Carried unanimously PUBLIC COMMENTS Joseph Davis, Business Manager of IBEW Local 352, addressed the Board in regards to the union survey being presented later that evening and the issues facing the Board of Water and Light. Mr. Davis asked that the Commissioners focus on the entire survey and not just specific items. He also stated that employees are deeply concerned about the organization and desire to address the issues and move forward in a positive manner. He is not advocating the removal of any individual, as that authority is the responsibility of the Commissioners. However, it is his charge to bring union membership concerns to the Commissioners in an effort to work together to resolve those concerns for the betterment of the organization. Commissioner Graves asked if completed copies of the survey results were available. Mr. Davis responded that they would be forthcoming upon the arrival of Mr. Joe Ross, Communications and Research Inc. Ron Byrnes, BWL retiree, advised the Board that he had responded to City Council, the Commissioners and the Mayor in regards to an anonymous letter sent by a BWL retiree. He asked the Commissioners not to give a letter any significant creditability when the author does not sign it. James Hooker, BWL employee and member of IBEW Local 352 stated that according to the Grand Ledge Independent newspaper, the BWL delivered a bill to Delta Township in the amount $460,000. According to the article the charges were regarding pole relocation fees. However, per the article when inquires were made of the BWL no one returned their calls. Mr. Hooker felt that it was unacceptable for something of this nature to occur from a utility that wants to be the only utility that its customers will accept. Mr. Hooker also stated that in the past few months, Joe Davis, Business Manager of IBEW had come under personal attack from current employees, fellow IBEW members and a former Commissioner. He is incensed over these attacks and finds it absurd that things of this nature are being orchestrated in light of our new public relations appointment, a former Lansing State Journal employee. He finds Mr. Davis' character to be exemplary and above reproach. He hopes that the Commissioners will look at the media and take into account some of items being reported. nl Ir'-MA--1n(-AC 17. 1 it I C1 7 7ra-)cocc Mo., 0 ran RUG-04-2006 14:45 BD OF WRTER LIGHT 1 517 7026655 P.05i21 Board Meeting Page 4 July 25,2006 COMMUNICATIONS Two letters were received from an anonymous ns forBW the B Retiree dated May 6, 2006 and July 24, 2006, both expressing e Received and placed on file. A letter was received from Ron Byrnes, BWL Retiree dated July 13, 2006 regarding a prior letter from another BWL retiree. Received and placed on file. A letter was received from BWL Management dated July 14, 2006 urging the reappointment of Sanford Novick, General Manager_ Received and placed on file. A letter was received from Judith Gapp dated July 18, 2006 requesting the relocation of BWL's utility poles from the current storage area near the Lansing river trail to a different location. Commissioner Smith indicated that the letter had been received and forwarded to Management General Manager, Sanford Novick commented that they were already in the process of contacting Ms. Gapp and had left messages regarding her concerns. Management is in the process of researching possible ways to accommodate the request if feasible. Commissioner Rios had also received an email from Ms. Gapp regarding this matter, which was forwarded to management. Commissioner Cochran was on the river trail 10-days ago and had a conversation with City employees who patrol the trail for safety purposes and trash pick. They also made mention of the poles location as well as trash accumulating along the fence line on the Board of Water and Light's side of the property. COMMITTEE REPORTS NOMINATING COMMITTEE REPORT Commissioners Present: Ron Callen, Robert Cochran and Semone James. The Nominating Committee met on June 20, 2006 at 9:30 a.m. to review Commissioner survey responses for consideration of Board officer nominations. The Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2006-07: Chair: Robin Smith RUG-04-2006 14:45 BD OF WRTER LIGHT 1 517 7026655 P.06i21 Board Meeting page 5 July 25,2DM Vice Chair: Santiago Rios There being no further business, the meeting adjourned at 9:40 a.m. Respectfully submitted, NOMINATING COMMITTEE Semone James, Chair Motion by Commissioner James, second by Commissioner Cochran, to approve the report as presented. Discussion: Commissioner Callen expressed concern over the issue of repeating the Chair position. Although, he considers Commissioner Smith a personal friend, he does not support the concept of failing to rotate officers. He believes that everyone is capable of doing the work and as such should be given opportunity to do so. Commissioner Callen also stated that it violates rule 9.2.3 in the Rules of Practice which states that the commissioners should endeavor quote, unquote to rotate the chairmanship. Commissioner Calkins stated that he would not vote to re-elect Commissioner Smith as Chair because he does not support her management style. He also believes that the Chair position should be rotated and that all of the Commissioners are capable of handling the position. Commissioner Rios stated that he wholeheartedly supports Commissioner Smith as Chair. He is pleased with her leadership and the direction of the board. He feels that it is important to maintain continuity during a time in which many important issues will be addressed. He supports Commissioner Smith repeating as Chair and has accepted the nomination for Vice Chair. Commissioner Smith indicated that it is not a violation of the rules to repeat as Chair. In fact, the Board has had periods in which the Chair served for multiple years. Commissioner Graves stated that he took exception to the Chair nomination primarily due to the issue of repeating a 3`d term. He does not believe that there are any valid reasons, continuity included, that the Chair position should not be rotated. Although, he did not submit his name for consideration he is confident that everyone is capable of serving in that capacity. Per Mr. Graves, if you review years past, one would see that there have been periods in which a Chair served for one year or several. Nevertheless, he believes that it is only fair that each sitting Commissioner have equal opportunity to set the agenda and manage the business of the Board. RUG-04-2006 14:45 HD OF WRTER LIGHT 1 517 7026655 P.07i21 Page 6 Board Meeting July 2.5,2006 Commissioner Cochran stated that he believes Commissioner Smith is not following the agenda of others; she addresses conflicting topics, and works to do what is in the best interest of BWL. Therefore, he supports Commissioner Smith continuing as Chair. Commissioner Smith indicated that the Board of Commissioners has a process that is utilized in the nomination and election of officers. Any individual interested in serving can submit their name to the Nomination Committee at which time the committee brings forth their recommendation. Commissioner Graves asked the Nominating Committee to explain their rationale for recommending that someone serve for multiple years. Commissioner James answered the question by indicating that it is not in the best interest of the Board to move officers in light of the current decisions that need to be addressed. She is pleased with Commissioner Smith's ethics and level of professionalism. She also appreciates her avoidance in making malicious statements to the media. Commissioner James believes that Commissioner Smith is extremely professional and handles the business of the Board accordingly. Commissioner Cochran pointed out that two names were submitted for consideration to hold the position and the Nominating Committee made its solicitation of the two. Following lengthy discussion, a roll call vote was taken and the motion to appoint Commissioner Smith as Chair and Commissioner Rios as Vice Chair carried. The motion carried by the following vote: Voting Aye: Cochran, James, Rios, Smith Voting Nay: Callen, Calkins, Graves Absent: None COMMITTEE OF THE WHOLE REPORT June 27, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 10:00 a.m. on, Tuesday, June 27, 2006. Commissioner Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Ron Callen, Bob Cochran, Joseph Graves, Jr., Semone James, Santiago Rios, and Robin Smith. PUBLIC COMMENT RUG-04-2006 14:46 BD OF WRTER LIGHT 1 517 702BB55 P.08i21 Page 7 Board Meeting July 25.2006 There were no public comments. GENERAL MANAGER'S PERFORMANCE REVIEW AND PROCESS The Commissioners had lengthy discussion on the process to be used for General Manager Sanford NovicWs performance review. The previous year's evaluation form, as well as a form that Commissioner Rios obtained at the APPA Conference, and the BWL Balanced Scorecard were discussed. Commissioner Graves suggested considering the process to be used for all three board appointed positions at this time, and not just that of the general manager. The general manager will have the opportunity to do a self-evaluation and each of the commissioners will also evaluate him; a meeting will be held to review each point of view. BOARD RETREAT AND STRATEGIC PLANNING Discussion was held on holding a board retreat. Commissioner Rios handed out a copy of a power point presentation on governance boards role in strategic and financial planning from the APPA National Conference held recently in Chicago. Commissioners were all invited to submit topics for the retreat agenda. Suggested topics include: Evaluating commissioners performance as a board • Define commissioner's role as a board versus management • How the board interacts with management in accomplishing in setting and accomplishing objectives for the organization • Key items that need to be addressed • How commissioners should be functioning as a board • How commissioners should interact with management The name of Jeff Tarbert was suggested as a possible facilitator for the retreat because of his years of experience working with boards. The Executive Committee with meet to work on developing the scope and framework for the board retreat so that the facilitator has a framework from which to work from. RECOMMENDATIONS ON ITEMS IN THE MAYOR'S LETTER, DATED MAY 25, 2006 Discussion was held on Mayor Virg Bemero's letter dated May 25, 2006. Most of the items have been responded to—call monitoring has been suspended, items related to Mr. Kus have been sealed. The only items left for discussion are hiring freezes and the number of board meetings to be held during the year. The board meeting schedule is set each year and the schedule is determined by the commissioners. Several years ago, the commissioners agreed to meet bi- monthly with committee meetings being held the alternate months. The city charter states that the board has to meet and the board votes annually on the meeting schedule. In responding to the mayor letter, a letter will be sent by stating the items have been addressed and the only pending item is the number RUG-04-2006 14:46 HD OF WRTER LIGHT 1 517 7026855 P.09i21 Board Meeting Page 8 July 25,2OW of board meetings and this will be addressed in the upcoming board retreat. The letter will also state that 54 meetings have been held during the past two years to discuss current issues_ REVIEW BID TABULATION AND PROPOSALS FOR PROVIDER OF TEMPORARY INTERNAL AUDITOR SERVICES Two bids were received for the provider of temporary internal audit services. Discussion was held on the two firms and whether to go ahead and hire a temporary internal audit firm or concentrate on hiring a full time internal auditor. A list of items that the temporary internal audit firm needs to address has to be established prior to hiring a firm. The suggestion was made that the executive committee determine recommended areas of involvement. In addition to financial concerns, the internal auditor needs to look at safety, production and performance issues also. Respectfully submitted, Santiago Rios Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Graves, to receive the Committee of the Whole Report as presented. Action: Carried unanimously. lililiffill EXECUTIVE COMMITTEE MEETING JULY 17, 2006 The Executive Committee met on Monday, July 17, 2006 at 9:00 am to discuss two items— City's Grant of Two Easements to the Stadium District Project and Review of Bid Tabulation and Proposals for Provider of a Human Resources Audit. Present: Commissioners Smith, Calkins, Graves and Rios. CITY'S GRANT OF TWO EASEMENTS TO THE STADIUM DISTRICT PROJECT At the executive committee meeting the Commissioners considered, (in accordance with the City Charter) whether they would approve the City's grant of two easements to Stadium District Partners LLC. The Board of Commissioners recommended the two easements to the Board meeting for approval provided the easements were edited to include language, which articulated their approval was as an accommodation to the City and assumed no liability. The Commissioners RUG-04-2006 14:46 BD OF WRTER LIGHT 1 517 7026B55 P. 10i21 Page 9 Board MeeUng guy 25,2W6 also wanted to add more specific language relative to the notification of a breach of the terms of the easement. The Commissioners also inquired about whether or not parking study had been conducted which would evaluate the developments impact on parking. David Christian (the undersigned engineer for the Stadium District) advised that he would try to obtain a copy of that study for the BWL's reference. REVIEW BID TABULATION AND PROPOSALS FOR PROVIDER OF A HUMAN RESOURCES AUDIT Robert Forester, Material and Services Management Department, presented information on the two bids that were received relative to the provider of the Human Resources Audit. Ten requests for proposal were mailed and two bidders responded, After reviewing the bid tabs, the commissioners requested that Bob Forester set up a meeting for the vendors to make a presentation to the board. Two times were suggested —Tuesday, July 25 at 4:OOPM prior to the Board Meeting or Monday, July 24 at 9:00. Bob Forester will contact the vendors to set the time. JOINT MEETING WITH CITY COUNCIL AND BOARD OF WATER AND LIGHT COMMISSIONERS Discussion was held on the tentative meeting scheduled on July 18 between City Council and Board Commissioners to discuss litigation. After a conference call with Melissa Jackson from Foster, Swift, it was determined that Amy Cavanaugh, BWL legal Counsel, will contact Brigham Young, City Attorney, to determine the legal issues to be discussed. Respectfully submitted, Robin Smith, Chair Motion by Commissioner Graves, seconded by Commissioner Callen, to receive the Executive Committee Report as presented. Action: Carried unanimously COMMITTEE OF THE WHOLE REPORT The Commiftee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 2:00 p.m., Tuesday, July 18, 2006. la r n w -rr,r �I. .1 D 9 n RUG-04-2006 14:47 BD OF WRTER LIGHT 1 517 702BB55 P. 11i21 Board Meeting Page 10 July 25,2006 Commissioner Smith called the meeting to order and asked the acting secretary to call the roll. The following members were present: Commissioners Gary Calkins, Ron Gallen, Robert Cochran, Joseph Graves, Jr., Semone James, Robin Smith. Commissioner Santiago Rios entered the meeting at 2:15 p.m. Public Comment Mr. Joe Davis, Business Manager for IBEW Local 352 discussed contract negotiations. He stated that the union would like to keep the current language but look at having more partnership language and would also like to work on Book B to the contract. He stated the union had performed an employee survey that he would like to present to the Commissioners. Commission Smith stated they would discuss it at and an Executive or Committee of the Whole Meeting. Moved by Commissioner Smith, seconded by Commissioner Calkins that the Board convene in closed session to discuss negotiations of a collective bargaining agreement. Approved by roll call vote: Yes: Commissioners Calkins, Callen, Cochran, Graves, James and Smith Nays: None Absent: Commissioner Rios Moved by Commissioner Calkins, seconded by Commissioner Smith, to return to open session (4:35 p.m.) Adopted unanimously. Rick Daly will be the chief Negotiator. No action was taken. Respectfully submitted, Santiago Rios Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Cochran, to receive the Committee of the Whole report as amended. Action: Garried unanimously - _ ....... M 11 RUG-04-2006 14:47 BD OF WRTER LIGHT 1 517 7026855 P. 12i21 Page I I Board Meeting July 25,20DO COMMITTEE OF THE WHOLE REPORT July 24, 2006 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 9:00 a.m., Monday, July 24, 2006. Commissioner Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present. Commissioners Gary Calkins, Ron Callen, Bob Cochran, Joseph Graves, Jr., Santiago Rios, and Robin Smith. Absent: Semone James Public Comment Mr. Joe Davis, Business Manager for IBEW Local 352 expressed his appreciation to the Board of Commissioners for going forth with the HR audit. He hopes that the audit will be conducted in an autonomous manner. Mr. Davis also indicated that the IBEW union survey results were complete and that he would like to add this late item to the next Board Meeting agenda. The presentation should take approximately 15 —20 minutes and will be conducted by the third party surveyors. Following discussion the Commissioners agreed that the item be added as new business at the next Board Meeting scheduled for July 25, 2006. CONDUCT FACE-TO-FACE INTERVIEWS WITH VENDORS FOR HUMAN RESOURCES AUDIT The first interview was conducted with Ed Nesvig and Carleen Nelson-Nesvig of Bee Tree Consulting Ltd. Presentation materials were reviewed and a question/answer session followed. The second interview took place with Michael S. Goree of Growth Strategies Consulting, Inc. Mr. Goree explained his presentation and a question/answer session also followed. The Commissioners agreed to schedule a Special Meeting on August 14, 2006 at 9:00 a.m. to award the RFP to the respective vendor and to thereafter, conduct the General Manager's performance evaluation. RUG-04-2006 14:47 BD OF WRTER LIGHT 1 517 7026855 P. 13i21 Page 12 Board Meeling July 25.2006 Pubic Comment Mr. Joe Davis, Business Manager for IBEW Local 352 indicated that he has a lot invested in having the truth revealed as he is accountable to 430 bargaining employees. He also stated that he is always looking out for the best interest of the BWL. The meeting adjourned at 11:15 a.m. Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Calkins, to receive the Committee of the Whole Report as presented. Action: Carried unanimously COMMITTEE OF THE WHOLE REPORT July 25, 2006 The Board of Water and Light's Committee of the Whole met at the Executive Offices, 1232 Haco Drive, Lansing, Michigan, on Tuesday, July 25, 2006 at 4:00 P.M. Commissioner Rios called the meeting to order and asked the Secretary to call the roll. The following Commissioners were present: Gary Calkins, Ron Callen, Robert Cochran, Semone James, and Robin Smith. Absent: Commissioner Joseph Graves Public Comment There were no public comments. CITY'S GRANT OF TWO EASEMENTS TO THE STADIUM DISTRICT PROJECT Associate Attorney, Brandie Ekren asked the Board of Commissioners to consider approving the City's grant of two easements to Stadium District Partners, LLC as permitted by the Lansing City Charter. Representatives of Stadium District Partners, LLC, Attorney, John Fifarek of Lasky, Fifarek and RUG-04-2006 14:47 BD OF WRTER LIGHT 1 517 7026655 P. 14i21 Board Meeting Page 13 July 25,2DM Hogan and Engineer, David Christian of DC Engineering, were present to answer questions in regards to the project. The Board of Commissioners recommended the two easements, as edited, to the Board meeting for approval. Motion by Commissioner Calkins, seconded by Commissioner Smith, to move the item to the July 25, 2006 Board agenda under Manager's Recommendations. Action: Carried unanimously DECLARING INTENT TO REIMBURSE PROJECT EXPENDITURES WITH BOND PROCEEDS AND AUTHORIZING PUBLICATION OF NOTICE OF INTENT TO ISSUE BONDS General Manager, Sanford Novick asked the Board of Commissioners to consider approving bond proceeds that will be used for capital improvements. The permit allots for an issuance of up to $40 million bonds while fiscal year 2007 only calls for a $35 million issue. The general terms can be up to 40 years with an interest rate as high as 10%. The bond amount and interest rate allows flexibility in how the bond will be used. Motion by Commissioner Calkins, seconded by Commissioner Smith to move the item to the July 25, 2006 Board agenda under Manager's Recommendations. Action: Carried unanimously The meeting adjourned at 4:15 p.m. Respectfully submitted, Santiago Rios, Chair ProTem Committee of the Whole Discussion: Refer to information under Manager's Recommendations. UNFINISHED BUSINESS None. NEW BUSINESS Joe Ross of Communications and Research, Inc. was introduced by Joseph Davis, Business Manager of IBEW Local 352 to present the results of the Union Member Survey. Commissioner Smith requested that copies of the survey be circulated to the Commissioners and the management team. ni 1r n n -- =<n nnnr nCC Mm., D 1 n RUG-04-2006 14:4B BD OF WRTER LIGHT 1 517 7026B55 P. 15i21 Board Meeting Page 14 July 25,2M Mr. Ross then proceeded to state that he hoped the results would be used as a catalyst for discussion and to shed light on the opinions of union members within recent months. Commissioner Rios asked Mr. Ross to share some of his background information with the Commissioners. Mr. Ross stated that he is a partner at Communications and Research Inc., which is a public relations and research firm that has been in business for 1 B years. They specialize in surveys for market research, economics, employment and workforce growth. They have worked with the Federal Reserve, colleges, Chamber of Commerce, local units of government and state government. Leaders of the BWL Local 352 asked their consultants, the Rossman Group in early June to write and distribute a survey to the union membership. The survey was posted online with a testing service and members were notified via a promotional flier, union stewards handed out copies and they were also sent to each union member. In addition, employees were encouraged to visit the site or fill out a paper copy_ Strict scientific survey procedures were not adhered to primarily because the respondents were not randomly selected. Mr. Ross stated that it is important to note that 147 responses were received of a possible 415 eligible union employee participants. In his opinion, this provides a good compass rating of thoughts relative to BWL management. The Rossman Group collected the data and asked Communications and Research Inc. to condense the information into a two page executive summary. Commissioner Graves asked Mr. Ross to provide more detail into what was meant by "a thoughtful manner", and to also speak to the statement regarding a "compass reading of management" in light of the fact that according to Mr. Ross the survey is not "statistically valid'. Mr. Ross stated that there were two types of surveying and one is scientific. People are randomly selected and then called to voluntarily participate in a survey. This is considered extremely valid. For example, the research work that he does with the Federal Reserve can be differentiated and voter survey's can be boiled down to +/-3 or 4% of 6% provided it is still a volunteer survey, which makes it very valid. Commissioner Graves then responded by asking how were members made aware of the opportunity to participate in the survey? Mr. Ross proceeded to read a statement of the survey results that included information regarding their methodology_ Commissioner Graves expressed concern over the lack of scientific precautions taken to avoid duplicate entries and prevent those ineligible to participate from taking the survey. RUG-04-2006 14:48 BD OF WRTER LIGHT 1 517 7026655 P. 16i21 Page 15 Board Meeting July 25,2006 Commissioner James asked why Commissioner Smith's name was left out of the Commissioner evaluations being that a statement was made in regards to her. Kelly Rossman of the Rossman Group stated that there were some open ended questions in which Commissioner Smith's name could have appeared in the response. Jim Dravenstatt, BWL employee, stated that he answered the questionnaire online and her name was listed with the other Comissioners. Commissioner Rios stated that the survey was scanned and sent to the Commissioners but they had not received an original copy. As a point of clarity, Commissioner Smith requested that a complete copy of the original survey be forwarded to the Commissioners as she has neither seen a copy nor received one. Commissioner Smith thanked Mr. Ross for presenting the report. She also thanked the union for using a third party to gather and issue the information and for their courage in sharing their opinions. Per Commissioner Smith, all information is useful in helping the Board to fulfill its obligations. Mr. Davis commented that although the numbers are difficult to hear they wanted to stress that these do represent the perceptions of those employees who responded. He went onto to state that he understood questioning of the methodology and validity of the survey but he would like to move on by addressing these issues in a productive manner. Commissioner Rios also thanked the union for providing this information that he believes will be helpful in making the BWL a more efficient and productive work environment. He also stated that they have been dealing with perception issues for over 2-years and that is one of the reasons why they unanimously agreed to conduct the HR Audit, which will allow them to address those issues. A copy of the survey results and Mr. Ross' credentials are filled with the permanent minutes in the Corporate Secretary office. RESOLUTIONS BOARD OF WATER AND LIGHT RESOLUTION HONORING TIM HAGGART WHEREAS, it is a pleasure to extend this expression of our thanks and best wishes to Tim Haggart for his service as a Commissioner of the Board of RUG-04-2006 14:48 HD OF WATER LIGHT 1 517 7026855 P. 17i21 Board Meetkig Page 16 July 25,20M Water and Light. This Board wishes to acknowledge his many contributions to the Board of Water and Light, the City of Lansing and its citizens, and WHEREAS, Tim Haggart was appointed to the Board of Commissioners in July 2001 as an at-large member and was later reassigned to the second ward in 2005. During his tenure on the Board he briefly served as Chair Pro Tom and also chaired the Human Resources Committee from 2002 through 2004, and the Nominating Committee in 2003. He also served as a member of the Board's special committee to address water main construction issues associated with water customer choice in 2002, and WHEREAS, Tim Haggart's commitment to excellence in public service has provided the Board of Water and Light with outstanding leadership through a period of time when the utility industry is experiencing unprecedented changes. Through these times, Tim Haggart has exhibited the highest standards of citizenship, dedication and unselfishness in all policy-making responsibilities necessary to the proper operation of the utility. RESOLVED, That the members of the Board of Water and Light Commissioners hereby honor and commend Tim Haggart upon leaving this Board after nearly five years of distinguished service. In Regular Session this 25th day of July, 2006, we sincerely wish Tim continued success in all endeavors. LANSING BOARD OF WATER AND LIGHT RESOLUTION HONORING MARY E. SOVA WHERE AS, It is with deep appreciation that we offer tribute to Mary E. Sova as she brings to a close an outstanding career at the Board of Water and Light, retiring with over 26 years of dedicated service. The members of this Board extend our thanks to a committed employee who always went above and beyond when assisting the Board of Water and Light Board of Commissioners, and WHEREAS, Mary E. Sova joined the Board of Water and Light in 1980 in its Human Resources Department. She was promoted that same year to the position of Secretary to the Secretary of the Board, and was then promoted in 1981 to her current position as Corporate Secretary; and WHEREAS, Mary has played an integral part over the years in making sure that the members of this Board were adequately prepared for every meeting. Her expertise in recordkeeping and retrieval was superb, and her knowledge of Board of Water and Light policy and procedures was an invaluable asset to the Committee members. She also served as a positive interface with City Council and City Hall; and .- .- n a n RUG-04-2006 14:49 HD OF WRTER LIGHT 1 517 7026B55 P. 16/21 Page 17 Board Meeting July 25,2DW WHEREAS, Marys deep commitment and devotion to the Board of Water and Light and the Board of Commissioners has been well demonstrated by the countless hours she has contributed to the Board. She was always able to balance her responsibilities with professionalism and politeness. Her hard work, professionalism, and sensitivity to the needs of the Board have won her the respect and admiration of all who have had the good fortune of knowing her. RESOLVED That the Board of Water and Light Commissioners hereby offer this expression of tribute to commend and thank Mary E. Sova for her notable contributions to the Board of Commissioners and to the Board of Water and Light. In regular session this 25t' day of July, 2006, we extend to Mary and her family our best wishes for the future and wish much happiness to Mary as she begins this new chapter in her life. Motion by Commissioner Cochran, seconded by Commissioner Callen, to formally approve both resolutions. Action: Carried unanimously MANAGER REMARKS General Manager, Sandy Novick reported that BWL was recognized by the American Public Power Association at their annual meeting in Chicago this past June as the recipient of their Community Service Award. Mr. Novick stated that BWL is the only organization in Michigan to ever receive such an honor and it is with the help and hard work of those here tonight that has allowed us to accomplish such a goal. It is an indication of some of our other community- oriented events such as the Chili-Cook-off, Silver Bells, and 15 Children's Museum just to name a few. Things of this nature have a positive impact on the community and this award is recognition of that effort. COMMISSIONERS' REMARKS Commissioner Smith announced that it was recently learned that former Board Commissioner, Jack Sebolt, recently passed away. Mr. Sebolt served on the Board from 1977 to 1995. On behalf of the Board, Commissioner Smith extended their sympathy to Mr. Sebolt's family and son, Brian Sebolt, current BWL employee. Commissioner Cochran stated that there is a product called boraxo 20 mule that maybe used to capture mercury out of the flues that may allow us to avoid spending millions to clean the stacks. It is element boron 1 of the borides and the infinity has heavy metals that form hard compounds, which could stay in the fly ash rather than sticking to the burners. Commissioner Calkins pointed out that according to the bylaws it is customary to elect executive committee members upon the solicitation of officers. RUG-04-2006 14:49 BD OF WRTER LIGHT 1 517 7026655 P. 19i21 e 18 Board Meeting PaDJuly 25,200t3 Motion by Commissioner Rios, seconded by Commissioner Graves, to elect Commissioners Calkins and Commissioner Cochran to the Executive Committee. Action, Carried unanimously Commissioner Smith thanked the Board for re-electing her to Chair as she tries to continue to serve with dignity and compassion. Commissioner Smith went on to appoint Commissioner James as the Finance Chair and Commissioner Cochran as the Human Resource Chair. Per Commissioner Smith, the other committee members will be notified of their assignments at a later date. EXCUSED ABSENCE None. PUBLIC COMMENTS Max Zemer, BWL retiree, commented that approximately one year ago he requested that the BWL conduct an employee survey due to low employee morale. Since that was not done then the union survey is the only available information to date. John Joseph Castillo, hired as a consultant by the union with 30 years of experience with the Michigan Department of Civil Rights, congratulated the Commissioners on receiving the community service award. He went on to state that the union participated in the 2e Annual Tournament of Friendship on July 14, 2006. The group is an organization formed 24 years ago to forge a relationship between minorities and the Michigan State Police Department. Several agencies participate and help raise college scholarship funds. Per the union's request, Mr. Castillo extended an invitation to the Commissioners and the general public to join them for a reception at the Clarion Hotel on July 26th to welcome the new Director of the Michigan Department of State Police. Tracy Tolbert, BWL employee, union Recording Secretary, and Lansing resident stated that she is currently on a leave of absence due to breast cancer. Ms. Tolbert states that she recently sent the Board of Commissioners a letter indicating that the BWL is a good organization to work for but that there is room for improvement. Ms. Tolbert thanked General Manager, Sandy Novick for the "Breakfast with Sandy' opportunities that allow employees to speak their mind. She also commended him for recognizing employees' statements as concerns and not as complaints. Ms. Tolbert stated that she wants to make sure that everyone realizes that it is their responsibility to work towards making the organization the best it can be. RUG-04-2006 14:49 BD OF WRTER LIGHT 1 517 7026655 P.20i21 Page 19 Board Meeting July 25,2006 Cathryn Coffee, BWL union employee, resident of 1811 Lorraine stated that Joe Davis speaks for the entire union and she would like his words taken into consideration. Ms. Coffee also stated that she also took the union survey online and believes that the results are accurate. Joe Wolfe, BWL retiree, former Assistant General Manager and Director of Operations stated that the expressed union member attitudes were a surprise to him. While complaints are generally common, the high volume surprised him the most. Mr. Wolfe stated that he was employed in the utility industry for 45 years and always believed that the BWL was a good place to work. He went on to state that if employees do not agree then perhaps they should start looking for other employment. He did not hear any specifics about what needed to be changed. However, he believes that there is a feeling that things need improvement and the BWL needs to find out why that feeling exists. Mr. Wolfe expressed his sympathy for the loss of Jack Sebolt as they were good friends and went onto to express his thanks for being given the opportunity to speak. Duane Williams, BWL employee did not know the results of the survey prior to this evening. However, he felt that the results were accurate. It also stated that it is best to investigate while nepotism exists, problems with the safety program and general overall misperceptions. Commissioner Rios agreed with Mr. Williams and asked that everyone work together to clear up any misperceptions that are not accurate. He also stated that in regards to the statement about Mark Nixon, he considers him to a person of integrity and professionalism. Commissioner Rios also stated that he had worked with Mr. Nixon on the editorial board of the Lansing State Journal and found it to be quite enlightening. He went on to say that whatever is printed in the newspaper is being sent in by someone and that should stop. There is a perception that the Mayor or City Council is manipulating the Commissioners and that is not true. Commissioner Rios also reported that Mayor Bemero did not appoint him nor did he work on his campaign. Commissioner Smith also stated that she has worked with three administrations and was appointed by Mayor Hollister and her commitment has been to the BWL. If you review her voting record then the minutes will reflect a commitment to the BWL and the community. Commissioner Cochran stated that on the day Mayor Bemero came to address the Board, three hours prior he asked Commissioner Cochran to resign, even though Mayor Bemero was the individual who had initially appointed him. He told the Mayor no and yet he is still a Commissioner. Some things they agree on and some they do not; however, Commissioner Cochran said he took an oath to serve community and intends to honor that oak. ^I In !']A -- 4 7. A n n -n nn'lr ncc nn•. n nn RUG-04-2006 14:50 BD OF WATER LIGHT 1 517 702EB55 P.21i21 Board MeeUng Page 20 July 25,2006 ADJOURNMENT On motion by Commissioner Rios, seconded by Commissioner Callen, the meeting adjourned at 7:00 p.m. is/ Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 4, 2006 TOTRL P.21 43 �ECENED ry7(Q�Uo -3 �'i 1 33 Preliminary—Subject to Board Approval on 1C�lay 3, 2006 0!,� tJ��1r� MINUTES OF THE BOARD OF COMMISSIONERS' SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, April 18, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Ron Callen, Robert Cochran, Joseph Graves, Tim Haggart, Semone James, Santiago Rios, and Robin Smith Absent: None The Secretary declared a quorum present. Chairperson Smith called the Special Meeting to order at 4:30 p.m. Commissioner Gary Calkins led the Pledge of Allegiance. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBEJCT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. Joseph Davis, Business Manager of IBEW Local 352, stated that at the March 28th regular meeting he spoke to the Board about the union's concern with trust and relevance and reiterated that the lack of communication has caused an atmosphere of mistrust at the Board of Water and Light. Mr. Davis stated that although the Human Resources Department prepared a report in response to concerns he raised at the last Board meeting, he has not had the opportunity to review the report nor share it with the IBEW's executive board. He announced that because the union believes the issues raised are of utmost importance, an amount of$2,000 has been approved by the union's executive board to contribute towards management's cost of an independent evaluation of the BWL's work climate. Mr. Davis noted that although there is a grievance procedure in place, it does not solve all their concerns and communication problems. Chair Smith thanked Mr. Davis for his comments and stated that the report prepared by the Human Resources Department would be forwarded to the union's executive board for comments and to determine if management's recommendations address their concerns. Special Board Meeting N—ates Page 44 April 18,2006 ADDITION TO AGENDA Moved by Commissioner Calkins, seconded by Commissioner Graves, to amend the Special Meeting agenda to add an item regarding "Board Input into Top Management Positions" for Board consideration. Discussion: Commissioner Cochran stated that this topic has not been reported out by the Committee of the Whole. Commissioner Calkins stated that this topic was initially placed on the Special Meeting Agenda when the meeting was scheduled; however, it was pulled from the agenda this morning. Chair Smith stated that she would prefer that this topic be discussed at a Committee of the Whole meeting. Action: Commissioner Calkins called for the question. The motion to add to the agenda, "Board Input into Top Management Positions" was adopted by the following vote: Voting Aye: Calkins, Callen, Graves, Haggart Voting Nay: Cochran, Smith Absent James, Rios SIX-YEAR FINANCIAL FORECAST General Manager Novick told the Board that the March 14`h Committee of the Whole meeting was the first of several meetings on the six-year forecast. The purpose for that presentation was to present a layout base of the current financial situation and decisions that would have to be made with respect to rates and other issues. At that meeting, the Commissioners asked staff for additional information with respect to other options and scenarios for discussion and planning purposes. Commissioner Rios entered the room at 4:40 p.in. General Manager Novick reported that in response to the Commissioners' request, staff has prepared six scenarios to continue planning discussions. He emphasized that management is not making recommendations or asking for a final decision at this meeting. Instead, it is the intent to lay out the various scenarios for the Commissioners to better understand the implications of various decisions the Board will eventually have to make. He invited other suggestions the Commissioners may have during the presentation. Mr. Novick noted that staff is working on the Fiscal Year 2007 O&M budget to present to the Finance Committee in May. With this in mind, the six-year planning process would need to include the proposed FY `07 budget. He asked for the Board's sense of direction in order to create a budget that reflects the scenario for FY '07. Commissioner James entered the room at 4:45 p.m. Senior Vice President of Finance and Administration Dennis McFarland reviewed certain aspects of his March 14"' presentation to the Committee of the Whole to set the stage as to why staff is now presenting the various scenarios. He reported that the "do nothing" base case would result in a projected $118 million shortfall over the six-year period. Mr. McFarland asked the Commissioners to keep two variables in mind when he presents the six scenarios; namely, (1) Page 45 Sp, _.1 Board N--,eting Minutes April 18,2006 rate impact and (2) financial strength of the BWL: He noted that the BWL is currently competitive and starting from a point where our financial goals have been met and our credit rating is strong at an AA. The issue is how these two variables move through time in the different scenarios. He reminded the Commissioners of the financial sensitivities previously discussed on March 14th; these include: (1) employee count, (2) weather, (3) wholesale electric prices, (4) inflation, (4) General Motors, and (5) fuel costs (wholesale effect). These sensitivities can affect the BWL's financial results over the next six years. The strategic issues that came out of the March 14th analysis that staff is looking through in the alternative scenarios are: • Dependence on Wholesale Markets • Environmental Regulations • Cost Management • Financing/Credit Options • Rate Options Mr. McFarland presented the six scenarios to use as a framework for policy discussion. He stated that by evaluating the financial results of these scenarios, the Board will better understand how each impacts the BWL's financial health. Revised Base Case Assumptions: • Electric: Level Rate Increases for FY 2007—2012 - To achieve average 1% rate of return (ROR), energy cost adjustment (ECA) affect included in base rate • Water: Level Rate Increases FY 2008 —2012 - To achieve average 1% ROR - Existing 6.5% increase in FY `07 • Steam Increases: - FY`07 =35%, FY'08 = 20%, FY'09 = 15%, FY'10 = 10%, FYI 1 = 5%, FY'12 = 10% • Chilled Water: Level rate Increases FY 2007 —FY 2012 - To achieve average 1% ROR • Bond Issue: July 1, 2007 at 4.04% for 20 years - Water= $20,000,000, Electric=$15,000,000 Cost Management Case Assumptions: • Revised Base Case Assumptions • Health Care Premium sharing effective January 1, 2007; 25% active employees and 5% retirees • Flat Reduction of$350,000 in electric O&M per year, effective January 1, 2007 Aggressive Cost Management case Assumptions • Revised Base Case Assumptions • $3,000,000 Labor Reduction in Electric effective January 1, 2007 • No Wage Increase in FY 2007 Special Board Meeting Iv Mates Page 46 April 18,2006 • Health Care Premium sharing effective January 1, 2007; 25% for active employees; 5% for retirees • Flat Reduction of$1,000,000 in electric O&M per year effective January 1, 2007 Monetize Belle River Case Assumptions • Revised Base Case Assumptions • Electric: - Sale of Belle River entitlement at $1,500 per kw ($225,000,000) - Wholesale sales eliminated, Belle River expenses eliminated - Supplement power purchased at Market Prices Monetize Eckert Case—Assumptions • Revised Base Case Assumptions • Electric: - Sale of Eckert Plant at $500 per kw ($181,000,000) - Eckert Fuel Cost eliminated, 27.86% of Electric non-fuel O&M eliminated - Wholesale sales eliminated - Supplement power purchased at Market Prices Monetize Eckert 132 Case Assumptions • Monetize Eckert Case Assumptions, except - Sale of Eckert Plant at $367 per kw ($132,800,000) There was extensive discussion with respect to each of the six scenarios. General Manager Novick pointed out that the options are not appealing. The BWL is not large enough to offset a $118 million deficit over a six-year period in a painless way. Senior Vice President of Finance and Administration Dennis McFarland stated that trade offs among customers, employees, and retirees are an important element in the mix of options. Commissioner Rios stated that he finds it difficult to analyze a group of scenarios as presented because the vision and strategy of core values of the BWL have not been incorporated into the overall situation. He said it would be more productive if management came forward with a comprehensive evaluation of the scenarios and recommendations with appropriate justification. He further stated that even if twenty scenarios were presented, he is more interested in hearing the thinking and recommendations of management based on where they see the organization going. This explanation is essential to assist the Board in setting a policy direction. Commissioner Smith stated that she would like to see recommendations and options with justification as to why those scenarios were presented. She would also like to see a mix of cost management and rate options. This information would be helpful to weigh the various options. She noted that monetizing an asset is not an alternative at this point. Commissioner Graves commented that his first priority is to minimize the impact on the ratepayers. He would prefer to keep the rates competitive while having the least impact on retirees and employees. Page 47 Sj A Board.—feting Minutes April 18, 2006 Commissioner Calkins stated that he is willing to consider a combination of scenarios with a mix between a rate increase and sharing of costs by employees. This would balance the impact on customers and employees. Commissioner Callen stated that relying only on rate increases to cover the projected deficit is unrealistic for the customers that Commissioners represent. The strategic issues discussed earlier in the meeting need to be considered to fairly distribute the pain. - Dependence on Wholesale Markets - Environmental Regulations - Cost Management - Financing/Credit Options - Rate Options Commissioner Cochran stated that he would prefer to implement a rate increase sooner rather than later. He challenged management to apply some of the cost management points discussed with a balance so that everybody shares equally. He does not support monetizing facilities at this time. He asked for staff recommendations and options regarding cost sharing with the appropriate rationale. Commissioner James echoed Commissioner Cochran's sentiments. She spoke about recent state employee cost management efforts that involved health insurance premium sharing and pay cuts. She noted that if it means everybody has to bite the bullet just a little bit to save jobs, she would support that effort. She expressed concern with rate increases because of the impact on those who are on fixed incomes and elderly citizens. She noted that the BWL must serve the best interest of the public. Commissioner Haggart said he would like to concentrate on the Fiscal Year 2007 Budget. He noted that the Board will have to take the utility's financial outlook into consideration when the FY'07 budget is considered in May. He would prefer to look further than 2012 and suggested moving away from 100% reliance on coal and focusing on gas turbines or combined cycle. BOARD INPUT INTO TOP MANAGEMENT POSITIONS Moved by Commissioner James, seconded by Commissioner Rios, to reopen the vote to place the item, "Board's Input into top Management Positions" on the agenda because they were not present to vote on this item or hear the reasoning for placing it on the agenda. Discussion: Chair Smith stated that she pulled this item from the agenda prior to this meeting was because in her judgment it would be a more appropriate topic for discussion at a Board Retreat. The question being to reopen the vote: Action: The motion failed by the following vote: Voting Aye: James, Rios, Smith Voting Nay: Cochran, Calkins, Callen, Graves, Haggart Absent None Special Board Meeting M.—ates Page 48 April 18, 2006 Moved by Commissioner Callen, seconded by Commissioner Graves that recognizing management continues to operate under the current policy with respect to filling employee positions, that the Board of Commissioners not be involved in filling the position of the Director of Communications. Discussion: Commissioner James stated that this is a key top management position and that she would like to discuss it further at a Board Retreat. Commissioner Rios stated that at the last Committee of the Whole meeting he expressed interest in having the Board discuss and make input into the decision-making process for key management positions. This is an appropriate and not an uncommon practice that is seen in all types of public entities where certain key management positions require the approval of a board, city council or senate. He referred to the minutes of a retreat held in the fall of 2003 that reported on the Board's consensus with respect to Board and Management responsibilities in order to provide a framework to guide the General Manager in the management of staff and the day-to-day operation of the BWL. Commissioner Rios noted that the minutes provide an indication of the thinking at that time, and most of the Commissioners who were on the Board at that time are not currently serving. Based on recent written comments received from a couple of Commissioners, he was persuaded that discussing this issue at a Board Retreat would provide an opportunity to have some dialogue. Commissioner Graves stated that he appreciates the remarks made by Commissioners James and Rios, but this is one of those instances where the Board simply has to disagree. All the Commissioners received copies of the 2003 Board Retreat minutes that clearly set out what the responsibilities of the Board were and the responsibilities of the General Manager. He noted that the BWL is not a legislative body. Commissioner Graves stated that it has been his experience that policy-making boards are not involved in the hiring of a direct report to the chief operating officer. It becomes very difficult to hold an individual accountable when a board decides that they are going to have some involvement in the hiring of direct reports. Commissioner Cochran echoed Commissioner Graves' sentiments. He stated that the General Manager has to have the trust of direct reports and the power to supervise them. The Board must separate itself from the hiring of direct reports. He reminded that the "buck stops" with the General Manager. Chair Smith stated that the notion of the Board having final approval of key executive staff positions is usurping itself into the process and takes away the authority of the General Manager is a fallacy. She said that in her opinion it may be a philosophy issue, because there are institutions that have given boards final approval of key executive positions. Commissioner Callen stated that he agrees that it would be appropriate to discuss the issue of Board input into top management positions in a Board Retreat. He reminded that there was a strong agreement as to the role of the Board and the General Manager, which is reflected in the Board's contract with the General Manager. Commissioner Callen said that if the Commissioners want to make a change on the Board assuming some responsibility for the selection of key executive positions, that is another matter, and it would require amending the Page 49 Spu.,.za Board ivieeting Minutes April 18,2006 contract, none of which he favors. He noted that his motion goes to the point of specifically filling the position of Director of Communications because it is a key position that needs to be filled soon. Commissioner Graves stated that there is agreement among Commissioners that Board input into top management positions should be discussed at a retreat. However, he fundamentally disagrees that the Commissioners should be injecting themselves into the business of hiring or having input into the General Manager's hiring. Action: Following lengthy discussion on this question, the motion was adopted by the following vote: Voting Aye: Cochran, Calkins, Callen, Graves, Haggart Voting Nay: James, Rios, Smith Absent None GENERAL MANAGER'S REMARKS There was no comment. COMMISSIONERS' REMARKS Commissioner Calkins stated that self-nomination forms will be sent to the Commissioners by the Corporate Secretary in May to survey Commissioners on their interest in serving as an officer. He inquired as to who might be interested in serving as the chair or vice chair for the neat fiscal year. Commissioner Graves indicated that he would be interested in serving as vice chair. Commissioner Calkins said that he might be interested in the chair position. Commissioner Graves stated that the Board engaged in difficult discussions at this meeting where there was not a consensus, particularly on the General Manager's authority to fill the position of Director of Communications without Board input. He stated that it is all right to have a different point of view and a different perspective. He said that he would hope all the Commissioners would understand that nothing he says really should be taken as a personal issue. There are issues the Board should discuss in a retreat setting, but the vote taken this evening on the Communications Director position was necessary so that the General Manager can move forward with the hiring process. Commissioner Rios acknowledged that there will be times when the Commissioners disagree, and that is all right because that is the way life is. He stated that issues discussed at this meeting relate to an important fact that sometimes the Board does not adequately talk about. It relates to how he views his responsibility as a Commissioner. At the end of the day, the Board shares in the responsibility and accountability for decisions made. He urged that the Board Retreat be scheduled soon to discuss accountability issues for all employees. Commissioner Cochran noted that each Commissioner was put on the Board of Commissioners by a political process and confirmed by City Council. The Board is arranged the same way that the City Council is with one member from each of the four wards and four at-large members. Special Board Meeting Minutes Page 50 April 18, 2006 This brings diversity and differences of opinion. Hopefully through discussion and enlightenment, the Board would vote for the best solution based on all the options presented. He agreed that there are issues that require more dialogue, preferably at a Board Retreat. Chair Smith commented that sometimes spirited discussions result from the Board's commitment in performing its due diligence. The Board has a fiduciary responsibility to ratepayers and employees of the BWL. Some difficult decisions are on the horizon, therefore, it is in the best interest for all concerned that these issues be thoroughly discussed. PUBLIC COMMENTS Joseph Davis, Business Manager of IBEW Local 352, stated that these are stressful times. He said that conversations concerning the BWL's six-year financial forecast were held between management and the union. Relationships between "employee and employer" are currently being tested as discussions about future restructuring takes place. He noted that there are organizational problems that need to be addressed in a positive manner. He renewed his request made at the last Board meeting for an independent evaluation of the BWL's work climate. Mr. Davis commented that union employees attending today's Board meeting are listening to discussions regarding health care, jobs, and at some point in the future monetizing Eckert Station. He urged combined efforts between management and the union to look at new markets and new ways of approaching things to better position the utility for the future. Ron Byrnes, a 31 year employee of BWL and retiree, stated that the Board's discussion regarding equity particularly applies to retirees. He commented that because of extenuating circumstances last year, he incurred over $40,000 of out-of-pocket expenses for health care on his immediate family. He voiced his opposition for the suggested 5% health care premium sharing for retirees. ADJOURNMENT On motion by Commissioner Graves, seconded by Commissioner Cochran, the meeting adjourned at 7:35 p.m. /s/ Mary E. Sova, Corporate Secretary Filed with Lansing City Clerk April 28, 2006 20 2tCElti'Lr---D � 37 Preliminary—Subject to Board Approval on May 23, 2006 ZOOS ��;' 18 Ail I I MINUTES OF THE BOARD OF COMMISSIONERS' REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, March 28, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Tim Haggart, Semone James, Santiago Rios, and Robin Smith Absent: Commissioner Ron Callen The Secretary declared a quorum present. Chairperson Smith called the meeting t order at 5:50 p.m. APPROVAL OF MINUTES There being no objections, the minutes of the January 26, 2006 regular meeting were approved. PUBLIC COMMENTS THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBEJCT OR ON ANY OTHER SUBJECT NOW, OR AT THE END OF THE MEETING. Paul Zamarron of 500 South Pine, Lansing, expressed concern with the closing of the BWL paystation that was located in City Hall. He said customers should have been notified and provided some options. Senior Vice President of Finance Dennis McFarland explained that the closure of the pay station was based on two factors: (a) it handled the fewest number of payments as compared to other pay stations and (b) payments were regularly submitted back to the Board in an untimely manner. The Board requested that a written response be sent to Mr. Zamarron with a copy to the Commissioners. Joseph Davis, Business Manager of IBEW Local 352, addressed the Board on behalf of the union regarding the issues of trust and relevance. He handed out a copy of his presentation and Page 21 Boas Feting March A,2006 elaborated on specific concerns relative to the future of electric generation in Lansing and the potential sale of generating assets due to losses of retail load. Mr. Davis commented that the lack of open communication has created an environment of mistrust. He cited recent controversies regarding lead pipes, CSO inspections, and the attempt to reconfigure line crews from three persons to a two-person crew. He discussed employee work rule disagreements and safety complaints. He asked the Board to give some consideration to conducting an external evaluation of the workplace climate at the BWL. Finally, he asked for a clarification of the Board's overall strategic business direction to satisfy financial challenges resulting from recent General Motors plant closures, environmental regulations, increased fuel costs, etc. Commissioner Rios stated he is concerned with the issued raised by the union and the apparent breakdown of trust in the integrity of the human resources process. Whether the complaints are real or perceived, they should be taken seriously because of an undercurrent that seems to exist. He noted that these issues have been persistent, at least since he has been on the Board over the past two years. He spoke on the importance of mutual trust and productive and positive communication between all involved parties. Additionally, he expressed concern that certain employees feel that processes are not being managed properly nor are certain directions being followed at all levels of the organization. He urged the Board to consider retaining an independent human resources professional to conduct an independent assessment of the BWL work climate. Commissioner Cochran agreed with Commissioner Rios and noted that although he is new on this Board, some of the union concerns were found quite by accident even before he knew he was going to serve on this Board. He reported that he and Mr. Davis co-chaired one of the Mayor's transition teams called Infrastructure and Information Technology. Through this association, Commissioner Cochran got to know Mr. Davis. He pointed out that there are always two sides to a story, but where there is smoke, there is fire. He expressed his belief that whether it is a failure to communicate or something that has caused the trust to be breached, there is no way of knowing how substantive and correct the allegations are due to lack of objective data. He supports an external workplace assessment to identify the problems and find solutions. General Manager Novick reminded the Commissioners that there is an independent outside entity that oversees human resources-related matters, and it is an arbitrator. He stated that this has been previously discussed with the Board, thus he wanted to make it clear, that when grievances occur, the employee goes through a formal processes with an arbitrator to evaluate the legitimacy of the concern. If the arbitrator determines the employee's complaint is not legitimate, then the employee has the option to bring this matter before the Board. Commissioner Graves told Mr. Davis that he appreciates his sharing concerns with the Board. He commented that Mr. Davis mentioned some of the organizational cultural issues have been existent for some time. Commissioner Graves noted that the Board has a responsibility to ensure that management is doing what it needs to do to change the culture, if in fact the issues are real. To undertake an organizational change has to involve both sides of the equation. He further stated that Mr. Davis spent some time talking about trust and a lack of trust. Commissioner Graves said that part of him thinks that it is not necessarily an absence of trust, but rather fear. He alluded to the flatness of the economy, the fact that Fisher Body has closed, and that General Motors is downsizing and facing serious fiscal challenges. He said that this is happening across Board Meeting ge 22 March 28, 2006 the country. And in this global competitive environment, we all are feeling some fear. He suggested that perhaps this contributes to seeing incidents in a way that perhaps magnifies them larger than they perhaps are. Mr. Davis responded that without trust, fear is the underlying issue because people are afraid their jobs are not going to be there and that the organization will not considers their needs. Chair Smith agreed with sentiments that an undercurrent of mistrust seems to exist in the organization. She referred this matter to the Committee of the Whole to address the following issues: (1) to consider retaining an independent human resources professional to conduct an independent evaluation of the organization's work climate and (2) to discuss how to clearly articulate the Board's overall strategic direction and implement cultural change. COMMUNICATIONS Letter from IBEW, Local 352, Business Manager Joseph D. Davis, regarding issues of concern by the union. Received and placed on file. (This item was discussed during Public Comments, above.) Addition to Agenda There being no objection, Chair Smith waived the order of business to consider a pending item concerning a property sale agreement with River Street Triangle, LLC. Chair Smith invited Jerry Ambrose, Chief of Staff to Mayor Bernero, to give the Board a status report on the City administration's effort to move forward with the development of Lansing's riverfront and to make a request. Mr. Ambrose reported that for several years, two portions of the riverfront were subject to development agreements with the River Street Triangle. The first parcel, referred to as the "Triangle," is located along the Grand River at Kalamazoo and Grand Avenue. The second parcel, known as the former coal storage site, is located along the Grand River at Shiawassee and Grand Avenue. After several years, these two prime pieces of real estate have not been developed. On behalf of City administration, Mr. Ambrose asked the Board to help move this development process along. He noted that back in 2001, the BWL entered into a Buy/Sell Agreement with River Street Triangle, LLC for the coal storage site. Following this sale agreement, the City of Lansing entered into a development agreement with River Street Triangle, LLC for the coal storage site. On December 2002 and a revised agreement on November 3, 2004, with a new administration coming into office, River Street Triangle entered into a tolling agreement which kept the status quo in place through March 31, 2006 to provide the new administration time to negotiate with River Street Triangle. Discussions about the coal storage site have been held between Mayor Bernero and developer Joel Ferguson; and at this time, the administration is asking the Board of Water and Light to exercise its rights under the coal storage agreement to authorize its General Manager to provide notice of termination to River Street Triangle and to refund the $100,000 deposit they paid under its agreement with BWL. Mr. Ambrose stated that the City administration believes this is the next step in moving forward on developing Lansing's riverfront and he urged the Board to act on this request. Bob Tresize, Page 23 Boat ;eting March z-8,2006 Executive Director of the Lansing Economic Development Corporation and City Attorney Brigham Smith were also present to respond to questions. Resolution 2006-3-1 Termination of Property Sale Agreements with River Street Triangle, LLC RESOLVED, That the Board of Commissioners authorizes the General Manager to issue an immediate notice of termination to River Street Triangle, LLC, terminating the "Amended and Restated Agreement to Sell Between the Board of Water and Light and River Street Triangle, LLC Regarding the Sale of the Property Located on the Corner of Shiawassee Street and Grand Avenue" dated May 31, 2005 (Restated Agreement) pursuant to Article V, Section 501. FURTHER RESOLVED, That the Board of Commissioners authorizes the General Manager to refund River Street Triangle, LLC's $100,000 deposit related to the Restated Agreement as soon after delivering the notice of termination as practical. FURTHER RESOLVED, That the Board of Commissioners authorizes the General Manager to issue an immediate notice of termination to River Street Triangle, LLC terminating the Agreement to Sell Between the Board of Water and Light and River Street Triangle, LLC Regarding the Sale of the Property Located on the Corner of Shiawassee Street and Grand Avenue dated May 17, 2001 pursuant to Article V, Section 501. Staff Comments: These Agreements were signed in 2005 and 2001, respectively. The Restated Agreement permits termination"by giving written notice" to River Street Triangle if the conditions precedent are not met by July 31, 2005. Because the City Council never approved the Restated Agreement, the conditions precedent were not met. Upon termination, the BWL must return River Street Triangle's $100,000 deposit. In addition, because the Restated Agreement was never approved, the 2001 Agreement was not superseded. Therefore, to fully terminate the property sale agreement with River Street Triangle, the 2001 agreement must also be terminated. The 2001 Agreement permits termination"by giving written notice"to River Street Triangle, LLC if the conditions precedent to that agreement are not met by May 31, 2004. Because River Street Triangle never closed on a purchase of property from the City of Lansing in accordance with the "City Agreement,"the conditions precedent were not met. Motion by Commissioner Rios, seconded by Commissioner Graves, to approve Resolution 2006-3-1 on the termination of the property sale agreements with River Street Triangle, LLC. Commissioner Rios remarked that the Board was in full agreement to cooperate with the City and the Mayor's Office to extend the time so that the project could be developed. Since the project is not going forward, then there is no reason for the Board to continue the agreement. Action: carried unanimously. Board Meeting age 24 March 28,2006 esolution Election of of the Chair Pro Tem Chair Smith announced that the officer position of Vice Chair is vacant due to the term expiration of former Commissioner Ifield Joseph. Under the Board's Rules of Procedure, in the absence of the Vice Chair, the Chair Pro Tem then assumes the post of Vice Chair. She welcomed Commissioner Graves as the new Vice Chair. In light of this change, a vacancy now exists for the Chair Pro Tem position. She asked for nominations from the floor. Commissioner Graves nominated Commissioner Calkins for the position of Chair Pro Tem. Chair Smith nominated Commissioner Rios for the position of Chair Pro Tem. Commissioner Calkins announced that he was not interested in serving as an officer at this time. Commissioner Graves withdrew his nomination. Commissioner Haggart moved that nominations be closed Commissioner Rios' nomination as Chair Pro Tem was carried unanimously. COMMITTEE REPORTS Resolution 2006-3-4 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m., Tuesday, January 31, 2006. Chair Pro Tem Joseph Graves, Jr. called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Ron Callen, Gary Calkins, Joseph Graves, Jr., Tim Haggart, Ifield Joseph, Santiago Rios, Robin Smith and Nancy Wonch. Public Comment The following employees spoke regarding safety concerns surrounding management's recent practice of reorganizing the line crews from a three-person standard configuration crew to a two- person crew. Joseph Davis, IBEW Business Manager, Local 352; Jack Houghtaling, IBEW President, Local 352; and Jayne Hoxie from the Overhead Line Department. The employees said they have safety issues with two lineworkers in the bucket to repair high voltage lines and no one on the ground to act as a safety observer. They said these are threats that could jeopardize the safety of their electrical crews. After discussion, the Commissioners thanked the employees for coming to the meeting to share their thoughts and experiences of working in higher voltages and heights. They assured the Page 25 Boai -eting March 28,2006 employees that their remarks and concerns would be taken under advisement and discussed with management to find a satisfactory solution to this controversy. Executive Session Moved by Commissioner Calkins, seconded by Commissioner Callen, to go into executive session to discuss an issue related to the General Manager's performance pursuant to MCL 15.268(a). (4:50 p.m.) The roll was called. Yeas: Commissioners Calkins, Callen, Graves, Haggart, Joseph, Rios, Smith, and Wonch. Nays: None Absent: None Carved unanimously. Moved by Commissioner Calkins, seconded by Commissioner Wonch, that the Committee of the Whole return to open session. Carried unanimously. The Committee of the Whole reconvened in open session at 6:40 p.m. The Committee of the Whole discussed issues related to the General Manager's performance and is in support of the General Manager addressing the concerns raised. There being no further business, the Committee of the Whole adjourned at 6:41 p.m. Respectfully submitted, Joseph E. Graves, Jr., Chair Pro Tem Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Graves, to receive the Committee of the Whole Report as presented. Action: Carried unanimously. Resolution 2006-3-5 Joint Meeting Lansing City Council and Board of Water and Light Commissioners March 9, 2006 Council President Harold Leeman called the joint meeting to order at 12:15 p.m. The meeting was held at the Cadillac Club, 1115 South Washington, Lansing. Councilmembers Present: Sandy Allen, Joan Bauer,Kathie Dunbar,Brian Jeffries, Harold Leeman, Tim Kaltenbach, and Carol Wood. Absent: Councilmember Randy Williams. Commissioners Present: Ron Callen,Bob Cochran, Joseph Graves, Jr., Semone James, Santiago Rios, Robin Smith. Absent: Commissioners Gary Calkins and Tim Haggart. Board Meeting age 26 March 28, 2006 City Staff Present: City Attorney Brigham Smith and City Council Administrative Assistant: Diana Bitely BWL Staff Present: General Manager Sanford Novick, Corporate Secretary Mary Sova, and Governmental Affairs Analyst Calvin Jones. The purpose for the joint meeting was for the BWL to present an update to the City Council on the following Topics: 1. Union Contract Update. Commissioner Rios reported that the current Agreement between BWL and IBEW, Local 352, expires October 31, 2006, but remains in effect unless and or until changed. Either party can request a change no more than ninety days but at least sixty days prior to the end of the contract term. 3. Law Suits. Board Chair Robin Smith reported that three major lawsuits are pending. One is with the former General Manager. No activity has occurred in some time. Total legal cost in calendar year 2005 was $30,000. The other two suits are with former employees Virginia and David Cluley. On March 8, 2006, the Court of Appeals upheld, on all counts, the lower court's dismissal of Mrs. Cluley's case. The BWL was denied summary disposition on two issues in Mr. Cluley's case, and those two issues are in the process of being appealed. Total cost on the Cluley cases in calendar year 2005 is $168,000. 4. Financial Update. General Manager Novick reported that although it appears the BWL will outperform budget, the utility is suffering operationally due to reduced wholesale revenues, lower revenues from General Motors (GM) and higher costs in the production area. However, this is more than offset by funds to be received from the Michigan Public Power Agency for excess SO2 credits associated with the BWL's ownership interest in the Belle River Plant. 5. Consolidation Options. General Manager Novick reported that management continues to look at ways to reduce costs through internal consolidations and reorganizations. In addition, staff has met twice with the City Administration and continues to have dialogue regarding ways to help each other out. For example, it was agreed to let the City use the BWL as its example to require all those who dig in the street to test the compaction of the backfill before surface paving occurs. It was agreed to do that for the City with the hope that long-term street repair costs will, if not decrease, at least not increase as rapidly. 6. Future Rate Increases. General Manager Novick advised the Council that a water increase of 6.5 %, approved in 2005, is already in place to take effect July 1, 2006. Staff will most likely be requesting a steam rate increase to be effective in September 2006 of approximately 35% due to the GM shutdowns. Every effort is being made through significant cost cuts to avoid an electric rate increase to stay competitive. 7. Capital Improvements for 2006. General Manager Novick stated that staff continues to work with the City in replacing water mains as part of the CSO initiative. Capital replacement of infrastructure is budgeted at a long-term rate of depreciation. The BWL 2006 capital budget is $33.4 million and it is anticipated at least that much will be spent. Page 27 Bom _eeting March 28,2006 8. Lead Service Replacements. Board Chair Smith commented that in calendar year 2005, the BWL replaced 2000 lead services of which 400 were for "sensitive"population (families with young children or households with expectant mothers). The replacement project is currently ahead of its ten-year schedule by six months. 9. Update on Riverside Sludge Pond. General Manager Novick reported that an outside consultant (SME) has been retained to evaluate the structural integrity of the existing dike walls and to test to see if there was any groundwater contamination. The results showed no contamination and sufficient structural integrity. A plan is being evaluated to place an earthen cap over the site, improve wall integrity due to added load from the earthen cap, reclaim the site for some public use, and the costs to achieve the above. 10. Update on North Lansing Landfill. General Manager Novick reported that the MDEQ has approved the BWL's amended consent order to install a below ground slurry wall and an earthen cap. On-site boring for additional geotechnical information is currently underway to confirm the slurry wall approach. 11. City Council/BWL Pairings. Council President Harold Leeman distributed a listing of suggested Commissioner and City Councilmember pairings as an effective mechanism to keep communication channels open and maintain close links between the City and the BWL. Following a question and answer period, the Commissioners and Councilmembers agreed that joint meetings are beneficial for open discussion on issues of mutual concern. It was agreed to meet twice a year. The meeting adjourned at 1:05 p.m. Motion by Commissioner Calkins, seconded by Commissioner James, to receive the Report on the Joint Meeting with the Lansing City Council as presented. Action: Carried unanimously. Resolution 2006-3-6 FINANCE COMMITTEE REPORT The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:00 p.m., Tuesday, March 14, 2006. Acting Finance Chair Gary Calkins called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Semone James, Gary Calkins, Robin Smith, and Ron Callen (arrived at 4:15 p.m.). Commissioners Cochran and Graves (arrived at 5:30 p.m.) were also present. Public Comment No persons spoke. Board Meeting age 28 March 28,2006 Information Technology(IT) Work Plan Harvey Briggs, Manager of Information Technology, presented an overview of the BWL's IT work plan to address current systems deficiencies. (A copy of the report is filed with the Corporate Secretary.) He reported that the BWL has recognized the need to be much more efficient and effective than ever before. In June of 2003, the IT strategic plan identified the biggest challenge to be the slow speed and high cost to enhance existing applications and implement new applications. Staff concluded that the solution to enhance the current system is to move development off the mainframe and train staff in new development technologies. Additionally, investigate `web services' and service-oriented architecture (SOA) to begin building systems with the tools that enable this technology. Mr. Briggs reported that a `Web Service' is a software component that is coded, tested, installed and ready to use. It can execute on any computer platform anywhere in the world. Mr. Briggs gave an overview of where the IT solutions industry is today and discussed the background of each of the following four vendors: SAP `NetWeaver'/ESA, Oracle — `Fusion Applications,' Microsoft — NET/Project Green and Lawson. He discussed the status of the BWL hardware and software costs for the mainframe and PC environment. The following BWL technology needs were outlined: • Document Management • Voice over IP • Financial Systems • Budgeting/Financial Analysis • Mobile Applications • Human Resources, Payroll and Timekeeping • Work Management • Customer Information System • Portal Technology/Web Services/SOA Mr. Briggs noted that the internal IT resources are limited. He stated that the path to achieve the level of automation needed to run the BWL effectively is to purchase new technology business software packages, phase out the mainframe, continue development moving towards a Web Services environment, and promote more training to change the IT skill set. Costs associated with the hardware and software direction, which included vendor costs to purchase a financial package and future packages were summarized. He noted that the BWL's six-year financial plan includes $6 million to cover the proposed application implementation. Vendor Selection for the New Financial and Reporting System Gentile Eva, Manager of General Accounting reviewed the new financial and reporting system project requirements, the timeline and evaluations of vendors. The scope of the project requirements included: • General Ledger • Fixed Assets • Work-in-Progress • Purchasing/Inventory Management Page 29 BoL leeting March 28,2006 • Stores Warehouse Operations • Accounts Payable • Reporting • Fuels Procurement Future considerations and applications include: • Customer Information • Work Management • Human Resources • Time and Attendance • Budgeting and Forecasting Ms Eva reviewed the entire process, which culminated in selecting the top three vendors for scripted demonstrations. The vendors are Lawson, Microsoft, and SAP. She reviewed the strengths and weaknesses for each of the vendors and the project team's grade in the areas of functionality for accounting and purchasing, technology, implementation timing, imp lementation/hardware, annual costs, and ease of future expansions. The vendors were also rated based on core financials, technical, and implementation. Ms. Eva noted that the three vendors are acceptable in the sense that they do respond to the express needs included in the RFP for financial modules. They are all minimally acceptable for the specific needs that were included in the RFP. The project team also evaluated future integration of other applications, quality of underlying technology, cost, and the extent of future commitments. The next steps involve vendor selection, contract negotiation, and the implementation phase. Completion of the new Financial and Reporting System is targeted for June 2007. [Commissioner Graves entered the room at 5:30 p.m.] The Commissioners asked numerous questions regarding justification for the cost difference and capabilities among the three vendors. They raised questions regarding training, implementation, the quality of future modules, and integration of the complete plan in years ahead. They asked for additional information regarding the experiences of other utilities that have moved their computer systems development off the mainframe to web-based systems using one of the three vendors. The Commissioners emphasized the importance of having a good foundation. They asked staff to bring forth a resolution that articulates the rationale for the Board to adopt a policy to move from the mainframe to a web-based system with justification for this large expenditure. Commissioner Smith commented that she would prefer to see additional information on the integration of modules and associated future costs. Following lengthy discussion, the Finance Committee took the following action: esolution On motion motion of Commissioner Calkins, seconded by Commissioner Callen, the Finance Committee recommends that the Board authorize staff to commence contract negotiations with SAP Services for formal approval by the full Board. Adopted. Board Meeting ge 30 March 28,2006 Voting Aye: Callen, Calkins, James Voting Nay: Smith Absent None BWL Financial Plan—FY2007Assumptions Sr. Vice President of Finance and Administration Dennis McFarland referred to the BWL financial plan for FY 2007 included in the meeting packet. Due to time constraints, he restricted his comments to the sheet on operating expenses underlying the fiscal year 2007 budget as follows: • No increase in full-time employees • Salary Increases: - Bargaining Unit—per contract to October 31, 2006, constant thereafter -Non-Bargaining -based on market study • Increase in underlying health care cost of 5% ($671K) • Funding of Retiree health Care ($4.1 mm) • Coal costs per contract to December 2006, market prices thereafter • Reallocation of discretionary resources (move people around for better utilization of resources) An in depth report will be presented to the Finance Committee in May when the FY 2007 budget review is held. FY2006 Capital Budget Adjustments. Due to time constraints, items relating to budget adjustments concerning Eckert Station Turbine #4 Steam Path Upgrade Project, the Eckert Station Black Start Project, and Eckert Station's 41h Black Start Generator Addition Project were referred to the regular Board meeting on March 28, 2006 for review and consideration. There being no further business, the Finance Committee adjourned at 6:00 p.m. Respectfully submitted, Ron C. Callen, Chair Motion by Commissioner Calkins, seconded by Commissioner Cochran, to approve the Finance Committee Report, including Resolution 2006-3-7 authorizing staff to commence contract negotiations with SAP Services for subsequent approval by the full Board. Action: Carried unanimously. Page 31 Boars .;eting March 28,2006 COMMITTEE OF THE WHOLE REPORT The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 6:05 p.m., Tuesday, March 14, 2006. Chair Pro Tem Joseph Graves, Jr. called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Ron Callen, Gary Calkins, Robert Cochran, Joseph Graves, Jr., Semone James, Santiago Rios, and Robin Smith. Absent was Commissioner Haggart. Public Comment There were no public comments. Six-Year Forecast Dennis McFarland, Sr. Vice President of Finance and Administration, presented the BWL Financial Plan for 2007 — 2012. He told the Commissioners that this is the first of several meetings on this topic. The purpose for this presentation is to give a layout base of the current financial situation and decisions that ultimately have to be made regarding rates and other issues. Mr. McFarland presented the following base case assumptions: • Revenue -No additional rate increases - General Motors contractual obligations met - Wholesale sales 25-30% of total electric sales • Expense - 2.7% general inflation -5%health care inflation - Coal prices at market - Continuation of the existing PILOT agreement with the City of Lansing • Operations - Eckert Station remains in service - Moores Park remains in service -No new environmental regulations He reviewed various graphs depicting data relative to the following: • Electric Load Forecast by Customer Class • Electric Generation Forecast • Projected Revenue and Expense from January 2005 shows a six-year cumulative net loss of$63 million. • Projected Revenue and Expense: Base Case March 2006 shows a six-year cumulative net loss of$118 million. • Projected Consolidated Net Income and Cash: Base Case • Net Income by Utility: Base Case Board Meeting Wage 32 March 28,2006 • Cash Flow by Utility: Base Case • Capital Expenditures by Utility • Energy Cost Adjustment Factor • Credit Statistics: Base Case Mr. McFarland presented a"Rate Reliant" case showing rate increases by year required in each utility to obtain a 4% rate of return. Also reviewed were cumulative rate increases required in each utility to obtain a 4%rate of return. It was noted that the water rate increase in July 2006, which is already set at 6.5%, does not achieve a 4%rate of return. Graphs depicting a"Rate Reliant" case were reviewed: • Consolidated Net Income and Cash: • Net Income by Utility • Cash Flow by Utility • Credit Statistics • Comparative Credit Statistics for Base + "Rate Reliant" Case Financial Sensitivities comparing the impact of various scenarios were discussed: Average Effect Six-Year Effect on Category Description on Annual Net Annual Net Income Income Employee Count Change to 10 employees + $740,000 +$4,440,000 Weather Affect on Electric Retail + $560,000 +$3,350,000 Revenue for 10% change in CDDS Wholesale Electric 5% change from projection + $1,900,000 +$11,400,000 Prices Inflation Change of 1%per year +$1,000,000 +$4,870,000 General Motors Risk of Bankruptcy Na -$18,000,000 Fuel Costs 5% change from projection +$1,500,000 +$9,000,000 (Wholesale Effect) Strategic issues that need to be discussed include: • Dependence on Wholesale markets • Environmental Regulations • Cost Management • Financing and Credit Options • Rate Options General Manager Novick reported that the Board would have to make significant decisions about rate sufficiency in future years. He stated that staff plans to return with additional analysis for Board consideration of strategic issues and determination of a rate strategy. Following discussion, the Commissioners indicated they would prefer to see a comprehensive package, rather than a piecemeal analysis with different scenarios, including worse case scenarios. Risk factors dealing with tough issues related to environmental regulations and power supply need to be discussed. General Manager Novick pointed out that a long-range projection Page 33 Boa.-Meeting March 28,2006 with dire alternatives would be difficult to complete in a couple of weeks due to long-term questions, which in part, are affected by environmental issues and the Integrated Resource Plan (IRP). Staff is building a knowledge base to address underlying unknowns. Mr. McFarland stated that by narrowing a range of options, it would be feasible to present a combination of options in a couple of weeks that would provide good credit stats and rate competitiveness. The Commissioners concurred. Mercury Presentation Nick Burwell, Senior Environmental Affairs Representative, presented an environmental overview. He reported that staff and consultant Sargeant & Lundy are in the process of developing an Integrated Resource Plan (W) that looks at issues and alternatives for existing and new electric generation. The IRP should be completed around the end of the fiscal year. The IRP has a section that identifies potentially significant environmental compliance and other environmental issues. Mr. Burwell stated that over the next few Commissioner meetings, he plans to present a background of these environmental topics as a preview of the IRP. He reported that some of these issues include: • Mercury and the Clean Air Mercury Rule (CAMR) • The Industrial Boiler MACT (Moores Park) • SOx and NOx and the Clean Air Interstate Rule (CAIR) • CO2 and potential greenhouse gas legislation • New Source Review (NSR) • Renewable Energy and potential Renewable Energy Portfolio requirements Mr. Burwell summarized some of the most important aspects of the Clean Air Mercury Rule (CAMR) and the Industrial Boiler MALT. The following rule-making timelines were reviewed: • On March 15, 2005, EPA issued the Clean Air Mercury Rule for mercury emissions from coal-fired power plants. - Compliance monitoring begins in 2009 - Phase 1 begins in 2010 and reduces emissions from approximately 48 tons to 38 tons - Phase 2 begins in 2018 and further reduces emissions from 38 tons to 15 tons. • Industrial Boiler MACT requires Moores Park compliance by September 2007. In reviewing Mercury planning issues, Mr. Burwell stated that there is no proven high-level control technology. Activated carbon injection currently leads the list, but because of the lack of technology, Phase 1 of CAMR was aimed at Mercury reduction entirely due to co-benefits of controls on NOx and SO2 emissions, while mercury specific controls are developed and tested. A significant problem for the BWL and most Michigan utilities is that Western PRB coal does not use other controls, such as flue gas desulphurization baghouses, selective catalytic reduction, although Western coal is more environmentally friendly. Currently no EPA certified monitoring technology exists. The small amounts make it difficult to monitor. The development of Michigan rules to implement CAMR have not started. Michigan and other states have sued EPA for more strict levels of control. Board Meeting Wage 34 March 28,2006 Mr. Burwell noted that it is anticipated the CAMR will be implemented "as is" in Michigan. In a 2004 study prepared by Sargeant &Lundy, the estimated costs of CAMR Phase 1 were projected to be $38 million for capital and $4.3 million for annual operating expenses (O&M). Mr. Burwell stated that it his "best guess"the industry should know a lot more about Mercury by the 2009-2012 time range. After lengthy discussion, the Commissioners discussed concerns with the impact the environmental issues will have on the ratepayers. General Manager Novick reported that staff would be coming to the Board by the end of the fiscal year to discuss the integrated resource plan recommendations. Internal Auditor Hiring Process Human Resources Director Mary Dwyer updated the Commissioners on the applications received for the Internal Auditor position. She requested clarification from the Commissioners as to how they wish to proceed with the hiring process before moving forward. There was lengthy discussion as to whether to proceed with interviewing the current pool of candidates or expanding the search using a recruiter. The Commissioners agreed to retain a recruiter. esolution 2006-3- On motion by Commissioner James, seconded by Commissioner Rios, the Committee of the Whole recommended that the Board proceed with a Request for Proposal for Executive Search Services for the Director of Internal Audit. Adopted. Voting Aye: Callen, Cochran, James, Rios, Smith Voting Nay: Calkins, Graves Absent Haggart There being no further business, the Committee of the Whole adjourned at 8:55 p.m. Respectfully submitted, Joseph E. Graves, Jr., Chair Pro Tem Committee of the Whole Motion by Commissioner Graves, seconded by Commissioner Calkins, to approve the Committee of the Whole Report, including Resolution 2006-3-8 to proceed with a Request for Proposal for Executive Search Services for the Director of Internal Audit. Action: Carried unanimously. REPORT OF THE SPECIAL COMMITTEE ON RULES OF PROCEDURE The Special Committee on Rules of Procedure met January 10, February 7 and March 21, 2006 to review the Rules of Procedure in their entirety and to propose amendments that will ensure the Board has a better understanding and guide on how it operates by including more specific procedures as needed. The Rules of Procedure were last amended on November 19, 2002. Page 35 Board. ..;eting March 28,2006 Committee Members were Commissioners Gary Calkins, Joseph Graves, Jr., Santiago Rios, and Robin Smith. The Committee wishes to thank all the Commissioners for their participation in the review effort. The Special Committee recommends Board approval to amend the Rules of Procedure as reflected in Exhibit 1. esolution 2006-3- Resolution to Amend the Rules of Procedures of the Board of Water and Light Commissioners RESOLVED, That the Board of Commissioners hereby approves the Rules of Procedure, as amended, with an effective date of July 1, 2006, subject to City Council concurrence. RESOLVED FURTHER, That the Rules of Procedure be submitted to the City Attorney for approval as to form. The City Charter specifies that the Rules shall then be submitted to the City Clerk for transmission to the City Council for concurrence. Respectfully submitted, Robin M. Smith, Chair Special Committee on Rules of Procedure Motion by Commissioner Rios, seconded by Commissioner Cochran, to approve the Report of the Special Committee on Rules of Procedure, including Resolution 2006-3-9 amending the Rules of Procedure. Action: Carried unanimously. MANAGER'S RECOMMENDATONS Resolution 2006-3-10 A. FY 2006 Capital Budget Increase for Eckert Station Turbine#4 Steam Path Upgrade Project RESOLVED, That the budget for the Eckert Station Turbine#4 Steam Path Upgrade Project (Prof. No. 2005-111) be increased from $504,000 to $1,150,000 to accommodate costs for additional repair work identified after the turbine was disassembled. Project Background: Senior President of Operations Bill cook reported that the original project scope and budget estimate were developed based on anticipated normal deterioration to the turbine internal components based on previous overhaul projects. After the turbine was disassembled, field inspections identified extensive unanticipated damage to the turbine low-pressure blades and casing. Due to this damage, major components of the turbine had to be shipped to an outside facility for repair. This resulted in significantly increased vendor repair payments and extended Board Meeting rage 36 March 28,2006 the outage. Extension of the outage resulted in increased internal labor costs due to the interference of this project with other planned maintenance and capital project schedules. It was determined that the root cause of the low-pressure blade damage was from excessive iron carry-over from the boiler caused by extending the frequency of boiler chemical cleaning from the Original Equipment Manufacturer's (OEM) recommended seven year cycle to twenty years. Damage to the casing was caused by extended low load operation in the 1997-1998 timeframe. Also, a contributing factor to the overall increased cost was due to extending the time between turbine overhauls from seven to nine years. The BWL has been working for a number of years to return to the OEM recommended boiler cleaning recommendation and turbine overhaul schedule of seven years. Only one unit remains to get back on this schedule and that is Eckert#5 scheduled to be worked on during the next fiscal year. Given what has been learned in this instance, next years budget will be adjusted to reflect anticipated similar findings for the overhaul of Eckert#5. In addition, operational parameters for low load operations were adjusted in 1999 such that no additional damage due to this issue should have been inflicted after that time. Motion by Commissioner Cochran, seconded by Commissioner Graves, to adopt Resolution 2006-3-10 regarding FY 2006 Capital Budget increase for Eckert Station Turbine #4 Steam Path Upgrade. Action: Carried unanimously. esolution 2006-3-11 B. FY 2006 Capital Budget Increase for Eckert Station Black Start Generator Project Cost Overruns RESOLVED, That the budget for the Eckert Station Black Start Project (Prof. No. 2005-116)be increased from $1,365,000 to $1,750,000 to accommodate project cost overruns. Project Background: Senior Vice President of Operations Bill Cook reported that the original project scope involved the purchase and installation of three used diesel generators (2 MW each) to provide for the emergency start-up of Eckert generators 1, 2 or 3 in the event of an area blackout. This project also provides for wholesale revenues associated with the addition of 6 MW. Added costs were a result of three major issues: 1. After the project was approved, environmental regulation changes required that $90,000 worth of additional emissions control equipment be installed. 2. BWL staff severely underestimated the cost of working with this used equipment. This was in part caused by a lack of complete equipment drawings, proprietary system information and vendor support. As a result, added material, equipment and labor costs were incurred, as well as schedule slippage costs that were not included in the original project budget. Page 37 Boar eting March 28,2006 3. BWL procedural and process problems involving project scope, estimating, change orders, drawings, supervision and project management all contributed to the increased cost and delay of the project from the anticipated summer installation to winter months. The schedule being delayed from summer to winter resulted in increased cost due to reduced efficiencies as well as increased outside contract labor resulting from BWL crews being unavailable due to working on other scheduled projects. The abovementioned procedural problems have been corrected. (An attachment outlining the procedural changes is included with the Board meeting packet.) While the project experienced overruns, Mr. Cook noted that as a result of using used equipment the final projected installed cost was very favorable compared to similar new capacity. While the final cost is expected to be $292/kW, up from $228/kW, a new peaking unit installed on a Greenfield site would cost $550/kW. esolution 2006-3-1 C. FY 2006 Capital Budget Increase to Install a Fourth Emergency Black Start Generator at Eckert Station RESOLVED, That the FY2006 Capital Budget be increased by$480,000 to accommodate a new project to install a fourth emergency Black Start Generator at Eckert. Project Background: Senior Vice President of Operations Bill Cook reported that the original Black Start Project Scope (Project No. 2005- 116) required the minimum installation of three 2 MW generators to provide the Black Start requirement for Eckert Units 1, 2 or 3. After searching for approximately 9 months, a set of five used 2 MW generators were found. These five units were being sold as a block, and were significantly less costly than the purchase of three new units needed for the Black Start Project. Concurrently, under a separate project, the BWL had a need to replace the emergency generator at the Dye Water Conditioning Plant. Consequently, the five generators were purchased. Three were slated for the Black Start Project, one unit reserved for the replacement of the emergency generator at the Dye Water Conditioning plant, and a fifth unit was obtained under the premise that if it could not be justified, it would be re-sold. An evaluation examining this last 2 MW generator has been completed, and it is recommended that it also be installed along with the original three units for Black Start at Eckert. The basis for this recommendation follows: 1. Opportunity sales to obtain added wholesale revenue associated with the sale of the added 2 MW is paid back in 5 to 10 years. This level of payback meets the payback threshold for FY2006 revenue producing capital budget projects. 2. Increased operational flexibility in a Black Start situation through the ability to start equipment sooner and simultaneously. During a blackout, the extra capacity margin provided by the added 2 MW would be used to get a unit back on line sooner. It would also serve as a contingency in the event that one of the original three Black Start units did not operate. Board Meeting ge 38 March 28, 2006 3. The addition of the fourth Black Start unit will permit Eckert Units 4, 5 or 6 to also be started via the Black Start units. Given that the original project will provide Black Start capability for Eckert 1, 2 or 3 only, at such time as those units are retired, the fourth Black Start generator is required to enable the newer Eckert units (4, 5 or 6) to be started. The installed cost of the fourth Black Start generator is $240/kW. Its installed cost/kW is less than the original three Black Start units, due to the ability to use common infrastructure already in place associated with the installation of those units. This compares to $550/kW for a new peaking unit installed at a Greenfield site. Mr. Cook noted that much of the work to install has already been expended. As a result of some internal communication issues, project management implemented the Black Start Project under the premise that the fourth unit was justified and included. Unfortunately, this was not fully uncovered until so late in the process that the unit is almost ready for completion. Once this was uncovered, work was stopped, pending Board approval. Discussion: The Board engaged in lengthy discussion regarding management's corrective actions to improve project management processes and the consequences. Mr. Cook reviewed the procedural changes implemented to solve the problem of future occurrences. He also noted that the parties involved starting with himself to the directors, managers, project managers to the supervisors on the job have been told of the displeasure of how the project planning and scope was handled. Mr. Cook stated that performance reviews this year would reflect the performance on this project. Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolutions 2006-3-11 and 2006-3-12, respectively, regarding FY 2006 Capital Budget increases for the Eckert Station Black Start Generators. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None RESOLUTIONS esolution 2006-3-13 RESOLUTION HONORING NANCY A. WONCH WHEREAS, It is with deep appreciation that we offer tribute to Nancy A. Wonch as she brings to a close an outstanding tenure of public service and accomplishment to the Board of Water and Page 39 Board M ig March 28,/_U06 Light. The members of this Board extend our thanks to a thoughtful Commissioner who brought unique insights to the Board's decision making process; and WHEREAS, Nancy A. Wonch was appointed as a First Ward Commissioner on July 2, 2001. She served on the Human Resources, Finance and Nominating Committees; and WHEREAS, Nancy A. Wonch brought a breadth of experience to all of her work as a Commissioner. Her commitment to addressing the many complex issues faced by the Board of Water and Light has been of great value to this Board. She encouraged lively discussions at all meetings of the Board with the priority goal of providing reliable, efficient service to local customers at a competitive price; and WHEREAS, in all her work, from the practice of law to responsibilities as a professor at the Thomas M. Cooley Law School and membership on numerous boards, Nancy A. Wonch has demonstrated high ideals of personal integrity and a sense of loyalty to make Lansing a better community. Over the past 15 years, Nancy has worked tirelessly to promote alternative dispute resolution in Lansing schools. Her warmth, humor, and character touch all who know her and has inspired others to pursue public service. RESOLVED That the Board of Water and Light Commissioners, hereby offers this expression of tribute to commend and thank Nancy A. Wonch for her notable contributions to the Board of Water and Light. In regular session this 281h day of March, 2006, we wish Nancy and her family our best wishes for the future and happiness as new challenges are encountered. Motion by Commissioner Graves, seconded by Commissioner Rios, to adopt the resolution. Action: Carried unanimously. esolution 2006-3-1 RESOLUTION HONORING IFIELD PHILINTON JOSEPH WHEREAS, It is with respect and appreciation that we recognize Ifield Philinton Joseph for his service as a Commissioner of the Board of Water and Light; and WHEREAS, Ifield Philinton Joseph was appointed as a Commissioner of the Board of Water and Light on March 3, 2003, as an At-Large member in the City of Lansing. During his time on the Board, he served with professionalism and integrity on the Human Resources, Finance, and Executive Committees; and WHEREAS, Ifield Philinton Joseph has led a distinguished mechanical engineering career. He fulfilled the American dream after leaving his home in Union Island in St. Vincent and the Grenadines as a young man to attend college in America. After graduating from New York Institute of Technology with a degree in mechanical engineering, he brought his knowledge in engineering design to General Motors. Through hard work, personal integrity and drive, he also found success as a partner of a small investment company. Community involvement and his strong sense of responsibility led him to serve on this Board. His role as a Commissioner provided expertise in technical financial aspects of industry, together with an understanding of Board Meeting ige 40 March 28,2006 the local economy and an excellent knowledge of economic incentive issues that maintain and attract business in Lansing; and RESOLVED, That the Board of Water and Light Commissioners do express grateful thanks and appreciation to Ifield Philinton Joseph, for his dedicated service on this Board. In regular session this 28th day of March 2006, we wish"Ifield" success in all his future endeavors. Motion by Commissioner Haggart, seconded by Commissioner Rios, to adopt the resolution. Action: Carried unanimously. GENERAL MANAGER'S REMARKS General Manager Sandy Novick reported that the BWL has been named winner of the American Public Power Association (APPA) Customer Service Award. This is a prestigious award, which only 62 of more than 2,000 public power utilities have received since its inception. The award will be presented at the APPA National Conference in Chicago this June. Mr. Novick also reported that the BWL is the recipient of the platinum designation in APPA's Reliable Public Power Program. The focus of the program is on operational performance based on four criteria: reliability, safety, training and system betterment. The recipient must achieve at least a 90% rating on those criteria. The award will be presented in April at APPA's Engineering and Operations Conference. Mr. Novick invited Director of Engineering Doug Wood to present the 2005 Combined Sewer Overflow (CSO) Year End Report, specifically as it affects the BWL water system. The same presentation will be given to the Lansing City Council. The start of the CSO season begins April 10, 2006. Mr. Wood reported that in 1992, the City begin a 30-year program to separate its combined sewer system as required by EPA to reduce combined sewer overflow discharge into Red Cedar and Grand Rivers. In 2001, the BWL and City entered into an Intergovernmental Agreement to work cooperatively to include water main improvements in CSO contracts. The Agreement allows the BWL to participate in the State's Revolving Funds low interest loans for eligible water improvements. Mr. Wood addressed the following five areas: • Actions implemented during the 2005 construction season • Infrastructure Improvements in 2005 • Customer Issues • Contractor Damage to BWL Facilities • Conclusions and Recommendations for 2006 The complete report is filed in the Corporate Secretary's Office. Mr. Wood reported that the BWL had a successful CSO year with construction along six street miles, 20,000 feet of water main installed, minimal inconvenience to customers and no significant construction issues. Recommendations for 2006 include: 0 Continue the current practice of using City of Lansing inspectors Page 41 Board: :ing March 28,2006 • Improve procedures for water interruption notification • Continue process of field checking values before CSO work • Continue training with both project inspectors and BWL field supervisors • Place continued emphasis on protection of BWL facilities • Ensure proper procedures are followed for service line connections and flushing operations • Continue replacing lead water service lines in advance of CSO work • Pursue utilization of a more automated system to track customer calls/complaints/inquiries. Following a question and answer period, Chair Smith commended Mr. Wood and all the workers involved in this project for the progress made over the past five years. COMMISSIONERS' REMARKS Commissioner Calkins stated that the Board's current Rules of Procedure indicate the Executive Committee shall consist of the three Board officers and one Commissioner elected by the Board. He expressed an interest in seeking that position along with any others who may also be interested. esolution 2006-3-31 Moved by Commissioner Graves, seconded by Commissioner Smith, that Commissioner Gary Calkins be appointed to the Executive Committee for the remainder of this term, ending June 30, 2006. Action: Carried unanimously. Chair Smith welcomed new Commissioners Bob Cochran and Semone James to the Board and invited them to give a brief overview of their backgrounds. Commissioner Cochran reviewed his background and stated that he considers it an honor to serve on the Board. He intends to take his responsibility as a Commissioner very seriously. He noted that he has already visited various BWL work sites and has spoken with employees with regard to pending issues. Commissioner James reported on her background. She has served on various boards in this community and considers it a privilege to serve on this Board. She pledged that if issues need to be addressed, it is her intent to take employee and customer concerns into consideration and move forward to make the BWL the best utility it can be. EXCUSED ABSENCES Moved by Commissioner Calkins, seconded by Commissioner Rios, to excuse the absence of Commissioner Ron Callen. Action: Carried unanimously. Board Meeting P [2 March 28,2006 PUBLIC COMMENTS None ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Graves, the meeting adjourned at 8:08 p.m. /s/ Mary E. Sova, Corporate Secretary Filed with Lansing City Clerk April 12, 2006 1 Preliminary—Subject to Board Approval on March. 28, 2006 MINUTES OF THE BOARD OF COMMISSIONERS' RESCHEDULED MEETING LANSING BOARD OF WATER AND LIGHT Thursday, January 26, 2006 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Joseph Graves, Jr., Ifield Joseph, Santiago Rios, Robin Smith, and Nancy Wonch. Absent: Commissioners Ron Callen and Tim Haggart. The Secretary declared a quorum present. Chairperson Smith called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES Motion by Commissioner Wonch, seconded by Commissioner Joseph, to approve the minutes of the rescheduled meeting held November 8, 2005. Cal-lied 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. Joseph Davis, Business Manager for IBEW Local 352, gave each Commissioner a binder containing information regarding issues between the union and management. Mr. Davis stated that a number of incidents that have taken place over the past 18 to 24 months have given the union reason to question the commitment of BWL management on the issue of safety of employees and satisfaction of BWL customers. The most recent issue raised between the union and management was that of three-person versus two-person line crews. Mr. Davis stressed several times that the main issue of contention between the union and management is safety of employees and not wages. He asked that these issues be addressed. Richard Bell, 3800 West Holmes Road reported that he purchased a home at 710 N. Chestnut Street, Lansing, last August and attempted to get the utilities turned on in the home. He was informed by the BWL that there was an outstanding bill of$1,600. This bill arises from service Board Meeting 3 January 26, 2006 for the In keeping with the Board's timeline of reviewingldaldOear the Commpting a set of bsionerssconsidered the General Manager and Corporate Secretary for this fis y issioner proposed objectives (attached) and gave feedback. Oance objectives amotion by s sub n tted be presented for seconded by Commissioner Wonch that the perform approval to the Board. Carried. Resolution 20061-1-2 FISCAL YEAR 2006 OBJECTIVES FOR BOARD-STAFF APPOINTEES RESOLVED, That the Fiscal Year 2006 Objectives for Generbal Macedon filer the nick and y's Corporate Secretary Mary Sova be adopted as submitted a p Office. REPORT ON CONTROLS AND RISK ASSESSMENT sented his report on Controls and Risk Assessment. Internal Auditor Glenn Holloway pre dde a foundati e on to continue mov in noted that the purpose of the presentation was to provi toward best practices in internal auditing by identifying sources of best practices and establishing a common framework for discussions of controls and risk. al He reviewed the evolution of best practices noting that prace I t cess Acroferies and 1977 requiring accounting contributions resulted in enacting the Foreign Con p controls and accounting reporting. The 1980's savings and loans evised iaa1994 resulted COSO was O (Committee of Sponsoring Organizations)report in 1992 an formed in 1985 by five financial professional associations to sponsor the National Commission on Fraudulent Financial Reporting: • The Institute of internal Auditors • American Institute of Certified Public Accountants American Accounting Association •• Institute of Management Accountants • Financial Executives Institute Mr.Holloway reported that the COSO is dedicated toim controls, and the corporate qualitygovernance.offinancial iial He reporting through business ethics, effective internale business further re ooed that in the 1990's and early 2000's, a series of -puff rofiled tremendous lda s and p ersonnel, and other stakeholders failure where investors, company p WorldCom, Adelphia, and Arthur causing bank failures, crises with Global Crossing, Enron, a single most important SOX) Andersen. This resulted in legislating theSar -fin racial disclosure and the practice of piece of legislation affecting corp governance, ment to public accounting. Mr. Holloway noted that Section 302 ofSOSX req ire requires a separate off on financial statements and internal control of management report on internal control effectiveness. he enterprise management framework, tion must be based on an accepted internal control framework. The need forr]? direction and uidance, providing key principles and concepts, a common language,COSO believes the ERM (Enterprise became even more compelling. Mr. Holloway no t Board Meeting 5 January 26,2006 Nays: None Absent: Commissioners Haggart and Rios. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith, that the Conunittee of the Whole return to open session. Carried unanimously. The Committee of the Whole reconvened in open session at 8:12 p.m. Commissioner Wonch left the meeting at 8:12 p.m. In the closed session, Internal Auditor Glenn Holloway discussed additional internal controls he recommends be implemented to prevent a recurrence of the recent employee theft. The commissioners suggested issuing a news release to local media announcing that a federal grand jury has issued an indictment in the alleged theft of approximately $441,000 in computer equipment from the BWL. Communications Director John Strickler indicated he would issue a release and suggested referring follow-up questions to the FBI. There being no further business, the Committee of the Whole adjourned at 8:15 p.m. Respectfully submitted, Joseph E. Graves, Jr., Chair Pro Tem Committee of the Whole Motion by Commissioner Graves, seconded by Commissioner Wonch, to receive the Committee of the Whole report as presented. Action: Carried unanimously. Motion by Commissioner Graves, seconded by Commissioner Wonch, to approve Resolution 2006-1-2 regarding the Fiscal Year 2006 Objectives for the Board-Staff Appointees. Action: Carried unanunously. Resolution 2006-1-3 SUMMARY REPORT FOR THE BOARD OF COMMISSIONERS PENSION FUND TRUSTEES REPORT The Pension Fund Trustees held their annual meeting on December 13, 2005, to receive the financial statements for the Defined Benefit Pension Plan, Defined Contribution Pension Plan and Retiree Benefit Plan. Performance reports for the three plans were reviewed in detail for the period ended September 30, 2005. Three proposed policies were presented by staff for approval by the Trustees and recommendation to the Board of Commissioners for adoption: Board Meeting 7 January 26,2006 and contains names of specific funds available at that time. This change identifies asset classes rather than specific funds, which will be reviewed and revised as appropriate by staff. Finally, the policy updates appropriate titles and tenninology. Moved by Trustee Calkins, seconded by Trustee Wonch and carried, to recommend the following resolution to the Board of Commissioners: Resolution 2006-1-5 FISCAL YEAR 2006 OBJECTIVES FOR BOARD STAFF APPOINTEES WHEREAS, the Lansing Board of Water and Light desires to revise the Defined Contribution Plan Investment Policy Statement, and WHEREAS, the Lansing Board of Water and Light further desires to update the existing Investment Options descriptions, and WHEREAS, the Lansing Board of Water and Light further desires to remove references to specific fund names from its Investment Options. RESOLVED, That the Lansing Board of Water and Light rescind the resolution dated September 7, 1997 establishing the pre-existing Funding Policy Statement, and FURTHER RESOLVED, That the attached Investment Policy Statement for the Lansing Board of Water and Light Employees' Defined Contribution Pension Plan dated December 13, 2005 be adopted. VEBA TRUST INVESTMENT POLICY Mr. McFarland reported that the last investment policy for the VEBA was approved in 2001. The proposed investment policy explicitly states the investment goals and philosophy underlying the fund, including risk tolerance and prohibited investments. Importantly, the new investment policy changes the asset allocation for the fund to be approximately 65% equity and 35% fixed income securities from the previously existing 50150 allocation. The new policy also permits the use of professional, independent investment managers. The policy also allows for the consideration of diversity when selecting investment managers. Finally, the policy updates certain titles and investment performance benclunarks. Moved by Trustee Wonch, seconded by Trustee Calkins and carried, to recommend the following resolution to the Board of Conunissioners: Resolution 2006-1-6 REVISED VEBA TR UST INVESTMENT POLICY WHEREAS, the Lansing Board of Water and Light desires to revise the asset allocation mix for the investments in the VEBA Trust Fund, and WHEREAS, the Lansing Board of Water and Light further desires to utilize professional, independent investment managers, and Board Meeting 9 January 26,2006 DEFINED BENEFIT AND DEFINED CONTRIB UTION PLAN AMENDMENTS General Counsel Amy Cavanaugh presented an overview of a required change to the Board of Water and Light (BWL) Defined Benefit (DB) and Defined Contribution (DC) Plan to comply with the Internal Revenue Service (IRS) Code Section 401(a)(31)(B). She described the circumstances under which the benefit may be involuntarily cashed out after a participant terminates employment. The proposed plan amendments reduce the involuntary cash out limit from $5,000 to $1,000 effective for distributions made on or after March 28, 2005. While the retroactive effective date is required by IRS rules to be March 28, 2005, governmental plans have until the close of the first regular legislative session of the legislative body with authority to amend the plan that begins on or after January 1, 2006 to amend the plan documents. For that reason, the plan documents must be in compliance by June 30, 2007. Under the proposed plan amendments, three options are available to the BWL; namely, (1) remove the involuntary cash out and manage funds regardless of the amount the employee has vested at departure; (2) remove the "trigger" to reduce the involuntary cash out limit fiom $5,000 to $1,000 and manage all sums above $1,000; or (3) keep the cash out "trigger" at $5,000, but roll anything exceeding the $1,000 into an IRA. The pros and cons of the different options were discussed. The Commissioners requested a cost benefit analysis for the various options for review prior to the Board meeting. The proposed resolution on material modifications of the DB and DC Plans for Employees' Pensions will be brought to the Board for further consideration. BWL SAFETY POLICY Jack Hill, Director of Environmental, Industrial Health and Safety, reported that an outside consultant from the National Safety Council recently performed an audit of the BWL's safety culture to offer recommendations for opportunities to improve. The consultant advised that within the cornerstone of any successful safety program, lays a concise and well-communicated safety and health policy that is supported at the highest level within an organization. The audit has been completed and 23 priority items have been identified. The proposed BWL Safety and Health Policy is the first of the priorities. A schedule to implement the other 22 priorities is under development for management to implement. The objective is to have a safe workplace, and the proposed policy will help set the tone and direction for the BWL. Following discussion, the Committee concurred with the proposed policy and authorized the General Manager to bring forth a resolution on the approval of a BWL Safety and Health Policy. Mr. Hill distributed a graph depicting that the BWL's total safety incident rate for fiscal year-to- date through December 2006 is at 6.6 as compared to 11.1 last year. This is a 40% improvement this fiscal year. The statistics will be supplied to the American Public Power Association (APPA) for their annual safety award competition. It was noted that last year the BWL's safety incident rate submitted to APPA was 10.9, which is a 38% improvement over last year. General Manager Novick noted that the BWL's next step is to strive for Best in Class in safety. AMEND RESOL UTION TO EXTEND A UTHORITY TO REFINANCE CERTAIN OUTSTANDING BONDS Board Meeting 11 January 26,2006 RESOLVED, That the "Meal" section of the Travel Policy for the Board of Corrunissioners and Board Appointees be amended as follows: Reimbursement will be made based on aett doeunentedeasts,-bitt will exeeed a m�ufn daily ameunt E)f a per diem meal rate of $50.00 r�ei-pis. PROCESS FOR FILLING THE INTERNAL AUDITOR POSITION Mary Dwyer, Director of Human Resources, reported that some information regarding filling the Internal Auditor position was recently provided to the Commissioners. She noted that the hiring process could be expedited if there is agreement to use the same documents as the last time. These include the job description and specifications,job posting, external advertising options, and related interview documents. Advertising for the position could start as early as January 14`h. Ms. Dwyer updated the Commissioners on advertising costs and the names of additional publications that are being included to the original advertising list. The Commissioners emphasized that hiring a new Internal Auditor is a priority and requested that staff move expeditiously with the recruitment process. They called attention to the importance of recruiting qualified and diverse applicants. Upon completion of the advertisement process, staff was asked to provide an update on the applicant pool at the earliest possible date in order for the Commissioners to decide how they wish to move forward with the interview and selection process. The Commissioners expressed no interest ui conducting telephone interviews to narrow the field of applicants. CAPITAL PROJECT B UDGET INCREASE FOR ERICKSON STATION REPAIRS Bill Cook, Senior Vice-President of Operations, reported that the Erickson Station boiler has experienced an increase in tube failures over the last year that has negatively impacted its availability and reliability and increased its maintenance.costs. The existing boiler screen, convection pass, secondary superheater and economizer tubes are 32 years old and have exceeded their life expectancy. Replacement tube materials will be upgraded as appropriate to increase the tube life expectancy based on the higher furnace gas temperatures and velocities when burning western coal. This will be the first phase of a two-phase program to address tube failure issues affecting the availability and reliability of the Erickson boiler. The second phase consisting of replacement of the secondary superheater and economizer tubes will be requested for completion next year as part of the fiscal 2007 capital budget. Temporary repairs to the secondary superheater and economizer tubes during the western coal conversion and previous outages have allowed these additional phase two tube replacements to be delayed. Mr. Cook noted that lost opportunity in the market could result upwards of$1 million when the plant is off line for one to three days. Following discussion, the Committee concurred with the proposed increase to the fiscal year 2006 Planned Capital Project Budget in the amount of$300,000 to cover the maintenance costs at Erickson Station. The General Manager was authorized to bring forth a resolution on the approval of the increase for action at the next Board meeting. The Committee of the Whole recessed briefly at 6:58 p.m. and reconvened at 7:12 p.m. Board Meeting 13 January 26,2006 Action: Carried unanimously. MANAGER'S RECOMMENDATIONS DISCUSSION REGARDING DB AND DC PLANAMENDMENTS. In response to questions raised at the January 10, 2006 Committee of the Whole Meeting, General Counsel Amy Cavanaugh outlined three options regarding required amendments to bring the BWL's pension plans into compliance with the Internal Revenue Code: Option 1: Remove the automatic cash-out provision entirely from both the DB and DC pension plans, which would permit the BWL to manage sums of any amount retained. Option 2: Retain the automatic trigger at $5,000 but any amount between $5,000 and $1,000 would have to be automatically rolled-over into an IRA plan if the participant did not make a prior election. Option 3: Lower the BWL automatic cash-out trigger to $1,000. Staff continues to recommend option 3. Resolution 2006-1-9 A. MATERIAL MODIFICATIONS OF DEFINED BENEFIT AND DEFINED CONTRIB UTION PLANS FOR EMPLOYEES'PENSIONS RESOLVED, That the Code Section 401(a)(31)(B) Automatic rollover Amendments to the Lansing Board of Water and Light Defined Benefit (DB) Plan for Employees' Pensions and the Lansing Board of Water and Light Employees' Defined Contribution(DC) Pension Plan to lower the plans' involuntary cash out limit from $5,000 to $1,000 are hereby adopted, retroactively effective as of March 28, 2005. Such amendments are attached hereto and shall be attached to the respective plan documents (see Exhibits A and B). FURTHER RESOLVED, That the Chair of the Board of Commissioners and the Corporate Secretary are hereby authorized to execute the amendments and related documents on behalf of the Board. Staff Comments: Ms. Cavanaugh reported the summary plan descriptions for the BWL DB pension plan and DC pension plan describe circumstances under which the benefit may be involuntarily cashed out after a participant terminates employment. The proposed plan amendments reduce the involuntary cash out limit from $5,000 to $1,000 effective for distributions made on or after March 28, 2005, in compliance with Internal Revenue Service (IRS) Code Section 401(a)(31)(B). This means that if the sum of the combined vested account balances at the time of distribution is $1,000 or less, applicable taxes will be withheld and the benefit will be paid directly to the participant in the form of a single sum cash payment, unless the participant elects within a 30-day election period to have their distribution rolled directly over into another employer plan or an IRA. Board Meeting 15 January 26, 2006 Staff Coinments: The Erickson Station boiler has experienced an increase in tube failures over the last year that has negatively impacted its availability and reliability and increased its maintenance costs. The existing boiler screen, convection pass, secondary superheater and economizer tubes are 32 years old and have exceeded their life expectancy. Replacement tube materials will be upgraded as appropriate to increase the tube life expectancy based on the high furnace gas temperatures and velocities when burning western coal. This will be the first phase of a two-phase program to address tube failure issues affecting the availability and reliability of the Erickson boiler. The second phase consisting of replacement of the secondary superheater and economizer tubes will be requested for completion next year as part of the FY 06-07 capital budget. Temporary repairs to the secondary superheater and economizer tubes during the western coal conversion and previous outages have allowed these additional phase two tube replacements to be delayed. Motion by Commissioner Wonch, seconded by Commissioner Rios, to approve Resolution 2006-1-11 regarding the capital project budget for Erickson Station Repairs. Action: Carried unanimously. UNFINISHED BUSINESS No unfinished business. NEW BUSINESS The General Manager was directed to prepare a report in response to safety issues raised by the union and the report issued by the National Safety Council. This infonnation is to be discussed at the next committee of the Whole meeting. RESOLUTIONS No resolutions. GENERAL MANAGER'S REMARKS General Manager Novick presented a Community Service Award from Michigan Recreation and Park Association to Director of Communications John Strickler for his dedication to the restoration, preservation and promotion of the Grand River as a recreational facility. Mr. Novick noted that since 1994, Mr. Strickler has taken a lead in community activities such as the Adopt- A-River Program and the annual Chili Cook-Off. Mr. Strickler humbly accepted the award and acknowledged Nancy Kremsreiter, Pace and Partners, Steve Witter and various agencies who are instrumental in the success of these programs. Mr. Strickler also announced that Impression 5 Science Center will be the new administrator for Adopt-A-River. Dennis McFarland, Senior Vice-President of Finance and Administration, presented an update in the mid-year financial status. The BWL's financial performance for the first six months of the fiscal year failed to meet budget expectations. Total operating expenses are nearly$7 million over budget and net income is about $2.4 million below budget. Turbine repairs at Eckert Board Meeting 17 January 26,2006 Moved by Commissioner Wonch, seconded by Commissioner Rios, that the Board return to open session. Carried unanimously. The Board reconvened in open session at 8:10 p.m. The Board discussed the process for hearing a complaint made against the General Manager and his performance. Following lengthy discussion, the Commissioners were in support to seek legal advice before scheduling another closed session to assure compliance with the Open Meetings Act. This matter will be taken up at a future Committee of the Whole meeting. ADJOURNMENT On motion by Commissioner Wonch, seconded by Cormnissioner Rios, the meeting adj oumed at 8:49 p.m. /s/Mary Sova, Corporate Secretary Filed with Lansing City Clerk February 7, 2006 Board Meeting 19 January 26,2006 EXHIBIT B FOURTH AMENDMENT TO THE LANSING BOARD OF WATER AND LIGHT EMPLOYEES' DEFINED CONTRIBUTION PENSION PLAN The Lansing Board of Water and Light Employees' Defined Contribution Pension Plan is hereby amended effective March 28, 2005 by making the change noted below. Section 6.3(c)(2) shall be replaced in its entirety with the following: "If the value of a Participant' s vested interest in the Trust at the time of distribution does not exceed $1,000 or such other maximum amount as is permitted by relevant law, any benefit payable hereunder will be paid within one year after termination of employment in the form of a hump sum distribution(the "Involuntary Cash-out"). If a Participant would have received a distribution under the preceding sentence but for the fact that the Participant' s vested account balance exceeded $1,000 when the Participant terminated service and if at a later time such account balance is reduced such that it is not greater than $1,000, the Participant will receive a distribution of such account balance and the nonvested portion will be treated as a Forfeiture. For purposes of this paragraph, if the value of a Participant' s combined vested account balances is zero, the Participant shall be deemed to have received a distribution of such vested account balances. Any portion of his or her Employer Basic Contribution Account which is not vested on the date of the Involuntary Cash-out shall be forfeited in accordance with Section 4.3." LANSING BOARD OF WATER AND LIGHT Dated: January , 2006 By: Its: Chair, Board of Commissioners Dated: January_, 2006 By: Its: Corporate Secretary