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HomeMy WebLinkAbout2007 Minutes BWL Approved by the Board: January 29, 2008 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, December 4, 2007 The Board of Commissioners met in the Executive Offices of 1232 Haco Drive, Second Floor in Lansing, Michigan. r- •- C::s Present: Commissioners Robert Cochran, Tony DeLuca, Joseph Graves, Semdne James, Peter Kramer, Frank Lain, Julee Rodocker and Sandra Zerkle. Absent: None The Secretary declared a quorum present. Chairperson James asked all to rise for the Pledge of Allegiance to the Flag. Chairperson James called the meeting to order at 5:15 p.m. 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. There were no public comments. COMMUNICATIONS None. UNFINISHED BUSINESS Special Board Mtg December 4,2007 Page 2 of 5 esolution 2007-12-1 a. Reset Public Hearing for 2008 Rate Increases WHEREAS, the Corporate Financial Targets for each of the Lansing Board of Water and Light's strategic business units is 4% return on net fixed assets; and WHEREAS, the fiscal Year 2008 budget filed with the City of Lansing included the following proposed rate increases: Electric Utility Customers 4%, Water Utility Customers 6% and Steam Utility Customers 6%, to become effective January 1, 2008; and WHEREAS, the proposed Fiscal Year 2008 budget with the proposed rate increases as filed would result in a combined net loss for the year of$5.6 million; and WHEREAS, based on the information presented at the November 6, 2007, Finance Committee meeting, an additional 3% rate increase for the electric utility customers, and an additional 1% rate increase for the water utility customers is necessary in order to begin addressing future infrastructure concerns, in particular with respect to generation plant replacement and lead service replacement and environmental requirements; and WHEREAS, the proposed rate increases for the Fiscal Year 2008 budget would take effect no earlier than March 1, 2008. RESOLVED, the proposed rate increase of 7% for electric, 7% for water and 6% for steam will be subject to further consideration after a public hearing is held. FURTHER RESOLVED, that the Board of Commissioners hereby sets the date of Tuesday, January 22, 2008 at 5:30 p.m. for a public hearing to solicit public input on the proposed 7% electric, 7%water and 6% steam rate adjustments. The hearing will be held in the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the City Clerk no later than December 7, 2007, information regarding proposed rate increases with an effective date of March 1, 2008. -------------------- Staff Comment: The original hearing date approved by the Board of Commissioners on November 27 falls on the Martin Luther King, Jr. holiday. Staff is recommending the hearing date be changed to the following day, Tuesday, January 22, 2008 at 5:30 p.m. If approved, the Board Meeting scheduled for that same time period will be set for January 29, 2008, at 5:30 p.m. -------------------- Motion by Commissioner Kramer, seconded by Commissioner Graves to adopt both resolutions to Reset the Public Hearing Date and Revise the Board Meeting Schedule. Special Board Mtg December 4,2007 Page 3 of 5 Action: Carried unanimously. NEW BUSINESS a. Officer Election The Board of Commissioners took opportunity to elect a person to the position of Vice Chair for the remainder of fiscal year 2008, as the position was currently vacant. It was also noted that due to the absence of a current Past Chair, the Board should elect a Commissioner to assume the duties of the Past Chair in the absence of the Chair and Vice Chair. As such, Commissioners Joseph Graves and Julee Rodocker expressed interest in the Vice Chair position. Commissioner Robert Cochran also expressed interest in fulfilling the duties of Past Chair. On motion by Commissioner Kramer, seconded by Commissioner Zerkle, the Board of Commissioners voted to accept the nominations for Commissioner Joseph Graves and Julee Rodocker as Vice Chair. Action: Carried unanimously. Both Commissioner Graves and Rodocker were asked to state their interest in the position and their qualifications thereof. Following statements from each respective candidate, the Board of Commissioners took the following action: On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Board of Commissioners elected to conduct a ballot vote for the Vice Chair election. Action: Carried unanimously. Secretary Jones distributed eight ballots, one to each Commissioner, and received eight ballots in return. Upon conclusion of the ballot count, it was announced that by majority vote the Board of Commissioners elected Julee Rodocker to the position of Vice Chair for the remainder of fiscal year 2008. Commissioner Cochran withdrew his interest in assuming the duties of Past Chair and deferred to Commissioner Graves. On motion by Commissioner Kramer, seconded by Commissioner Cochran, the Board of Commissioners voted to nominate Commissioner Joseph Graves to assume the duties of Past Chair in the absence of the Chair and Vice Chair. Action: Carried unanimously. RESOLUTIONS a. Reschedule January Board Meeting Special Board Mtg December 4,2007 Page 4 of 5 esohition 2007-1 REVISED 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 of Commissioners for the calendar year shall be adopted in November. RESOLVED, That regular meetings of the Board of Commissioners are hereby set for calendar year 2008 as follows, unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2008 Tuesday January 29 Tuesday March 25 Tuesday May 27 Tuesday July 22 Tuesday September 23 Tuesday November 25 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 6, 2008. ----------------- Comments: The Board of Commissioners will hold a public hearing for 2008 rate increases on January 22, 2008. Therefore, the regular Board meeting previously scheduled for Tuesday, January 22, 2008 will be rescheduled for Tuesday, January 29, 2008 at 5:30 p.m. This resolution presented at the Special Board meeting on December 4, 2007 hereby supercedes the Board Meeting Schedule resolution previously adopted at the November 27, 2007 Board meeting. ------------------ Motion by Commissioner Kramer, seconded by Commissioner Graves to adopt both resolutions to Reset the Public Hearing Date and Revise the Board Meeting Schedule. Action: Carried unanimously. MANAGER'S REMARKS None. Special Board Mtg December 4,2007 Page 5 of 5 COMMISSIONERS' REMARKS None. EXCUSED ABSENCES None. PUBLIC COMMENTS There were no public comments. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Graves, the meeting adjourned at 5:48 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk December 11, 2007 Preliminary—Subject to Board Approval on January 2, ,>2008 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, December 4, 2007 The Board of Commissioners met in the Executive Offices of 1232 Haco Drive, Second Floor in Lansing, Michigan. Present: Commissioners Robert Cochran, Tony DeLuca, Joseph Graves, Semone James, Peter Kramer, Frank Lain, Julee Rodocker and Sandra Zerkle. Absent: None The Secretary declared a quorum present. Chairperson James asked all to rise for the Pledge of Allegiance to the Flag. Chairperson James called the meeting to order at 5:15 p.m. 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. There were no public comments. COMMUNICATIONS None. UNFINISHED BUSINESS esolution 2007-12-1 a. Reset Public Hearing for 2008 Rate Increases WHEREAS, the Corporate Financial Targets for each of the Lansing Board of Water and Light's strategic business units is 4% return on net fixed assets; and Special Board Mtg December 4,2007 Page 2 of 5 WHEREAS, the fiscal Year 2008 budget filed with the City of Lansing included the following proposed rate increases: Electric Utility Customers 4%, Water Utility Customers 6% and Steam Utility Customers 6%, to become effective January 1, 2008; and WHEREAS, the proposed Fiscal Year 2008 budget with the proposed rate increases as filed would result in a combined net loss for the year of$5.6 million; and WHEREAS, based on the information presented at the November 6, 2007, Finance Committee meeting, an additional 3% rate increase for the electric utility customers, and an additional 1% rate increase for the water utility customers is necessary in order to begin addressing future infrastructure concerns, in particular with respect to generation plant replacement and lead service replacement and environmental requirements; and WHEREAS, the proposed rate increases for the Fiscal Year 2008 budget would take effect no earlier than March 1, 2008. RESOLVED, the proposed rate increase of 7% for electric, 7% for water and 6% for steam will be subject to further consideration after a public hearing is held. FURTHER RESOLVED, that the Board of Commissioners hereby sets the date of Tuesday, January 22, 2008 at 5:30 p.m. for a public hearing to solicit public input on the proposed 7% electric, 7% water and 6% steam rate adjustments. The hearing will be held in the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the City Clerk no later than December 7, 2007, information regarding proposed rate increases with an effective date of March 1, 2008. -------------------- Staff Comment: The original hearing date approved by the Board of Commissioners on November 27 falls on the Martin Luther King, Jr. holiday. Staff is recommending the hearing date be changed to the following day, Tuesday, January 22, 2008 at 5:30 p.m. If approved, the Board Meeting scheduled for that same time period will be set for January 29, 2008, at 5:30 p.m. -------------------- Motion by Commissioner Kramer, seconded by Commissioner Graves to adopt both resolutions to Reset the Public Hearing Date and Revise the Board Meeting Schedule. Action: Carried unanimously NEW BUSINESS a. Officer Election Special Board Mtg December 4,2007 Page 3 of 5 The Board of Commissioners took opportunity to elect a person to the position of Vice Chair for the remainder of fiscal year 2008, as the position was currently vacant. It was also noted that due to the absence of a current Past Chair, the Board should elect a Commissioner to assume the duties of the Past Chair in the absence of the Chair and Vice Chair. As such, Commissioners Joseph Graves and Julee Rodocker expressed interest in the Vice Chair position. Commissioner Robert Cochran also expressed interest in fulfilling the duties of Past Chair. On motion by Commissioner Kramer, seconded by Commissioner Zerkle, the Board of Commissioners voted to accept the nominations for Commissioner Joseph Graves and Julee Rodocker as Vice Chair. Action: Carried unanimously. Both Commissioner Graves and Rodocker were asked to state their interest in the position and their qualifications thereof. Following statements from each respective candidate, the Board of Commissioners took the following action: On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Board of Commissioners elected to conduct a ballot vote for the Vice Chair election. Action: Carried unanimously. Secretary Jones distributed eight ballots, one to each Commissioner, and received eight ballots in return. Upon conclusion of the ballot count, it was announced that by majority vote the Board of Commissioners elected Julee Rodocker to the position of Vice Chair for the remainder of fiscal year 2008. Commissioner Cochran withdrew his interest in assuming the duties of Past Chair and deferred to Commissioner Graves. On motion by Commissioner Kramer, seconded by Commissioner Cochran, the Board of Commissioners voted to nominate Commissioner Joseph Graves to assume the duties of Past Chair in the absence of the Chair and Vice Chair. Action: Carried unanimously. RESOLUTIONS a. Reschedule January Board Meeting esolution 2007-12-2 REVISED BOARD MEETING SCHEDULE Special Board Mtg December 4,2007 Page 4 of 5 In accordance with the Board's Rules of Administrative Procedure, a schedule of dates, places, and times for each regular meeting of the Board of Commissioners for the calendar year shall be adopted in November. RESOLVED, That regular meetings of the Board of Commissioners are hereby set for calendar year 2008 as follows, unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2008 Tuesday January 29 Tuesday March 25 Tuesday May 27 Tuesday July 22 Tuesday September 23 Tuesday November 25 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 6, 2008. ----------------- Comments: The Board of Commissioners will hold a public hearing for 2008 rate increases on January 22, 2008. Therefore, the regular Board meeting previously scheduled for Tuesday, January 22, 2008 will be rescheduled for Tuesday, January 29, 2008 at 5:30 p.m. This resolution presented at the Special Board meeting on December 4, 2007 hereby supercedes the Board Meeting Schedule resolution previously adopted at the November 27, 2007 Board meeting. ------------------ Motion by Commissioner Kramer, seconded by Commissioner Graves to adopt both resolutions to Reset the Public Hearing Date and Revise the Board Meeting Schedule. Action: Carried unanimously MANAGER'S REMARKS None. COMMISSIONERS' REMARKS None. Special Board Mtg December 4,2007 Page 5 of 5 EXCUSED ABSENCES None. PUBLIC COMMENTS There were no public comments. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Graves, the meeting adjourned at 5:48 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk December 11, 2007 Approved by the Board: January 29, 2008 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, November 27, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices 1232,, Haco Drive, Lansing, Michigan. Present: Commissioners Joseph Graves, Semone James, Peter Kramer, Julee' �t' ' 711 Robin Smith and Sandra Zerkle. Absent: Commissioner Robert Cochran. (Note: 4ch Ward vacancy exists.) The Secretary declared a quorum present. Chairperson James asked all to rise for the Pledge of Allegiance to the Flag. Chairperson James called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES By motion of Commissioner Graves, seconded by Commissioner Smith the minutes of the September 25, 2007 regular meeting and November 6, 2007 special board 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. There were no public comments. COMMUNICATIONS Letter dated November 6, 2007, from Santiago Rios stating his resignation from the Board of Commissioners effective immediately. Received and placed on file. Regular Board Meeting November 27,2007 Page 2 of 39 COMMITTEE REPORTS EXECUTIVE COMMITTEE October 8, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 11:30 a.m. on Tuesda Monday, October 8, 2007. Executive Committee Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Santiago Rios, and Robin Smith. Commissioner Graves was also present. Absent: None Public Comments There were no public comments. Discuss Pending Litigation Moved by Commissioner James, seconded by Commissioner Cochran to go into executive session to discuss a pending litigation with outside counsel, Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (11:39 a.m.). The roll was called. Yeas: Commissioners Cochran, Graves, James, Rios, and Smith. Nays: None. Absent: None Carried unanimously. Moved by Commissioner Graves, seconded by Commissioner Cochran that the Executive Committee return to open session. Carried unanimously. The Executive Committee meeting reconvened in open session at 12:22 p.m. Commissioner Rios advised that the Executive Committee received an update regarding pending litigation. There being no further business, the meeting adjourned at 12:23 p.m. Respectfully submitted, Santiago Rios, Chair Regular Board Meeting November 27,2007 Page 3 of 39 Executive Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. HUMAN RESOURCE COMMITTEE October 9, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:20 p.m. on Tuesday, October 9, 2007. Human Resource Committee Chair, Julee Rodocker called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Julee Rodocker and Sandra Zerkle. Absent: Commissioner Joseph Graves. Public Comment There were no public comments. Director of Internal Audit Six-month Review Susan Pifer, Director of Internal Audit and Board appointee requested a closed session for the purpose of receiving her six-month performance review as permitted by Open Meetings Act exemption MCL 15.268(a). (4:22 p.m.) The roll was called. Yeas: Commissioners Cochran, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Graves. Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Zerkle that the Human Resource Committee return to open session. Carried unanimously. The Human Resource Committee meeting reconvened in open session at 4:48 p.m. On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommended that the salary increase package for Susan Pifer, Director of Internal Audit be forwarded to the full Board for discussion. Action: Carried unanimously There being no further business, the meeting adjourned at 5:19 p.m. Regular Board Mceting November 27,2007 Page 4 of 39 Respectfully submitted, Julee M. Rodocker, Chair Human Resource Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. AD HOC COMMITTEE October 11, 2007 The Ad Hoc Committee on Workforce Development met at the Executive Offices, Lansing, beginning at 11:00 a.m. on Thursday, October 11, 2007. Ad Hoc Committee Chair, Sandra Zerkle called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Santiago Rios, and Sandra Zerkle. Alternate committee member Joseph Graves was also present. Absent: Commissioner Julee Rodocker Public Comments There were no public comments. CSO Project Doug Wood, Director of Engineering provided the committee with information relevant to the Board of Water and Light's (BWL) role and participation in the Combined Sewer Overflow (CSO) Project. The BWL spent $6,000,000 this year in four areas and is expected to spend approximately$8,000,000 next year in nine areas. Per unit costs are equivalent to a foot of main, which is all-inclusive but does not include changes made in the field. The Public Service Department manages the project on behalf of the City of Lansing and Tetratech is the design consultant and been since the projects inception. Some of the additional information highlighted by Mr. Wood includes the following: • With additional staffing and equipment, the BWL could perform any or all of the water main work that the CSO contractors now perform. • Approximate annual expenditures paid to the City of Lansing for water main work in the last few years range from $3,500,00 to $6,000,000. • Based on historical comparisons there may not be any savings to BWL customers. However, it would allow the development of new employees to replace those retiring within the next few years. • The City would likely be concerned with two different construction forces working in the same streets. Regular Board Meeting November 27,2007 Page 5 of 34 • The State Revolving Fund (SRF) advantage may be lost to the BWL if the BWL performs the work. • CSO related work stops in November and starts back in the spring. This may be a staffing concern as BWL Water T&D Maintenance is essentially completing current staffing. After lengthy discussion, the Ad Hoc Committee directed staff to draft a letter to the appropriate parties indicating the BWL's interest in establishing dialogue to discuss its ability to do some of the CSO work. The City and the BWL share the same objective in wanting to serve its customers in the most effective and efficient means possible. Therefore,the letter will reflect the BWL's proactive interest in possibly addressing the task at hand. It was also noted that the BWL might propose working in one area as a demonstration of its ability to handle the task, which might involve the creation of one water crew (4-5 persons) who could also be utilized on other BWL projects as well. In addition, staff will also develop a business plan to determine the feasibility of either doing some, all or none of the CSO work in a cost effective and competitive manner. Master Plumbers Dick Peffley, Executive Director of Operations gave a verbal update regarding Master Plumbers in relation to the Lead Service Replacement Program. When replacing a lead service, the BWL chops off the service line on the customer's side of the meter, installs a new service line, and reconnects the service. A plumber is then called to make the final termination to the customers plumbing, as the BWL is not allowed to work on the customer's side of the meter because it is a violation of the City and State plumbing code. The former General Manager previously approached the City to obtain a variance to work 2 or 3 feet down from the meter to allow the BWL to reconnect the meter and provide one stop shopping. However, the variance was denied because the BWL is not licensed. If the variance had been approved then the BWL would have hired a master plumber as part of the licensing requirement. Currently, there are two individuals in the bargaining unit willing to take a license. In addition, the BWL could decide to become a master plumber contractor by establishing a limited liability corporation(LLC). The LLC would allow the BWL to file for full permits,perform work on BWL facilities, and have a master plumber on staff. Mr. Peffley is in the process of researching additional information regarding the above matter. Commissioner Rios noted that he viewed the topic from a broader perspective in that the BWL's creditability is paramount in terms of any work that it performs. It appears that the BWL should have the highest possible certification available relative to its ability to do water work. A master plumber on staff serves the BWL in terms of creditability, general work, and contract negotiations, i.e. CSO Project, Delta Township, etc. There is a significant amount of work done on BWL premises that is classified as plumbers work but contracted out to vendors, which raises the question of what can the BWL do more effectively and efficiently in house, if it had its own master plumber. In addition, the Ad Hoc Committee is seeking to develop the workforce and as such, they have discussed planning and developing people Regular Board Meeting November 27,2007 Page 6 of 39 Susan Pifer, Director of Internal Audit provided a handout entitled, "Vendor Analysis" and gave a brief overview of its contents. A complete copy of the handout dated October 6, 2007 is on file in the office of the Corporate Secretary. Some of the presentation highlights include the following: Assumptions • Reported payments to plumbing companies represent labor, tools and equipment (not materials) • Plumbing services provided by plumbing companies may be adequately performed or supervised by Board employees • Reported payments to (three)plumbing companies is representative of the work volume that a licensed employee-plumber (or plumbers) will perform • Average salaries do not include fringe benefits or tools and equipment required by a licensed plumber (or plumbers) Conclusions • 2007 meter connect and reconnects approached $160,000 in payments to John E. Green • Average salary for a master plumber in Lansing is $48,000 • Assuming 40% fringe benefit rate and a discount rate of 70% for billable hours, the annual cost for a master plumber employed by the BWL is $96,000 or 60% of the cost to contract meter connects and reconnects • Current contracts for heating, plumbing, valve installation and boilermakers to perform work on LBWL premises exceed $1 million Limitations • Michigan Compiled Law (MCL) 338.3525 provides that plumbing shall not be performed unless a"plumbing contractor" who is responsible for the work has secured a permit • MCL 338.3531 provides that only a sole proprietorship, partnership, corporate, or limited liability company may apply for licensure as a"plumbing contractor" • Although, MCL 338.3521 provides that licensure is not required for installation of pipe from the water main to the services, a permit and inspections are still required per MCL 338.3525(b) • MCL 338.3551 provides that where a business requires the regular employment of a plumber, a licensed master plumber shall be authorized to secure permits for installations of plumbing on the premises owned or occupied and used by the business Next Steps • Even if the Code is interpreted to prohibit meter connects and reconnects by an LBWL master plumber-employee, current contracts for plumbing on LBWL premises exceed $1 million • Special filings may permit a master plumber employed by LBWL to pull the permits and supervise on-premises work, e.g. City of Lansing master plumber Regular Board Meeting November 27,2007 Page 7 of 39 • Refer citations to general counsel for further interpretation regarding scope of work legally permissible for a master plumber-employee Ms. Pifer noted that the vendor analysis was a cursory level review. Additional research relative to the specific work conducted and the skill level of the employee conducting the work, i.e. master plumber,journeyman plumber, etc. may be required. Following the presentation materials, Dick Peffley noted that prior to the report a request to add two welders on staff was made for the purpose of succession planning and reducing the amount of contract work awarded to outside vendors. It was also clarified that a BWL master plumber can perform work on BWL facilities. In addition, there was also discussion as to what contractor work was performed by a master plumber and/or journeyman plumber pipe fitter. On recommendation by Commissioner Rios, it was suggested that the BWL investigate and move forward the hiring of a master plumber and journeyman in order to help increase the BWL's creditability in this area and build workforce development. In addition, Jim Dravenstat-Morceri, Assistant Business Manager of IBEW Local 352 recommended that the BWL search for a master plumber with heating and air conditioning credentials. The added skill level would allow the BWL to avoid contracting heating and air conditioning work. It was also noted that revenue generated from BWL inspections is credited to the general fund but should be reflected in Water Department revenue. Ron Byrnes, Business Manager of IBEW Local 352 also advised that the Water Department has not been given the resources, attention or direction necessary to be fully functional. Therefore, they have been unable to complete some of the tasks previously mentioned because they were not fully staffed. As such, he advised that there is enough work to justify a master plumber position and it should not piggyback another classification but should standalone by itself. J. Peter Lark, General Manager noted that there was a recent meeting in which he met with Water Department management to discuss the departments concerns. It is his belief that they are beginning to address those issues, which could include the addition of a master plumber. After further discussion, it was noted that the various suggestions are all ideas that can be explored. Updates Denise Mulder, Director of Human Resources provided updates on several topics that include the items listed below. Contract Language Re-establishing Groundsmen. The groundsmen position was previously used as a feeder role to the lineman helper. Lineman helper duties essentially combined the responsibilities of a truck driver and groundsmen. The lineman helper position eliminated approximately 15 years ago provided employees exposure to the Regular Board Meeting November 27,2007 Page 8 of 39 work conducted by a lineman. Therefore, if an employee were interested in that position then they would traditionally begin as a groundsman,become a lineman helper, and then apply for the lineman apprentice pool to become a lineman if they so desired. Presently, the BWL posts notices three times a year advertising all apprenticeships within the organization. In its current capacity, any employee is eligible to test and be considered for an apprenticeship position. It was suggested that the BWL consider re-establishing the groundsmen role to increase the number of candidates who successfully transition from an apprentice to a lineman. In addition, the committee also discussed utilizing a combined lineman helper program in which persons can either attrition from a groundsmen to lineman apprentice to lineman, or apply for the lineman apprenticeship regardless of their current work classification. As such, the combined program would allow the BWL to pull from the entire employee resource pool and prevent the program from becoming too limiting in nature. After further discussion and upon recommendation by Commissioner Zerkle, it was suggested that Denise Mulder and Ron Byrnes meet to discuss the issues and possible parameters of such a program. Commissioner Graves departed the meeting at 12:29 p.m. Erickson Training Facilities. No update was provided. High School Partnership for Training Linemen in Schools. The committee discussed the possibility of creating a high school partnership; whereas, persons could apply for a linemen helper position and possibly test to become a lineman apprentice. A program of this nature would allow the BWL to draw from the local population and expose the student body to a career in skilled trades. Concern was expressed relative to the concept of allowing high school participants to receive the higher salaried positions. As a result, it was suggested that giving student participants consideration regarding entry level BWL positions maybe more appropriate. The committee also discussed the necessity of expanding its recruiting efforts to build on the number of BWL lineman apprentices but to also increase the number of existing lineman on staff. Although, salaries are competitive it was noted that lineman have expressed concerns regarding the contribution amount for the BWL's defined contribution plan. Denise Mulder noted that the Human Resource Department have begun discussions regarding the improvement of recruiting efforts and the employment process, which may include advertising linemen positions in the upper peninsula. After further discussion and upon recommendation by Commissioner Zerkle, it was suggested that Denise Mulder and Ron Byrnes develop a plan that would address the re-creation of the groundsmen position (or lineman helper program)with the inclusion of a high school partnership program if feasible. In addition, discussions are taking place with Lansing Community College and Dr. T.C. Wallace, Superintendent of the Lansing School District to determine how the BWL might cultivate a partnership with each respective entity. Diversity Employee Recruitment. It was reported that former Diversity Administrator/Ombudsperson, Shan Shaw accepted a new position with another entity and is no longer with the BWL. However,prior to his departure a diversity plan was submitted to the General Manager per previous request. The plan addressed the need for the General Manager to make known to staff and management his interest in diversity. Regular Board Meeting November 27,2007 Page 9 of 39 Denise Mulder advised that diversity is not the responsibility of one but is driven by the employment process. Therefore, anyone who touches the employment process should understand diversity and develop a methodology to expand the BWL's recruiting efforts. Some of those efforts include periodic diversity training sessions and concentrated outreach. It was further noted that Peter Lark is scheduled to participate in an eight month CEO Program to enhance his knowledge of diversity. In addition, it was also suggested that the BWL attend Michigan Works Job Fairs and work with existing programs such as the Hope Scholarship and Junior Achievement in an effort to expand its recruiting efforts. Contract Work Back In-house. No update was provided. JTTC Survey. The Joint Technical Training Committee (JTTC) developed a survey, which was sent to every department that contains bargaining unit employees. The respective areas formed departmental training committees overseen by the JTTC in order to provide input. The JTTC will tabulate the survey results and forward recommendations to Denise Mulder who will review and evaluate the recommendations for submittal to senior management for further review. There being no further business, the meeting adjourned at 12:42 p.m. Respectfully submitted, Sandra Zerkle, Chair Ad Hoc Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. COMMITTEE OF THE WHOLE October 16, 2007 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 16, 2007. Committee of the Whole Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Peter Kramer, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioner Joseph Graves Public Comments Keith Harrison, Ronald Shull, and Paul David Arnold of the Sons of Union Veterans of the Civil War, Lansing/Sunfield Curtenius Guard Camp #17 presented a certificate of appreciation to members of the Board of Water and Light (BWL), Maintenance and Regular Board Meeting November 27,2007 Page 10 of 39 Construction Resource Center. The Sons of Union Veterans are charged with maintaining the memorials and graves sites of veterans located at the Mount Hope Cemetery. As such, five-months ago the organization undertook a project to refurnish the sites, which involved receiving assistance from the BWL in cleaning a 75' foot flag pole, power washing a 35' civil war monument, and raising headstones. In honor of their hard work and effort, certificates of appreciation were given to George Bibbings, Kathy Darr, James Munroe, Mark Nixon, Al Shaver, Brian Westfall, and Dennis Zerkle. The Sons of Union Veterans also noted the importance of community partnerships when working to address such large community projects. Background on Establishing a Foundation Dennis W. Fliehman, President of Capital Region Community Foundation (CRCF) in Lansing gave a brief overview of the CRCF and information pertaining to the parameters involved in establishing a foundation. The CRCF is a 501C3 public charity organization charged with the mission of improving the well being of persons in the tri-county area. The goal is primarily achieved by helping individuals and organizations establish permanent charitable endowment funds. The CRCF currently has approximately 300 endowment funds, which are received and invested by CRCF with a portion of the net income given to qualified charitable organizations. CRCF's is comprised of volunteer board members who are not compensated. Listed below are highlighted areas relative to two foundational structures. Private Foundation • Advantageous for organizations who want to exercise a great deal of control over all aspects of charitable giving; including the investment and supervision of money. • Additional staffing needs are typically necessary to manage the gifts, address governmental regulations, and file appropriate tax forms. Business Advised Fund • Advantageous for businesses who want the satisfaction of charitable giving without the administrative burden. • Gifts are made corporately or by individuals to a fund managed by CRCF. • The advisory committee for the respective fund is not allowed to invade the principle unless by extraordinary circumstance. The donation becomes the asset of the community foundation with direction from the BWL as to how it would like a portion of the net income distributed. Maximum distribution amount is 4% (or a total of 5% including the CRCF fee). • CRCF Fee— 1.25% annual fee based on the value of the fund, which allows CRCF to provide grants to numerous non-profit organizations in the community. • Investment Management Fee—Approximately 62 basis points that are prorated across all funds. • Fund Managers—There are eleven fund managers and CRCF has a fee based consultant, named Itech, Inc. that selects and monitors the managers on a quarterly basis. Asset allocation is 70% equity and 30% fixed. • Donations are tax deductible and if eligible one may receive a 50% tax credit on State of Michigan returns. Regular Board Meeting November 27,2007 Page 11 of 39 • Minimum investment amount is $10,000. Following the presentation, the Board of Commissioners discussed the merits of a private foundation, a business advised fund, and a 501C3 relative to the needs and goals of the BWL. It was suggested that the Board consider leaving their existing community sponsorship mechanism as is and raise additional funds to establish a private foundation. After further discussion, the Board directed staff to provide the following information: cost associated with establishing a private foundation, the amount of funds currently spent for community sponsorships including administrative costs, the amount spent on community sponsorships during the past 3-5 years, and the parameters and cost associated with establishing a 5010. Update on the Phoenix Project Robert Trezise, Jr., President of the Economic Development Corporation of the City of Lansing appeared before the Committee of the Whole to provide an update regarding the Phoenix Project. Accident Fund one of the largest private employers in the City of Lansing will build its corporate headquarters on the site of the former Ottawa Station. The development entitled, "Phoenix Project" is the largest economic development in the country partnering the City of Lansing, State of Michigan, Christman Company, Accident Fund and the BWL. The project that developed from a request for proposal process will involve the rehabilitation of Ottawa Station, the removal of the towers and chiller system, public ramp, and facilities just north of the Ottawa Station. The renovation of the above space will provide a Grand Avenue entrance and accessible riverfront. The development will be a union project, which is common amongst public entities but very unusual for private companies. In addition, the City also announced a massive urban village development project located across the river from Ottawa Station, which is a demonstration of the power of one major project. When discussing the diversification of the economy, new generations and businesses alike are competing for knowledge base labor forces and typically are interested in the urban environment or lack thereof. The development of said project will allow for the building of a true metropolitan area in the downtown cluster amongst state government. The total investment is estimated at $156 million with the Lansing Brownfield Redevelopment Authority and State of Michigan each contributing $34.9 million and $38 million respectively. The BWL will be requested to snake a primary contribution to the project in the form of the conveyance of property on Grand Avenue from Ottawa Street to Shiawassee for a nominal fee of$1.00 or thereabouts. As such, the City will seek to have the BWL declare the area in question surplus property and remove the chiller system. It is anticipated that the BWL will not incur cost to relocate the chiller, as the Lansing Brownfield Redevelopment Authority and Christman Company are scheduled to bare said expense. In response to the Commissioners concerns pertaining to the level of secrecy regarding the project and the delayed manner in which the Board of Commissioners were advised of its specifics, Mr. Trezise explained the highly sensitive nature of the project due to Blue Cross Blue Shield (parent company) and Accident Fund's request. He also advised that a confidentiality agreement had been signed to help ensure that the project was not made public until deemed necessary and appropriate. Mr. Trezise apologized for the secrecy and the manner in which the Board was made aware of its role in said project. In response to a Regular Board Meeting November 27,2007 Page 12 of 39 prior question, Mr. Trezise also noted that the return on investment for the City of Lansing is $9 million (income tax return) and $6.7 million in direct cost. It was further advised that he did not know the return on investment for any of other participants in the project as of yet. Additionally, the City will not come forth regarding the conveyance of the Ottawa property until well into 2008. The Commissioners noted their excitement about the Phoenix Project and the positive impact that it will have on the community. The influx of new jobs and removal of expenses related to maintaining the Ottawa structure will be good for the BWL. It was further noted that the BWL would be pleasantly surprised at the benefits derived from the additional load and the BWL's participation in the project. The preservation of the integrity of the architecture of the building will be a benefit to the BWL, as will the promotion and publicity of said project. J. Peter Lark, General Manager noted that they are working on a business case for the Phoenix Project. In addition, the BWL will gain electric and water load and they are also seeking to gain steam and chilled water for said location. After further discussion, the Board asked Mr. Trezise to provide them with a packet of materials that contained an executive summary and tenn sheet, which would speak to the specifics of the project. The Board also directed staff to prepare a business case that speaks to the additional utility load, financials, and intangible value that the project will generate. There being no further business, the meeting adjourned at 7:00 p.m. Respectfully submitted, Semone M. James, Chair Committee of the Whole The report will be filed with the minutes of the November 27, 2007 Board meeting. AD HOC COMMITTEE November 1, 2007 Commissioner Zerkle called the Ad Hoc to order at 11:00 a.m. on Thursday,November 1, 2007. The Acting Secretary called the roll. The following Commissioners were present: Commissioners Cochran, Rios, Rodocker and Zerkle. Public Comments There were no public comments. Master Plumber/Outside Services Regular Board Meeting November 27,2007 Page 13 of 39 Sue Pifer, Director of Internal Audit handed out a Vendor Analysis of Outside Services listing nine outside contractors who have done work for the BWL and who were paid over$25,000.00. Miller Pipeline is currently being used for the lead service replacement and William E. Walter for HVAC work. The Board of Water and Light has been doing 50% of lead service replacement work. By the beginning of the next construction season, the board will hire permanent employees and will be doing 75% of this work. Also by the next construction season, board forces will do 100% of the HVAC work; this work is currently being done by outside forces. As this is a new classification, a wage structure will be set up. There will be considerable savings to the BWL by hiring its own labor. Both of these projects will be evaluated in the future to make sure they are financially prudent. There are currently two Board of Water and Light employees who have expressed an interest in taking the test to become the Board's Master Plumber. If one of these persons gets the master plumber position, the job that was vacated will be replaced. CSO Proiect As directed at the last Ad Hoc Committee Meeting, General Manager Lark drafted a letter to Chad Gamble, Director of Public Service for the City of Lansing. The letter stated the BWL's interest in establishing dialogue to discuss its ability to do some of the CSO work. It also stated that utilizing the BWL's workforce may be one way in which to enhance the BWL's and cities common objective of providing the best service possible for our customers and residents. Updates Ron Byrnes reported that the channel they are currently using for the pre-apprenticeship poll is adequate. By changing the system, problems could occur if the person or persons do not progress through the system. There are currently two people eligible for the apprenticeship program in the line department. Denise Mulder stated that the results from the Joint Technical Training Committee (JTTC) survey results are back from the departmental training committees and are being analyzed. A list of recommendations will be forwarded to senior management for review such as for organizational priorities. General Manager Lark spoke of a program in the Detroit area for utilities to partnership to train utility people. Some BWL employees may be used for training in this program. Denise Mulder spoke on a program to partner with the local school system and the best methodology is through LCC Technical education. There are 8 positions that would be entry-level positions that we currently hire from the outside. The BWL and the union would be willing to set aside a certain number of those positions for incoming high school students; this would have to be determined on an annual basis because of manpower planning. This program is not for linemen but for entry-level positions into the BWL. Charles Moore reported on a canned curriculum, which is available through Grand Rapids schools. He will provide the information to Denise Mulder. Regular Board Meeting November 27,2007 Page 14 of 39 General Manager Lark reported on the responsibilities of the newly established Diversity Advisory Council. Members are Sue Devon, Amy Ranno, Calvin Jones and Cheval Breggins. Committee members are brainstorming ideas and have outside meetings set up with diversity employees from other companies to see what they are doing in the area of diversity. Commissioners have a strong interest in this issue. Commissioner Rios reported on a diversity workshop he recently attended with APPA. Communication plays a big role in diversity and is often left out of the loop. The BWL Communication Director should be involved in keeping this issue in the forefront. Commissioner Zerkle made the recommendation to disperse the Ad Hoc Committee as the original goals of the committee have been met. Issues are in process. Commissioner Zerkle will give a final report at the next Committee of the Whole. The Ad-Hoc Committee would like to receive an update at the end of 2008 from Internal Auditor Susan Pifer. This report should show a comparison as to whether or not there is a cost savings to the BWL by bringing some of the contract work in-house. Motion for adjournment was made by Commissioner Rios, seconded by Commissioner Cochran. There being no further business, the meeting adjourned at 11:30p.m. Respectfully submitted, Sandra Zerkle, Chair Ad Hoc Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. FINANCE COMMITTEE MEETING November 6, 2007 The Finance Committee met at the Executive Offices, 1232 Haco Dr. on Tuesday, November 6, 2007 at 4:30 p.m. Finance Committee Chair, Robin Smith called the meeting to order and asked the acting secretary to call the roll. The following members were present: Commissioners Semone James, Peter Kramer, and Robin Smith. Alternate committee members Robert Cochran and Joseph Graves were also present. Public Comments There were no public comments. Utility Rate Adjustments Sue Devon introduced William Aldrich the new Manager of Finance and Planning area. General Manager Peter Lark presented an overview of the direction of the BWL regarding a potential rate increase. The FY08 budget called for rate increases of 4% in Regular Board Meeting November 27,2007 Page 15 of 39 electric, 6% in water and 6% in steam. Instead, Mr. Lark is suggesting a 5% increase in the electric rates. Based on the FY08 budget, net income projections are not positive but the net income for the Is'quarter of this year was very positive because of excellent wholesale and retail electric sales. The projected combined net income losses for FY08 of$5.8M, together with the capital expenditures and debt service would result in a cash deficit of$11M. Even though the first quarter of operations boosted the projections for FY08 to a positive net operating income for the year of$1.2 million, it is still significantly below the $20M requirement to generate a 4% return on fixed assets. A 5% increase will amount to $1.87 for a residential customer per month. The BWL rates will still be approximately 20% below Consumers Energy. The $48M cash on hand at the end of FY07 is very important to maintain as it affects our bond rating and because there will be a lot of expenditures in the future, some of which involve the new mercury Sox and Nox rulings. In addition to being considerate of our customers, we need to be able to have the reserves and meet capital expenditures. Chief Financial Officer Sue Devon spoke on the financial plan that was presented in May of 2007, which contained the original rate increases for 2008. The financial goals of the BWL are to maintain credit quality, ensure adequate liquidity, maintain rate competitiveness, efficient and appropriate use of capital and to have financially independent utilities. According to Fitch, the recommendation for utilities of our size is to have 104 days of cash on hand; to have 104 days of cash the BWL needs to have a cash balance of$82M. BWL rates and charges should be sufficient to cover all Operations &Maintenance O&M expenses, contributions to the city, depreciation expense, and a reasonable return on the BWL's capital investment. The return on the BWL's capital investment should be sufficient to provide cash flow for debt service, bond coverage, and capital improvements. Rates and charges should be adequate to cover all annual operating costs and deprecation charges for the utility and to provide as determined by the Commissioners, a rate of return for each utility's operations. Resolution#99-3-2 established the financial goals at 4%. A 4%return over a six-year period would be $11M in electric, $8M for water, $1 M for steam and $1 M for chilled water or $20M for all utilities combined. The 4% on net assets is needed to reinvest in the business. With the rate increases projected in May 2007, the projected net income for all utilities for the six-year period would be $21.5M. To reach that 4% return goal over the six-year period we should generate approximately $118M. Cash comes from net income, depreciation, and bond proceeds. The cash pays for our debt service, and capital expenditures. Recurring rates at a lower level are easier for customers to accept. Rating agencies appreciate it if a utility is consistent of having rate increases of 3%, 4% or 5% every year. The average increases per customer with a rate increase of 5% on electric would be $1.87 per month. With a 6% rate increase on water and steam, the increases would be $.82 for water and $58 for steam. Currently the BWL rates are approximately 17.5% less than Consumers. In order to schedule a rate hearing on January 21, 2008, the filing and publication Regular Board Meeting November 27,2007 Page 16 of 39 deadline is December 7, 2007. We have to give the public 45 days notice for a public hearing. Commissioner Kramer expressed a concern that 5% is not enough of a rate increase. There was extensive discussion on various scenarios as the question was raised as to why the BWL is not asking for rate increases in the area of 9%. In the past, capital improvements have been paid for by operating cash. BWL rates could be raised 10% and still be very competitive with Consumers Energy and Detroit Edison. It was suggested that the rates be raised 7.5%. Historically the BWL has only raised rates 3% at one time. A responsible business plan would be to look at some period of time with a gradual and consistent rate increases over a longer period of time that gets the BWL back to the 4% rate of return on assets. A motion was made to forward the following 2008 rates increases for the public hearing 7% for electric, 7% for water and 6% for steam—moved by Commissioner Cochran, seconded by Commissioner Kramer. Motion carried unanimously. REP Recommendations: SAP Controls The RFP for SAP controls assessment to evaluate out implementation on SAP that went live on April 2. There were four responders, one a national firm Deloitte and Touche, two regional firms Plante &Moran and Virchow Krause and a local group Rehmann. Deloitte & Touche was able to outscore the others. However, their price was approximately 10%higher. On-site interviews were scheduled to compare the firms and understand the value in the price premium for the national firm. The regional firms brought in the consultants that the BWL will be working with to do their presentations. Not only did Deloitte & Touche fail to bring in the consultants for the engagement, they were unwilling to commit to staffing and were not willing to cap their fees for possible overruns. Plante & Moran and Virchow Krause did cap their fees. Director of Internal Audit Sue Pifer recommends Plante &Moran to be the selected vendor for the Board's SAP Enterprise Risk Planning Financials implementation because of the clarity of their presentation and deliverables. Commissioner Graves made the motion to accept the RFP for Plante &Moran, seconded by Commissioner Cochran. Motion carried unanimously. Motion for adjournment by Commissioner Cochran, seconded by Commissioner Kramer. Meeting adjourned at 6:50PM. Respectfully submitted, Robin M. Smith, Chair Finance Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. EXECUTIVE COMMITTEE Regular Board Meeting November 27,2007 Page 17 of 39 November 8, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:30 p.m. on Thursday, November S. 2007. Executive Committee Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James and Robin Smith. Commissioner Graves was also present. Absent: None Public Comments There were no public comments. Board of Commissioners Budtet Update The Executive Committee reviewed the Board of Commissioners budget update for fiscal year 2008 to date (July 1, 2007 to September 29, 2007). Following a brief review, the committee made no changes or amendments to the Board of Commissioners fiscal year 2008 budget. Board Appointees Bud1jet Update The Executive Committee reviewed the budget updates for each respective Board appointee that included the General Manager, Director of Internal Audit and Corporate Secretary. Susan Pifer noted that the Department of Metrics and Audits would be over budget by approximately$20,000 for the SAP Controls Assessment due to a previously low initial estimate. It was also reported that each Board of Water and Light (BWL) department has provided Susan Devon, Chief Financial Officer with forecasts and budget variances to allot for potential budgetary changes. Following brief discussion, there were no changes or amendments made to the Board appointee's fiscal year 2008 budget. Discuss Board Retreat Commissioner James noted her conversation with Bryan Singletary, President of Practical Energies regarding the Board of Commissioners upcoming retreat. As such, Mr. Singletary was advised of the current state of affairs at the BWL and was asked to provide the Commissioners with a proposal and fee schedule regarding the facilitation of said retreat. J. Peter Lark, General Manager noted that he is awaiting Sargent Lundy's analysis of Erickson Station, which is expected by mid-December 2007. As such, a copy of Executive Director of Strategic Planning and Development, George Stojic's strategic plan would be made available to the Board of Commissioners by the end of January 2008. The plan will be a broad overview of the BWL and its potential direction for the next twenty years. The plan would also include a resolution for the BWL to move forward in the process. Regular Board Meeting November 27,2007 Page 18 of 39 Upon further discussion, the Commissioners suggested that a short outline with paragraphs that speak to specific topics be provided during the retreat to aid in the discussion process. In addition, it was noted that the facilitator could sign a nondisclosure statement should he receive a draft copy of the strategic plan prior to its official release date. It was also advised that there is no need to wait for the strategic plan in scheduling the retreat. An outline with specific paragraphs and/or bulletin points would be sufficient in allowing for thorough discussion. In moving forward the Executive Committee agreed that the two-day retreat would consist of the following: Day One: Board Development with Facilitator Guidance—AM Strategic Planning with Facilitator Guidance—PM Day Two: Strategic Planning with BWL Staff Participation—Full Day Discuss Parliamentary Training The Executive Committee reviewed information pertaining to parliamentary training for the Board of Commissioners. After brief discussion, the committee agreed that it is necessary to provide the training to board members to enhance their experience in this area. In doing so, they directed Secretary Jones to obtain additional proposals from other consultants and/or parliamentarians including references to provide to the Executive Committee for further review. There being no further discussion, the meeting adjourned at 5:17 p.m. Respectfully submitted, Semone M. James, Chair Executive Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. esolution=2D07=11=1 SUMMARY REPORT FOR THE BOARD OF COMMISSIONERS PENSION FUND TRUSTEES REPORT The Pension Fund Trustees held their annual meeting on November 13, 2007, to receive the financial statements for the Defined Benefit Pension Plan, Defined Contribution Pension Plan and the Retiree Benefit Plan and Trust (VEBA). Performance reports for the three plans were reviewed in detail for the period ended September 30, 2007. Representatives from LCG Associates reviewed the Defined Benefit Pension Plan Performance Report and staff presented the Defined Contribution Pension and Retiree Benefit Plan and Trust Performance Reports. Regular Board Meeting November 27,2007 Page 19 of 39 Staff did not propose any changes to the existing policies that include the Defined Benefit Pension Plan Investment Policy, Defined Contribution Pension Plan Investment Policy and the VEBA Trust Investment Policy. There being no further business, the meeting adjourned at 4:40 p.m. Respectfully submitted, Semone M. James, Chair Pension Fund Trustees MINUTES BOARD OF WATER AND LIGHT PENSION FUND TRUSTEES' ANNUAL MEETING Tuesday, November 13, 2007 Present: Trustees Joseph E. Graves, Semone M. James, Peter W. Kramer, Robin M. Smith and Sandra Zerkle (arrived at 3:48 p.m.). Absent: Trustees Robert W. Cochran and Julee M. Rodocker (Note: 41l' Ward vacancy exists.) Staff Present: General Manager J. Peter Lark, Executive Director and Chief Financial Officer Susan Devon, Director of Internal Audits Susan Pifer, Manager of Finance and Planning Bill Aldrich, Associate Internal Auditor Perez Goree, Bulk Power Analyst Sue Flores, Associate Attorney Brandie Ekren, and Corporate Secretary Rhonda Jones. Consultant Present: Senior Vice President of LCG Associates Richard Babcock, Consultant of LCG Associates David Emerson, and C.L. Moore & Associates Charles Moore Chairperson James called the meeting to order at 3:45 p.m. to receive information from LCG Associates. The roll call was taken at 4:15 p.m. and the Secretary declared a quorum. Public Comments There were no public comments. Audited Financial Statements Regular Board Meeting November 27,2007 Page 20 of 39 Executive Director and Chief Financial Officer Susan Devon reported that the financial statements for the Defined Benefit, Defined Contribution, and Retiree Benefit and Trust Reports (VEBA) each received a clean opinion by external independent auditors, Plante &Moran. The pension plan audits were complete in September 2007. The auditors did not have any areas of concern or issue for the BWL to consider at this time. Moved by Trustee Graves, seconded by Trustee Smith and carried, to approve the following resolution: RESOLUTION ACCEPTANCE OF 2007 AUDITED FINANCIAL STATEMENTS FOR DEFINED BENEFIT PENSION PLAN, DEFINED CONTRIBUTION PENSION PLAN, AND RETIREE BENEFIT PLAN (VEBA) Resolved, that the Corporate Secretary receive and place on file the Defined Benefit, Defined Contribution and Retiree Benefit Pension reports presented during the Pension Trustee Meeting. -------------------- Defined Benefit Pension Plan Performance Report Susan Devon gave a brief overview of the third quarter performance results for the Defined Benefit Pension plan as of September 30, 2007. The BWL is currently within its asset allocation policy for all of the funds. Total net assets were $125 million and the total rate of return is 16.5%. Actuarial accrued liability is $83 million and actuarial asset value is $126 million. The plan is currently over funded by approximately $43 million and the ratio for over funding is 125%, which will allow for a Section 420 transfer to the VEBA plan of approximately$5 million. David Emerson, Consultant of LCG Associates presented the third quarter market returns for the Defined Benefit (DB) Pension plan for the period ending September 30, 2007. Long standing issues in the economy notably the housing market finally came to bear. The subprime rate is an issue throughout the country and a number of defaults have risen in the housing market. The defaults have rippled throughout the overall economy, specifically in July and the first part of August 2007. It has not only affected the subprime rate but it also affected the credit markets, corporate debt, and a number of different areas throughout the economy. The Federal Reserve infused liquidity into the marketplace in August 2007 by lowering the discount rate by 50 basis points. At their next regularly scheduled meeting the discount rate was again lowered by another 50 basis points and the federal fund rate was also decreased. Since the end of the quarter the Federal Reserve lowered the federal fund rate by an additional 25 basis points. Once liquidity was initially infused into the market, it significantly changed the overall view of the economy and the direction of the markets. The markets then rebounded and finished on an incline. In the last several years, value oriented companies and stocks have been Regular Board Meeting November 27,2007 Page 21 of 39 doing very well and they have now seen growth come back to the market, which is primarily being lead by technology. Richard Babcock, Senior Vice President of LCG Associates gave an overview of the total fund allocation and discussed the following associated charts and reports for the quarter ending September 30, 2007: • Total Fund Allocation The departure from domestic equity to international equity was intentional. Domestic equity is 4-5%below target and international equity is 4-5% above target. It was intentional as they felt that international markets have more intrinsic value than the domestic markets and the performance indicates that it was profitable. • Distribution of Assets As of late, growth funds are doing better than value funds after lagging behind for the past 6-7 years. There is slight overweight in large growth versus large value funds, which also rings true for small cap funds. As a result,the asset allocation has improved slightly to the BWL's benefit. • Performance Summary for the current quarter and historical performance Domestic equity composite is slightly underperforming. LCG believes that they have a great selection of managers. However, their management style is simply not in favor right now. The performance is lagging and LCG will look at the managers that caused the underperformance. International equity has had substantial top performance in every time period. Asset allocation is approximately 90% of the return that accrues to any institutional investor. Institutions have problems in that they hire managers with great 1 to 5 year track records. However, one must fight against the mentality of buying high and selling low when one should buy low and sell high. In response to Trustee questions regarding changing strategies, asset allocation study's, and the international market, Mr. Babcock noted the following: LCG reviewed several strategies and conducted an in-depth asset allocation analysis, which was presented to the BWL when they were initially hired. LCG can initiate an asset allocation study in any quarter and the last one performed on behalf of the BWL approximately three years ago. Mr. Babcock expressed great interest in performing the study and noted that they would like to explore this option in trying to implement strategies with lower risk and high return. The managers have made $5 to 7 million extra in the international market with substantially less risk by simply changing the BWL's allocation strategy held many years ago. In response to a question regarding the success of the international market and its potential longevity, Mr. Babcock noted that international markets have done well in part due to the United States (US) dollar decline against other world currencies. The US dollar is currently in parody with the Canadian dollar for the first time in history. LCG still intrinsically likes international versus domestic not withstanding the dollar, which may continue to be slightly over weighted in the international market. Forty percent of the world's gross domestic product(GDP) is the United States, which will Regular Board Meeting November 27,2007 Page 22 of 39 continue to decrease as the world continues to develop. It was also advised that LCG consultants would like to look at the BRIC (Brazil, Russia, India and China) strategy. There are a number of managers that specialize in those four countries and their rapid GDP growth. • Comparative Performance. The results are net of fees and it is estimated that LCG's current fees are approximately 75 basis points including custodian fees. • Total Fund Performance • Total Fund Five-Year Return vs. Risk. If a fund is above the blue line drawn from T- Bills to the S&P 500 then that suggests excess alpha, which is additional rate of return above and beyond the risk level that one initially took. • Equity Sector Allocation. The pie chart indicates the change in diversification from September 2006 to September 2007. • Equity Allocation for all of the funds • Equity Performance for individual managers for the current quarter and historical performance The Wachovia Equity Account has been removed, which is good because the funds performance had deteriorated over time. A Small Cap Value search for new funds was difficult as half of the funds are closed. As a result, American Beacon Small Cap Value was chosen by default. There is a concern that there are a lot of dollars in this combined portfolio. Therefore, in going forward, LCG will begin to look for a replacement. • Fixed Income Sector Allocation • Fixed Income Allocation • Fixed Income and Cash &Equivalents (C&E) Performance for the current quarter and historical performance SmithBarney is a corporate bond manager whose long-term record has been excellent. Western Asset is relatively new but they are generally considered to be one of the top three fixed income managers in the country. Trustee Smith noted that she would like to see another asset allocation study, as it has been three years since the last one was performed. Although, the funds are performing well it would be good to see if there is anything else that maybe performing better. Mr. Babcock agreed with the suggestion and noted that typically they try to perform an asset allocation study every one to three years for all of their clients. Trustee James advised attendees that the BWL has issued a request for proposal (RFP) for banking and investment services. Once they have selected a manager and the RFP is awarded then the BWL would look to commission that organization to conduct an asset allocation study. Trustee Graves noted that at the last Trustee meeting held in November 2006, one of the items he specifically discussed was whether or not LCG Associates had the capability or interest in looking at fund managers from a diversity perspective. Trustee Graves went onto ask what has happened regarding that topic since they last spoke? Regular Board Meeting November 27,2007 Page 23 of 39 Mr. Babcock responded by noting that LCG conducted a search for a fixed income manager since they last meet with the Trustees. In conjunction with that they also did a diversity search. Mr. Babcock noted that they are color blind to start with as they are happy to do business with anyone who can do the work and has all the requisites in place. During the search a couple of candidates surfaced. However, for that particular asset class and at that particular point in time there simply was not a candidate that came to the forefront. In the final analysis, others came forth and as a result the committee selected another candidate. Mr. Babcock also advised that they have no problem with looking for diversity and continue to do so, as they have diversity managers for many of their clients. The complete report on An Investment Management Analysis of Comparative Risk and Return presented by LCG Associates for the quarter ending September 30, 2007 is on file with the permanent minutes. Defined Contribution Pension Plan Susan Devon provided a high level summary report of the Defined Contribution (401A) Plan as of September 30, 2007. The packet materials contained information relative to the following: • Plan assets by class total $133,165,000 • Historical performance of funds • Historical performance benchmarks Plan participants exercise control over the assets in their account and the BWL establishes various accounts that employees are able to invest in. The BWL looks for funds that provide options for security and long-term stability and growth for employee funds. The options that they provide are designed to allow employees to diversify their portfolios with various funds providing different risk and return characteristics. The options include equity, income and cash opportunities. Employees also have access to a Goalmaker program as an alternative way for employees to select their model portfolio. Goalmaker will automatically rebalance the portfolios funds to keep it on track with the model that the employee has selected. Approximately 18% of employees are participating in the Goalmaker program compared to 15% last year. Prudential reported the following information relative to BWL employee interaction and use of their respective services: • Prudential received 1,400 calls from BWL employees to their voice response service • Prudential Customer Service Representatives received 190 calls from BWL employees • There were over 5,000 hits from BWL employees on Prudential's participation website • Representatives came in and held 12 meetings to answer employee questions • Two special meetings were held to discuss the self-directed brokerage account options. Prudential also held a pre-retirement informational meeting to address questions for those employees considering retirement. Regular Board Meeting November 27,2007 Page 24 of 39 In response to Trustee questions regarding employee fund management and increased employee education, Ms. Devon noted that the BWL does not know how employees who are managing their owns funds are doing at this time because that is private information. In addition, Ms. Devon advised that the number of employee education meetings has been consistent. In the September annual update from Prudential they have an education plan that provides more of what the Trustees maybe looking for. However, staff has not implemented it as of yet because they are going out for a RFP for the Defined Contribution Pension plan. The Trustees also asked if they were continuing to hear that employees need more information because the concern was raised a few months ago relative to the amount of information made available. Trustee Smith also asked what additionally might the BWL do to satisfy that issue because it was an employee request and it appears that the BWL is essentially doing the same educational piece as before? Ms. Devon noted that representatives are available anytime an employee wants to get in touch with Prudential and they can also arrange one-on-one meetings. She advised that she was aware of the concern,which is why Prudential came in with the additional educational piece. However, the BWL has not acted on it as of yet because of the pending RFP previously mentioned. Bulk Power Analyst Sue Flores reported that Prudential started visiting some of the plants at different times during the day, which is very valuable for some of the 24/7 shift employees. Retiree Benefit Plan & Trust(VEBA) Susan Devon reviewed the status of the Retiree Benefit Plan and Trust (VEBA) for the third quarter ending September 30, 2007. The VEBA trust has increased from $43 million as of June 30, 2006 to $61 million as of June 30, 2007. The asset allocation targets indicate that the BWL was out of balance at the end of the year. Investment in fixed and large cap funds allowed for the diversification of cash. The BWL made an investment in Lehman Bond and Large Core I-Shares S&P, which brought the funds back in line with the investment fund policy. The total rate of return for fair market value is 13.8%. Actuarial accrued liability is $198 million and actuarial asset value is $52 million as of February 2007. Therefore, the VEBA trust is under funded by approximately$146 million. The over funding in the Defined Benefit Pension plan will allow for the transfer of$5 million to the VEBA plan. The transfer is scheduled to take place in June 2008. Other Susan Pifer, Director of Internal Audits advised that the subcommittee comprised of Susan Devon, Charles Moore and herself are in the process of scheduling onsite interviews regarding proposals submitted for the banking and investment advisory services. As such, it was noted that they intend to conduct the meetings and will notify Regular Board Meeting November 27,2007 Page 25 of 39 the Commissioners so that they may attend if interested. In addition, Ms. Pifer noted that the committee amended its original recommendation to include interviews with the following parties: LCG Associates, Mercer Investment Consulting, Asset Consulting Group, Inc., Merrill Lynch Institutional Consulting Group and Citizens Bank. Wilshire Consulting Group was removed from the list and replaced by Citizens Bank in order to gain a banking community in the final interviews. Ms. Pifer also noted that they received two models in the RFP responses. One model represents advisory services only and the other one represents a banking relationship. The advisory services (only) provide an advisor that is completely independent and does not have a relationship with the investment manager(i.e. LCG Associates). The second model provides bundled services where the investment manager typically compensates the advisor. However, the advisor would sign a conflict of interest statement to note that they would not invest in their own securities to give the BWL some degree of independence. Charles Moore of C.L. Moore & Associates further expounded and advised that the essential overall concern is that the advisor would recommend their own funds and perhaps receive back door fees. BWL management currently ensures that this does not happen by keeping an independent advisor by way of LCG Associates. It was noted that perhaps other organizations could give the subcommittee some transparency in how the funds are being handled so that they may gain a better understanding of the process. There being no further business, the Pension Fund Trustees meeting adjourned at 4:40 p.m. Submitted by: Rhonda Jones Corporate Secretary The report will be filed with the minutes of the November 27, 2007 Board meeting. COMMITTEE OF THE WHOLE November 13, 2007 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, November 13, 2007. Committee of the Whole Chair, Robin Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Joseph Graves, Semone James, Peter Kramer, Robin Smith, and Sandra Zerkle. Absent: Commissioners Robert Cochran and Julee Rodocker (Note: At Large Vacancy exists). Regular Board Meeting November 27,2007 Page 26 of 39 Public Comments There were no public comments. PA 141 (Customer Choice) George Stojic, Executive Director of Strategic Planning and Development provided an overview of Public Act (PA) 141 and the Board of Water and Light's (BWL)position regarding customer choice. Public Act 141 of 2000 allowed electric utility customers the opportunity to receive electric generation service from alternate electric suppliers. The act effective June 5, 2000 impacted investor owned utilities and will affect municipally owned utilities after December 31, 2007. Section 10y of PA 141 distinguishes between customers located within the municipal's legal boundary and those outside of its boundary. There is also distinction between distribution and electric generation services. Section 10y, and thereby Act 141 applies to BWL territories outside of the City of Lansing. Since the Act does not specifically reference 425 agreements, it is assumed that those areas are within the municipal's boundary. BWL staff recommended that the Board of Commissioners prohibit customers outside of the City of Lansing the opportunity to choose an alternative electric supplier based on the following reasons. 1) Granting customers the option to switch to an alternate electric supplier would require the BWL to develop an appropriate customer choice program, which requires the need for substantial investment in time, money and resources. 2) Traditionally, alternative electric suppliers selectively market to those customers with a low cost to serve and avoid customers with high costs to serve. 3) The cost to serve all BWL customers would increase due to marketing efforts by alternative electric suppliers and the cost associated with creating a BWL customer choice program. It was further noted that if the BWL opted out of customer choice then those same customers would have the opportunity to change to another utility company for distribution service only. Although, this option would be available, staff noted that BWL vulnerability is relatively small and highly improbable due to the following reasons: 1) Any other utility desiring to serve an existing BWL customer must obtain a certificate of convenience and need from the Michigan Public Service Commission (MPSC), as required by 1929 Public Act 69. If utility companies were to apply for the certificate, the BWL would have opportunity to intercede in the process and contest the need for said certificate. 2) Act 141 provides the BWL with the option to operate under MPSC Rule 460.3411. The Rule governs which utility is allowed to serve a customer when two or more utilities operate in the same area, with one of the provisions prohibiting existing customers from switching utility companies. Regular Board Meeting November 27,2007 Page 27 of 39 3) Consumers Energy is the only adjacent utility company who could provide distribution service to existing BWL customers. However, Consumers Energy's significantly higher rates, reduces the customers incentive to switch utility company's and makes this scenario unlikely. In response to a Commissioner question, Mr. Stojic confirmed that it would be cost prohibitive if a customer choose another utility company for distribution service due to the potential cost associated from the BWL to the utility company. J. Peter Lark, General Manager also advised that he is working with Chairs of the Technology and Energy Committees in both the House and Senate to introduce "no switching" language into the rewrite of PA 141. The "no switch" language would provide the BWL some protection and would essentially state that BWL customers cannot be taken away by other utilities, the same way as the BWL cannot presently take customers from other utility companies. Mr. Lark further noted that he has agreement from both Chairs of the House and Senate that there is no problem with adding the "no switch" language in the rewrite of PA 141. It was also confirmed that if the City of Lansing enters into a 425 agreement then the BWL is still allowed to compete. In response to a Commissioner question regarding distribution service and vulnerability, Mr. Stojic clarified that a full service regulated utility company would have to establish itself in order to compete with the BWL. The most likely utility company would be Consumers Energy and he is unaware of how any other utility company would form in this particular area. Although, it is highly unlikely, staff verified that an example of such an act would be the purchase of an existing utility system; such as, the one located on the campus of Michigan State University. However, one must keep in mind that both Consumers Energy and DTE electrical rates are significantly higher than the BWL's making this scenario improbable. The question was asked as to whether or not there is anything in the law that would prevent another company from buying BWL "lines" in order to provide service to customers; similar to what occurred in the communications industry? In response to the question, staff noted that another utility company could offer to buy the BWL from the City of Lansing. However, it does not appear that a utility company could buy BWL "lines" unless the BWL opened its transmission system. At some point in the future, the BWL may have to open its transmission system to allow use by others. Nevertheless, the distribution system would not be subjected to this, as it is the end use point to the customer. On motion by Commissioner Graves, seconded by Commissioner James, the Committee of the Whole agreed to receive the resolution concerning Public Act 141 —Customer Choice. The resolution will be forwarded to the full board for consideration. Action: Carried unanimously. Comnissioner James departed the meeting at 5:48 p.m. Regular Board Meeting November 27,2007 Page 28 of 39 Public Relations (Advertising) Update Mark Nixon, Director of Communications gave an overview of public relations and marketing campaigns currently taking place at the BWL. He noted that renewable energy is the cornerstone of the BWL's marketing campaign. As such, the "You've Got the Green Light", campaign includes a billboard on interstate 496 noting the BWL's message of renewable energy and energy conservation. In conjunction with Michigan State University's go green campaign the BWL has also purchased radio space on their station to promote its message. In addition, Mr. Nixon also noted the following marketing efforts: • The BWL partnered with Meijer Stores for the CFL exchange program entitled, "A Bright Idea". The event took place on October 20, 2007 and 2,600 CFL's were given out. The BWL paid for the light bulbs and Meijer Stores paid for all of the advertising. • BWL is the "Presenting Sponsor" of Silver Bells. The BWL logo is on banners throughout Lansing. In response to a Commissioner question regarding the BWL's website, Mr. Nixon noted that it has been slow but they are in the process of redesigning the website. The redesign will allow the Communications Department to instantaneously make changes. In addition, the BWL added a float to this year's parade bringing it to a total of two entries. One is a resurrected and retooled float previously used in the Riverfest Parade and the other one is similar to last year's entry with some new additions. • A new label design for BWL bottled water is complete. In response to a Commissioner question regarding redesigning the bottle itself, George Stojic noted that Quality Dairy currently bottles and packages the water. Therefore, the bottle design is Quality Dairy's standard product. The BWL is currently reviewing the bottles design and the cost to change it. Once that information is received then staff would make an assessment of its potential options. • The demographics in the Lansing area are changing with English either being a second language or persons maintaining a heavy reliance on Spanish. Experimentally, the BWL is currently advertising bilingually in both English and Spanish for its ads in Adelante Magazine. • Capital Area United Way(CAUW) thermometer signs registering the monies raised thus far contain the BWL logo located at the bottom. It was noted that the BWL donated an estimated $7,500 to CAUW for their advertising campaign. In response to a Commissioner's question regarding the BWL's participation in the CAUW campaign, Cheval Breggins, Communications &Public Relations Representative noted the following information. • BWL's 2007 CAUW campaign goal is $90,000 and thus far the BWL has raised approximately$88,000. Regular Board Meeting November 27,2007 Page 29 of 39 • BWL is currently 5% over its 2006 goal. • BWL secured 95 raffle prizes that cost the BWL significantly less than last years expenditures, of which Calvin Jones secured approximately 98% of those items. • For the first time in history the BWL ran a pacesetter program in which the second floor of Haco Drive and the bargaining unit ran its campaign during the summer. Thereby, allowing monies to be in the coffer when the campaign kicked off in September. • The kickoff consisted of in kind catered food and a live radio broadcast from 6:00 a.m. to 9:00 a.m. with"Mad Dog" Dave DeMarco. J. Peter Lark, Mark Nixon, Julie Lamond of the Lansing School District, the CEO of United Way and others also spoke. • The BWL had thirty-sixty second spots that began at 7:30 a.m. in which one heard the voice of Dave DeMarco who talked about the BWL and its kick off campaign. Cominissioner Smith thanked Mark Nixon for his hard work regarding the "A Bright Light" campaign and signage, which is the type of branding and advertising that the Board of Commissioners desires for the BWL. She also noted that the slogan is one that will carry the BWL well into the future. In addition, Commissioner Smith also congratulated the Communications Department and BWL employees for the work that they have done and the commitment made to the CAUW campaign. BWL Charitable Foundation Calvin Jones, Governmental Relations Manager noted that J. Peter Lark, General Manager charged the Community Sponsorship Committee with the responsibility of responding to previously raised questions regarding the creation of a BWL foundation. As such, Cheval Breggins, Brandie Ekren and Calvin Jones with guidance by Mr. Lark composed the team that reviewed and responded to the Commissioners initial inquiry. Mr. Jones reported that the BWL could establish a non-profit corporation (a 501(c)3 charitable foundation) through support and authorization from Lansing City Council. Currently, the BWL does not have the ability to charter its own foundation without permission from Lansing City Council. If the BWL wanted to proceed then it would have to go through Council's process in to further progress with this project. The committee concluded that the current BWL Community Sponsorship Committee process could accomplish much of the same benefits as a non-profit corporation without allocating additional costs in human resources towards the establishment and operation of a foundation. The BWL is a charitable giver in accordance with its sponsorship policy and Public Act 301 of 1969. In the past, the BWL has partnered with other agencies equipped to issue a charitable gift tax-deductible statement. The committee recommended that the BWL leave in place the existing sponsorship process of charitable giving. They also recommended that if the BWL wants to partake in some sponsorship activities then it partner with other already established 501(c)3 agencies. Regular Board Meeting November 27,2007 Page 30 of 39 Commissioner Smith noted that she was glad to receive the discussion because it was good to determine if the BWL should change its current structure and whether or not the BWL could form a foundation. Commissioner Smith thanked staff for its research efforts and went onto ask the following questions: 1) how would a 501(c)3 change the guidelines for those who come forth for charitable dollars and 2) is City Council's process similar to what was done with the BWL's Rules of Procedure? Mr. Jones noted that the governing body of the BWL's foundation would probably determine how the funds should be managed and/or allocated. In addition, it was further advised that the governing body would probably want membership on the foundation board. In response to the second question, Mr. Jones advised that he was unsure of Lansing City Council's exact process. However, City Council is a political process that could go a number of different directions. One of which might include input by City Council as to how the funds are expended, who would sit on the board, how many board members would there be, would Council sit on the board, etc. As a result, there could be a number of rules imposed on the process if a foundation were created, which is significantly different than what is currently being done at the BWL. The Committee of the Whole agreed with staff s recommendation and noted no need to change the existing process, as it appears to be working well for the BWL. There being no further business, the meeting adjourned at 6:11 p.m. Respectfully submitted, Robin M. Smith, Chair Committee of the Whole The report will be filed with the minutes of the November 27, 2007 Board meeting. HUMAN RESOURCE COMMITTEE November 19, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:35 p.m. on Monday, November 19, 2007. Human Resource Committee Chair, Julee Rodocker called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, Julee Rodocker and Sandra Zerkle. Absent: None Public Comment There were no public comments. Regular Board Meeting November 27,2007 Page 31 of 39 Director of Internal Audit Six Month Performance Review The Human Resource Committee conducted Susan Pifer, Director of Internal Audits six- month performance review at its previously held meeting on October 9, 2007. At the conclusion of said meeting, the committee passed a motion recommending a salary increase be forwarded to the full Board for consideration. The purpose of today's meeting involves the discussion of whether or not the salary increase should be in a base pay raise or a combination of base pay and lump sum. In response to Commissioner Graves' question, Director of Human Resources Denise Mulder noted that Board of Water and Light's (BWL) existing practice is that employees are given salary increases up to the market rate and anything over and above is given in a lump sum amount. It was clarified that the lump sum amount is a part of the pension calculation but it is not compounded. The Human Resource Department is currently reviewing this practice board wide for all employees. On motion by Commissioner Zerkle, seconded by Commissioner Cochran, the Human Resource Committee recommended that Susan Pifer, Director of Internal Audits receive a base pay salary increase. Discussion: After brief discussion, Commissioner Zerkle introduced a friendly amendment to note that Susan Pifer's base pay salary increase is 3.04% retroactive to September 26, 2007, which is her six-month anniversary date. In addition, the Commissioners also asked if the BWL is looking at changing the policy for the rest of the organization? Ms. Mulder noted that the BWL is reviewing its entire salary administration program and how it will be administered in a going forward basis. In response to an additional question, Ms. Mulder noted that they would take into consideration the actions taken at today's meeting relative to existing salary practices and the remaining organization. Action: Carried unanimously. There being no further business, the meeting adjourned at 4:42 p.m. Respectfully submitted, Julee M. Rodocker, Chair Human Resource Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. MANAGER'S RECOMMENDATIONS esolutlon 2007-11- A. Public Hearing for 2008 Rate Increases Regular Board Meeting November 27,2007 Page 32 of 39 WHEREAS, the Corporate Financial Targets for each of the Lansing Board of Water and Light's strategic business units is 4%return on net fixed assets; and WHEREAS, the fiscal Year 2008 budget filed with the City of Lansing included the following proposed rate increases: Electric Utility Customers 4%, Water Utility Customers 6% and Steam Utility Customers 6%, to become effective January 1, 20083 and WHEREAS, the proposed Fiscal Year 2008 budget with the proposed rate increases as filed would result in a combined net loss for the year of$5.6 million; and WHEREAS, based on the information presented at the November 6, 2007, Finance Committee meeting, an additional 3%rate increase for the electric utility customers, and an additional 1% rate increase for the water utility customers is necessary in order to begin addressing future infrastructure concerns, in particular with respect to generation plant replacement and lead service replacement and environmental requirements; and WHEREAS, the proposed rate increases for the Fiscal Year 2008 budget would take effect no earlier than March 1, 2008. RESOLVED, the proposed rate increase of 7% for electric, 7% for water and 6% for steam will be subject to further consideration after a public hearing is held. FURTHER RESOLVED, that the Board of Commissioners hereby sets the date of Thursday Monday, January 21, 2008 at 5:30 p.m. for a public hearing to solicit public input on the proposed 7% electric, 7%water and 6% steam rate adjustments. The hearing will be held in the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the City Clerk no later than December 7, 2007, information regarding proposed rate increases with an effective date of March 1, 2008. -------------------- Staf Comment: The Finance Committee agreed with this proposed resolution at its November 6, 2007, meeting and sent it to the full Board for approval. A notice of a Public Hearing for the proposed rate increases will be published no later than December 7, 2007. -------------------- Susan Devon, Chief Financial Officer noted that the correct hearing date is Monday, January 21, 2008. Motion by Commissioner Kramer, seconded by Commissioner Graves to adopt the resolution to approve the Public Hearing Date of Monday, January 21, 2008, on proposed Regular Board Meeting November 27,2007 Page 33 of 39 rate increases for electric, water, and steam; and to authorize the Corporate Secretary to file information with the City Clerk by December 7, 2007. Discussion: Commissioner Smith noted that during the rate discussion there was change in the proposed rates that would place the BWL inline with the 10-year forecast and where the organization desires to be at such time. Action: Carried unanimously. A copy of the Financial Plan Update FY 2008—20013, 6 Year Forecast dated November 27, 2007 is on file in the Office of the Corporate Secretary. (Attachment) esolution.20©7-11-3 B. Public Act 141 —Customer Choice WHEREAS, Public Act 141 of 2000 was enacted by the Michigan Legislature and became effective on June 5, 2000, and was intended to permit customers of electric utilities in Michigan the opportunity to receive electric generation service from an alternate electric supplier; and WHEREAS, Section 10y of Public Act 141 of 2000 applies to Michigan's municipally owned electric utilities; and WHEREAS, Section I Oy of Public Act 141 of 2000 requires the governing board of a municipal electric utility to determine whether it will permit all customers located outside the boundary of the municipality that owns the utility and receiving electric delivery service from the municipal utility the opportunity to receive electric generation service from an alternate electric supplier; and WHEREAS, the Lansing Board of Water and Light has customers located outside of Lansing's boundaries who take electric delivery service from the Lansing Board of Water and Light and would be eligible to take electric generation service from an alternate electric supplier, if the Board made such a determination; and WHEREAS, no customer has indicated an interest in purchasing power from an alternate electric supplier, and the cost of developing and implementing a customer choice program for Lansing Board of Water and Light customers located outside of Lansing's boundary would be substantial, would allow for selective marketing to some customers but not provide an opportunity to choose an alternative electric supplier to all customers, and would raise rates for all Lansing Board of Water and Light customers. NOW THEREFORE, BE IT RESOLVED, the Board of Commissioners at this time declines to permit electric customers located outside Lansing's boundaries from taking electric generation service from an alternate electric supplier. -------------------- Regular Board Meeting November 27,2007 Page 34 of 39 Staff Comments: Public Act 141 of 2000 allowed customers of electric utilities the option of taking electric generation service from an alternate, or competitive, electric supplier. An alternate electric supplier is a non-utility, non-regulated, firm that is licensed by the Michigan Public Service Commission to sell electricity(electric generation service) to customers of an electric utility. Section 10y of the Act applies to municipally-owned electric utilities but delayed any impact until after December 31, 2007. The Act requires the governing board of a municipally-owned utility to determine whether to permit its customers the opportunity of taking electric generation service from an alternate electric supplier. This provision applies to the Lansing Board of Water and Light (LBWL). Section 10y identifies two distinct groups of municipal electric customers: those located within the municipal's legal boundary and those located outside that boundary. The Act also identifies two distinct electric services: electricity delivery(distribution service) and electric generation service. Section 10y, and therefore Act 141, applies only to those customers of the LBWL that are located outside of the City's boundaries. The Act does not specifically mention 425 agreements, but it seems likely that these areas would be considered within the municipal's boundary. The Commissioners must decide whether to allow LBWL customers located outside of Lansing's boundary the option to choose to receive electric generation service from an alternate electric supplier. If it does not allow customers located outside of Lansing's boundary the option of choosing to receive electric generation service from an alternate electric supplier, the Act would allow another utility to provide electric delivery service to customers located outside of the City's boundary. A decision by the Commissioners to allow customers located outside of Lansing's boundary the,opportunity to switch electric generation service to an alternate electric supplier would require the LBWL staff to invest substantial time and resources in developing appropriate tariffs, terms and conditions of service, dispute resolution procedures, billing changes, and make additional metering investment. Allowing customers to choose another electric generation supplier would also permit an alternate electric supplier to selectively market to some customers, those that have a low cost to serve, and avoid customers who may cost more to serve. The selective marketing by alternative electric suppliers and costs associated with offering a customer choice program would increase the cost of serving all of LBWL's customers. For these reasons, LBWL staff recommends that the Commissioners not allow customers located outside of Lansing's boundary to choose an alternative electric supplier. Act 141 permits the Commissioners to deny alternative electric suppliers from providing electric generation service to LBWL customers located outside of Lansing's boundary, but, in so doing, it could provide an opportunity for those customers to switch to another utility for electric delivery service. This possibility, however, is practically non-existent for three reasons. First, if another utility seeks to serve an existing LBWL customer, it Regular Board Meeting November 27,2007 Page 35 of 39 must secure a certificate of convenience and need from the Michigan Public Service Commission, as required by 1929 Public Act 69. Act 69 was intended to avoid duplication of utility investment. If a utility applies for an Act 69 certificate, the LBWL would have an opportunity to intervene in the proceeding and contest the need for a certificate. Second, Act 141 provides the LBWL with the option to operate under R 460.3411 (Rule 411) of the Michigan Public Service Commission's rules. Rule 411 governs which utility is allowed to serve a customer when two or more utilities operate in the same area. One provision of Rule 411 prohibits existing customers from switching from one utility to another. Third, the only utility adjacent to the LBWL and which could provide electric delivery service to an existing LBWL customer is Consumers Energy. Since Consumers Energy's rates are significantly higher than LBWL rates, there would appear to be no incentive for LBWL customers to switch to Consumers Energy electric delivery service. Based upon the protections offered by Act 69, Rule 411, and the rate differential between LBWL and Consumers Energy, we recommend that the Commissioners not permit customers located outside of Lansing's boundaries the opportunity to take service from an alternate electric supplier. -------------------- Motion by Commissioner Rodocker, seconded by Commissioner Graves to adopt the resolution to accept the manager's recommendation regarding Public Act 141, Section 10y, as it pertains to customer choice. Discussion: Commissioner Smith noted that she believes staffs recommendation regarding Public Act 141, Section IOy is in the best interest of the BWL. Action: Carried unanimously. UNFINISHED BUSINESS Commissioner Smith advised that when the Board received their internal audit report they then asked for more diversity. It was noted that there are minority owned companies who can fulfill those needs but the Board has not seen it in the Retiree Benefit Plan and Trust (VEBA). In response to a clarification regarding the passing of Proposal 2 and the BWL's inability to hire based on minority status; Commissioner Smith agreed that one could not hire based on minority status. However, one can seek out persons who meet the qualifications and are also minority owned. J. Peter Lark, General Manager advised that he was not completely familiar with the Board's discussion. However, the BWL Diversity Council was created to aggressively Regular Board Meeting November 27,2007 Page 36 of 39 address those issues. In addition, Mr. Lark also reported that he is currently enrolled in an eight month CEO diversity training program scheduled to begin in 2008. Susan Devon further advised that the Diversity Council is composed of Cheval Breggins, Calvin Jones, Amy Ranno and herself. The council has already begun to meet to discuss diversity issues relative to the BWL. Ms. Devon also noted that she met with Brandie Ekren, Associate Attorney to discuss the parameters surrounding Proposal 2. NEW BUSINESS None. RESOLUTIONS esolution`2007--11- A. SIX-MONTH PERFORMANCE INCREASE FOR DIRECTOR OF INTERNAL AUDITS WHEREAS, the Human Resource Committee conducted the six-month performance review for Director of Internal Audits Susan M. Pifer on October 9, 2007 and thereby recommended a performance increase; and WHEREAS, the percentage increase of 3.04% is representative of a compiled average of the recommended salary adjustment from the Board of Commissioners. RESOLVED, That the Board approve a 3.04% salary base pay performance increase effective September 26, 2007 for Director of Internal Audits Susan M. Pifer as permitted by the employment agreement entered into between the Board of Commissioners and Ms. Pifer at the time of her employment. ------------------------ Motion by Commissioner Smith, seconded by Commissioner Rodocker to adopt the resolution regarding the Six-month Performance Increase for the Director of Internal Audits. Discussion: Commissioner Smith noted that the Director of Internal Audits has a great attention to detail and she believes that Ms. Pifer will serve the Board well. Action: Carried unanimously. esolution 2007-11 B. Resolution by the Board of Commissioners Regular Board Meeting November 27,2007 Page 37 of 39 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 of Commissioners for the calendar year shall be adopted in November. RESOLVED, That regular meetings of the Board of Commissioners are hereby set for calendar year 2008 as follows, unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2008 Tuesday January 22 Tuesday March 25 Tuesday May 27 Tuesday July 22 Tuesday September 23 Tuesday November 25 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 6, 2008. ----------------- Motion by Commissioner Graves, seconded by Commissioner Zerkle to adopt the resolution to approve the Board Meeting Dates for Calendar Year 2008. Action: Carried unanimously. Osolution 2007--11- C. Acceptance of Plante & Moran as Vendor for Internal Control Assessment for SAP Enterprise Risk Planninlz Financials Implementation WHEREAS, the Commissioners of the Lansing Board of Water and Light adopted Resolution 2007-5-13 on May 22, 2007, which recommended that the Internal Auditor solicit a Request for Proposal (RFP) for an internal control assessment for the Board's SAP Enterprise Risk Planning (ERA) Financials implementation, and WHEREAS, the Internal Auditor, in conjunction with General Accounting, conducted research and completed an RFP for SAP Controls Assessment for ERP Financials, and Regular Board Meeting November 27,2007 Page 38 of 39 WHEREAS, the Finance Committee reviewed such RFP and determined that the Internal Auditor may move forward with its solicitation and the evaluation of proposals, it is RECOMMENDED, that the Finance Committee accept Plante &Moran as the selected vendor for the engagement and that the Internal Auditor move forward to schedule and manage the engagement with the selected vendor. -------------------- Staff Comments: The Finance Committee agreed with this recommendation at its meeting on November 6, 2007, and sent it to the full Board for approval. -------------------- Motion by Commissioner Kramer, seconded by Commissioner Graves, to adopt the resolution to accept Plante &Moran as the vendor for Internal Control Assessment for SAP Enterprise Risk Planning Financials Implementation. Action: Carried unanimously. MANAGER'S REMARKS Peter Lark announced that the BWL was a proud sponsor of Silver Bells in the City and will also be a sponsor of the Toys for Tots program. In keeping with the holiday spirit, the BWL will host a holiday party on December 6, 2007. COMMISSIONERS' REMARKS Commissioner James extended gratitude to Commissioner Smith for her service and leadership on the Board of Commissioners. It was noted that Commissioner Smith's tenure on the Board would soon end due to new Commissioner appointments. As such, Tony DeLuca and Frank Lain were recognized and asked to stand in acknowledgement of their pending appointment to the Board of Commissioners. Commissioner Graves advised that it had been a pleasure working with Commissioner Smith. He further noted his appreciation for the leadership that she had brought to the Board and wished her well in future endeavors. Commissioner Smith thanked staff members, Commissioners, and the Mayor. She also thanked everyone for there support during her father's illness and noted the special gratitude held during the Thanksgiving holiday season. She expressed appreciation for the rich opportunity to participate in the selection of the General Manager, Corporate Secretary and Director of Internal Audits. Commissioner Smith also noted that the BWL is in good hands and she anticipates a bright future for the organization. EXCUSED ABSENCES Regular Board Meeting November 27,2007 Page 39 of 39 On motion by Commissioner Graves, seconded by Commissioner Smith, to excuse the absence of Commissioner Robert Cochran. Action: Carried unanimously. PUBLIC COMMENTS There were no public comments. ADJOURNMENT On motion by Commissioner Smith, seconded by Commissioner Graves, the meeting adjourned at 6:10 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk December 5, 2007 Financial Plan Update FY 2008 — 2013 6 Year Forecast Board Meeting November 27 , 2007 Corporate Financial Goal Resolve that the corporate financial goal for the BWL Strategic business units be as follows : Return on Assets target of > 4. 0% on Assets (Net income divided by net fixed assets) Board of Commissioner' Meeting Tuesday, March 23, 1999 WATER&LIGHT MW 2 Financial Goal > 4% on Net Assets By Utility: Net Income Requirement Average Annual Income Requirement Electric ~ $ 11 Million Water ~ $ 8 Million Steam ~ $ 1 Million Chilled Water ~ 1 Million Total $20 Million Mw LANSING BOARD OF WATER&LIGHT 0 FY 2008-FY2013 Financial Projections As presented to the Board May 22, 2007 4 Financial Projections Rate Increases Reflected in 2008-2013 Forecast FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Rate Increase: Electric -incrs. In January 4.00% 3.00% 2.50% 2.50% 2.50% 2.50% Water- incrs. In January 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% Steam - incrs. In January 6.00% 7.50% 7.50% 7.50% 7.50% 7.50% Chilled Water-incrs in July 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% WATER&UCJ-IT Mw 5 Financial Projections 2008-2013 Forecast: Net Income FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Total 08-13 6 Yr Goal 4% Net Income(Loss): Electric $ (2,970) $ 3,243 $ 2,439 $ 4,883 $ 9,409 $ 12,036 $ 29,041 $ 64,000 Water $ (1,068) $ (984) $ (354) $ 246 $ 1,087 $ 1,916 $ 843 $ 4500 Steam $ (769) $ (773) $ (603) $ (882) $ (856) $ (279) $ (4,162) $ 3,900 Chilled Water $ (963) $ (765) $ (697) $ (657) $ (600) $ (552) $ (4,233) $ 5,500 Total Net Income $ (5,770) $ 721 $ 785 $ 39590 $ 99041 $ 13,120 $ 21,489 $ 118,400 WATER&LIGHT MwNote: Using Assumptions from May, 2007 projections 6 Financial Projections 2008-2013 Forecast: Return on Fixed Assets FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Total 08-13 6 Yr Goal 4% @ year Return on Net Fixed Assets: Electric -1.14% 1.23% 0.92% 1.85% 3.54% 4.39% 10.79% 24.00% Water -0.64% -0.55% -0.19% 0.13% 0.54% 0.94% 0.24% 24.00% Steam -3.24% -3.68% -3.25% -5.85% -7.39% -3.47% -26.88% 24.00% Chilled Water -3.62% -3.05% -2.96% -2.99% -2.96% -2.95% -18.54% 24.00% Total -1.20% 0.15% 0.16% 0.72% 1.81% 2.60%1 4.24%1 24.0% WATER&UGHT mm, Note: Using Assumptions from May, 2007 projections 7 Financial Projections 2008-2013 Forecast: Cash Flow FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Total08-13 Projected Cash Flow: Net Income(Loss) (5,770) 721 785 3,590 9,041 13,120 21,489 Depreciation 31,946 34,641 36,143 37,894 39,326 40,981 220,931 Bond Proceeds 19,500 9,750 9,750 0 0 0 39,000 Other Sources of Cash 0 (2,120) (2,120) 8,480 (2,120) (2,120) 0 Total Sources of Cash 45,676 42,992 44,559 49,965 46,247 51,982 281,420 Debt Service (5,887) (6,222) (6,185) (6,387) (6,587) (6,797) (38,066) Capital Expenditures(N (49,157) (44,579) (41,986) (37,995) (41,958) (47,011) (262,686) Other Uses of Cash (1,637) (1,217) (1,976) 1( ,9761 (3,708) (2,000) (12,513) Total Uses of Cash (56,680) (52,018) (50,147) (46,358) (52,253) (55,808) (313,265) Cash Excess(Deficit) (11,004) (9,026) (5,588) 3,606 (6,006) (3,826) (31,845) Cash Excess (Deficit) by Utility: Electric $ (9,787) $ (3,283) $ (3,021) $ 466 $ 1,534 $ (727) $ (14,818) Water $ 3,259 $ (5,332) $ (1,939) $ (7,651) $ (7,864) $ (3,957) $ (23,484) Steam $ (3,947) $ (372) $ (277) $ 11,071 $ 530 $ 1,115 $ 8,120 Chilled Water $ (529) $ (39) $ (350) $ (280) $ (206) $ (258) $ (1,662) Cash Excess Deficit $ 11,004 $ 9,026 S 5,588 $ 3,606 $ 6,006 3,826 S 31,845 WATER\LIGHT on Note: Using Assumptions from May, 2007 projections 8 FY2008 -FY2013 Debt r Se vice F, --LB- WL Debt Service For Fiscal Years ended 2008-2013 $12,000 $10,000 _ $8,000 c� $6,000 O +M+ $4,000 C $2,000 2008 2009 2010 2011 2012 2013 ■ Principal $5,887 $5,472 $5,435 $5,637 $5,837 $6,047 ® Interest $4,178 $3,946 $3,723 $3,500 $3,278 $3,029 \HATER&LIGHT MWNote: Excludes Bonded debt payment on Combined Utilities Complex, received from GM 9 FY2008-FY2013 Capital Budget & Annual Depreciation LBWL Capital Budget For Fiscal Years ended 2008-2013 $60,000 N $50,000 $40,000 $30,000 O $20,000 $10,000 C 2008 2009 2010 2011 2012 2013 0 Bectric $26,136 $26,068 $25,558 $25,652 $28,414 $36,190 �ill Water $18,935 $17,170 $14,766 $11,733 $13,043 $10,277 0 Steam $3,687 $1,035 $1,355 $378 $350 $344 Chilled Water $399 $306 $307 $232 $151 $200 ® -Ann. Depreciation 31,946 34,641 36,143 37,894 39,326 40,981 WATT Note: Common Capital expenditures are allocated to utilities based on net Fixed Assets Mw 10 June 30, 2007 Cash Balances Cash Balances as of June 30 2007: Current Funds Operating, Receiving, Bond &Interest $ 66,121,180 Designated Funds: Coal Fluctuation $ 3,909,002 Uninsured Losses $ 16,315,060 Future Water Facilities $ 3,186,026 $ 23,410,088 Non-Current Funds: CW Bond funds $ 1,807,814 Bond Reserve $ 10,386,050 Bond Redemption $ 14,122,693 Total 115 847 824 *indicates fully or partially restricted funds Restricted and Non-Restricted Funds Balance Restricted* Desi nated** Non-Restricted M Operating Funds $ 66,092,961 $ 19,794,600 $ 46,298,361 Arbitrage Rebate Fund $ 28,219 $ 28,219 $ - Designated Funds $ 23,410,088 $ 23,410,088 $ - CW Bond fimds $ 1,807,814 $ 1,807,814 $ - Bond Reserve $ 10,386,050 $ 9,916,541 $ 469,509 Bond Redemption $ 14,122,693 $ 12,954,880 $ 1,167,813 Total $ 115,847,824 $ 44,502,054 $ 23,410,088 $ 47,935,683 NWTER&UCd-IT *The restricted portions of these funds are required by Bond Resolution,seepage 18,Footnote 4 of the LBWL Enterprise Fund Audit dater!June 30,2007 11 MM, **Designated funds have been established by Board resolution and inchide funds designated for Coal Fluctuation,Unisured Losses and Future Water Facilities WATER&LIGHT 0 0000;0Financial Report Three Months Ended September 30, 2007 12 Variance in Net Operating Income Fiscal Year to Date September, 2007 Compared to Budget approved - May 22, 2007 ($000) Budgeted Net Income (705) Changes in Operating Income: Net Retail Electric 3,407 Net Wholesale Electric 1,973 Net Water Sales 239 Net Steam Sales (152) Depreciation 759 Veba Allocation - under budget 846 O&M Expenses Permanent identified-FYTD (573) Temporary Timing differences 911 ECA Timing Difference 338 All Other- Operating Variances 140 Subtotal Changes in Operating Income 7,888 Changes in Other Income: Interest Earnings 598 Other Income 228 Additional PILOT (289) All Other- Non-Operating Variances 53 Subtotal Changes in Other Income 590 WATER&UGHT Actual Net Income 7,773 13 Revised Net Income Projection FY2008 (OOOS) Net Income - Original Budget - Annual $ (51769) FYTD ($705loss + $7,773 over budget) - Quarter $ 8,478 Less Temporary effects (timing differences) ECA Adjustment $ (338) Temporary O & M Variances $ (911) Other Adjustments - Remainder of FY08: Net Increase in Electric Wholesale Sales $ 1,868 Net Increase in Electric Industrial Sales $ 427 Net Reduction in Water Industrial Sales $ (198) Net reduction in Steam Commercial Sales $ (376) Effect of delaying rate increase from January to March $ (1,305) Remove Interest from Belle River Project $ (4,000) Revenue from S02 trade (non-cash) $ 2,275 Anticipated 0 & M Overages $ (2,155) Remaining VEBA Variance $ 3,171 VVATER&LlUiT Projected Net Income $ 11168 Mw 14 4% Return on Net Fixed Assets In '$000's Net Fixed Assets as of September, 2007 : $ 508,933 X 4% Target ROA $ 20,357 Through September, 2007: Revised Projected FY2008 Net Income: $ 1 168 Net Fixed Assets as of September, 2007: $ 508,933 Resulting ROA 0.2% WATER&LIGHT MM- 15 FY2008 Cash Deficit Based on revised projected Net Income FY2008 Revised Budget Projection* Projected Cash Flow: Net Income (Loss) (5,770) 1,168 Depreciation 311946 31 J 87 Bond Proceeds 191500 191500 Other Sources of Cash 0 0 Total Sources of Cash 45,676 519855 Debt Service (5,887) (5,887) Capital Expenditures (Net) (49,157) (49,157) Other Uses of Cash 1 637 1,637) Total Uses of Cash (569680) (569680) Cash Excess (Deficit) (119004) (49825) WATER UGHT MM, 16 Recommended 2008 rateincreases FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Total08-13 Rate Increase: Electric 7.00% 3.00% 2.50% 2.50% 2.50% 2.50% 20.00% Water 7.00% 6.00% 6.00% 6.00% 6.00% 6.00% 37.00% Steam 6.00% 7.50% 7.50% 7.50% 7.50% 7.50% 43.50% Chilled Water 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% 15.00% Note: FY08 increase in March, FY2009-2013 in July not compounded Net Income (Loss): Electric $ (1,805) $ 8,478 $ 7,585 $ 11,488 $ 14,861 $ 18,043 $ 58,650 Water $ (1,029) $ (596) $ (3) $ 614 $ 1,500 $ 2,399 $ 2,884 Steam $ (791) $ (386) $ (240) $ (511) $ (467) $ 145 $ (2,251) Chilled Water $ (906) $ (862) $ (820) $ (787) $ (728) $ (671) $ (4,773) Total Net Income $ (4,531) $ 6,634 $ 6,522 $ 10,805 $ 15,166 $ 19,916 $ 54,511 Rate of Return: Electric -0.7% 3.2% 2.9% 4.3% 5.6% 6.6% Water -0.6% -0.3% 0.0% 0.3% 0.7% 1.2% Steam -3.3% -1.8% -1.3% -3.4% -4.0% 1.8% Chilled Water -3.4% -3.4% -3.5% -3.6% -3.6% -3.6% Combined ROR -0.9% 1.4% 1.3% 2.2% 3.0% 3.9% Cash Excess (Deficit): Electric $ (9,348) $ 386 $ 2,075 $ 5,725 $ 10,544 $ 5,280 $ 14,661 Water $ 3,298 $ (14,694) $ (11,339) $ (7,282) $ (7,451) $ (3,474) $ (40,942) Steam $ (3,970) $ 2,134 $ 2,206 $ 15,062 $ 3,039 $ 3,660 $ 22,131 Chilled Water $ (472) $ (136) $ (473) $ (410) $ (335) $ (377) $ (2,202) Total Cash Excess (Deficit) $ (10,492) $ (12,310) $ (7,530) $ 13,095 $ 5,796 $ 5,089 $ (6,352) WATER&LIC iT mm, 17 Effect of Rate Increase on Monthly Bills ELECTRIC: Based On Monthly Useage of (kwli)--> 500 750 1000 Current Rate* $ 39.98 $ 58.84 $ 77.70 7.0% Rate increase $ 42.59 $ 62.67 $ 82.76 Increase over current rates---> $ 2.61 $ 3.83 $ 5.06 *Includes LCA as of October, 2007 WATER: Based On Monthly Useage of (ccf)--> 4 5 6 Current Rate $ 13.75 $ 15.43 $ 17.11 7.0% Rate increase $ 14.72 $ 16.52 $ 18.32 Increase over current rates---> $ 0.97 $ 1.09 $ 1.21 STEAM: Based On Monthly Useage of (m1h)--> 100 400 1000 Current Rate $ 961 $ 3,925 $ 9,961 6.0% Rate increase $ 1,019 $ 4,160 $ 10,556 Increase over current rates---> $ 58 $ 235 $ 595 WATER\LIGHT mm 18 Comparison of Electric Residential Monthly bill to Consumers Energy 500 kWh 750 kWh 1 )000 kWh BWL-current* $39.98 $58.84 $77.70 Consumers $48.46 $72.68 $96.91 Differential 17.51% 19.04% 19.82% BWL +7% incr* $42.59 $62.67 $82.76 Consumers +7.5% $52.09 $78. 13 $ 104. 18 Differential 18.25% 19.78% 20.56% *BWL Current Rates including October, 2007 ECA WATERSLIGHT Mw 19 Rate increase timeline: including Public Hearing, publication and filing dates Last Day for Public Hearing 30 days prior For Rate Adjustments Effective Thursday, January 31, 2008 Saturday, March 01, 2008 d Back up to one day prior to scheduled Board Meeting (1122108) since board approval is required Last Day for Filing Notice after hearing date 45 days prior Monday, January 21, 2008 01 Friday, December 07, 2007 _ Kew: Filing & Publication Deadline 4 December, 07, 2007 -Public Hearing Date 4 January 21, 2008 -Board Meeting to Review Public Hearing comments 4 January 22, 2008 -Rate Adjustments Effective 4 March 1, 2008 WATER&LIGHT MW 20 History of Rate increases : Average System Date Increase Electric: Jan-98 to 2000 0.0% Jan-01 3.0% Total Cummulative % 14.2% Jan-02 3.0% Ave over 10 years 1.42% Jan-03 3.0% Jul-05 3.0% Sep-06 1.5% Water: Jan-98 to 2000 0.0% Jan-01 7.0% Total Cummulative % 35.1% Jan-02 6.0% Ave over 10 years 3.51% Jan-03 5.0% Jul-05 6.5% Jul-06 6.5% Steam: Jan-98 to 2000 0.0% (Rate 1 only) Jan-01 3.0% Total Cummulative % 47.5% Jan-02 3.0% Ave over 10 years 4.75010 Jan-03 3.0% Sep-06 35.0% WATE� Note: Average inflation for ten years ended June, 2007 = 3.01 MwSource: Bureau of Labor Statistics, Detroit-Ann Arbor-Flint, Metro region 21 Preliminary—Subject to Board Approval on January 22, 2008 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT �a Tuesday, November 27, 2007 0 t`y The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. — Fi Present: Commissioners Joseph Graves, Semone James, Peter Kramer, Julee Rodocker, Robin Smith and Sandra Zerkle. Absent: Commissioner Robert Cochran. (Note: 4ch Ward vacancy exists.) The Secretary declared a quorum present. Chairperson James asked all to rise for the Pledge of Allegiance to the Flag. Chairperson James called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES By motion of Commissioner Graves, seconded by Commissioner Smith the minutes of the September 25, 2007 regular meeting and November 6, 2007 special board 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. There were no public comments. COMMUNICATIONS Letter dated November 6, 2007, from Santiago Rios stating his resignation from the Board of Commissioners effective immediately. Received and placed on file. Regular Board Meeting November 27,2007 Page 2 of 39 COMMITTEE REPORTS EXECUTIVE COMMITTEE October 8, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 11:30 a.m. on T iesda Monday, October 8, 2007. Executive Committee Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Santiago Rios, and Robin Smith. Commissioner Graves was also present. Absent: None Public Comments There were no public comments. Discuss Pending Litigation Moved by Commissioner James, seconded by Commissioner Cochran to go into executive session to discuss a pending litigation with outside counsel, Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (11:39 a.m.). The roll was called. Yeas: Commissioners Cochran, Graves, James, Rios, and Smith. Nays: None. Absent: None Carried unanimously. Moved by Commissioner Graves, seconded by Commissioner Cochran that the Executive Committee return to open session. Carried unanimously. The Executive Committee meeting reconvened in open session at 12:22 p.m. Commissioner Rios advised that the Executive Committee received an update regarding pending litigation. There being no further business, the meeting adjourned at 12:23 p.m. Respectfully submitted, Santiago Rios, Chair Regular Board Meeting November 27,2007 Page 3 of 39 Executive Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. HUMAN RESOURCE COMMITTEE October 9, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:20 p.m. on Tuesday, October 9, 2007. Human Resource Committee Chair, Julee Rodocker called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Julee Rodocker and Sandra Zerkle. Absent: Commissioner Joseph Graves. Public Comment There were no public comments. Director of Internal Audit Six-month Review Susan Pifer, Director of Internal Audit and Board appointee requested a closed session for the purpose of receiving her six-month performance review as permitted by Open Meetings Act exemption MCL 15.268(a). (4:22 p.m.) The roll was called. Yeas: Commissioners Cochran, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Graves. Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Zerkle that the Human Resource Committee return to open session. Carried unanimously. The Human Resource Committee meeting reconvened in open session at 4:48 p.m. On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommended that the salary increase package for Susan Pifer, Director of Internal Audit be forwarded to the full Board for discussion. Action: Carried unanimously There being no further business, the meeting adjourned at 5:19 p.m. Regular Board Meeting November 27,2007 Page 4 of 39 Respectfully submitted, Julee M. Rodocker, Chair Human Resource Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. AD HOC COMMITTEE October 11, 2007 The Ad Hoc Committee on Workforce Development met at the Executive Offices, Lansing, beginning at 11:00 a.m. on Thursday, October 11, 2007. Ad Hoc Committee Chair, Sandra Zerkle called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Santiago Rios, and Sandra Zerkle. Alternate committee member Joseph Graves was also present. Absent: Commissioner Julee Rodocker Public Comments There were no public comments. CSO Project Doug Wood, Director of Engineering provided the committee with information relevant to the Board of Water and Light's (BWL) role and participation in the Combined Sewer Overflow (CSO) Project. The BWL spent$6,000,000 this year in four areas and is expected to spend approximately$8,000,000 next year in nine areas. Per unit costs are equivalent to a foot of main, which is all-inclusive but does not include changes made in the field. The Public Service Department manages the project on behalf of the City of Lansing and Tetratech is the design consultant and been since the projects inception. Some of the additional information highlighted by Mr. Wood includes the following: • With additional staffing and equipment, the BWL could perform any or all of the water main work that the CSO contractors now perform. • Approximate annual expenditures paid to the City of Lansing for water main work in the last few years range from$3,500,00 to $6,000,000. • Based on historical comparisons there may not be any savings to BWL customers. However, it would allow the development of new employees to replace those retiring within the next few years. • The City would likely be concerned with two different construction forces working in the same streets. Regular Board Meeting November 27,2007 Page 5 of 39 • The State Revolving Fund (SRF) advantage may be lost to the BWL if the BWL performs the work. • CSO related work stops in November and starts back in the spring. This may be a staffing concern as BWL Water T&D Maintenance is essentially completing current staffing. After lengthy discussion, the Ad Hoc Committee directed staff to draft a letter to the appropriate parties indicating the BWL's interest in establishing dialogue to discuss its ability to do some of the CSO work. The City and the BWL share the same objective in wanting to serve its customers in the most effective and efficient means possible. Therefore, the letter will reflect the BWL's proactive interest in possibly addressing the task at hand. It was also noted that the BWL might propose working in one area as a demonstration of its ability to handle the task, which might involve the creation of one water crew (4-5 persons) who could also be utilized on other BWL projects as well. In addition, staff will also develop a business plan to determine the feasibility of either doing some, all or none of the CSO work in a cost effective and competitive manner. Master Plumbers Dick Peffley, Executive Director of Operations gave a verbal update regarding Master Plumbers in relation to the Lead Service Replacement Program. When replacing a lead service, the BWL chops off the service line on the customer's side of the meter, installs a new service line, and reconnects the service. A plumber is then called to make the final termination to the customers plumbing, as the BWL is not allowed to work on the customer's side of the meter because it is a violation of the City and State plumbing code. The former General Manager previously approached the City to obtain a variance to work 2 or 3 feet down from the meter to allow the BWL to reconnect the meter and provide one stop shopping. However, the variance was denied because the BWL is not licensed. If the variance had been approved then the BWL would have hired a master plumber as part of the licensing requirement. Currently, there are two individuals in the bargaining unit willing to take a license. In addition, the BWL could decide to become a master plumber contractor by establishing a limited liability corporation (LLC). The LLC would allow the BWL to file for full permits, perform work on BWL facilities, and have a master plumber on staff. Mr. Peffley is in the process of researching additional information regarding the above matter. Commissioner Rios noted that he viewed the topic from a broader perspective in that the BWL's creditability is paramount in terms of any work that it performs. It appears that the BWL should have the highest possible certification available relative to its ability to do water work. A master plumber on staff serves the BWL in terms of creditability, general work, and contract negotiations, i.e. CSO Project, Delta Township, etc. There is a significant amount of work done on BWL premises that is classified as plumbers work but contracted out to vendors, which raises the question of what can the BWL do more effectively and efficiently in house, if it had its own master plumber. In addition, the Ad Hoc Committee is seeking to develop the workforce and as such, they have discussed planning and developing people Regular Board Meeting November 27,2007 Page 6 of 39 Susan Pifer, Director of Internal Audit provided a handout entitled, "Vendor Analysis" and gave a brief overview of its contents. A complete copy of the handout dated October 6, 2007 is on file in the office of the Corporate Secretary. Some of the presentation highlights include the following: Assumptions • Reported payments to plumbing companies represent labor, tools and equipment (not materials) • Plumbing services provided by plumbing companies may be adequately performed or supervised by Board employees • Reported payments to (three) plumbing companies is representative of the work volume that a licensed employee-plumber (or plumbers) will perform • Average salaries do not include fringe benefits or tools and equipment required by a licensed plumber (or plumbers) Conclusions • 2007 meter connect and reconnects approached $160,000 in payments to John E. Green • Average salary for a master plumber in Lansing is $48,000 • Assuming 40% fringe benefit rate and a discount rate of 70% for billable hours, the annual cost for a master plumber employed by the BWL is $96,000 or 60% of the cost to contract meter connects and reconnects • Current contracts for heating, plumbing, valve installation and boilermakers to perform work on LBWL premises exceed $1 million Limitations • Michigan Compiled Law (MCL) 338.3525 provides that plumbing shall not be performed unless a"plumbing contractor" who is responsible for the work has secured a permit • MCL 338.3531 provides that only a sole proprietorship, partnership, corporate, or limited liability company may apply for licensure as a"plumbing contractor" • Although, MCL 338.3521 provides that licensure is not required for installation of pipe from the water main to the services, a permit and inspections are still required per MCL 338.3525(b) • MCL 338.3551 provides that where a business requires the regular employment of a plumber, a licensed master plumber shall be authorized to secure permits for installations of plumbing on the premises owned or occupied and used by the business Next Steps • Even if the Code is interpreted to prohibit meter connects and reconnects by an LBWL master plumber-employee, current contracts for plumbing on LBWL premises exceed $1 million • Special filings may permit a master plumber employed by LBWL to pull the permits and supervise on-premises work, e.g. City of Lansing master plumber Regular Board Meeting November 27,2007 Page 7 of 39 • Refer citations to general counsel for further interpretation regarding scope of work legally permissible for a master plumber-employee Ms. Pifer noted that the vendor analysis was a cursory level review. Additional research relative to the specific work conducted and the skill level of the employee conducting the work, i.e. master plumber,journeyman plumber, etc. may be required. Following the presentation materials, Dick Peffley noted that prior to the report a request to add two welders on staff was made for the purpose of succession planning and reducing the amount of contract work awarded to outside vendors. It was also clarified that a BWL master plumber can perform work on BWL facilities. In addition, there was also discussion as to what contractor work was performed by a master plumber and/or journeyman plumber pipe fitter. On recommendation by Commissioner Rios, it was suggested that the BWL investigate and move forward the hiring of a master plumber and journeyman in order to help increase the BWL's creditability in this area and build workforce development. In addition, Jim Dravenstat-Morceri, Assistant Business Manager of IBEW Local 352 recommended that the BWL search for a master plumber with heating and air conditioning credentials. The added skill level would allow the BWL to avoid contracting heating and air conditioning work. It was also noted that revenue generated from BWL inspections is credited to the general fund but should be reflected in Water Department revenue. Ron Byrnes, Business Manager of IBEW Local 352 also advised that the Water Department has not been given the resources, attention or direction necessary to be fully functional. Therefore, they have been unable to complete some of the tasks previously mentioned because they were not fully staffed. As such, he advised that there is enough work to justify a master plumber position and it should not piggyback another classification but should standalone by itself. J. Peter Lark, General Manager noted that there was a recent meeting in which he met with Water Department management to discuss the departments concerns. It is his belief that they are beginning to address those issues, which could include the addition of a master plumber. After further discussion, it was noted that the various suggestions are all ideas that can be explored. Updates Denise Mulder, Director of Human Resources provided updates on several topics that include the items listed below. Contract Language Re-establishing Groundsmen. The groundsmen position was previously used as a feeder role to the lineman helper. Lineman helper duties essentially combined the responsibilities of a truck driver and groundsmen. The lineman helper position eliminated approximately 15 years ago provided employees exposure to the Regular Board Meeting November 27,2007 Page 8 of 39 work conducted by a lineman. Therefore, if an employee were interested in that position then they would traditionally begin as a groundsman,become a lineman helper, and then apply for the lineman apprentice pool to become a lineman if they so desired. Presently, the BWL posts notices three times a year advertising all apprenticeships within the organization. In its current capacity, any employee is eligible to test and be considered for an apprenticeship position. It was suggested that the BWL consider re-establishing the groundsmen role to increase the number of candidates who successfully transition from an apprentice to a lineman. In addition, the committee also discussed utilizing a combined lineman helper program in which persons can either attrition from a groundsmen to lineman apprentice to lineman, or apply for the lineman apprenticeship regardless of their current work classification. As such, the combined program would allow the BWL to pull from the entire employee resource pool and prevent the program from becoming too limiting in nature. After further discussion and upon recommendation by Commissioner Zerkle, it was suggested that Denise Mulder and Ron Byrnes meet to discuss the issues and possible parameters of such a program. Commissioner Graves departed the meeting at 12:29 p.m. Erickson Training Facilities. No update was provided. High School Partnership for Training Linemen in Schools. The committee discussed the possibility of creating a high school partnership; whereas, persons could apply for a linemen helper position and possibly test to become a lineman apprentice. A program of this nature would allow the BWL to draw from the local population and expose the student body to a career in skilled trades. Concern was expressed relative to the concept of allowing high school participants to receive the higher salaried positions. As a result, it was suggested that giving student participants consideration regarding entry level BWL positions maybe more appropriate. The committee also discussed the necessity of expanding its recruiting efforts to build on the number of BWL lineman apprentices but to also increase the number of existing lineman on staff. Although, salaries are competitive it was noted that lineman have expressed concerns regarding the contribution amount for the BWL's defined contribution plan. Denise Mulder noted that the Human Resource Department have begun discussions regarding the improvement of recruiting efforts and the employment process, which may include advertising linemen positions in the upper peninsula. After further discussion and upon recommendation by Commissioner Zerkle, it was suggested that Denise Mulder and Ron Byrnes develop a plan that would address the re-creation of the groundsmen position (or lineman helper program) with the inclusion of a high school partnership program if feasible. In addition, discussions are taking place with Lansing Community College and Dr. T.C. Wallace, Superintendent of the Lansing School District to determine how the BWL might cultivate a partnership with each respective entity. Diversity Employee Recruitment. It was reported that former Diversity Administrator/Ombudsperson, Shan Shaw accepted a new position with another entity and is no longer with the BWL. However, prior to his departure a diversity plan was submitted to the General Manager per previous request. The plan addressed the need for the General Manager to make known to staff and management his interest in diversity. Regular Board Meeting November 27,2007 Page 9 of 39 Denise Mulder advised that diversity is not the responsibility of one but is driven by the employment process. Therefore, anyone who touches the employment process should understand diversity and develop a methodology to expand the BWL's recruiting efforts. Some of those efforts include periodic diversity training sessions and concentrated outreach. It was further noted that Peter Lark is scheduled to participate in an eight month CEO Program to enhance his knowledge of diversity. In addition, it was also suggested that the BWL attend Michigan Works Job Fairs and work with existing programs such as the Hope Scholarship and Junior Achievement in an effort to expand its recruiting efforts. Contract Work Back In-house. No update was provided. JTTC Survey. The Joint Technical Training Committee (JTTC) developed a survey, which was sent to every department that contains bargaining unit employees. The respective areas formed departmental training committees overseen by the JTTC in order to provide input. The JTTC will tabulate the survey results and forward recommendations to Denise Mulder who will review and evaluate the recommendations for submittal to senior management for further review. There being no further business, the meeting adjourned at 12:42 p.m. Respectfully submitted, Sandra Zerkle, Chair Ad Hoc Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. COMMITTEE OF THE WHOLE October 16, 2007 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 16, 2007. Committee of the Whole Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Peter Kramer, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioner Joseph Graves Public Comments Keith Harrison, Ronald Shull, and Paul David Arnold of the Sons of Union Veterans of the Civil War, Lansing/Sunfield Curtenius Guard Camp#17 presented a certificate of appreciation to members of the Board of Water and Light (BWL), Maintenance and Regular Board Meeting November 27,2007 Page 10 of 39 Construction Resource Center. The Sons of Union Veterans are charged with maintaining the memorials and graves sites of veterans located at the Mount Hope Cemetery. As such, five-months ago the organization undertook a project to refurnish the sites, which involved receiving assistance from the BWL in cleaning a 75' foot flag pole, power washing a 35' civil war monument, and raising headstones. In honor of their hard work and effort, certificates of appreciation were given to George Bibbings, Kathy Darr, James Munroe, Mark Nixon, Al Shaver, Brian Westfall, and Dennis Zerkle. The Sons of Union Veterans also noted the importance of community partnerships when working to address such large community projects. Background on Establishing a Foundation Dennis W. Fliehman, President of Capital Region Community Foundation (CRCF) in Lansing gave a brief overview of the CRCF and information pertaining to the parameters involved in establishing a foundation. The CRCF is a 501C3 public charity organization charged with the mission of improving the well being of persons in the tri-county area. The goal is primarily achieved by helping individuals and organizations establish permanent charitable endowment funds. The CRCF currently has approximately 300 endowment funds, which are received and invested by CRCF with a portion of the net income given to qualified charitable organizations. CRCF's is comprised of volunteer board members who are not compensated. Listed below are highlighted areas relative to two foundational structures. Private Foundation • Advantageous for organizations who want to exercise a great deal of control over all aspects of charitable giving; including the investment and supervision of money. • Additional staffing needs are typically necessary to manage the gifts, address governmental regulations, and file appropriate tax forms. Business Advised Fund • Advantageous for businesses who want the satisfaction of charitable giving without the administrative burden. • Gifts are made corporately or by individuals to a fund managed by CRCF. • The advisory committee for the respective fund is not allowed to invade the principle unless by extraordinary circumstance. The donation becomes the asset of the community foundation with direction from the BWL as to how it would like a portion of the net income distributed. Maximum distribution amount is 4% (or a total of 5% including the CRCF fee). • CRCF Fee— 1.25% annual fee based on the value of the fund, which allows CRCF to provide grants to numerous non-profit organizations in the community. • Investment Management Fee—Approximately 62 basis points that are prorated across all funds. • Fund Managers —There are eleven fund managers and CRCF has a fee based consultant, named Itech, Inc. that selects and monitors the managers on a quarterly basis. Asset allocation is 70% equity and 30% fixed. • Donations are tax deductible and if eligible one may receive a 50% tax credit on State of Michigan returns. Regular Board Meeting November 27,2007 Page I I of 39 • Minimum investment amount is $10,000. Following the presentation, the Board of Commissioners discussed the merits of a private foundation, a business advised fund, and a 5010 relative to the needs and goals of the BWL. It was suggested that the Board consider leaving their existing community sponsorship mechanism as is and raise additional funds to establish a private foundation. After further discussion, the Board directed staff to provide the following information: cost associated with establishing a private foundation, the amount of funds currently spent for community sponsorships including administrative costs, the amount spent on community sponsorships during the past 3-5 years, and the parameters and cost associated with establishing a 5010. Update on the Phoenix Project Robert Trezise, Jr., President of the Economic Development Corporation of the City of Lansing appeared before the Committee of the Whole to provide an update regarding the Phoenix Project. Accident Fund one of the largest private employers in the City of Lansing will build its corporate headquarters on the site of the former Ottawa Station. The development entitled, "Phoenix Project" is the largest economic development in the country partnering the City of Lansing, State of Michigan, Christman Company, Accident Fund and the BWL. The project that developed from a request for proposal process will involve the rehabilitation of Ottawa Station, the removal of the towers and chiller system, public ramp, and facilities just north of the Ottawa Station. The renovation of the above space will provide a Grand Avenue entrance and accessible riverfront. The development will be a union project, which is common amongst public entities but very unusual for private companies. In addition, the City also announced a massive urban village development project located across the river from Ottawa Station, which is a demonstration of the power of one major project. When discussing the diversification of the economy, new generations and businesses alike are competing for knowledge base labor forces and typically are interested in the urban environment or lack thereof. The development of said project will allow for the building of a true metropolitan area in the downtown cluster amongst state government. The total investment is estimated at $156 million with the Lansing Brownfield Redevelopment Authority and State of Michigan each contributing $34.9 million and $38 million respectively. The BWL will be requested to make a primary contribution to the project in the form of the conveyance of property on Grand Avenue from Ottawa Street to Shiawassee for a nominal fee of$1.00 or thereabouts. As such, the City will seek to have the BWL declare the area in question surplus property and remove the chiller system. It is anticipated that the BWL will not incur cost to relocate the chiller, as the Lansing Brownfield Redevelopment Authority and Christman Company are scheduled to bare said expense. In response to the Commissioners concerns pertaining to the level of secrecy regarding the project and the delayed manner in which the Board of Commissioners were advised of its specifics, Mr. Trezise explained the highly sensitive nature of the project due to Blue Cross Blue Shield (parent company) and Accident Fund's request. He also advised that a confidentiality agreement had been signed to help ensure that the project was not made public until deemed necessary and appropriate. Mr. Trezise apologized for the secrecy and the manner in which the Board was made aware of its role in said project. In response to a Regular Board Meeting November 27,2007 Page 12 of 39 prior question, Mr. Trezise also noted that the return on investment for the City of Lansing is $9 million (income tax return) and $6.7 million in direct cost. It was further advised that he did not know the return on investment for any of other participants in the project as of yet. Additionally, the City will not come forth regarding the conveyance of the Ottawa property until well into 2008. The Commissioners noted their excitement about the Phoenix Project and the positive impact that it will have on the community. The influx of new jobs and removal of expenses related to maintaining the Ottawa structure will be good for the BWL. It was further noted that the BWL would be pleasantly surprised at the benefits derived from the additional load and the BWL's participation in the project. The preservation of the integrity of the architecture of the building will be a benefit to the BWL, as will the promotion and publicity of said project. J. Peter Lark, General Manager noted that they are working on a business case for the Phoenix Project. In addition, the BWL will gain electric and water load and they are also seeking to gain steam and chilled water for said location. After further discussion, the Board asked Mr. Trezise to provide them with a packet of materials that contained an executive summary and term sheet, which would speak to the specifics of the project. The Board also directed staff to prepare a business case that speaks to the additional utility load, financials, and intangible value that the project will generate. There being no further business, the meeting adjourned at 7:00 p.m. Respectfully submitted, Semone M. James, Chair Committee of the Whole The report will be filed with the minutes of the November 27, 2007 Board meeting. AD HOC COMMITTEE November 1, 2007 Commissioner Zerkle called the Ad Hoc to order at 11:00 a.m. on Thursday, November 1, 2007. The Acting Secretary called the roll. The following Commissioners were present: Commissioners Cochran, Rios, Rodocker and Zerkle. Public Comments There were no public comments. Master Plumber/Outside Services Regular Board Meeting November 27,2007 Page 13 of 39 Sue Pifer, Director of Internal Audit handed out a Vendor Analysis of Outside Services listing nine outside contractors who have done work for the BWL and who were paid over$25,000.00. Miller Pipeline is currently being used for the lead service replacement and William E. Walter for HVAC work. The Board of Water and Light has been doing 50% of lead service replacement work. By the beginning of the next construction season, the board will hire permanent employees and will be doing 75% of this work. Also by the next construction season, board forces will do 100% of the HVAC work; this work is currently being done by outside forces. As this is a new classification, a wage structure will be set up. There will be considerable savings to the BWL by hiring its own labor. Both of these projects will be evaluated in the future to make sure they are financially prudent. There are currently two Board of Water and Light employees who have expressed an interest in taking the test to become the Board's Master Plumber. If one of these persons gets the master plumber position, the job that was vacated will be replaced. CSO Project As directed at the last Ad Hoc Committee Meeting, General Manager Lark drafted a letter to Chad Gamble, Director of Public Service for the City of Lansing. The letter stated the BWL's interest in establishing dialogue to discuss its ability to do some of the CSO work. It also stated that utilizing the BWL's workforce may be one way in which to enhance the BWL's and cities common objective of providing the best service possible for our customers and residents. Updates Ron Byrnes reported that the channel they are currently using for the pre-apprenticeship poll is adequate. By changing the system, problems could occur if the person or persons do not progress through the system. There are currently two people eligible for the apprenticeship program in the line department. Denise Mulder stated that the results from the Joint Technical Training Committee (JTTC) survey results are back from the departmental training committees and are being analyzed. A list of recommendations will be forwarded to senior management for review such as for organizational priorities. General Manager Lark spoke of a program in the Detroit area for utilities to partnership to train utility people. Some BWL employees may be used for training in this program. Denise Mulder spoke on a program to partner with the local school system and the best methodology is through LCC Technical education. There are 8 positions that would be entry-level positions that we currently hire from the outside. The BWL and the union would be willing to set aside a certain number of those positions for incoming high school students; this would have to be determined on an annual basis because of manpower planning. This program is not for linemen but for entry-level positions into the BWL. Charles Moore reported on a canned curriculum, which is available through Grand Rapids schools. He will provide the information to Denise Mulder. Regular Board Meeting November 27,2007 Page 14 of 39 General Manager Lark reported on the responsibilities of the newly established Diversity Advisory Council. Members are Sue Devon, Amy Ranno, Calvin Jones and Cheval Breggins. Committee members are brainstorming ideas and have outside meetings set up with diversity employees from other companies to see what they are doing in the area of diversity. Commissioners have a strong interest in this issue. Commissioner Rios reported on a diversity workshop he recently attended with APPA. Communication plays a big role in diversity and is often left out of the loop. The BWL Communication Director should be involved in keeping this issue in the forefront. Commissioner Zerkle made the recommendation to disperse the Ad Hoc Committee as the original goals of the committee have been met. Issues are in process. Commissioner Zerkle will give a final report at the next Committee of the Whole. The Ad-Hoc Committee would like to receive an update at the end of 2008 from Internal Auditor Susan Pifer. This report should show a comparison as to whether or not there is a cost savings to the BWL by bringing some of the contract work in-house. Motion for adjournment was made by Commissioner Rios, seconded by Commissioner Cochran. There being no further business, the meeting adjourned at 11:30p.m. Respectfully submitted, Sandra Zerkle, Chair Ad Hoc Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. FINANCE COMMITTEE MEETING November 6, 2007 The Finance Committee met at the Executive Offices, 1232 Haco Dr. on Tuesday, November 6, 2007 at 4:30 p.m. Finance Committee Chair, Robin Smith called the meeting to order and asked the acting secretary to call the roll. The following members were present: Commissioners Semone James, Peter Kramer, and Robin Smith. Alternate committee members Robert Cochran and Joseph Graves were also present. Public Comments There were no public comments. Utility Rate Adjustments Sue Devon introduced William Aldrich the new Manager of Finance and Planning area. General Manager Peter Lark presented an overview of the direction of the BWL regarding a potential rate increase. The FY08 budget called for rate increases of 4% in Regular Board Meeting November 27,2007 Page 15 of 39 electric, 6% in water and 6% in steam. Instead, Mr. Lark is suggesting a 5% increase in the electric rates. Based on the FY08 budget, net income projections are not positive but the net income for the 1st quarter of this year was very positive because of excellent wholesale and retail electric sales. The projected combined net income losses for FY08 of$5.8M, together with the capital expenditures and debt service would result in a cash deficit of$11M. Even though the first quarter of operations boosted the projections for FY08 to a positive net operating income for the year of$1.2 million, it is still significantly below the $20M requirement to generate a 4% return on fixed assets. A 5% increase will amount to $1.87 for a residential customer per month. The BWL rates will still be approximately 20% below Consumers Energy. The $48M cash on hand at the end of FY07 is very important to maintain as it affects our bond rating and because there will be a lot of expenditures in the future, some of which involve the new mercury Sox and Nox rulings. In addition to being considerate of our customers, we need to be able to have the reserves and meet capital expenditures. Chief Financial Officer Sue Devon spoke on the financial plan that was presented in May of 2007, which contained the original rate increases for 2008. The financial goals of the BWL are to maintain credit quality, ensure adequate liquidity, maintain rate competitiveness, efficient and appropriate use of capital and to have financially independent utilities. According to Fitch, the recommendation for utilities of our size is to have 104 days of cash on hand; to have 104 days of cash the BWL needs to have a cash balance of$82M. BWL rates and charges should be sufficient to cover all Operations &Maintenance O&M expenses, contributions to the city, depreciation expense, and a reasonable return on the BWL's capital investment. The return on the BWL's capital investment should be sufficient to provide cash flow for debt service, bond coverage, and capital improvements. Rates and charges should be adequate to cover all annual operating costs and deprecation charges for the utility and to provide as determined by the Commissioners, a rate of return for each utility's operations. Resolution#99-3-2 established the financial goals at 4%. A 4% return over a six-year period would be $11M in electric, $8M for water, $1 M for steam and $1 M for chilled water or $20M for all utilities combined. The 4% on net assets is needed to reinvest in the business. With the rate increases projected in May 2007, the projected net income for all utilities for the six-year period would be $21.5M. To reach that 4% return goal over the six-year period we should generate approximately$118M. Cash comes from net income, depreciation, and bond proceeds. The cash pays for our debt service, and capital expenditures. Recurring rates at a lower level are easier for customers to accept. Rating agencies appreciate it if a utility is consistent of having rate increases of 3%, 4% or 5% every year. The average increases per customer with a rate increase of 5% on electric would be $1.87 per month. With a 6% rate increase on water and steam, the increases would be $.82 for water and $58 for steam. Currently the BWL rates are approximately 17.5% less than Consumers. In order to schedule a rate hearing on January 21, 2008, the filing and publication Regular Board Meeting November 27,2007 Page 16 of 39 deadline is December 7, 2007. We have to give the public 45 days notice for a public hearing. Commissioner Kramer expressed a concern that 5% is not enough of a rate increase. There was extensive discussion on various scenarios as the question was raised as to why the BWL is not asking for rate increases in the area of 9%. In the past, capital improvements have been paid for by operating cash. BWL rates could be raised 10% and still be very competitive with Consumers Energy and Detroit Edison. It was suggested that the rates be raised 7.5%. Historically the BWL has only raised rates 3% at one time. A responsible business plan would be to look at some period of time with a gradual and consistent rate increases over a longer period of time that gets the BWL back to the 4% rate of return on assets. A motion was made to forward the following 2008 rates increases for the public hearing 7% for electric, 7% for water and 6% for steam—moved by Commissioner Cochran, seconded by Commissioner Kramer. Motion carried unanimously. RFP Recommendations: SAP Controls The RFP for SAP controls assessment to evaluate out implementation on SAP that went live on April 2. There were four responders, one a national firm Deloitte and Touche, two regional firms Plante &Moran and Virchow Krause and a local group Rehmann. Deloitte & Touche was able to outscore the others. However, their price was approximately 10% higher. On-site interviews were scheduled to compare the firms and understand the value in the price premium for the national firm. The regional firms brought in the consultants that the BWL will be working with to do their presentations. Not only did Deloitte & Touche fail to bring in the consultants for the engagement, they were unwilling to commit to staffing and were not willing to cap their fees for possible overruns. Plante & Moran and Virchow Krause did cap their fees. Director of Internal Audit Sue Pifer recommends Plante & Moran to be the selected vendor for the Board's SAP Enterprise Risk Planning Financials implementation because of the clarity of their presentation and deliverables. Commissioner Graves made the motion to accept the RFP for Plante &Moran, seconded by Commissioner Cochran. Motion carried unanimously. Motion for adjournment by Commissioner Cochran, seconded by Commissioner Kramer. Meeting adjourned at 6:50PM. Respectfully submitted, Robin M. Smith, Chair Finance Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. EXECUTIVE COMMITTEE Regular Board Meeting November 27,2007 Page 17 of 39 November 8, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:30 p.m. on Thursday, November 8, 2007. Executive Committee Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James and Robin Smith. Commissioner Graves was also present. Absent: None Public Comments There were no public comments. Board of Commissioners Budget Update The Executive Committee reviewed the Board of Commissioners budget update for fiscal year 2008 to date (July 1, 2007 to September 29, 2007). Following a brief review, the committee made no changes or amendments to the Board of Commissioners fiscal year 2008 budget. Board Appointees Budget Update The Executive Committee reviewed the budget updates for each respective Board appointee that included the General Manager, Director of Internal Audit and Corporate Secretary. Susan Pifer noted that the Department of Metrics and Audits would be over budget by approximately $20,000 for the SAP Controls Assessment due to a previously low initial estimate. It was also reported that each Board of Water and Light (BWL) department has provided Susan Devon, Chief Financial Officer with forecasts and budget variances to allot for potential budgetary changes. Following brief discussion, there were no changes or amendments made to the Board appointee's fiscal year 2008 budget. Discuss Board Retreat Commissioner James noted her conversation with Bryan Singletary, President of Practical Energies regarding the Board of Commissioners upcoming retreat. As such, Mr. Singletary was advised of the current state of affairs at the BWL and was asked to provide the Commissioners with a proposal and fee schedule regarding the facilitation of said retreat. J. Peter Lark, General Manager noted that he is awaiting Sargent Lundy's analysis of Erickson Station, which is expected by mid-December 2007. As such, a copy of Executive Director of Strategic Planning and Development, George Stojic's strategic plan would be made available to the Board of Commissioners by the end of January 2008. The plan will be a broad overview of the BWL and its potential direction for the next twenty years. The plan would also include a resolution for the BWL to move forward in the process. Regular Board Meeting November 27,2007 Page 18 of 39 Upon further discussion, the Commissioners suggested that a short outline with paragraphs that speak to specific topics be provided during the retreat to aid in the discussion process. In addition, it was noted that the facilitator could sign a nondisclosure statement should he receive a draft copy of the strategic plan prior to its official release date. It was also advised that there is no need to wait for the strategic plan in scheduling the retreat. An outline with specific paragraphs and/or bulletin points would be sufficient in allowing for thorough discussion. In moving forward the Executive Committee agreed that the two-day retreat would consist of the following: Day One: Board Development with Facilitator Guidance—AM Strategic Planning with Facilitator Guidance—PM Day Two: Strategic Planning with BWL Staff Participation—Full Day Discuss Parliamentary Training The Executive Committee reviewed information pertaining to parliamentary training for the Board of Commissioners. After brief discussion, the committee agreed that it is necessary to provide the training to board members to enhance their experience in this area. In doing so, they directed Secretary Jones to obtain additional proposals from other consultants and/or parliamentarians including references to provide to the Executive Committee for further review. There being no further discussion, the meeting adjourned at 5:17 p.m. Respectfully submitted, Semone M. James, Chair Executive Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. esolution 2007-11-I SUMMARY REPORT FOR THE BOARD OF COMMISSIONERS PENSION FUND TRUSTEES REPORT The Pension Fund Trustees held their annual meeting on November 13, 2007, to receive the financial statements for the Defined Benefit Pension Plan, Defined Contribution Pension Plan and the Retiree Benefit Plan and Trust (VEBA). Performance reports for the three plans were reviewed in detail for the period ended September 30, 2007. Representatives from LCG Associates reviewed the Defined Benefit Pension Plan Performance Report and staff presented the Defined Contribution Pension and Retiree Benefit Plan and Trust Performance Reports. Regular Board Meeting November 27,2007 Page 19 of 39 Staff did not propose any changes to the existing policies that include the Defined Benefit Pension Plan Investment Policy, Defined Contribution Pension Plan Investment Policy and the VEBA Trust Investment Policy. There being no further business, the meeting adjourned at 4:40 p.m. Respectfully submitted, Semone M. James, Chair Pension Fund Trustees MINUTES BOARD OF WATER AND LIGHT PENSION FUND TRUSTEES' ANNUAL MEETING Tuesday, November 13, 2007 Present: Trustees Joseph E. Graves, Semone M. James, Peter W. Kramer, Robin M. Smith and Sandra Zerkle (arrived at 3:48 P.m.). Absent: Trustees Robert W. Cochran and Julee M. Rodocker (Note: 4th Ward vacancy exists.) Staff Present: General Manager J. Peter Lark, Executive Director and Chief Financial Officer Susan Devon, Director of Internal Audits Susan Pifer, Manager of Finance and Planning Bill Aldrich, Associate Internal Auditor Perez Goree, Bulk Power Analyst Sue Flores, Associate Attorney Brandie Ekren, and Corporate Secretary Rhonda Jones. Consultant Present: Senior Vice President of LCG Associates Richard Babcock, Consultant of LCG Associates David Emerson, and C.L. Moore & Associates Charles Moore Chairperson James called the meeting to order at 3:45 p.m. to receive information from LCG Associates. The roll call was taken at 4:15 p.m. and the Secretary declared a quorum. Public Comments There were no public comments. Audited Financial Statements Regular Board Meeting November 27,2007 Page 20 of 39 Executive Director and Chief Financial Officer Susan Devon reported that the financial statements for the Defined Benefit, Defined Contribution, and Retiree Benefit and Trust Reports (VEBA) each received a clean opinion by external independent auditors, Plante &Moran. The pension plan audits were complete in September 2007. The auditors did not have any areas of concern or issue for the BWL to consider at this time. Moved by Trustee Graves, seconded by Trustee Smith and carried, to approve the following resolution: RESOLUTION ACCEPTANCE OF 2007 AUDITED FINANCIAL STATEMENTS FOR DEFINED BENEFIT PENSION PLAN, DEFINED CONTRIBUTION PENSION PLAN, AND RETIREE BENEFIT PLAN (VEBA) Resolved, that the Corporate Secretary receive and place on file the Defined Benefit, Defined Contribution and Retiree Benefit Pension reports presented during the Pension Trustee Meeting. -------------------- Defined Benefit Pension Plan Performance Report Susan Devon gave a brief overview of the third quarter performance results for the Defined Benefit Pension plan as of September 30, 2007. The BWL is currently within its asset allocation policy for all of the funds. Total net assets were $125 million and the total rate of return is 16.5%. Actuarial accrued liability is $83 million and actuarial asset value is $126 million. The plan is currently over funded by approximately$43 million and the ratio for over funding is 125%, which will allow for a Section 420 transfer to the VEBA plan of approximately$5 million. David Emerson, Consultant of LCG Associates presented the third quarter market returns for the Defined Benefit (DB) Pension plan for the period ending September 30, 2007. Long standing issues in the economy notably the housing market finally came to bear. The subprime rate is an issue throughout the country and a number of defaults have risen in the housing market. The defaults have rippled throughout the overall economy, specifically in July and the first part of August 2007. It has not only affected the subprime rate but it also affected the credit markets, corporate debt, and a number of different areas throughout the economy. The Federal Reserve infused liquidity into the marketplace in August 2007 by lowering the discount rate by 50 basis points. At their next regularly scheduled meeting the discount rate was again lowered by another 50 basis points and the federal fund rate was also decreased. Since the end of the quarter the Federal Reserve lowered the federal fund rate by an additional 25 basis points. Once liquidity was initially infused into the market, it significantly changed the overall view of the economy and the direction of the markets. The markets then rebounded and finished on an incline. In the last several years, value oriented companies and stocks have been Regular Board Meeting November 27,2007 Page 21 of 39 doing very well and they have now seen growth come back to the market, which is primarily being lead by technology. Richard Babcock, Senior Vice President of LCG Associates gave an overview of the total fund allocation and discussed the following associated charts and reports for the quarter ending September 30, 2007: • Total Fund Allocation The departure from domestic equity to international equity was intentional. Domestic equity is 4-5%below target and international equity is 4-5% above target. It was intentional as they felt that international markets have more intrinsic value than the domestic markets and the performance indicates that it was profitable. • Distribution of Assets As of late, growth funds are doing better than value funds after lagging behind for the past 6-7 years. There is slight overweight in large growth versus large value funds, which also rings true for small cap funds. As a result, the asset allocation has improved slightly to the BWL's benefit. • Performance Summary for the current quarter and historical performance Domestic equity composite is slightly underperforming. LCG believes that they have a great selection of managers. However, their management style is simply not in favor right now. The performance is lagging and LCG will look at the managers that caused the underperformance. International equity has had substantial top performance in every time period. Asset allocation is approximately 90% of the return that accrues to any institutional investor. Institutions have problems in that they hire managers with great 1 to 5 year track records. However, one must fight against the mentality of buying high and selling low when one should buy low and sell high. In response to Trustee questions regarding changing strategies, asset allocation study's, and the international market, Mr. Babcock noted the following: LCG reviewed several strategies and conducted an in-depth asset allocation analysis, which was presented to the BWL when they were initially hired. LCG can initiate an asset allocation study in any quarter and the last one performed on behalf of the BWL approximately three years ago. Mr. Babcock expressed great interest in performing the study and noted that they would like to explore this option in trying to implement strategies with lower risk and high return. The managers have made $5 to 7 million extra in the international market with substantially less risk by simply changing the BWL's allocation strategy held many years ago. In response to a question regarding the success of the international market and its potential longevity, Mr. Babcock noted that international markets have done well in part due to the United States (US) dollar decline against other world currencies. The US dollar is currently in parody with the Canadian dollar for the first time in history. LCG still intrinsically likes international versus domestic not withstanding the dollar, which may continue to be slightly over weighted in the international market. Forty percent of the world's gross domestic product (GDP) is the United States, which will Regular Board Meeting November 27,2007 Page 22 of 39 continue to decrease as the world continues to develop. It was also advised that LCG consultants would like to look at the BRIC (Brazil, Russia, India and China) strategy. There are a number of managers that specialize in those four countries and their rapid GDP growth. • Comparative Performance. The results are net of fees and it is estimated that LCG's current fees are approximately 75 basis points including custodian fees. • Total Fund Performance • Total Fund Five-Year Return vs. Risk. If a fund is above the blue line drawn from T- Bills to the S&P 500 then that suggests excess alpha, which is additional rate of return above and beyond the risk level that one initially took. • Equity Sector Allocation. The pie chart indicates the change in diversification from September 2006 to September 2007. • Equity Allocation for all of the funds • Equity Performance for individual managers for the current quarter and historical performance The Wachovia Equity Account has been removed, which is good because the funds performance had deteriorated over time. A Small Cap Value search for new funds was difficult as half of the funds are closed. As a result, American Beacon Small Cap Value was chosen by default. There is a concern that there are a lot of dollars in this combined portfolio. Therefore, in going forward, LCG will begin to look for a replacement. • Fixed Income Sector Allocation • Fixed Income Allocation • Fixed Income and Cash &Equivalents (C&E) Performance for the current quarter and historical performance SmithBarney is a corporate bond manager whose long-term record has been excellent. Western Asset is relatively new but they are generally considered to be one of the top three fixed income managers in the country. Trustee Smith noted that she would like to see another asset allocation study, as it has been three years since the last one was performed. Although, the funds are performing well it would be good to see if there is anything else that maybe performing better. Mr. Babcock agreed with the suggestion and noted that typically they try to perform an asset allocation study every one to three years for all of their clients. Trustee James advised attendees that the BWL has issued a request for proposal (RFP) for banking and investment services. Once they have selected a manager and the RFP is awarded then the BWL would look to commission that organization to conduct an asset allocation study. Trustee Graves noted that at the last Trustee meeting held in November 2006, one of the items he specifically discussed was whether or not LCG Associates had the capability or interest in looking at fund managers from a diversity perspective. Trustee Graves went onto ask what has happened regarding that topic since they last spoke? Regular Board Meeting November 27,2007 Page 23 of 39 Mr. Babcock responded by noting that LCG conducted a search for a fixed income manager since they last meet with the Trustees. In conjunction with that they also did a diversity search. Mr. Babcock noted that they are color blind to start with as they are happy to do business with anyone who can do the work and has all the requisites in place. During the search a couple of candidates surfaced. However, for that particular asset class and at that particular point in time there simply was not a candidate that came to the forefront. In the final analysis, others came forth and as a result the committee selected another candidate. Mr. Babcock also advised that they have no problem with looking for diversity and continue to do so, as they have diversity managers for many of their clients. The complete report on An Investment Management Analysis of Comparative Risk and Return presented by LCG Associates for the quarter ending September 30, 2007 is on file with the permanent minutes. Defined Contribution Pension Plan Susan Devon provided a high level summary report of the Defined Contribution (401A) Plan as of September 30, 2007. The packet materials contained information relative to the following: • Plan assets by class total $133,165,000 • Historical performance of funds • Historical performance benchmarks Plan participants exercise control over the assets in their account and the BWL establishes various accounts that employees are able to invest in. The BWL looks for funds that provide options for security and long-term stability and growth for employee funds. The options that they provide are designed to allow employees to diversify their portfolios with various funds providing different risk and return characteristics. The options include equity, income and cash opportunities. Employees also have access to a Goalmaker program as an alternative way for employees to select their model portfolio. Goalmaker will automatically rebalance the portfolios funds to keep it on track with the model that the employee has selected. Approximately 18% of employees are participating in the Goalmaker program compared to 15% last year. Prudential reported the following information relative to BWL employee interaction and use of their respective services: • Prudential received 1,400 calls from BWL employees to their voice response service • Prudential Customer Service Representatives received 190 calls from BWL employees • There were over 5,000 hits from BWL employees on Prudential's participation website • Representatives came in and held 12 meetings to answer employee questions • Two special meetings were held to discuss the self-directed brokerage account options. Prudential also held a pre-retirement informational meeting to address questions for those employees considering retirement. Regular Board Meeting November 27,2007 Page 24 of 39 In response to Trustee questions regarding employee fund management and increased employee education, Ms. Devon noted that the BWL does not know how employees who are managing their owns funds are doing at this time because that is private information. In addition, Ms. Devon advised that the number of employee education meetings has been consistent. In the September annual update from Prudential they have an education plan that provides more of what the Trustees maybe looking for. However, staff has not implemented it as of yet because they are going out for a RFP for the Defined Contribution Pension plan. The Trustees also asked if they were continuing to hear that employees need more information because the concern was raised a few months ago relative to the amount of information made available. Trustee Smith also asked what additionally might the BWL do to satisfy that issue because it was an employee request and it appears that the BWL is essentially doing the same educational piece as before? Ms. Devon noted that representatives are available anytime an employee wants to get in touch with Prudential and they can also arrange one-on-one meetings. She advised that she was aware of the concern, which is why Prudential came in with the additional educational piece. However, the BWL has not acted on it as of yet because of the pending RFP previously mentioned. Bulk Power Analyst Sue Flores reported that Prudential started visiting some of the plants at different times during the day, which is very valuable for some of the 24/7 shift employees. Retiree Benefit Plan & Trust (VEBA) Susan Devon reviewed the status of the Retiree Benefit Plan and Trust(VEBA) for the third quarter ending September 30, 2007. The VEBA trust has increased from$43 million as of June 30, 2006 to $61 million as of June 30, 2007. The asset allocation targets indicate that the BWL was out of balance at the end of the year. Investment in fixed and large cap funds allowed for the diversification of cash. The BWL made an investment in Lehman Bond and Large Core I-Shares S&P, which brought the funds back in line with the investment fund policy. The total rate of return for fair market value is 13.8%. Actuarial accrued liability is $198 million and actuarial asset value is $52 million as of February 2007. Therefore, the VEBA trust is under funded by approximately$146 million. The over funding in the Defined Benefit Pension plan will allow for the transfer of$5 million to the VEBA plan. The transfer is scheduled to take place in June 2008. Other Susan Pifer, Director of Internal Audits advised that the subcommittee comprised of Susan Devon, Charles Moore and herself are in the process of scheduling onsite interviews regarding proposals submitted for the banking and investment advisory services. As such, it was noted that they intend to conduct the meetings and will notify Regular Board Meeting November 27,2007 Page 25 of 39 the Commissioners so that they may attend if interested. In addition, Ms. Pifer noted that the committee amended its original recommendation to include interviews with the following parties: LCG Associates, Mercer Investment Consulting, Asset Consulting Group, Inc., Merrill Lynch Institutional Consulting Group and Citizens Bank. Wilshire Consulting Group was removed from the list and replaced by Citizens Bank in order to gain a banking community in the final interviews. Ms. Pifer also noted that they received two models in the RFP responses. One model represents advisory services only and the other one represents a banking relationship. The advisory services (only) provide an advisor that is completely independent and does not have a relationship with the investment manager(i.e. LCG Associates). The second model provides bundled services where the investment manager typically compensates the advisor. However, the advisor would sign a conflict of interest statement to note that they would not invest in their own securities to give the BWL some degree of independence. Charles Moore of C.L. Moore & Associates further expounded and advised that the essential overall concern is that the advisor would recommend their own funds and perhaps receive back door fees. BWL management currently ensures that this does not happen by keeping an independent advisor by way of LCG Associates. It was noted that perhaps other organizations could give the subcommittee some transparency in how the funds are being handled so that they may gain a better understanding of the process. There being no further business, the Pension Fund Trustees meeting adjourned at 4:40 p.m. Submitted by: Rhonda Jones Corporate Secretary The report will be filed with the minutes of the November 27, 2007 Board meeting. COMMITTEE OF THE WHOLE November 13, 2007 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, November 13, 2007. Committee of the Whole Chair, Robin Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Joseph Graves, Semone James, Peter Kramer, Robin Smith, and Sandra Zerkle. Absent: Commissioners Robert Cochran and Julee Rodocker (Note: At Large Vacancy exists). Regular Board Meeting November 27,2007 Page 26 of 39 Public Comments There were no public comments. PA 141 (Customer Choice) George Stojic, Executive Director of Strategic Planning and Development provided an overview of Public Act (PA) 141 and the Board of Water and Light's (BWL) position regarding customer choice. Public Act 141 of 2000 allowed electric utility customers the opportunity to receive electric generation service from alternate electric suppliers. The act effective June 5, 2000 impacted investor owned utilities and will affect municipally owned utilities after December 31, 2007. Section 10y of PA 141 distinguishes between customers located within the municipal's legal boundary and those outside of its boundary. There is also distinction between distribution and electric generation services. Section 10y, and thereby Act 141 applies to BWL territories outside of the City of Lansing. Since the Act does not specifically reference 425 agreements, it is assumed that those areas are within the municipal's boundary. BWL staff recommended that the Board of Commissioners prohibit customers outside of the City of Lansing the opportunity to choose an alternative electric supplier based on the following reasons. 1) Granting customers the option to switch to an alternate electric supplier would require the BWL to develop an appropriate customer choice program, which requires the need for substantial investment in time, money and resources. 2) Traditionally, alternative electric suppliers selectively market to those customers with a low cost to serve and avoid customers with high costs to serve. 3) The cost to serve all BWL customers would increase due to marketing efforts by alternative electric suppliers and the cost associated with creating a BWL customer choice program. It was further noted that if the BWL opted out of customer choice then those same customers would have the opportunity to change to another utility company for distribution service only. Although, this option would be available, staff noted that BWL vulnerability is relatively small and highly improbable due to the following reasons: 1) Any other utility desiring to serve an existing BWL customer must obtain a certificate of convenience and need from the Michigan Public Service Commission (MPSC), as required by 1929 Public Act 69. If utility companies were to apply for the certificate, the BWL would have opportunity to intercede in the process and contest the need for said certificate. 2) Act 141 provides the BWL with the option to operate under MPSC Rule 460.3411. The Rule governs which utility is allowed to serve a customer when two or more utilities operate in the same area, with one of the provisions prohibiting existing customers from switching utility companies. Regular Board Meeting November 27,2007 Page 27 of 39 3) Consumers Energy is the only adjacent utility company who could provide distribution service to existing BWL customers. However, Consumers Energy's significantly higher rates, reduces the customers incentive to switch utility company's and makes this scenario unlikely. In response to a Commissioner question, Mr. Stojic confirmed that it would be cost prohibitive if a customer choose another utility company for distribution service due to the potential cost associated from the BWL to the utility company. J. Peter Lark, General Manager also advised that he is working with Chairs of the Technology and Energy Committees in both the House and Senate to introduce "no switching" language into the rewrite of PA 141. The "no switch" language would provide the BWL some protection and would essentially state that BWL customers cannot be taken away by other utilities, the same way as the BWL cannot presently take customers from other utility companies. Mr. Lark further noted that he has agreement from both Chairs of the House and Senate that there is no problem with adding the "no switch" language in the rewrite of PA 141. It was also confirmed that if the City of Lansing enters into a 425 agreement then the BWL is still allowed to compete. In response to a Commissioner question regarding distribution service and vulnerability, Mr. Stojic clarified that a full service regulated utility company would have to establish itself in order to compete with the BWL. The most likely utility company would be Consumers Energy and he is unaware of how any other utility company would form in this particular area. Although, it is highly unlikely, staff verified that an example of such an act would be the purchase of an existing utility system; such as, the one located on the campus of Michigan State University. However, one must keep in mind that both Consumers Energy and DTE electrical rates are significantly higher than the BWL's making this scenario improbable. The question was asked as to whether or not there is anything in the law that would prevent another company from buying BWL"lines" in order to provide service to customers; similar to what occurred in the communications industry? In response to the question, staff noted that another utility company could offer to buy the BWL from the City of Lansing. However, it does not appear that a utility company could buy BWL "lines" unless the BWL opened its transmission system. At some point in the future, the BWL may have to open its transmission system to allow use by others. Nevertheless, the distribution system would not be subjected to this, as it is the end use point to the customer. On motion by Commissioner Graves, seconded by Commissioner James, the Committee of the Whole agreed to receive the resolution concerning Public Act 141 —Customer Choice. The resolution will be forwarded to the full board for consideration. Action: Carried unanimously. Commissioner James departed the meeting at 5:48 p.m. Regular Board Meeting November 27,2007 Page 28 of 39 Public Relations (Advertising) Update Mark Nixon, Director of Communications gave an overview of public relations and marketing campaigns currently taking place at the BWL. He noted that renewable energy is the cornerstone of the BWL's marketing campaign. As such, the "You've Got the Green Light", campaign includes a billboard on interstate 496 noting the BWL's message of renewable energy and energy conservation. In conjunction with Michigan State University's go green campaign the BWL has also purchased radio space on their station to promote its message. In addition, Mr. Nixon also noted the following marketing efforts: • The BWL partnered with Meijer Stores for the CFL exchange program entitled, "A Bright Idea". The event took place on October 20, 2007 and 2,600 CFL's were given out. The BWL paid for the light bulbs and Meijer Stores paid for all of the advertising. • BWL is the "Presenting Sponsor" of Silver Bells. The BWL logo is on banners throughout Lansing. In response to a Commissioner question regarding the BWL's website, Mr. Nixon noted that it has been slow but they are in the process of redesigning the website. The redesign will allow the Communications Department to instantaneously make changes. In addition, the BWL added a float to this year's parade bringing it to a total of two entries. One is a resurrected and retooled float previously used in the Riverfest Parade and the other one is similar to last year's entry with some new additions. • A new label design for BWL bottled water is complete. In response to a Commissioner question regarding redesigning the bottle itself, George Stojic noted that Quality Dairy currently bottles and packages the water. Therefore, the bottle design is Quality Dairy's standard product. The BWL is currently reviewing the bottles design and the cost to change it. Once that information is received then staff would make an assessment of its potential options. • The demographics in the Lansing area are changing with English either being a second language or persons maintaining a heavy reliance on Spanish. Experimentally, the BWL is currently advertising bilingually in both English and Spanish for its ads in Adelante Magazine. • Capital Area United Way (CAUW) thermometer signs registering the monies raised thus far contain the BWL logo located at the bottom. It was noted that the BWL donated an estimated$7,500 to CAUW for their advertising campaign. In response to a Commissioner's question regarding the BWL's participation in the CAUW campaign, Cheval Breggins, Communications &Public Relations Representative noted the following information. • BWL's 2007 CAUW campaign goal is $90,000 and thus far the BWL has raised approximately$88,000. Regular Board Meeting November 27,2007 Page 29 of 39 • BWL is currently 5% over its 2006 goal. • BWL secured 95 raffle prizes that cost the BWL significantly less than last years expenditures, of which Calvin Jones secured approximately 98% of those items. • For the first time in history the BWL ran a pacesetter program in which the second floor of Haco Drive and the bargaining unit ran its campaign during the summer. Thereby, allowing monies to be in the coffer when the campaign kicked off in September. • The kickoff consisted of in kind catered food and a live radio broadcast from 6:00 a.m. to 9:00 a.m. with "Mad Dog" Dave DeMarco. J. Peter Lark, Mark Nixon, Julie Lamond of the Lansing School District, the CEO of United Way and others also spoke. • The BWL had thirty-sixty second spots that began at 7:30 a.m. in which one heard the voice of Dave DeMarco who talked about the BWL and its kick off campaign. Commissioner Smith thanked Mark Nixon for his hard work regarding the "A Bright Light" campaign and signage, which is the type of branding and advertising that the Board of Commissioners desires for the BWL. She also noted that the slogan is one that will carry the BWL well into the future. In addition, Commissioner Smith also congratulated the Communications Department and BWL employees for the work that they have done and the commitment made to the CAUW campaign. BWL Charitable Foundation Calvin Jones, Governmental Relations Manager noted that J..Peter Lark, General Manager charged the Community Sponsorship Committee with the responsibility of responding to previously raised questions regarding the creation of a BWL foundation. As such, Cheval Breggins, Brandie Ekren and Calvin Jones with guidance by Mr. Lark composed the team that reviewed and responded to the Commissioners initial inquiry. Mr. Jones reported that the BWL could establish a non-profit corporation (a 501(c)3 charitable foundation) through support and authorization from Lansing City Council. Currently, the BWL does not have the ability to charter its own foundation without permission from Lansing City Council. If the BWL wanted to proceed then it would have to go through Council's process in to further progress with this project. The committee concluded that the current BWL Community Sponsorship Committee process could accomplish much of the same benefits as a non-profit corporation without allocating additional costs in human resources towards the establishment and operation of a foundation. The BWL is a charitable giver in accordance with its sponsorship policy and Public Act 301 of 1969. In the past, the BWL has partnered with other agencies equipped to issue a charitable gift tax-deductible statement. The committee recommended that the BWL leave in place the existing sponsorship process of charitable giving. They also recommended that if the BWL wants to partake in some sponsorship activities then it partner with other already established 501(c)3 agencies. Regular Board Meeting November 27,2007 Page 30 of 39 Commissioner Smith noted that she was glad to receive the discussion because it was good to determine if the BWL should change its current structure and whether or not the BWL could form a foundation. Commissioner Smith thanked staff for its research efforts and went onto ask the following questions: 1) how would a 50l(c)3 change the guidelines for those who come forth for charitable dollars and 2) is City Council's process similar to what was done with the BWL's Rules of Procedure? Mr. Jones noted that the governing body of the BWL's foundation would probably determine how the funds should be managed and/or allocated. In addition, it was further advised that the governing body would probably want membership on the foundation board. In response to the second question, Mr. Jones advised that he was unsure of Lansing City Council's exact process. However, City Council is a political process that could go a number of different directions. One of which might include input by City Council as to how the funds are expended, who would sit on the board, how many board members would there be, would Council sit on the board, etc. As a result, there could be a number of rules imposed on the process if a foundation were created, which is significantly different than what is currently being done at the BWL. The Committee of the Whole agreed with staff's recommendation and noted no need to change the existing process, as it appears to be working well for the BWL. There being no further business, the meeting adjourned at 6:11 p.m. Respectfully submitted, Robin M. Smith, Chair Committee of the Whole The report will be filed with the minutes of the November 27, 2007 Board meeting. HUMAN RESOURCE COMMITTEE November 19,2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:35 p.m. on Monday, November 19, 2007. Human Resource Committee Chair, Julee Rodocker called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, Julee Rodocker and Sandra Zerkle. Absent: None Public Comment There were no public comments. Regular Board Meeting November 27,2007 Page 31 of 39 Director of Internal Audit Six Month Performance Review The Human Resource Committee conducted.Susan Pifer, Director of Internal Audits six- month performance review at its previously held meeting on October 9, 2007. At the conclusion of said meeting, the committee passed a motion recommending a salary increase be forwarded to the full Board for consideration. The purpose of today's meeting involves the discussion of whether or not the salary increase should be in a base pay raise or a combination of base pay and lump sum. In response to Commissioner Graves' question, Director of Human Resources Denise Mulder noted that Board of Water and Light's (BWL) existing practice is that employees are given salary increases up to the market rate and anything over and above is given in a lump sum amount. It was clarified that the lump sum amount is a part of the pension calculation but it is not compounded. The Human Resource Department is currently reviewing this practice board wide for all employees. On motion by Commissioner Zerkle, seconded by Commissioner Cochran, the Human Resource Committee recommended that Susan Pifer, Director of Internal Audits receive a base pay salary increase. Discussion: After brief discussion, Commissioner Zerkle introduced a friendly amendment to note that Susan Pifer's base pay salary increase is 3.04% retroactive to September 26, 2007, which is her six-month anniversary date. In addition, the Commissioners also asked if the BWL is looking at changing the policy for the rest of the organization? Ms. Mulder noted that the BWL is reviewing its entire salary administration program and how it will be administered in a going forward basis. In response to an additional question, Ms. Mulder noted that they would take into consideration the actions taken at today's meeting relative to existing salary practices and the remaining organization. Action: Carried unanimously. There being no further business, the meeting adjourned at 4:42 p.m. Respectfully submitted, Julee M. Rodocker, Chair Human Resource Committee The report will be filed with the minutes of the November 27, 2007 Board meeting. MANAGER'S RECOMMENDATIONS esolution 2007-11-2� A. Public Hearing for 2008 Rate Increases Regular Board Meeting November 27,2007 Page 32 of 39 WHEREAS, the Corporate Financial Targets for each of the Lansing Board of Water and Light's strategic business units is 4% return on net fixed assets; and WHEREAS, the fiscal Year 2008 budget filed with the City of Lansing included the following proposed rate increases: Electric Utility Customers 4%, Water Utility Customers 6% and Steam Utility Customers 6%, to become effective January 1, 2008; and WHEREAS, the proposed Fiscal Year 2008 budget with the proposed rate increases as filed would result in a combined net loss for the year of$5.6 million; and WHEREAS, based on the information presented at the November 6, 2007, Finance Committee meeting, an additional 3% rate increase for the electric utility customers, and an additional 1% rate increase for the water utility customers is necessary in order to begin addressing future infrastructure concerns, in particular with respect to generation plant replacement and lead service replacement and environmental requirements; and WHEREAS, the proposed rate increases for the Fiscal Year 2008 budget would take effect no earlier than March 1, 2008. RESOLVED, the proposed rate increase of 7% for electric, 7% for water and 6% for steam will be subject to further consideration after a public hearing is held. FURTHER RESOLVED, that the Board of Commissioners hereby sets the date of T-hur-sclay Monday, January 21, 2008 at 5:30 p.m. for a public hearing to solicit public input on the proposed 7% electric, 7% water and 6% steam rate adjustments. The hearing will be held in the Board of Water and Light offices, 1232 Haco Drive, Lansing. The Corporate Secretary is directed to file with the City Clerk no later than December 7, 2007, information regarding proposed rate increases with an effective date of March 1, 2008, -------------------- Staff Comment: The Finance Committee agreed with this proposed resolution at its November 6, 2007, meeting and sent it to the full Board for approval. A notice of a Public Hearing for the proposed rate increases will be published no later than December 7, 2007. -------------------- Susan Devon, Chief Financial Officer noted that the correct hearing date is Monday, January 21, 2008. Motion by Commissioner Kramer, seconded by Commissioner Graves to adopt the resolution to approve the Public Hearing Date of Monday, January 21, 2008, on proposed Regular Board Meeting November 27,2007 Page 33 of 39 rate increases for electric, water, and steam; and to authorize the Corporate Secretary to file information with the City Clerk by December 7, 2007. Discussion: Commissioner Smith noted that during the rate discussion there was change in the proposed rates that would place the BWL inline with the 10-year forecast and where the organization desires to be at such time. Action: Carried unanimously. A copy of the Financial Plan Update FY 2008—20013, 6 Year Forecast dated November 27, 2007 is on file in the Office of the Corporate Secretary. (Attachment) esoludon 2007-11-3 B. Public Act 141 —Customer Choice WHEREAS, Public Act 141 of 2000 was enacted by the Michigan Legislature and became effective on June 5, 2000, and was intended to permit customers of electric utilities in Michigan the opportunity to receive electric generation service from an alternate electric supplier; and WHEREAS, Section 10y of Public Act 141 of 2000 applies to Michigan's municipally owned electric utilities; and WHEREAS, Section 10y of Public Act 141 of 2000 requires the governing board of a municipal electric utility to determine whether it will permit all customers located outside the boundary of the municipality that owns the utility and receiving electric delivery service from the municipal utility the opportunity to receive electric generation service from an alternate electric supplier; and WHEREAS, the Lansing Board of Water and Light has customers located outside of Lansing's boundaries who take electric delivery service from the Lansing Board of Water and Light and would be eligible to take electric generation service from an alternate electric supplier, if the Board made such a determination; and WHEREAS, no customer has indicated an interest in purchasing power from an alternate electric supplier, and the cost of developing and implementing a customer choice program for Lansing Board of Water and Light customers located outside of Lansing's boundary would be substantial, would allow for selective marketing to some customers but not provide an opportunity to choose an alternative electric supplier to all customers, and would raise rates for all Lansing Board of Water and Light customers. NOW THEREFORE, BE IT RESOLVED, the Board of Commissioners at this time declines to permit electric customers located outside Lansing's boundaries from taking electric generation service from an alternate electric supplier. -------------------- Regular Board Meeting November 27,2007 Page 34 of 39 Staff Comments: Public Act 141 of 2000 allowed customers of electric utilities the option of taking electric generation service from an alternate, or competitive, electric supplier. An alternate electric supplier is a non-utility, non-regulated, firm that is licensed by the Michigan Public Service Commission to sell electricity (electric generation service) to customers of an electric utility. Section 10y of the Act applies to municipally-owned electric utilities but delayed any impact until after December 31, 2007. The Act requires the governing board of a municipally-owned utility to determine whether to permit its customers the opportunity of taking electric generation service from an alternate electric supplier. This provision applies to the Lansing Board of Water and Light (LBWL). Section 10y identifies two distinct groups of municipal electric customers: those located within the municipal's legal boundary and those located outside that boundary. The Act also identifies two distinct electric services: electricity delivery (distribution service) and electric generation service. Section 10y, and therefore Act 141, applies only to those customers of the LBWL that are located outside of the City's boundaries. The Act does not specifically mention 425 agreements, but it seems likely that these areas would be considered within the municipal's boundary. The Commissioners must decide whether to allow LBWL customers located outside of Lansing's boundary the option to choose to receive electric generation service from an alternate electric supplier. If it does not allow customers located outside of Lansing's boundary the option of choosing to receive electric generation service from an alternate electric supplier, the Act would allow another utility to provide electric delivery service to customers located outside of the City's boundary. A decision by the Commissioners to allow customers located outside of Lansing's boundary the opportunity to switch electric generation service to an alternate electric supplier would require the LBWL staff to invest substantial time and resources in developing appropriate tariffs, terms and conditions of service, dispute resolution procedures, billing changes, and make additional metering investment. Allowing customers to choose another electric generation supplier would also permit an alternate electric supplier to selectively market to some customers, those that have a low cost to serve, and avoid customers who may cost more to serve. The selective marketing by alternative electric suppliers and costs associated with offering a customer choice program would increase the cost of serving all of LBWL's customers. For these reasons, LBWL staff recommends that the Commissioners not allow customers located outside of Lansing's boundary to choose an alternative electric supplier. Act 141 permits the Commissioners to deny alternative electric suppliers from providing electric generation service to LBWL customers located outside of Lansing's boundary, but, in so doing, it could provide an opportunity for those customers to switch to another utility for electric delivery service. This possibility, however, is practically non-existent for three reasons. First, if another utility seeks to serve an existing LBWL customer, it Regular Board Meeting- November 27,2007 Page 35 of 39 must secure a certificate of convenience and need from the Michigan Public Service Commission, as required by 1929 Public Act 69. Act 69 was intended to avoid duplication of utility investment. If a utility applies for an Act 69 certificate, the LBWL would have an opportunity to intervene in the proceeding and contest the need for a certificate. Second, Act 141 provides the LBWL with the option to operate under R 460.3411 (Rule 411) of the Michigan Public Service Commission's rules. Rule 411 governs which utility is allowed to serve a customer when two or more utilities operate in the same area. One provision of Rule 411 prohibits existing customers from switching from one utility to another. Third, the only utility adjacent to the LBWL and which could provide electric delivery service to an existing LBWL customer is Consumers Energy. Since Consumers Energy's rates are significantly higher than LBWL rates, there would appear to be no incentive for LBWL customers to switch to Consumers Energy electric delivery service. Based upon the protections offered by Act 69, Rule 411, and the rate differential between LBWL and Consumers Energy, we recommend that the Commissioners not permit customers located outside of Lansing's boundaries the opportunity to take service from an alternate electric supplier. -------------------- Motion by Commissioner Rodocker, seconded by Commissioner Graves to adopt the resolution to accept the manager's recommendation regarding Public Act 141, Section 10y, as it pertains to customer choice. Discussion: Commissioner Smith noted that she believes staffs recommendation regarding Public Act 141, Section 1Oy is in the best interest of the BWL. Action: Carried unanimously. UNFINISHED BUSINESS Commissioner Smith advised that when the Board received their internal audit report they then asked for more diversity. It was noted that there are minority owned companies who can fulfill those needs but the Board has not seen it in the Retiree Benefit Plan and Trust (VEBA). In response to a clarification regarding the passing of Proposal 2 and the BWL's inability to hire based on minority status; Commissioner Smith agreed that one could not hire based on minority status. However, one can seek out persons who meet the qualifications and are also minority owned. J. Peter Lark, General Manager advised that he was not completely familiar with the Board's discussion. However, the BWL Diversity Council was created to aggressively Regular Board Meeting November 27,2007 Page 36 of 39 address those issues. In addition, Mr. Lark also reported that he is currently enrolled in an eight month CEO diversity training program scheduled to begin in 2008. Susan Devon further advised that the Diversity Council is composed of Cheval Breggins, Calvin Jones, Amy Ranno and herself. The council has already begun to meet to discuss diversity issues relative to the BWL. Ms. Devon also noted that she met with Brandie Ekren, Associate Attorney to discuss the parameters surrounding Proposal 2. NEW BUSINESS None. RESOLUTIONS esolution 2007-11- A. SIX-MONTH PERFORMANCE INCREASE FOR DIRECTOR OF INTERNAL AUDITS WHEREAS, the Human Resource Committee conducted the six-month performance review for Director of Internal Audits Susan M. Pifer on October 9, 2007 and thereby recommended a performance increase; and WHEREAS, the percentage increase of 3.04% is representative of a compiled average of the recommended salary adjustment from the Board of Commissioners. RESOLVED, That the Board approve a 3.04% salary base pay performance increase effective September 26, 2007 for Director of Internal Audits Susan M. Pifer as permitted by the employment agreement entered into between the Board of Commissioners and Ms. Pifer at the time of her employment. ------------------------ Motion by Commissioner Smith, seconded by Commissioner Rodocker to adopt the resolution regarding the Six-month Performance Increase for the Director of Internal Audits. Discussion: Commissioner Smith noted that the Director of Internal Audits has a great attention to detail and she believes that Ms. Pifer will serve the Board well. Action: Carried unanimously. esolution 2007-11- B. Resolution by the Board of Commissioners Regular Board Meeting November 27,2007 Page 37 of 39 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 of Commissioners for the calendar year shall be adopted in November. RESOLVED, That regular meetings of the Board of Commissioners are hereby set for calendar year 2008 as follows, unless otherwise notified or as a result of date conflicts with rescheduled City Council meetings: 2008 Tuesday January 22 Tuesday March 25 Tuesday May 27 Tuesday July 22 Tuesday September 23 Tuesday November 25 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 6, 2008. ----------------- Motion by Commissioner Graves, seconded by Commissioner Zerkle to adopt the resolution to approve the Board Meeting Dates for Calendar Year 2008. Action: Carried unanimously. esolution 2007-11- C. Acceptance of Plante & Moran as Vendor for Internal Control Assessment for SAP Enterprise Risk Planning Financials Implementation WHEREAS, the Commissioners of the Lansing Board of Water and Light adopted Resolution 2007-5-13 on May 22, 2007, which recommended that the Internal Auditor solicit a Request for Proposal (RFP) for an internal control assessment for the Board's SAP Enterprise Risk Planning (ERA) Financials implementation, and WHEREAS, the Internal Auditor, in conjunction with General Accounting, conducted research and completed an RFP for SAP Controls Assessment for ERP Financials, and Regular Board Meeting November 27,2007 Page 38 of 39 WHEREAS, the Finance Committee reviewed such RFP and determined that the Internal Auditor may move forward with its solicitation and the evaluation of proposals, it is RECOMMENDED, that the Finance Committee accept Plante &Moran as the selected vendor for the engagement and that the Internal Auditor move forward to schedule and manage the engagement with the selected vendor. -------------------- Staff Comments: The Finance Committee agreed with this recommendation at its meeting on November 6, 2007, and sent it to the full Board for approval. -------------------- Motion by Commissioner Kramer, seconded by Commissioner Graves, to adopt the resolution to accept Plante & Moran as the vendor for Internal Control Assessment for SAP Enterprise Risk Planning Financials Implementation. Action: Carried unanimously. MANAGER'S REMARKS Peter Lark announced that the BWL was a proud sponsor of Silver Bells in the City and will also be a sponsor of the Toys for Tots program. In keeping with the holiday spirit, the BWL will host a holiday party on December 6, 2007. COMMISSIONERS' REMARKS Commissioner James extended gratitude to Commissioner Smith for her service and leadership on the Board of Commissioners. It was noted that Commissioner Smith's tenure on the Board would soon end due to new Commissioner appointments. As such, Tony DeLuca and Frank Lain were recognized and asked to stand in acknowledgement of their pending appointment to the Board of Commissioners. Commissioner Graves advised that it had been a pleasure working with Commissioner Smith. He further noted his appreciation for the leadership that she had brought to the Board and wished her well in future endeavors. Commissioner Smith thanked staff members, Commissioners, and the Mayor. She also thanked everyone for there support during her father's illness and noted the special gratitude held during the Thanksgiving holiday season. She expressed appreciation for the rich opportunity to participate in the selection of the General Manager, Corporate Secretary and Director of Internal Audits. Commissioner Smith also noted that the BWL is in good hands and she anticipates a bright future for the organization. EXCUSED ABSENCES Regular Board Meeting November 27,2007 Page 39 of 39 On motion by Commissioner Graves, seconded by Commissioner Smith, to excuse the absence of Commissioner Robert Cochran. Action: Carried unanimously. PUBLIC COMMENTS There were no public comments. ADJOURNMENT On motion by Commissioner Smith, seconded by Commissioner Graves, the meeting adjourned at 6:10 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk December 5, 2007 ATTACHMENT INFORMATION Power Point attachments shows Financial Plan Update FY 2008-2013 6 Year Forecast, dated November 27, 2007 Pertinent information in this attachment is as follows: PAGE 8 Financial Projections 2008-2013 based upon original budget assumptions with 4% Electric, 6% Water, and 6% Steam rate increases. PAGE 17 Financial Projections 2008-2013 based upon Finance Committee's revised 7% Electric, 7% Water, and 6% Steam rate increases. PAGE 18 Effect of Rate Increases on Monthly Bills. PAGE 19 Comparison of Electric Residential Monthly Bills to Consumers Energy. Financial Plan Update FY 2008 — 2013 6 Year Forecast Board Meeting Novembe r 27 , 2007 Corporate Financial Goal Resolve that the corporate financial goal for the BWL Strategic business units be as follows : Return on Assets target of >_ 4.0% on Assets (Net income divided by net fixed assets) Board of Commissioner' Meeting Tuesday, March 23, 1999 2 Financial Goal >_ 4°Io on Net Assets By Utility : Net Income Requirement Average Annual Income Requirement Electric $11 Million Water $ 8 Million Steam $ 1 Million Chilled Water 1 Million Total $20 Million W. 3 LANSING BOARD OF WATER&LIGHT 9107 10 FY 2008-FY2013 Financial Projections As presented to the Board May 22, 2007 4 Financial Projections Rate Increases Reflected in 2008-2013 Forecast FY2008 - FY2013, Six Year Forecast 2008 1 2009 2010 2011 2012 2013 Rate Increase: Electric - incrs. In January 4.00% 3.00% 2.50% 2.50% 2.50% 2.50% Water- incrs. In January 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% Steam - incrs. In January 6.00% 7.50% 7.50% 7.50% 7.50% 7.50% Chilled Water- incrs in July 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% wnreMUKxr MM. 5 Financial Projections 2008-2013 Forecast: Net Income FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Total 08-13 6 Yr Goal @ 4% Net Income(Loss): Electric $ (2,970) $ 3,243 $ 2,439 $ 4,883 $ 9,409 $ 12,036 $ 29,041 $ 64,000 Water $ (1,068) $ (984) $ (354) $ 246 $ 1,087 $ 1,916 $ 843 $ 45,000 Steam $ (769) $ (773) $ (603) $ (882) $ (856) $ (279) $ (4,162) $ 3,900 Chilled Water $ (963) $ (765) $ (697) $ (657) $ (600) $ (552) $ (4,233) $ 5,500 Total Net Income $ (5,770) $ 721 $ 785 $ 3,590 $ 9,041 $ 13,120 $ 21,489 $ 118,400 WgTER&LIGHT 0 Note: Using Assumptions from May, 2007 projections 6 Financial Projections 2008-2013 Forecast: Return on Fixed Assets FY2008 - FY2013, Six Year Forecast 2008 2009 2010 2011 2012 2013 Total 08-13 6 Yr Goal 4% @ year Return on Net Fixed Assets: Electric -1.14% 1.23% 0.92% 1.85% 3.54% 4.39% 10.79% 24.00% Water -0.64% -0.55% -0.19% 0.13% 0.54% 0.94% 0.24% 24.00% Steam -3.24% -3.68% -3.25% -5.85% -7.39% -3.47% -26.88% 24.00% Chilled Water -3.62% -3.05% -2.96% -2.99% -2.96% -2.95% -18.54% 24.00% Total -1.20% 0.15% 0.16% 0.72% 1.81% 2.60%1 4.24%1 24.0% MM. Note: Using Assumptions from May, 2007 projections 7 Financial Pro ' ections J 2008-2013 Forecast: Cash Flow FY2008 - FY2013, Six Year Forecast 2008 1 2009 1 2010 1 2011 1 2012 1 2013 1 Total08-13 Projected Cash Flow: Net Income(Loss) (5,770) 721 785 3,590 9,041 13,120 21,489 Depreciation 31,946 34,641 36,143 37,894 39,326 40,981 220,931 Bond Proceeds 19,500 9,750 9,750 0 0 0 39,000 Other Sources of Cash 0 (2,120) (2,120) 8,480 (2.120) (2,120) 0 Total Sources of Cash 45,676 42,992 44,559 49,965 46,247 51,982 281,420 Debt Service (5,887) (6,222) (6,185) (6,387) (6,587) (6,797) (38,066) Capital Expenditures (N (49,157) (44,579) (41,986) (37,995) (41,958) (47,011) (262,686) Other Uses of Cash (1,637) 1( ,217) (1,976) (1,976) (3,708) (2,000) (12,513) Total Uses of Cash (56,680) (52,018) (50,147) (46,358) (52,253) (55,808) (313,265) Cash Excess(Deficit) (11,004) (9,026) (5,588) 3,606 (6,006) (3,826) (31,845) Cash Excess (Deficit) by Utility: Electric $ (9,787) $ (3,283) $ (3,021) $ 466 $ 1,534 $ (727) $ (14,818) Water $ 3,259 $ (5,332) $ (1,939) $ (7,651) $ (7,864) $ (3,957) $ (23,484) Steam $ (3,947) $ (372) $ (277) $ 11,071 $ 530 $ 1,115 $ 8,120 Chilled Water $ (529) $ (39) $ (350) $ (280) $ (206) $ (258) $ (1,662) Cash Excess Deficit $ (11,004) $ (9,026) $ (5,588) $ 3,606 $ (6,006) $ (3,826) $ (31,845) MMMIMMMUMM wATER&UCM W. Note: Using Assumptions from May, 2007 projections 8 FY2008 -FY2013 Debt Service LBWL Debt Service For Fiscal Years ended 2008-2013 $12,000 $10,000 - - -- -- N $8,000 - $6,000 --- - -- - O r�- $4,000 - - -- - C $2,000 - 0 2008 ; 2009 2010 2011 2012 2013 I■ Principal $5,887 $5,472 1— $5,435 $5,637 4 $5,837 $6,047 1■Interest Interest-, $4,178 _ _ $3,946 _ $3,723 _ $3,500 $3,278 -� $3,029 — - -- wnTEeauCM IN. Note: Excludes Bonded debt payment on Combined Utilities Complex, received from GM 9 FY2008-FY2013 Capital Budget & Annual Depreciation LBWL Capital Budget For Fiscal Years ended 2008-2013 $60,000 N $50,000 $40,000 - -- 3 $30,000 - - — O $20,000 - - — - $10,000 - - --- - -- i 2008 2009 2010 2011 2012 2013 Bectric ` $26,136 $26,068 $25 558 $25,652 $28 414 $36,190 1 — I I�Water 7 $18,935 - $17,170 —$14,766---� $11,733 $13043 $10,277 — — _ ---- -Steam $3,687 $1,035 $1,355 $378 $350 $344 Chilled Water $399 $306 $307 $232 $151 $200 i I� • ■Ann. Depreciation 31,946 34,641 36,143 37,894 I 39,326 t 40,981 -- -------..._. — - __L__. ._ Note: Common Capital expenditures are allocated to utilities based on net Fixed Assets Ow. 10 June 30, 2007 Cash Balances Cash Balances as of June 30 2007: Current Funds Operating, Receiving, Bond &Interest $ 66,121,180 Designated Funds: Coal Fluctuation $ 3,909,002 Uninsured Losses $ 16,315,060 Future Water Facilities $ 3,186,026 $ 23,410,088 Non-Current Funds: CW Bond funds $ 1,807,814 Bond Reserve $ 10,386,050 Bond Redemption $ 14,122,693 Total $ 115 847 824 *indicates fully or partially restricted funds Restricted and Non-Restricted Funds Balance Restricted* Designated*7 Non-Restricted Operating Funds $ 66,092,961 $ 19,794,600 $ 46,298,361 Arbitrage Rebate Fund $ 28,219 $ 28,219 $ - Designated Funds $ 23,410,088 $ 23,410,088 $ CW Bond funds $ 1,807,814 $ 1,807,814 $ - Bond Reserve $ 10,386,050 $ 9,916,541 $ 469,509 Bond Redemption $ 14,122,693 $ 12,954,880 $ 1,167,813 Total $ 115,847,824 1 $ 44,502,054 $ 23,410,088 $ 47,935.6133 E® *The restricted portions of these funds are required by Bond Resolution,seepage 18,Footnote 4 of the LBWL Enterprise Fund Audit dated June 30,2007 11 MM. **Designated funds have been established by Board resolution and include funds designated for Coal Fluctuation,Unisured Losses and Future Water Facilities WATER&LIGHT r7 Financial Report Three Months Ended September 30, 2007 12 Variance in Net Operating Income Fiscal Year to Date September, 2007 Compared to Budget approved - May 22, 2007 ($000) Budgeted Net Income (705) Changes in Operating Income: Net Retail Electric 3,407 Net Wholesale Electric 1,973 Net Water Sales 239 Net Steam Sales (152) Depreciation 759 Veba Allocation - under budget 846 O& M Expenses Permanent identified-MD (573) Temporary Timing differences 911 ECA Timing Difference 338 All Other- Operating Variances 140 Subtotal Changes in Operating Income 7,888 Changes in Other Income: Interest Earnings 598 Other Income 228 Additional PILOT (289) All Other - Non-Operating Variances 53 Subtotal Changes in Other Income 590 Actual Net Income 7,773 W. 13 Revised Net Income Projection FY2008 (OOOS) Net Income - Original Budget - Annual $ (5,769) FYTD ($705 loss+$7,773 over budget) - Quarter $ 8,478 Less Temporary effects (timing differences) ECA Adjustment $ (338) Temporary O & M Variances $ (911) Other Adjustments - Remainder of FY08: Net Increase in Electric Wholesale Sales $ 1,868 Net Increase in Electric Industrial Sales $ 427 Net Reduction in Water Industrial Sales $ (198) Net reduction in Steam Commercial Sales $ (376) Effect of delaying rate increase from January to March $ (1,305) Remove Interest from Belle River Project $ (4,000) Revenue from S02 trade (non-cash) $ 2,275 Anticipated 0 & M Overages $ (2,155) Remaining VEBA Variance $ 3,171 NTNTxTMTffl Projected Net Income $ 11168 W. 14 4% Return on Net Fixed Assets In '$000's Net Fixed Assets as of September, 2007 : $ 508,933 X 4% Target ROA $ 20,357 Through September, 2007: Revised Projected FY2008 Net Income: $ 1 168 Net Fixed Assets as of September, 2007 : $ 508,933 Resulting ROA 0.2% VW4nR&UGHT Ow. 15 FY2008 Cash Deficit Based on revised projected Net Income FY2008 Revised Budget Projection* Projected Cash Flow: Net Income (Loss) (5,770) 11168 Depreciation 31,946 315187 Bond Proceeds 19,500 19,500 Other Sources of Cash 0 0 Total Sources of Cash 459676 519855 Debt Service (5,887) (5,887) Capital Expenditures (Net) (49,157) (49,157) -- Other Uses of Cash (1,637) (1,637) Total Uses of Cash (569680) (569680) Cash Excess (Deficit) (119004) (49825) MM. 16 Recommended 2008rate FY20O8 - FY2O13, Six Year Forecast 2008 1 2009 1 2010 1 2011 1 2012 1 2013 Total08-13 Rate Increase: Electric 7.00% 3.00% 2.50% 2.50% 2.50% 2.50% 20.00% Water 7.00% 6.00% 6.00% 6.00% 6.00% 6.00% 37.00% Steam 6.00% 7.50% 7.50% 7.50% 7.50% 7.50% 43.50% Chilled Water 0.00% 3.00% 3.00% 3.00% 3.00% 3.00% 15.00% Note: FY08 increase in March, FY2009-2013 in July not compounded Net Income(Loss): Electric $ (1,805) $ 8,478 $ 7,585 $ 11,488 $ 14,861 $ 18,043 $ 58,650 Water $ (1,029) $ (596) $ (3) $ 614 $ 1,500 $ 2,399 $ 2,884 Steam $ (791) $ (386) $ (240) $ (511) $ (467) $ 145 $ (2,251) Chilled Water $ (906) $ (862) $ (820) $ (787) $ (728) $ (671) $ (4,773) Total Net Income $ (4,531) $ 6,634 $ 6,522 $ 10,805 $ 15,166 $ 19,916 $ 54,511 Rate of Return: Electric -0.7% 3.2% 2.9% 4.3% 5.6% 6.6% Water -0.6% -0.3% 0.0% 0.3% 0.7% 1.2% Steam -3.3% -1.8% -1.3% -3.4% -4.0% 1.8% Chilled Water -3.4% -3.4% -3.5% -3.6% -3.6% -3.6% Combined ROR -0.9% 1.4% 1.3% 2.2% 3.0% 3.9% Cash Excess (Deficit): Electric $ (9,348) $ 386 $ 2,075 $ 5,725 $ 10,544 $ 5,280 $ 14,661 Water $ 3,298 $ (14,694) $ (11,339) $ (7,282) $ (7,451) $ (3,474) $ (40,942) Steam $ (3,970) $ 2,134 $ 2,206 $ 15,062 $ 3,039 $ 3,660 $ 22,131 Chilled Water $ (472) $ (136) $ (473) $ (410) $ (335) $ (377) $ (2,202) Total Cash Excess(Deficit) $ (10,492) $ (12,310) $ (7,530) $ 13,095 $ 5,796 $ 5,089 $ (6,352) IN. 17 Effect of Rate Increase on Monthly Bills ELECTRIC: Based On Monthly Useage of (kwh)--> 500 750 1000 Current Rate" $ 39.98 $ 58.84 $ 77.70 7.0% Rate increase $ 42.59 $ 62.67 $ 82.76 Increase over current rates---> $ 2.61 $ 3.83 $ 5.06 *bichides ECA as of October,2007 WATER: Based Ott Monthly Useage of (ccf)--> 4 5 6 Current Rate $ 13.75 $ 15.43 $ 17.11 7.0% Rate increase $ 14.72 $ 16.52 $ 18.32 Increase over current rates---> $ 0.97 $ 1.09 $ 1.21 STEAM: Based On Monthly Useage of (ndb)--> 100 400 1000 Current Rate $ 961 $ 3,925 $ 9,961 6.0% Rate increase $ 1,019 $ 4,160 $ 10,556 Increase over current rates---> $ 58 $ 235 $ 595 18 mm. Comparison of Electric Residential Monthly bill to Consumers Energy 500 kWh 750 kWh 1 ,000 kWh BWL-current* $39.98 $58.84 $77.70 Consumers $48.46 $72.68 $96.91 Differential 17.51% 19.04% 19.82% BWL +7% incr* $42.59 $62.67 $82.76 Consumers +7.5% $52.09 $78. 13 $104. 18 Differential 18.25% 19.78% 20.56% *BVVL Current Rates including October, 2007 ECA Ow. 19 Rate increase timeline: including Public Hearing, publication and filing dates Last Day for Public Hearing 30 days prior For Rate Adjustments Effective Thursday, January 31, 2008 Saturday, March 01, 2008 Back up to one day prior to scheduled Board Meeting (1122108) since board approval is required Last Day for Filing Notice after hearing date 45 days prior 1 Monday, January 21, 2008 0 Friday, December 07, 2007 Key Dates: *Filing & Publication Deadline --> December, 07, 2007 *Public Hearing Date 4 January 21, 2008 -Board Meeting to Review Public Hearing comments 4 January 22, 2008 -Rate Adjustments Effective 4 March 1, 2008 MTEMMM W. 20 History of Rate increases : Average System Date Increase Electric: Jan-98 to 2000 0.0% Jan-01 3.0% Total Cummulative % 14.2% Jan-02 3.0% Ave over 10 years 1.42010 Jan-03 3.0% Jul-05 3.0% Sep-06 1.5% Water: Jan-98 to 2000 0.0% Jan-01 7.0% Total Cummulative % 35.1% Jan-02 6.0% Ave over 10 years 3.5101b Jan-03 5.0% Jul-05 6.5% Jul-06 6.5% Steam: Jan-98 to 2000 0.0% (Rate 1 only) Jan-01 3.0% Total Cummulative % 47.5% Jan-02 3.0% Ave over 10 years 4.75% Jan-03 3.0% Sep-06 35.0% Note: Average inflation for ten years ended June, 2007= 3.01 ON. Source: Bureau of Labor Statistics, Detroit-Ann Arbor-Flint, Metro region 21 Approved by the Board: November 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, September 25, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232' Haco Drive, Lansing, Michigan. Present: Commissioners Robert Cochran, Joseph Graves, Semone James, Peter Kramer, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioner Robin Smith. The Secretary declared a quorum present. Chairperson Rios asked all to rise for the Pledge of Allegiance to the Flag. Chairperson Rios called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES By motion of Commissioner Zerkle, seconded by Commissioner Cochran the minutes of the July 24, 2007 regular 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. There were no public comments. COMMUNICATIONS Letter from Joseph D. Davis,Business Manager of IBEW Local 352 regarding, Changing of the Guard. The letter was presented at the July 24, 2007 Board meeting. Received and placed on file. Regular Board Meeting September 25,2007 Page 2 of 51 Letter from an anonymous person to J. Peter Lark, General Manager regarding actions taken on first day of employment. Received and placed on file. COMMITTEE REPORTS esolution 2007-9-4 COMMITTEE OF THE WHOLE August 21,2007 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, August 21, 2007. Committee of the Whole Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Joseph Graves, Semone James, Julee Rodocker, Robin Smith and Sandra Zerkle. Absent: Commissioners Robert Cochran and Santiago Rios. Public Comments There were no public comments. Update on Rules of Procedure The Board of Commissioners Rules of Procedure amended November 28, 2006 was submitted to the City Attorney's office for approval as to form. Upon approval, the item would then be sent to City Council for consideration and final approval. As such, Brigham Smith, City Attorney proposed several changes to the amended Rules of Procedure and discussed with the Board of Commissioners the reasoning for said modifications relative to style, substance and form. Upon further discussion, the Committee of the Whole took the following actions: On motion by Commissioner Calkins, seconded by Commissioner Smith, the Committee of the Whole agreed to remove section 13.1.1 from the amended Rules of Procedure. Action: Carried unanimously. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Committee of the Whole agreed to approve the Rules of Procedure as amended by City Attorney, Brigham Smith and to move forward said item to the full Board for consideration and approval; at which time it would then be resubmitted to City Council for final approval. Discussion: The Commissioners further discussed whether or not there was agreement with the authority that Mr. Smith stipulated during their discussion of the rules and his explanation regarding various changes. Regular Board Meeting September 25,2007 Page 3 of 51 Action: Carried unanimously. Commissioner James introduced the new Associate Internal Auditor, Perez Goree. Replacing Alternate Designated Rep for the Acid Rain Program was pulled from the agenda. Replacement of MPPA Commissioners from BWL Peter Lark, General Manager noted that the primary reason for the change is to replace the former Senior Vice President of Operations who is no longer with the Board of Water and Light (BWL). The commissioner and the alternates represent the BWL on the Michigan Public Power Agency Board of Commissioners. As such, George Stojic, Director of Strategic Planning and Development were recommended as the BWL's commissioner to MPPA. It was also advised that Douglas Wood and David Bolan would remain as MPPA's first and second alternate commissioners, respectively. On motion by Commissioner Smith, seconded by Commissioner Graves, the Committee of the Whole agreed to forward the proposed resolution to Authorize Naming of Commissioner to Michigan Public Power Agency (MPPA) to the full Board for consideration. Discussion: Mr. Lark confirmed that Mr. Stojic's job title is correct as of now. However, it may change in the near future. Action: Carried unanimously. Stonehouse III Property Development Proiect Kellee Christensen, Manager of System Integrity and Customer Projects advised that Stonehouse III is a condominium development project in East Lansing, Michigan. As such, staff has come before the Board to ask permission to allow the General Manager to release any easements as related to the project. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Committee of the Whole agreed to forward the proposed resolution for the Stonehouse III Development Project: BWL Easement Transaction to the full Board for consideration. Action: Carried unanimously. National Safety Council Update Pete Thelen, Director of Safety reminded the Commissioners that in 2005 the National Safety Council (NSC) audited the BWL and made a series of recommendations. The audit results became a roadmap that the BWL is following in an effort to improve safety. The information in the packet materials contains a list of twenty-one (21) priority items that the NSC recommended the BWL improve. The list contains the activities, target dates and milestones. The NSC will be brought back to conduct another audit to substantiate the BWL efforts and make any further comments and recommendations it Regular Board Meeting September 25,2007 Page 4 of 51 deems appropriate. Mr. Thelen also advised the Commissioners of the cooperation he has received from the IBEW and improved communications made with employees. In addition, it was also noted that it has taken the BWL a long time to achieve a safety culture. General Manager's Goals and Objectives Peter Lark, General Manager submitted a list of twenty-seven (27) goals and objectives that included suggestions from himself, the Board of Commissioners, and Dick Peffley's previous objectives as Interim General Manager. Commissioner Graves noted that the list contains good ideas relative to strategic planning regarding new generation and aging plants, which are two issues that should be addressed by either Mr. Lark or George Stojic. He also advised that the BWL needs a comprehensive plan that addresses the needs of the state of Michigan and the BWL. Mr. Lark notified the Board that Mr. Stojic is in the process of developing a draft plan within the next 6-months that would address issues such as, renewable energy, energy efficiency, purchasing power, etc. In response to the Commissioners request to complete the draft in a shorter timeframe, Mr. Lark asked Mr. Stojic to complete the plan in 5- months with a note to the Board that he would request additional time to finish said draft if necessary. In addition, the Committee of the Whole also discussed whether or not the objectives dated August 16, 2007 reflect the measures that the Board would use to evaluate the General Manager's performance. After further discussion, the committee suggested that Mr. Lark submit to the Human Resource Committee a prioritized list of goals obtainable within a one-year timeframe. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Committee of the Whole agreed to approve the General Manager's Objectives document dated August 16, 2007 and to also have the General Manager prioritize the items. Discussion: The Commissioners discussed the need for criteria to be laid out in which to evaluate Mr. Lark. They also discussed the standard form that the Commissioners traditionally use to evaluate the General Manager and other appointees as well as the need to place the objectives within said format. The Committee of the Whole referred the prioritization matter and the development of a suitable evaluation format to the Human Resource Committee. Upon further discussion, Commissioner Smith introduced a friendly amendment to change the title of the document from "General Manager's Objectives" to `BWL Priority Focus" that the General Manager will oversee. The amended document will also be submitted to the full Board for consideration and approval. Commissioner Calkins accepted the friendly amendment. Regular Board Meeting September 25,2007 Page 5 of 51 Action: Carried unanimously. Other Interim Director of Operations. The `interim' title for the Director of Operations position has been removed. Dick Peffley has formally accepted the position, which may be changed to Executive Director of Operations although, that decision has not yet been made. Mr. Lark has worked closely with Mr. Peffley who has an excellent working knowledge of Eckert and Erickson Station. He also advised that with the addition of Susan Devon, George Stojic, Dick Peffley and himself the BWL is second to no other utility company in the state of Michigan. Lead Pipe Replacement. Commissioner Calkins noted that he received a complaint that the BWL is leaving lead pipe in the ground when working on lead pipe replacements. Staff noted that the BWL attempts to pull the lead out through the ground as opposed to boring it. However, sometimes the lead will break depending on its strength. After brief discussion, Mr. Lark advised that he would note the matter regarding Commissioner Calkins request for further clarification regarding the aforementioned subject. He also notified the Commissioners that the BWL is currently pricing a new truck for both lead pipe removal and tree trimming, as he would like to accelerate the lead pipe replacement program. In addition, Mr. Lark verified that he has not reviewed the existing tree trimming contract. However, he is looking to increase BWL employee workload relative to tree trimming. The Commissioners discussed concerns surrounding tree-trimming issues and asked the General Manager to review the matter for future consideration. Delta Township Water Agreement Update. Peter Lark met with Joe Drolett of Delta Township and as such, they will continue to work together to resolve issues and correct matters regarding the water agreement. New Customer Load. The BWL is expecting new electric and water load with the building of a new 15-story condominium development project in downtown Lansing. The customer is now looking at taking steam and chilled water. As such, a meeting is scheduled for next week to further discuss the matter. In addition, Mr. Lark would like some marketing by way of Mr. Stojic and staff members, as the BWL may have opportunity for growth at the Triangle (State Police) location and Ottawa Station. The Commissioners noted the need for further discussion regarding steam, the cross subsidization of said utility, steam rates and the development of a strategic plan that takes those items into account. Executive Summaries. The Commissioners asked that executive summaries and presenters names be included with future presentations as a standard course of operation. In the past, it was found to be helpful when meeting and/or receiving information from staff members. Regular Board Meeting September 25,2007 Page 6 of 51 MMEA. The BWL rejoined the Michigan Municipal Electric Association (MMEA), which will be very beneficial in moving forward to address the 90% mercury rule and its affect on Eckert Station. Proposed Revision to Public Act 141. Mr. Lark is scheduled to meet with Frank Accavitti, Chairman of the Energy and Technology Committee in the House of Representatives to look at changing the decision date relative to the BWL's participation in deregulation. If the BWL chooses to participate then the city of Lansing will be protected from competition and outlaying areas would be open to competition. It was noted that the outlaying areas maybe protected due to the 425 Agreement. Lansing State Journal Editorial. Mr. Lark met with the Lansing State Journal's editorial board to discuss various issues. Executive Report. Commissioner Smith asked Mr. Lark to provide an executive report to the Board of Commissioners that highlights various items on a monthly basis via email. She also advised that if additional items arise then the Board would want to be aware of those topics as well. It was further noted that the executive report did not have to contain explicit explanations relative to its content. There being no further business, the meeting adjourned at 8:11 p.m. Respectfully submitted, Semone M. James, Chair Committee of the Whole Motion by Commissioner Zerkle, seconded by Commissioner Rodocker, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolution 2007-9-2 AD HOC COMMITTEE September 11, 2007 The Ad Hoc Committee on Workforce Development met at the Executive Offices, Lansing, beginning at 11:10 a.m. on Tuesday, September 11, 2007. Ad Hoc Committee Chair, Sandra Zerkle called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Cochran, Santiago Rios, Julee Rodocker(arrived at 11:21 a.m.) and Sandra Zerkle. Alternate committee member Joseph Graves (arrived at 11:26 a.m.)was also present. Absent: None Public Comments Regular Board Meeting September 25,2007 Page 7 of 51 There were no public comments. Discuss Parameters of Workforce Development Committee The Ad Hoc Committee on Workforce Development met to discuss the committee's parameters. As such, various topics were reviewed in relation to the development of the Board of Water and Light's (BWL) employee workforce. Listed below is a brief summary of the topics addressed during said meeting. Lineman shortage—It was suggested that the BWL re-establish hiring entry level persons such as groundsmen or truck drivers for a feeder program that would lead to a journeyman apprenticeship. The in-house program would provide employees the opportunity to show ability and aptitude for the journeyman apprenticeship while allowing the BWL to address lineman shortages with an internal program. It was noted that recent BWL wage increases have mad hourly wage rates competitive with other companies. However, there might be issue with the BWL's deferred compensation relative to other utilities. In addition, it was recommended that Denise Mulder, Human Resource Director seek non-monetary enhancements unique to the lineman that would give them a sense of pride and heightened value within the organization, i.e. lab coats, BWL shirts, etc. The Commissioners also suggested that Ms. Mulder provide a list of possible items to the Board of Commissioners for further consideration. Erickson Training Center—The lineman's training center at Erickson Station, which is currently 15-years old needs significant improvement. They are presently unable to provide compute training because there are no workstations and in addition, storage and lack of space also create an unappealing work environment. It was suggested that the BWL contact Lansing Community College (LCC) to discuss creating a partnership in which LCC would make recommendations for a new training facility that could also be used to provide LCC students with practical hands on experience. High School Partnerships—The committee discussed the possibility of creating a partnership with the Lansing School District that would expose area high school students to the skilled trades. It was noted that Michigan State University's Upward Bound program was a very effective means of mentoring and partnering area students with local business entities. In addition, it was suggested that J. Peter Lark, General Manager contact Lansing Superintendent, Dr. T.C. Wallace, Jr. for preliminary discussions surrounding the topic. Diversity—The committee expressed a desire to incorporate diversity into workforce development, recruitment of new hires, internal promotions, and procurement. It was noted that the committee would like the BWL Diversity Coordinator to attend a future Ad Hoc Committee meeting for further discussion on said topic. The General Manager may also have to address purported issues of frustration and lack of support from various supervisory levels relative to diversity initiatives. In addition, it is the committee's desire to ensure that the BWL is reaching out to a diverse population and that diversity is a part of the process. Regular Board Meeting September 25,2007 Page 8 of 51 Mr. Lark noted that in July 2007 Shan Shaw, Administrator/Diversity Omsbudmen was charged with the responsibility of creating and submitting a diversity plan by November 4, 2007. Mr. Lark also advised that they would be open to making sure that the BWL mirrors its community. Ms. Mulder further reported efforts by the Human Resource Department in an effort to draw a more diverse population, which include broader recruitment forms, campus recruiting, posting on college job boards, and increased electronic recruitment. The program will be finalized by January 2008. Accurate and Valid Data—In moving forward with developing and maintaining an adequate and well prepared workforce, it is necessary to receive accurate and factual information. A cost benefit analysis is an essential tool that would aid the Commissioners in making various decisions as they move forward. Contractor Work—The committee suggested reviewing the economic feasibility of allowing external contractors to do prime work for the Water Department. To this regard, the broader scope of the committee is to re-evaluate the BWL's capacity and what it should be, make decisions, give direction, and provide the resources and tools necessary for management to carry out the tasks at hand. A request was also made to receive definitive information from staff on the total number of dollars being spent on contractor work. In addition, it was noted that the Commissioners do not have enough sufficient information to express a specific opinion on the direction the BWL should take relative to utility rates and employee staffing levels. Mr. Lark noted that the BWL is in the process of securing two new trucks that will allow for the creation of a tree trimming and water crew. The BWL will hire 3-4 persons for each crew, which will allow for a decrease in work currently awarded to outside contractors. He also advised that the BWL is doing an outstanding job with tree trimming. As the former Chairman of Michigan Public Service Commission, they received a significant number of calls regarding tree trimming, which is the nature of the utility industry. Mr. Lark also reported that they are ahead of schedule with lead water replacements and the BWL is the only utility in the country with such a program. The grogram will eventually end and the BWL should be careful not to over hire for that particular project; although there is no danger of over hiring in the Water Department in and of itself. He further noted that a good estimated employee count for the BWL would be 850 employees. Energy Rates—It was advised that the BWL electric rates are lower than Consumers Energy (CE) due to smart investment decisions made within the last 5 — 10 years. CE's rates are approximately 20% higher than the BWL's and they also have a rate increase before the MPSC for$200,000,000. It was noted that based on certain items the BWL's rates should be lower than CE's. However, there are infrastructure improvements, water bond issues, environmental concerns, and future generation needs that the BWL must address in the near future. Regular Board Meeting September 25,2007 Page 9 of 51 Combined Sewer Overflow (CSO) Project—The BWL previously worked with the City of Lansing to replace and upgrade water mains due to the CSO Project. Over time the BWL eventually contracted the work out and Tetratech currently oversees the entire project on behalf of the City of Lansing. Discussion arose as to whether or not it is feasible for the BWL to return to changing its own water mains as opposed to contracting the work to another entity. Construction contracts are up for renewal in January 2008. Joint Technical Training Committee (JTTC) —Dolores Appling, President IBEW Local 352 announced that the BWL held its second JTTC meeting and they are in the process of sending surveys (due in 30 days) to assess departmental training needs. Department Training Committees are also being formed who will aid in determining respective departmental training needs. In addition, two Lansing Community College professors have donated their time twice a week to tutor apprenticeship students. After further discussion, the Ad Hoc Committee expressed its pleasure with the direction and optimism of the meeting. They also agreed to meet on a monthly basis and directed staff to report on the above items at the next meeting, which will be scheduled for October 2007. There being no further business, the meeting adjourned at 12:51 p.m. Respectfully submitted, Sandra Zerkle, Chair Ad Hoc Committee Motion by Commissioner James, seconded by Commissioner Cochran, to receive the Human Resource Committee report as presented. Action: Carried unanimously. esolution 2007-9-3 HUMAN RESOURCE COMMITTEE September 13, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:10 p.m. on Thursday, September 13, 2007. Human Resource Committee Chair, Julee Rodocker called the meeting to order and initially received information from staff. The Chair asked the secretary to call the roll after a quorum of members was available at 4:38 p.m. The following committee members were present: Commissioners Robert Cochran, Julee Rodocker, and Sandra Zerkle (arrived at 4:38 p.m.). Absent: Commissioner Joseph Graves. Public Comment Regular Board Meeting September 25,2007 Page 10 of 51 There were no public comments. General Manager Goals 2007-08 The Committee of the Whole met August 21, 2007 and directed J. Peter Lark, General Manager to submit a list of goals and objectives to be used in his performance evaluation for fiscal year end 2008. As such, Mr. Lark submitted the following items in response to the committee's direction. He also advised the Human Resource (HR) Committee that he has reviewed the evaluation materials forwarded to him, and he is fine with whatever evaluation tool the Board agrees to utilize. General Manager Goals FY 2007-08 1. Improve relations between management and the workforce, with particular emphasis on developing a more congenial and productive relationship with the union. Eliminate "Management vs. Union" mentality. 2. Improve external relations —develop a greater community presence by supporting key components of our community (e.g. Sparrow Foundation and educational resources.) 3. Improve relations with our fellow municipal utility entities, in particular the MMEA and the MPPA. 4. Re-visit the decision to withdraw from the MPPA Power Pool. 5. Prepare draft Strategic Plan for the potential development of added generation resources on the BWL system. 6. Work to reverse preliminary MDEQ mercury ruling that as of 2015 will effectively limit BWL to the operation of two of the three smaller units at Eckert, and none of the three larger units. 7. Continue working with Delta Township to resolve water wholesale contract issues. 8. Make recommendation for water bonding. 9. Develop economic development policy for existing and new customers. Commissioner Rodocker noted that the Human Resource Committee would reach consensus regarding, which evaluation tool to use for the General Manager and will notify him accordingly. It was further advised that the Board of Commissioners is attempting to utilize a forward thinking tool as they advance with the evaluation process. Denise Mulder, Human Resource Director advised that it is easy for Board appointees to be forgotten because they are not a part of the Board of Water and Light's (BWL) evaluation process. The BWL conducts performance evaluations after the close of the fiscal year. However, the appointees are on a contractual basis, which does not coincide Regular Board Meeting September 25,2007 Page 11 of 51 with the fiscal period. As such, the Commissioners may want to consider altering the next contract length to allow the appointees performance reviews to fall within the BWL fiscal year cycle so that all reviews would take place at the same time. Ms. Mulder also noted that the HR Department is presently modifying their performance review format. Once finalized the HR Department could forward a copy of the format to the Board of Commissioners to consider using as a tool for the appointees, except for the General Manager who would typically have a slightly different format. The new format will be in place for the July 1, 2008 review cycle. After further discussion, the Human Resource Committee took the following actions: On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommended that the full Board approve the suggestion to place the appointees in the BWL system and adjust the contracts accordingly in each case and to also evaluate the new Human Resource Department form after it has been revised to see if it will work for the Board of Commissioners. In the meanwhile, it was further recommended that the Board continue to use its existing evaluation form until further notice. Action: Carried unanimously. On motion by Commissioner Cochran, seconded by Commissioner Rodocker, the Human Resource Committee agreed to approve the General Manager's Goals for Fiscal- Year 2008 as submitted. The item will be forwarded to the full Board for consideration and approval. Action: Carried unanimously. Discuss Six-Month Review Process for the Director of Internal Audit Susan Pifer, Director of Internal Audit began work at the BWL on March 26, 2007. As such, her six-month anniversary date is September 261h. Presently, the HR Committee is not scheduled to meet again until November 101h, which would be Ms. Pifer's 71/2-month anniversary. After brief discussion, the HR Committee agreed to schedule another meeting for October 2007 in order to conduct the Director of Internal Audit's six-month performance review in a timely manner. It was also noted that the Board would utilize the same format as was used for the Corporate Secretary. In addition, Wendy Bradley, HR System Consultant will process the evaluation materials and compile the results on behalf of the Board of Commissioners. Ms. Pifer will also forward a copy of her performance factors to the HR Department. The HR Committee agreed to schedule another meeting for Tuesday, October 91h at 11:00 a.m. for the purpose of conducting the Director of Internal Audit's six-month performance review. Annual Performance Review of Corporate Secretary Regular Board Meeting September 25,2007 Page 12 of 51 Rhonda Jones, Corporate Secretary and Board appointee requested a closed session for the purpose of receiving her contractual year-end performance evaluation as permitted by Open Meetings Act exemption MCL 15.268(a). (4:55 p.m.) The roll was called. Yeas: Commissioners Cochran, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Graves. Carried unanimously. Moved by Commissioner Zerkle, seconded by Commissioner Cochran that the Human Resource Committee returns to open session. Carried unanimously. The Human Resource Committee meeting reconvened in open session at 5:12 p.m. Upon conclusion of the closed session, the Human Resource Committee took the following actions: On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommends to the full Board changing the cycles to agree with the company cycle, which represents reviews in August for the three appointees and adjust the contracts accordingly. Action: Carried unanimously On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommends to the full Board that Rhonda Jones be reappointed as Corporate Secretary and that her wage be raised by 3.25% effective July 23, 2007. Discussion: Ms. Mulder recommended July 23, 2007 as the effective date of the wage increase, as it coincides with Secretary Jones' anniversary date. Action: Carried unanimously. There being no further business, the meeting adjourned at 5:19 p.m. Respectfully submitted, Julee M. Rodocker, Chair Human Resource Committee Motion by Commissioner Kramer, seconded by Commissioner Cochran, to receive the Human Resource Committee report as presented. Regular Board Meeting September 25,2007 Page 13 of 51 Action: Carried unanimously. solution 2007-9- COMMITTEE OF THE WHOLE September 18, 2007 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, September 18, 2007. Committee of the Whole Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Peter Kramer, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioner Joseph Graves Public Comments There were no public comments. Designated Development Fund J. Peter Lark, General Manager presented a proposed resolution in which staff sought approval for the creation of a designated development fund. The establishment of the fund would allow the Board of Water and Light (BWL) to take steps towards addressing future infrastructure needs. It was noted that the proposed resolution would also represent the Board's acceptance of the fund in theory with staff recommended guidelines to follow. The Committee of the Whole discussed the creation of the designated development fund and generally supported what is believed to be a good visionary idea. However, committee members expressed a desire to receive additional information and explanation regarding the theory of the fund, future funding options, whether or not the fund should be a part of the operations and maintenance budget, guidelines that speak to the specific purpose of the fund, and verbiage changes to the proposed resolution. The committee also expressed concern regarding the characterization of the funds as excess, rather than a more accurate terminology such as unallocated. After further discussion, the committee directed staff to provide additional information and re-present the proposal pending changes to the original resolution. Utility Rate Adiustments Susan Devon, Chief Financial Officer presented a proposed resolution regarding a public hearing concerning electric, water, and steam rate increases. The resolution proposed rate increases (of electric 4%, water 6%, steam 6%) similar to what was approved in the fiscal year 2008 budget on May 22, 2007. However, in addition to the original 4% electric rate increase, staff proposed an additional 1% electric rate change, whereas, the increase would help mitigate budgeted net losses and future infrastructure concerns. It also was noted that the BWL has certain statue guidelines that it must follow in order to Regular Board Meeting September 25,2007 Page 14 of 51 propose and approve utility adjustments. Therefore, the proposed resolution was presented in an effort to move forth a public hearing so that rate changes may take effect January 1, 2008. The committee members discussed the proposed resolution and explained to staff past practice whereas, staff would typically present various rate cases and supporting documentation to the Finance Committee, which would also include a PowerPoint presentation. It was also noted that although the fiscal year 2008 budget was passed with the aforementioned rate changes, the Board of Commissioners would like to receive additional data in order to determine if the budgeted rate adjustments should be modified. The committee also asked staff to present a budget that does not have a net loss in the first or second fiscal year. After further discussion, Commissioner James recommended that the matter be referred to the Finance Committee. Staff was also advised that they could request a special Finance Committee meeting if deemed necessary. In response to the committee's comments, Mr. Lark noted that staff attributed some strength to the fact that the Board previously approved the rate changes in theory at the May 22, 2007 board meeting. Nevertheless, he advised the committee that staff would present the requested information at the next Finance Committee meeting, as directed by the Committee of the Whole. It was also clarified that by doing so, there is a possibility that the rate change will not take effect January 1, 2008 as originally anticipated. And in response to a request to see capital outlays, Mr. Lark noted that they are presently unable to estimate capital outlay costs relative to possible future infrastructure projects at this time. Agenda Items for Joint BWL City Council Meeting The committee briefly reviewed the agenda items for the Joint BWL/City Council meeting scheduled for Thursday, September 27, 2007 at 11:30 a.m. located in the boardroom at Haco Drive. There were no changes to the agenda and it was confirmed that City Council has not provided any additional items at said time. The committee members directed staff to a provide a paragraph write up for each agenda item so that it maybe presented to the Board of Commissioners and City Council for review prior to the meeting. In addition, the committee also received a brief explanation from staff regarding the history of the CSO Project and the BWL's participation. Management Updates: Tree Trimming—Dick Peffley, Executive Director of Operations gave a brief update regarding tree trimming. It was noted that Wright Tree Service presently has seven (7) trucks/crews servicing BWL territories. However, that number should be reduced to five (5), as the BWL will have a company sponsored crew and the City of Lansing will also perform tree-trimming work on behalf of the BWL. In addition, it was noted that the BWL has finished its 5-year cycle tree trimming cycle and is currently pruning. In response to the report, the committee noted that it would be helpful to know in advance what areas the BWL is scheduled to transition to next. Regular Board Meeting September 25,2007 Page 15 of 51 Community Sponsorships—Cheval Breggins, Communications/Public Relations Representatives gave a brief update of community sponsorships for fiscal year to date 2008. The update provided information relative to sponsorship requests that were either approved and/or denied as well as a list of upcoming events that contain BWL involvement. Other New Commissioner. Commissioner James introduced Peter W. Kramer as the latest addition to the Board of Commissioners. Law School. The Commissioners congratulated Susan Pifer, Director of Internal Audit on her recent graduation from Thomas L. Cooley Law School. Legal Updates. Commissioner Smith asked that Brandie Ekren, Associate Attorney provide an update to the Board on the Joseph Pandy legal matter at a future date. There being no further business, the meeting adjourned at 7:10 p.m. Respectfully submitted, Semone James, Chair Committee of the Whole Motion by Commissioner James, seconded by Commissioner Cochran, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolution 2007-9- FINANCE COMMITTEE September 19, 2007 The Finance Committee met at the Executive Offices, Lansing beginning at 4:00 p.m. on Wednesday, September 19, 2007. Finance Committee, Robin Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Semone James, Peter Kramer, and Robin Smith. Alternate committee member Robert Cochran was also present. Absent: Commissioner Santiago Rios. Public Comments There were no public comments. FY 2007 Audited Financial Statements: Enterprise & Trust Funds Regular Board Meeting September 25,2007 Page 16 of 51 Doug Rober, Managing Partner and Kristine Latchaw, Audit Manager of Plante & Moran were introduced to the Finance Committee. The auditors were present to review the year- end June 30, 2007 Audited Financial Statements for the Board of Water and Light (BWL) Enterprise Funds. Final copies of the audited reports were distributed, in addition to copies of the auditor and management letters, and copies of supplemental materials for Plante &Moran's presentation. Mr. Rober briefly reviewed the auditor letter and noted that samples of the organizations high risks areas were taken in order to provide an unqualified opinion. The letter also sited sensitive accounting estimates regarding the North Lake Lansing and Comfort Street landfills as well as fees in relation to the termination of the contractual agreement with General Motors under management judgments and accounting estimates. Mr. Rober noted that there were no significant adjustments made to the financial statements or disagreements with management. Unrecorded possible financial adjustments were not reported because they were deemed immaterial. A summary of the unrecorded possible adjustments was attached to the auditor's letter and includes the following: • Known misstatements: To record accounts payable that was not accrued at year-end due to late-arriving invoices or receiving's • Estimate Adjustments: To adjust outstanding CSO liability to calculated amount based on actual costs incurred to date on project and; • To record IBNR liability for worker's compensation self-insurance • Implied Adjustments: None Kristine Lachaw noted that all four reports that include the Enterprise Fund, Defined Benefit Plan, Pension Plan and the Retiree Benefit Plan and Trust were unqualified opinions, which is the highest rating that Plante & Moran could give. Ms. Lachaw reviewed the graphical information contained within the supplemental report that addressed the following topics • Comparison of Operating Revenue by utility category from 2004—2007. • Comparison of Operating Expenses by expense category from 2004—2007. • Comparison of Significant Power Costs from 2003 —2007. • Comparison of Operating Income (Loss) from 2003 —2007. • Comparison of Kilowatt Hours Generated Versus Purchased from 2003 —2007. • Comparison of Sales Source of Kilowatt Hours Generated from 2003 —2007. • Comparison of Bond Debt Service Requirements from 2007 —2012. Doug Rober briefly reviewed the Statement of Net Assets for the Enterprise Fund and noted that the accruals are consistent with no new disclosure requirements, as they are similar to what they were in the past. Kristine Latchaw also reviewed Plante &Moran's management letter comments, which also include BWL management responses. A brief summary of the manager comments are presented below: Regular Board Meeting September 25,2007 Page 17 of 51 New Auditing Standards—There were changes made to the auditing rules in 2006. The new standards significantly change how audits are conducted and communicated to the Board of Commissioners. In addition, the new standards will also bring nonpublic companies and governmental bodies into closer alignment with organizations currently under Sarbanes-Oxley. As part of the new guidelines, Plante &Moran also reported that they are not aware of any significant deficiencies in account procedures or internal controls. Therefore, nothing was reported. In addition, as a result of the new rules Plante & Moran will also work with management in reviewing and documentation of internal controls. In response to a committee question, Ms. Latchaw noted that the presentation materials will not change. However, time spent will increase and become more staggered throughout the year as opposed to primary year-end auditing work. Commissioner Smith asked that Plante &Moran provide guidance to Susan Pifer, Director of Internal Audit, as this will be a new process for the BWL. She also asked that it be communicated to the general public and City Council so as to ensure that the changes being made are not result of BWL past practice. Stores Inventory—The BWL conducts cycle counts of stores inventory items throughout the year. It was determined that cycle counts and system records are not sufficient for a year-end inventory, and physical year-end inventories are costly. Therefore, it was recommended that staff and the Internal Audit Department develop a cycle counting system that meets all reporting and auditing needs. Journal Entry Review and Approval—It was reported that several journal entries did not reflect evidence of a reviewer. As such, it was recommended that the BWL maintain adequate documentation of the review being performed, as it will aid in the implementation of the new auditing standards previously discussed. Capital Assets—Capital assets are the primary asset on BWL financial statements. Therefore, it is essential that they possess a thorough understanding of the assets, and that management and accounting staff reviews all procedures and internal control process related to said topic. It was also noted that self-constructed assets are difficult and audit risky because of the time and materials included and the possibility of manipulating those figures. Therefore, the process used relative to those items should be consistent with generally accepted accounting principles. Accounting for Derivatives—If the BWL decides to withdraw from the MPPA Power Pool and enter into arrangements with more risk then it could be considered derivatives for accounting purposes. Therefore, should the BWL engage in instruments designed to leverage or hedge risk in an effort to ear a higher return on power sales; then it should consider guidance from an outside third party to assist in implementing the accounting and internal control procedures. Business Continuation Planning—The BWL has a significant number of persons who are nearing retirement. It is critical that the BWL continue to take steps to plan and implement a business continuation plan to prepare for the departure of key personnel. Regular Board Meeting September 25,2007 Page 18 of 51 RFP for Investment and Banking Services Susan Pifer presented a proposed Finance Committee action, which indicated a change in committee members from Sue Flores, Charles Moore and Susan Pifer to Sue Devon (new Chief Financial Officer), Charles Moore and Susan Pifer. In addition, the committee also noted that a course of action will be recommended to the Finance Committee in October 2007 as opposed to July. In response to the Finance Committee's request, Ms. Pifer noted that the Subcommittee intends to present all responses, a matrix of said information and a recommendation regarding the request for proposal (RFP) to the Finance Committee. On motion by Commissioner James, seconded by Commissioner Cochran, the Finance Committee agreed to adopt the proposed committee action pertaining to the changes regarding the Subcommittee Plan. Action: Carried unanimously. Sarbanes-Oxley Subcommittee Ms. Pifer presented a proposed Finance Committee action whereas, she and Sue Devon, Chief Financial Officer will co-chair a subcommittee to study Sarbanes-Oxley or a equivalent internal controls implementation; and make a recommendation to the Finance. Committee in November 2007 regarding said findings. Ms. Pifer also provided information regarding a one-day seminar in Metro Detroit, Michigan entitled, "Sarbanes-Oxley Benefiting from Compliance". The information was forwarded to the Board of Commissioners and various staff persons to determine their level of interest in attending. On motion by Commissioner James, seconded by Commissioner Cochran, the Finance Committee adopted the proposed committee action recommending the formation of a Sarbanes-Oxley Subcommittee with recommendations to be made to the Finance Committee in November 2007. Action: Carried unanimously. Signature Authorizations Sue Devon presented four proposed signature authorization resolutions necessary due to recent BWL staff and job title changes. The Finance Committee took the following actions: On motion by Commissioner Cochran, seconded by Commissioner James, the Finance Committee agreed to approve the Authority to Sign Checks resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. Regular Board Meeting September 25,2007 Page 19 of 51 On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Finance Committee agreed to approve the Delegation of Authority resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Finance Committee agreed to approve the Authority to Invest Operating and Pension Funds resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Finance Committee agreed to approve the Automated Transaction Clearing House (ACH) Policy resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. Other Commissioner Smith noted that she intends to recommend to the Executive Committee. that they consider forming an Audit Committee so that they may separate Finance and Audit Committee items respectively. There being no further business, the meeting adjourned at 4:54 p.m. Respectfully submitted, Robin M. Smith, Chair Finance Committee Motion by Commissioner Rios, seconded by Commissioner Cochran, to receive the Finance Committee report as presented. Action: Carried unanimously. esolution 2007-9- EXECUTIVE COMMITTEE September 20, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Thursday, September 20, 2007. Executive Committee Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Santiago Rios, and Robin Smith. Absent: None Regular Board Meeting September 25,2007 Page 20 of 51 Public Comments There were no public comments. Board of Commissioners Budget The Executive Committee reviewed and discussed the Board of Commissioners budget update for fiscal year to date 2008. Following their discussion, the Executive Committee directed Susan Pifer, Director of Internal Audit to review the Commissioner's budget to ensure that the correct budget items are allocated to the appropriate responsibility areas (RA). They also asked Ms. Pifer to specifically review the cost and budget allocations associated with the Collaborative Economic Development Hope Loan and cellular phone costs. In addition, the committee asked that an itemized expense report be included with future Board budget updates. In response to a committee question, J. Peter Lark, General Manager noted that employees are allowed to utilize Board of Water and Light cell phones for personal use, provided they do not engender additional costs. Review Process for Expense Reports The Executive Committee reviewed the budget updates and expenses reports for Board appointed employees. Ms. Pifer noted that she intends to interview two firms in response to the RFP for the SAP Controls Assessment. As a result, the Board will be invited to sit in on the interviews if they choose to do so. In response to a committee question, staff was unsure if the BWL currently has a policy denoting a preference for local or Michigan based firms. Brankie Ekren, Associate Attorney will verify and follow-up with a response to said question. Discuss Board of Commissioners Retreat The Executive Committee discussed the possibility of holding a Board retreat in which the Board of Commissioners and executive staff would have opportunity to discuss recent and future changes as well as the strategic plan. It was suggested that the BWL conduct a 2-day retreat in which the Board of Commissioners would meet to discuss various issues on day one and then meet with executive staff on day two. After brief discussion, the Executive Committee took the following action: On motion by Commissioner James, seconded by Commissioner Cochran, the Executive Committee agreed to support the development of a cost effective 2-day Board retreat in which the Commissioners would meet together on day one and management would meet with the Board of Commissioners on day two. Action: Carried unanimously. Upon further discussion, the Executive Committee also agreed that a facilitator would be helpful in giving input on the strategic plan and maintaining focus during the Commissioners session. In addition, it also appears that a facilitator may not be necessary during the second phase of the retreat with the Board of Commissioners and executive staff. However, the committee agreed to allow Commissioner Rios to work Regular Board Meeting September 25,2007 Page 21 of 51 with Secretary Jones in planning the retreat as such, a proposal will be submitted to the Executive Committee at the next meeting. Discuss Legal Review Process The Executive Committee agreed to table the legal review process discussion until further notice. Other The General Manager provided Executive Committee with information pertaining to a potential business deal with the City of Lansing. There being no further business, the meeting adjourned at 5:28 p.m. Respectfully submitted, Santiago Rios, Chair Executive Committee Motion by Commissioner James, seconded by Commissioner Cochran, to receive the Executive Committee report as presented. Action: Carried unanimously. MANAGER'S RECOMMENDATIONS esolution 2007-9- A. Naming of Commissioner to Michigan Public Power Agency RESOLVED, That George Stojic, Executive Director of Strategic Planning and Development, be named as the BWL commissioner to MPPA; and RESOLVED FURTHER, That Douglas Wood and David Bolan remain as MPPA's first alternate commissioner and second alternate commissioner, respectively. -------------------- Staff Comments: The change of primary commissioner is necessary to replace William Cook Jr. who is no longer employed at the BWL. The commissioner and the alternates represent the BWL on the MPPA Board of Commissioners. The alternates represent the BWL in the event the commissioner is not available. -------------------- Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-9-7 for the Naming of Commissioner to Michigan Public Power Agency. Regular Board Meeting September 25,2007 Page 22 of 51 Action: Carried unanimously. [Resolution 2007-9- B. Stonehouse III Development Project: BWL Easement Transactions RESOLVED, That the Board of Commissioners hereby authorize the General Manager to release the easements related to the Stonehouse III development project as presented at the August 21, 2007, Committee of the Whole meeting, provided the Lansing Board of Water and Light receives adequate easements to meet its operational needs upon the General Manager's review. -------------------- Staff Comments: Stonehouse III, LLC and the City of East Lansing are developing a parcel of land in Downtown East Lansing. In order for the development project to proceed, Stonehouse III, LLC and the City of East Lansing have requested that the BWL release several easements. The facilities currently located in those easements will be moved to new easement areas, which should be sufficient for the BWL's operational needs. Additionally, the BWL will receive an additional easement for existing underground electrical facilities and new conduits that are currently without an easement. A summary of the relevant property transactions are attached. -------------------- Motion by Commissioner Rios, seconded by Commissioner James, to adopt Resolution 2007-9-8 for the Stonehouse Development Project: BWL Easement Transactions. Action: Carried unanimously. esolution 2007-9- C. Fiscal Year 2007 Audited Financial Statements RESOLVED, That the fiscal year 2007 Audited Financial Statements for the Board of Water and Light Enterprise Fund have been reviewed and is hereby accepted as presented. FURTHER RESOLVED, That the Corporate Secretary is hereby directed to file a copy of the fiscal year 2007 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) no later than December 31, 2007. FURTHER RESOLVED, That the Corporate Secretary is hereby directed to file a coy of the fiscal year 2007 Audited Financial Statements of the Board of Water and Light Enterprise Fund with the City of Lansing no later than October 15, 2007. Regular Board Meeting September 25,2007 Page 23 of 51 -------------------- Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-9-9 for the Fiscal Year 2007 Audited Financial Statements. Action: Carried unanimously. esolution 2007-9-1 D. Authority to Sign Checks RESOLVED, That Board of Water and Light Policy 1-01 "Authority to Sign Checks" is hereby amended as follows: The signatures of not less than two (2) of the following officers shall be required to sign checks for the general checking account at National City Bank and the payroll/pension checking account at Standard Federal Bank. 1. General Manager 2. Chief Financial Officer 3. Corporate Secretary This resolution supersedes Resolution 2004-01-07. -------------------- Staff Comments: Due to organizational and title changes, this resolution is necessary to incorporate the new title of Chief Financial Officer. -------------------- Motion by Commissioner James, seconded by Commissioner Zerkle, to adopt Resolution 2007-9-10 for the Authority to Invest Operating and Pension Funds. Action: Carried unanimously. esolution 2007-9-11 E. Delegation of Authority RESOLVED, That Board of Water and Light Policy 1-03 "Delegation of Authority" is hereby amended as follows: In the General Manager's absence, the officers listed below shall have the full authority and responsibility for Board of Water and Light (BWL) operations, in the order in which they are listed, or as otherwise designated by the General Manager. Regular Board Meeting September 25,2007 Page 24 of 51 1. Executive Director of Operations. 2. Chief Financial Officer This resolution supersedes Resolution 2004-01-09. -------------------- Staff Comments: Due to organizational and title changes, this resolution is necessary to incorporate the new title changes. -------------------- Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-9-11 for the Delegation of Authority. Action: Carried unanimously. esolution 2007-9-12 F. Authority to Invest Operating and Pension Funds RESOLVED, That Board of Water and Light Policy 7-01 "Authority to Invest Operating and Pension Funds" is hereby amended as follows: RESOLVED, That the General Manager and/or one of the following designated representatives in the sequence listed below, shall be authorized to invest operating and pension funds in such securities as permitted by law and to purchase, sell, sign and endorse for transfer, certificates representing said securities and invested in the name of the Board of Water and Light (BWL): 1. Chief Financial Officer 2. Manager of Finance and Planning The Revenue Bond Act of 1933 (PA 94 of 1933, MSA 5.2731), as amended, and BWL Bond Resolution 89-10-3 govern and restrict the investment of BWL operating funds. Pension funds are governed by the Public Retirement System Investment Act (MCL 38.1132 et seq.), as amended. This resolution supersedes Resolution 2004-01-10. -------------------- Staff Comments: Due to organizational and title changes, this resolution is necessary to incorporate the Chief Financial Officer title. -------------------- Regular Board Meeting September 25,2007 Page 25 of 51 Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-9-12 for the Authority to Invest Operating and Pension Funds. Action: Carried unanimously. esolution 2007-9-I3 G. Automated Transaction Clearing House (ACH) Policy WHEREAS, Act No. 738 of the Public Acts of 2002 authorizes the use of electronic transactions by designated officers of the Board of Water and Light; and WHEREAS, the Board of Commissioners deems that it is in the best interest of the Board of Water and Light to make certain financial transactions by using electronic transactions as described in the Act. RESOLVED, That the Board of Water and Light is authorized to utilize electronic transactions in compliance with written procedures and internal controls developed and recommended by the Chief Financial Officer and presented to the Commissioners as Electronic Transactions Procedures on this date. Authority The Chief Financial Officer may enter into ACH or electronic transaction agreements. Responsibility The Chief Financial Officer shall be responsible for establishing all ACH and electronic transaction arrangements, including payment approval, accounting, reporting, and overseeing compliance. The Chief Financial Officer shall be responsible for documentation detailing the goods of services purchased, the cost of the goods or services, the date of the payment, and the responsibility area and account charged. This information is contained in the BWL electronic general ledger software system and is available upon request. Internal Controls Electronic transactions are used to pay federal income tax withholding, FICA taxes, state income tax withholding, state sales tax and fees paid to credit card processors and other third party payment processors. Electronic transactions are used to process automatic bank deposits for employee payroll and retiree pension payments. Electronic transactions are used to deposit payments from customers via credit card or other third-party payment processors. Currently, only payments initiated by General Accounting or deposits processed through Remittance Processing are transacted electronically. In the future, if the volume of electronic payments demands it, additional internal controls may be desired. For the present, the following two rules are sufficient" Regular Board Meeting September 25,2007 Page 26 of 51 1. Payments made electronically are approved by the Supervisor or Manager responsible for approval and payment. The Manager sends the notice or invoice to Accounts payable prior to the date payment is requested. The Chief Financial Officer shall approve all electronic transactions before payment is made. Both approvals shall reside in General Accounting voucher files along with copies of the payment advices. 2. Payments received electronically from others are recorded in the daily bank statements. The cash receipts journal kept by Remittance Processing contains the payee, date and amount of each transaction. These records are contained in the electronic general ledger software system and are available upon request. This resolution supersedes Resolution 2004-01-11. -------------------- Staff Comments: Due to title changes, this resolution is necessary to incorporate the Chief Financial Officer title. Everything else remains the same. -------------------- Motion by Commissioner Graves, seconded by Commissioner James, to adopt Resolution 2007-9-13 for the Automated Transaction Clearing House (ACH) Policy. Action: Carried unanimously. Motion by Commissioner Cochran, seconded by Commissioner James, to amend the September 25, 2007 Board meeting agenda to include the following resolutions: Larch Substation To Be Declared Surplus and Honoring Joseph D. Davis. Action: Carried unanimously. esolution 2007-9-1 H. LARCH SUBSTATION TO BE DECLARED SURPLUS DECLARE BOARD OF WATER AND LIGHT (BWL) PROPERTY AT 1609 NORTH LARCH STREET, LANSING, MICHIGAN, AS SURPLUS AND NO LONGER NEEDED FOR OPERATONS AND AUTHORIZE THE SALE OF THE PROPERTY IN ACCORDANCE WITH CURRENT BWL PROPERTY DISPOSAL PROCEDURES. WHEREAS, the following described Larch Substation Property, located on the west side of North Larch Street north of North Street in Lansing, Ingham County, Michigan, has been identified as surplus and no longer needed for the operation of the Board of Water and Light (BWL); City of Lansing Parcel Number 33-01-01-09-235-031 described as LOTS 30 THRU 34 INCLUSIVE EXC.THAT PART LYING W.OF A LINE COMM. 15.28 FT E.OF THE S.W.COR.OF LOT 30;TH.N Regular Board Meeting September 25,2007 Page 27 of 51 10'24'32"E TO A POINT ON N.LINE OF LOT 32 THAT IS 34.36 FT E.OF THE N.W.COR.OF SAID LOT;TH.N 10'24'32"E 47.9 FT.;TH.N 54'50'51"E 30.35 FT.TO THE N.LINE OF LOT 34,EXC.THE N.4.25 FT.OF LOT 34, NELLERS SUB.NO. 1. WHEREAS, the BWL has been contacted by an adjacent property owner interested in purchasing the property; and WHEREAS, upon approval of the property as surplus by the Board of Commissioners, the BWL will proceed to dispose of the property in accordance with current BWL "Property Disposal Procedures;" RESOLVED, that the Board of Commissioners hereby declares the above described North Larch Substation property as surplus and no longer needed for Utility purposes and approves the sale of the property in accordance with current BWL "Property Disposal Procedures." RESOLVED FURTHER, that the General Manager and Corporate Secretary are authorized to sign all documents necessary to dispose of this parcel, subject to approval of the BWL Legal Department. FURTHER RESOLVED, That this sale is expressly conditioned upon compliance with. the Lansing City Charter or Codified Ordinances of the City of Lansing, including approval of the sale by the Lansing City Council. Staff Commentary: This parcel was identified by staff in both the 2002 and 2006 Property Utilization Studies as no longer needed for BWL operations. Most of this real estate parcel was acquired by deed in 1930. In 1964, the northern part of this property was acquired from the State Highway Commissioner. Also in 1964, the western portion of the land acquired in 1930 was sold to the Michigan State Highway Department. Salvageable materials and equipment have been removed from the brick electrical substation building and the fenced substation yard located to the west of the substation building. ------------------- Comments: Doug Wood, Director of Engineering also advised the Board of Commissioners that the adjacent property owner who intends to hire additional staff is interested in purchasing the North Larch Street parcel in order to build a parking lot. It was further noted that the urgency of the request is due to pending weather changes that could prevent construction from proceeding if not done in a timely manner. Motion by Commissioner Rios, Commissioner Cochran, to adopt Resolution 2007-9-14 for the Larch Substation to be Declared Surplus. Action: Carried unanimously. UNFINISHED BUSINESS Regular Board Meeting September 25,2007 Page 28 of 51 There was no unfinished business. RESOLUTIONS esolution 2007-9-1 GENERAL MANAGER'S FISCAL 2007-08 GOALS WHEREAS, the Board of Commissioners met with the Director and General Manager on August 21, 2007 and September 13, 2007 in order to discuss and establish his performance objectives for Fiscal Year 2007-08. RESOLVED, That the Fiscal Year 2007-08 Performance Objectives for J. Peter Lark, the Director and General Manager, are as follows and hereby approved. FISCAL YEAR 2007-08 OBJECTIVES 1. Improve relations between management and the workforce, with particular emphasis on developing a more congenial and productive relationship with the union. Eliminate "Management vs. Union" mentality. 2. Improve external relations—develop a greater community presence by supporting key components of our community(e.g. Sparrow Foundation and educational resources.) 3. Improve relations with our fellow municipal utility entities, in particular the MMEA and the MPPA. 4. Re-visit the decision to withdraw from the MPPA Power Pool. 5. Prepare draft Strategic Plan for the potential development of added generation resources on the BWL system. 6. Work to reverse preliminary MDEQ mercury ruling that as of 2015 will effectively limit BWL to the operation of two of the three smaller units at Eckert, and none of the three larger units. 7. Continue working with Delta Township to resolve water wholesale contract issues. 8. Make recommendation for water bonding. 9. Develop economic development policy for existing and new customers. Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-9-15 for the General Manager's Fiscal 2007-08 Goals. Regular Board Meeting September 25,2007 Page 29 of 51 Discussion: Commissioner Rios noted that there was extensive discussion and input from the Commissioners and Peter Lark in developing the General Manager's goals. It is a joint effort and everyone takes ownership in assisting Mr. Lark in meeting the objectives, as they are important relative to the success of the entire organization. Commissioner Rios went onto thank everyone for their hard work regarding this endeavor. Action: Carried unanimously. esolution 2007-9-1 BOARD OF WATER AND LIGHT PRIORITY FOCUS WHEREAS, the Board of Commissioners met with the Director and General Manager on August 21, 2007 to discuss a number of goals and objectives as then presented by the Director and General Manager. RESOLVED, That the goals and objectives then presented at the August 21, 2007 meeting be deemed the Board of Water and Light's Priority Focus items, which are as follows and hereby approved. BWL PRIORITY FOCUS: 1. Improve relations between management and the workforce, with particular emphasis on developing a more congenial and productive relationship with the union. Eliminate "Management vs. Union" mentality. Deal with union issues from a human resources perspective as opposed to a confrontational/defensive perspective (It seems we spend a lot of time, effort, and money trying to prove the union "wrong" even when the facts don't support our action). 2. Develop a more positive view of the BWL through increased efforts to get our good work reported in the local media. 3. Improve external relations—develop a greater community presence by supporting key components of our community (e.g. Sparrow Foundation, educational resources— especially tie-ins with educational institutions—LCC, MSU, etc., stronger partnership with Common Ground.) 4. Improve relations with our fellow utility entities, in particular the MMEA and the MPPA. 5. Re-visit the decision to withdraw from the MPPA Power Pool. 6. Continue working on the recommendations from the IRP on an action plan for the potential development and/or equity interest of added generation on the BWL system. Prepare draft Feasibility Study within the next six (6) months. Regular Board Meeting September 25,2007 Page 30 of 51 7. Work to reverse preliminary MDEQ mercury ruling that as of 2015 will effectively limit BWL to the operation of two of the three smaller units at Eckert, and none of the three larger units. 8. Re-evaluate the entire tree-trimming program including development and implementation of a new tree-trimming program, multiple contractors, more in-house work, and working with the city. 9. Continue working with Delta Township (and other similar contracts) to resolve water wholesale contract issues. 10. Investigate CSO and lead service replacement program for best utilization of labor resources. 11. Update Strategic Plan for FY 2007-08. 12. Conduct a follow-up National Safety Council audit. 13. Continue working on a succession plan that will include staffing level recommendations. Establish a succession plan consistent with our strategic plan, which includes development of a realistic budget. 14. Complete Health Care Task Force. 15. Complete pension survey. 16. Continue to work on Ottawa development project. 17. Develop a long-term rate strategy. 18. Prepare for upcoming union contract negotiations. 19. Make recommendation for water bonding. 20. Continue working with General Motors to resolve steam contract issues. 21. Resolve HR Audit issues. 22. Water Department issues—deficient staffing and excess use of outside contractors. 23. Develop economic development policy for existing and new customers. 24. Review organization structure—eliminate redundant supervision. 25. Develop incentive program to reward employees for outstanding contributions. Regular Board Meeting September 25,2007 Page 31 of 51 26. Prepare recommendation regarding deregulation. 27. Effectively communicate with the Board of Commissioners; keep all Commissioners updated, especially on important issues. Motion by Commissioner Rios, seconded by Commissioner James, to adopt Resolution 2007-9-17 for the Board of Water and Light Priority Focus. Discussion: J. Peter Lark, General Manger noted that the BWL Priority Focus items are general areas of concern for the General Manager and the BWL. He further advised that there was significant discussion involving these items, which he and the BWL intend to work towards next year. Commissioner Rios added that there had been a lot of discussion, and it was exciting to have a meeting of the minds on specific objectives and general items that the BWL should be aware of at all times. He went onto to note that he is very pleased with the endeavor and believe that it will take the organization to great places. Action: Carried unanimously. esolution 2007-9-I 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, effective immediately, 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 Cochran, seconded by Commissioner Kramer, to adopt Resolution 2007-9-17 to amend the Rules of Procedure of the Board of Water and Light. Discussion: Commissioner Rios advised that the City Charter indicates that the Board of Commissioners is to designate certain positions that include the General Manager, Internal Auditor and Secretary. He is unaware of how or why the Secretary's title was changed to Corporate Secretary. However, Brigham Smith, City Attorney noticed the difference in titles between the City Charter and the Rules of Procedures and recommended that the Board adhere to the charter verbiage. Commissioner Rios also noted that there are other internal BWL documents, which denotes the Secretary position as Corporate Secretary. It was further reported that the City Charter also refers to the General Manager position as Director, which is another discrepancy between the two Regular Board Meeting September 25,2007 Page 32 of 51 documents. It was suggested that the Board of Commissioners approve the Rules of Procedure as amended and address the specific designation of staff persons at a later date. Action: Carried unanimously. BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN RULES OF PROCEDURE AS AMENDED 09/25/07 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 the preceding year. 1.2 Special Meetings 1.2.1 Special Meetings of the Board shall be called by the General Manager or 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 Secretary or someone designated by the Secretary. 1.3 Rescheduled Meetings 1.31. 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. Regular Board Meeting September 25,2007 Page 33 of 51 1.4 Conflicting Times The schedule of regular Board meetings shall not conflict with regular meetings of the Lansing City Council. 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 and State law. 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 Secretary shall be responsible for posting notices. III. QUORUM FOR A REGULAR OR SPECIAL MEETING 3.1 Number Required Regular Board Meeting September 25,2007 Page 34 of 51 The presence of five members of the Board 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(s) designated in the public notice. 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 serving 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 expiration 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 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. See19.2.3. Regular Board Meeting September 25,2007 Page 35 of 51 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 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 lst 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 Regular Board Meeting September 25,2007 Page 36 of 51 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 most immediate past Chair of the Board who is not currently serving as Chair or Vice Chair of the Board shall be designated "Past Chair." If no Past Chair is serving on the Board, members of the Board shall select a member to assume the duties of the Past Chair as set forth in these Rules of Administrative Procedure. The Past Chair shall assume the duties of the Chair when neither the Chair nor the Vice Chair is present. VIII. CHARTER POSITIONS 8.1 Director, Secretary and Internal Auditor The Board shall, at its first regular meeting following July Vt 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 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 or ad hoc 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 STANDING COMMITTEES 9.2.1 The following standing committees shall be appointed by the Chair as provided in 9.4: Regular Board Meeting September 25,2007 Page 37 of 51 Finance Human Resource Nominating Executive 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 Operations &Maintenance 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 1"of each year, nominate a slate of officers at its annual organizational meeting and shall endeavor to rotate officers of the Board annually. 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. 9.2.5 The Executive Committee shall, during the intervals between the Board of Commissioners' meetings, assist in the development of the BWL's position on major issues and submit and recommend the position to the Board for consideration and action. 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 Ad Hoc Committees Ad hoc committees shall convene whenever the need arises to address an issue or topic that would not appropriately fall within any of the other standing committees and would not require the attention of the Committee of the Whole. 9.4 Appointment of Standing and Ad Hoc Committees Regular Board Meeting September 25,2007 Page 38 of 51 The Chair shall appoint the standing committees and such other ad hoc committees as the Board may from time to time establish. The first member named on each committee shall be the Chair of the committee. Standing Committees: All standing 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 have four (4) members, including the Chair, Vice Chair and Past Chair and one (1) Commissioner elected by the Board, whose term shall be concurrent with the terms of the Officers. The Nominating Committee shall not consist of any members who intend to run for an officer position. Ad Hoc Committees: The Chair shall appoint members of any ad hoc committee. An ad hoc committee may have any number of members. 9.5 Sub-Committees Authorized The Executive Committee shall establish such sub-committees as deemed necessary. 9.6 Quorum for Committee Meetings A quorum for a standing or ad hoc committee shall be three (3). 9.7 Committee Meetings Meetings of standing or ad hoc committees may be called by the General Manager or Secretary on the request of the Chair of the Board, Chair of a committee or any two committee members. 9.8 Committee Reports Each standing or ad hoc 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 19.5. 9.9 Committee Resolutions Regular Board Meeting September 25,2007 Page 39 of 51 Committee reports recommending action by the Board shall have incorporated in the report the necessary resolutions or motions to accomplish the action. 9.10 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 Regular Board Meeting September 25,2007 Page 40 of 51 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 A eg_nda An 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 before the meeting. 10.1.4 Changes to the A eg nda 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 The time limits of Section 10.1.1.3 apply to all 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 extending time limits for comments under the circumstances, or in limiting remarks to the subject matter under discussion as provided in 10.1.1.3. 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. Regular Board Meeting September 25,2007 Page 41 of 51 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. 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 shall hold a public hearing at least thirty days before the effective date of any changes in rate structure. The Board shall comply with the requirements of Charter Section 5-205.2 for public hearings regarding changes in the 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. Regular Board Meeting September 25,2007 Page 42 of 51 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 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. Comments or conduct that disrupt the orderly conduct of meetings or hearings 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 Public Hearing on Rates: In the case of a rate hearing, the Board may hold a separate meeting or meetings after the rate hearing to discuss the proposed changes to the rate structure and vote on the proposed changes. If the Board's discussions after the rate hearing 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. 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. XIII. MEMBERS OF THE BOARD 13.1 Attendance Each member of the Board shall attend all meetings of the Board in person 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 may be grounds for removal by the City from the office as a member of the Board. 13.2 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 may be disqualified from voting on such matter as set forth in the Lansing City Charter. XIV. RECONSIDERATION OF ACTION Regular Board Meeting September 25,2007 Page 43 of 51 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. XV. MINUTES 15.1 Preparation and Filing The Secretary shall keep minutes of regular and Special Meetings of the Board and committees and shall file a copy of the Board minutes 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 is filed with the City Clerk. 15.2 Corrections Corrections in the regular or Special Meeting or committee 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. 15.3 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 they are filed with the City Clerk. Corrected minutes shall be available no later than the next subsequent meeting after correction. 15.4 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). XVI. CONFIDENTIALITY 16.1 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 Secretary. 16.2 Closed Session Regular Board Meeting September 25,2007 Page 44 of 51 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. XVII. 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. XVHI. 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. An affirmative a majority of members serving shall be required to amend the rules of procedure, after which the proposed revisions shall be forwarded to the City in compliance with Charter Section 5-105.8. XIX. MISCELLANEOUS 19.1 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." 19.2 News Media Regulations 19.2.1 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. 19.2.2 Following the adjournment of a Board meeting, members of the news media may request interviews of members of the Board. 19.2.3 All policy statements shall be made on behalf of the Board by the Chair. See 4.3. 19.3 Vacancy, Resignation, Absence of Elected Officers Regular Board Meeting September 25,2007 Page 45 of 51 19.3.1 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. 19.3.2 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. 19.4 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. 19.5 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. 19.6 Hiring Consultants The Board of Commissioners may hire external consultants, such as accountants, but not outside legal counsel. 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. All outside legal counsel must be hired by in-house counsel and in accordance with the Charter. Regular Board Meeting September 25,2007 Page 46 of 51 19.7 Reimbursement of Board Member Expenses 19.7.1 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 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. 19.7.2 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, 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, and 9/25/07. esolution 2007-9-1 Reappointment of the Charter Position of Corporate Secretary The Board's Rules of Administrative Procedures specify that the Board is to appoint a Director and General Manager, Internal Auditor, and Corporate Secretary, respectively at Regular Board Meeting September 25,2007 Page 47 of 51 its first regular meeting following July lst of each year or as soon thereafter as may be appropriate. RESOLVED,That the Board of Commissioners hereby reappoints the following individual to the Charter position of Corporate Secretary for fiscal year 2007-2008, or, until a successor is appointed, whichever last occurs: Rhonda Jones, Corporate Secretary RESOLVED, That Rhonda Jones' current employment contract is amended to reflect the new reappointment and contract commencement period of July 1, 2007. ---------------- Comments: Commissioner Rios explained that they annually review the performance of all Board appointees. As such, they receive assistance from the Human Resource Department regarding the collection of input and information for each individual. The process is very thorough in that it provides the Board and the individual being reviewed the opportunity to give input regarding their prior years performance. As part of the process, the Board is required to either reappoint the individual or do something different. In this particular matter, there was unanimous consent amongst the Board of Commissioners to reappoint Rhonda Jones as Corporate Secretary with a subsequent salary increase of three and a quarter percent (3.25%). Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-9-18 for the Reappointment of Rhonda Jones to the Charter Position of Corporate Secretary. Action: Carried unanimously. evolution 2007-9-I Performance Evaluation and Compensation Increase For Charter Position of Corporate Secretary RESOLVED, That the Corporate Secretary, Rhonda Jones, is hereby eligible to receive a salary adjustment effective as of July 1, 2007. RESOLVED FURTHER, That the Board of Commissioners authorizes a three and t-we fifth a quarter percent (3.25%) salary adjustment for the Corporate Secretary, based on the evaluation of the employee's performance from July 24, 2006 through June 30, 2007. The percentage increase represents a compiled average of the recommended salary adjustment from the Board of Commissioners. Regular Board Meeting September 25,2007 Page 48 of 51 Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-9-19 for the Performance Evaluation and Compensation Increase for the Charter Position of Corporate Secretary. Action: Carried unanimously. esolution 2007-9-2 BOARD OF WATER AND LIGHT RESOLUTION HONORING JOSEPH D. DAVIS WHEREAS, Joseph D. Davis has been a Board of Water &Light employee for more than 17 years; WHEREAS Joe has been an active member in the International Brotherhood of Electrical Workers Local 352 for 16 years, serving as its Business Manager since 2003; WHEREAS Joe was IBEW Local 352 President from 1999 to 2003, and Vice President in 1998; WHEREAS Joe has served on the Joint Safety Committee, the Joint Apprenticeship and Licensing Committee and on various training committees; WHEREAS Joe began work at the BWL as a Laborer in Water Construction and has worked in various capacities at the Board, and departs the BWL as a Journeyman Electrician; WHEREAS Joe has demonstrated a commitment to community service through such events as the Chili Cook-off, Silver Bells in the City and Common Ground; WHEREAS Joe has been instrumental in promoting stronger ties between the IBEW and the Board of Water & Light; WHEREAS he has devoted countless hours to maintaining a strong work force, and a vibrant collective bargaining unit, whose mission is to further the well-being of its membership; WHEREAS, after these many years, Joe now has accepted a new challenge as an International Representative of the IBEW, representing 40 union locals in five states; THEREFORE BE IT RESOLVED: That the Board of Water & Light's governing Board of Commissioners congratulate Joseph D. Davis on his years of devoted service as an IBEW representative and as a BWL worker, and that all Commissioners join in bestowing all best wishes to Joe on his new endeavor. Regular Board Meeting September 25,2007 Page 49 of 51 BOARD OF COMMISSIONERS Santiago Rios, Chair Joseph E. Graves, Jr. Semone M. James, Vice Chair Peter W. Kramer Robin M. Smith, Past Chair Julee M. Rodocker Robert W. Cochran Sandra Zerkle --------------------- Comments: Commissioner Rios congratulated Joseph Davis,Business Manager of IBEW Local 352 on his recent appointment as IBEW International Representative. Mr. Davis was recognized for his promotion within the IBEW as he will now have responsibility for multiple bargaining units throughout five (5) states. Commissioner Rios also noted the pride that an organization receives when a BWL employee obtains recognition of that nature. It was further advised that Mr. Davis would no longer be at the BWL on a daily basis due to his new position. The resolution was read into record in its entirety. Motion by Commissioner Rios, seconded by Commissioner Graves, to adopt Resolution 2007-9-2007, Honoring Joseph D. Davis. Discussion: Commissioner Zerkle expressed pleasure in knowing and working with Mr. Davis over the years. She noted his belief in the advancement, safety and well being of employees. In addition to his desire to ensure that the company he worked for was healthy and responsive to the needs of the employees. Commissioner Cochran advised that he would be absent from Mr. Davis' upcoming celebration and wished him luck in his new endeavor. Action: Carried unanimously. Additional Comments: Joseph Davis introduced wife, Carol Davis and noted that he joined the BWL Water Construction Department seventeen (17) years ago as a temporary laborer. The BWL provided a decent job that allowed him to pay the bills and take care of his family of which the BWL is an extension. In addition, he noted that it feels significantly better coming to current Board meetings than in years past. He also advised that it is a great time to be at the BWL, as there is a great team in place and great people Regular Board Meeting September 25,2007 Page 50 of 51 within the organization. All of these items played a factor in his decision to accept a new position. Mr. Davis noted that Peter Lark and his team have good leadership and both the Commissioners and the management team have good vision. He went onto advise Commissioner Kramer that it is a great time to be a part of the Board, and he hopes to continue to do things that will help the BWL. MANAGER'S REMARKS J. Peter Lark, General Manager noted that the excitement factor has been large and the work gratifying. An excellent time has been had due in part to Joseph Davis who has been a great guy to work with in representing the union. Mr. Lark thanked Mr. Davis for all the work he has done in helping with management and labor relations, which Mr. Lark hopes to improve as they move forward. Connections Live!—Mr. Lark noted that the BWL recently held a consumer forum entitled, "Connections Live!" It was an opportunity for the BWL to reach into the community to its customers. With winter approaching the BWL thought it a good idea to explain and help customers know how to keep their bills down and where to receive assistance if needed. The occasion went well and the project received input and assistance from many members of the BWL staff. Mr. Lark went onto publicly thank staff for its efforts in this endeavor. COMMISSIONERS' REMARKS Commissioner Rios welcomed Ron Byrnes as the new Business Manager for IBEW Local 352. Commissioner Cochran advised Commissioner Kramer that the serenity Joseph Davis previously alluded to was a hard fight for everyone. Commissioner Rios officially welcomed the newest Board of Commissioner, Peter W. Kramer to the Board of Water and Light. Commissioner Kramer noted that he was very encouraged by the welcome from management and being able to tour the facilities. The organization is fantastic and he is looking forward to participating in its success. Commissioner Rios noted Calvin Jones' promotion to Governmental Relations Manager and offered congratulations. He also acknowledged his help to the BWL and the Commissioners in relation to political matters and City Council. Peter Lark went onto acknowledge the promotion and good work that Calvin Jones has done for many years. He also noted that Mr. Jones is a tremendous asset to the organization and as a result he was promoted from analyst to manager. EXCUSED ABSENCE Regular Board Meeting September 25,2007 Page 51 of 51 On motion by Commissioner James, seconded by Commissioner Zerkle, to excuse the absence of Commissioner Robin M. Smith. Action: Carried unanimously. PUBLIC COMMENTS There were no public comments. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner James, the meeting adjourned at 6:20 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk October 2, 2007 Preliminary—Subject to Board Approval on November 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday November 6, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Robert Cochran, Joseph Graves, Peter Kramer, Semone James, Santiago Rios, Julee Rodocker(4:12p.m.), Robin Smith and Sandra Zerkle. Absent: None The Acting Secretary declared a quorum present. c_ T•.a r j Chairperson Rios called the meeting to order at 3:30 p.m. ;T-1 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. There were no public comments. COMMUNICATIONS Commissioner Santiago Rios announced that he has made a decision to pursue other interests, so he is resigning as a BWL Commissioner as of Tuesday, November 6, 2007, immediately following the Special Board meeting. Because of the interest he is going to pursue, he feels it would be a conflict of interest for him to remain a BWL Commissioner. Commissioner Rios stated that Commissioner James would become the new Chair; he also suggested that Commissioner Rodocker become the new Vice Chair. Commissioners expressed their good wishes to Santiago Rios in his future endeavors. Commissioner Rios gave a letter of resignation to Acting Secretary Sullivan and asked that it be forwarded to Mayor Bernero. Special Board Mtg November 6,2007 Page 2 of 3 CLOSED SESSION Discuss Legal Issice Moved by Commissioner Cochran, seconded by Commissioner Graves to go into closed session to discuss a legal opinion with outside counsel, Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act (OMA) exemption MCL 15.268(h). The roll was called. Ayes: Commissioners Cochran, Graves, James, Kramer, Rios, Smith and Zerkle. Nays: None Absent: Commissioner Rodocker Carried unanimously. Motion by Commissioner Rios, seconded by Commissioner Kramer, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 4:10 p.m. Motion by Commissioner Graves and seconded by Commissioner Smith that the recommendation made by outside counsel in the closed session be adopted. Ayes: Commissioners Cochran, Graves, James, Kramer, Rios, Smith, Zerkle. Nays: None Absent: Commissioner Rodocker Carried unanimously. UNFINSHED BUSINESS None. NEW BUSINESS According to the Rules of Procedure, the Vice Chair is to assume the role of Chair in the absence of the Chair. The last chair will assume the role of Vice Chair. Commissioner Jaynes will assume the position of Chair, and Commissioner Smith will assume the role of Vice Chair. RESOLUTIONS None. Special Board Mtg November 6,2007 Page 3 of 3 MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Smith would like the resolution that is written for Commissioner Rios to be read into the next meeting minutes and that he is invited to hear the resolution. EXCUSED ABSENCE None. PUBLIC COMMENTS Ron Byrnes, Jr. extended best wishes to Commissioner Rios; he stated that he felt Commissioner Rios has been a voice of fairness. Mr. Byrnes also offered congratulations to Commissioners James and Smith on their positions. Ron Byrnes, Sr. advised that it has been a pleasure working with Commissioner Rios. He has handled tough decisions in a very professional manner. He also congratulated Commissioners James and Smith in their positions. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Smith, the meeting adjourned at 4:20 p.m. /s/Rosemary Sullivan, Acting Corporate Secretary Filed with Lansing City Clerk November 16, 2007 NUV-1b-2Ud'( 1b:U1 hW Ut- WHItK LIU-1I 1 Di fYJGnzJDD I-. 'Ui/U-D Preliminary—Subject to Board Approval on November 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday November 6, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Robert Cochran, Joseph Graves, Peter Kramer, Semone James, Santiago Rios, Julee Rodocker(a:iz p.m.), Robin Smith and Sandra Zerkle. Absent: None The Acting Secretary declared a quorum present. Chairperson Rios called the meeting to order at 3:30 p.m. 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. There were no public comments. COMMUNICATIONS Commissioner Santiago Rios announced that he has made a decision to pursue other interests, so he is resigning as a BWL Commissioner as of Tuesday, November 6, 2007, immediately following the Special Board meeting. Because of the interest he is going to pursue, he feels it would be a conflict of interest for him to remain a BWL Commissioner. Commissioner Rios stated that Commissioner James would become the new Chair; he also suggested that Commissioner Rodocker become the new Vice Chair. Commissioners expressed their good wishes to Santiago Rios in his future endeavors. Commissioner Rios gave a letter of resignation to Acting Secretary Sullivan and asked that it be forwarded to Mayor Bemero. NOU-16-2007 16:29 1 517 7026955 P.01 NOU-16-2007 1B:01 BD OF WATER LIGHT 1 517 YIJ26855 H.U2103 Spccial Board Nitg Novcmbcr 6,2007 Page 2 of CLOSED SESSION Discuss Leaal Issue Moved by Commissioner Cochran, seconded by Commissioner Graves to go into closed session to discuss a legal opinion with outside counsel, Melissa Jackson of Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act (OMA) exemption MCL 15.268(h). The roll was called. Ayes: Commissioners Cochran, Graves, James, Kramer, Rios, Smith and Zerkle. Nays: None Absent: Commissioner Rodocker Carried unanimously. Motion by Commissioner Rios, seconded by Commissioner Kramer, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 4:10 p.m. Motion by Commissioner Graves and seconded by Commissioner Smith that the recommendation made by outside counsel in the closed session be adopted. Ayes: Commissioners Cochran, Graves, James, Kramer, Rios, Smith, Zerkle. Nays: None Absent: Commissioner Rodocker Carried unanimously. UNFINSHED BUSINESS None. NEW BUSINESS According to the Rules of Procedure, the Vice Chair is to assume the role of Chair in the absence of the Chair. The last chair will assume the role of Vice Chair. Commissioner James will assume the position of Chair, and Commissioner Smith will assume the role of Vice Chair. RESOLUTIONS None. NOU-16-2007 16:29 1 517 702G955 P.02 NOU-16-2007 1B:02 BD OF WATER LIGHT 1 517 7026655 P.03iO3 Spccial Bosrd Mfg November 6,2007 Pagc 3 of 3 MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Smith would like the resolution that is written for Commissioner Rios to be read into the next meeting minutes and that he is invited to hear the resolution. EXCUSED ABSENCE None. PUBLIC COMMENTS Ron Byrnes, Jr. extended best wishes to Commissioner Rios; he stated that he felt Commissioner Rios has been a voice of fairness. Mr. Byrnes also offered congratulations to Commissioners James and Smith on their positions. Ron Byrnes, Sr. advised that it has been a pleasure working with Commissioner Rios. He has handled tough decisions in a very professional manner. He also congratulated Commissioners James and Smith in their positions. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner Smith, the meeting adjourned at 4:20 p.m. %s/ Rosemary Sullivan, Acting Corporate Secretary Filed with Lansing City Clerk November 16, 2007 TOTAL P.03 NOU-16-2007 16:30 1 517 7026955 P.03 5tr-�b-�Jb'( 11;4*:) nU ur WhiIMM L.iunl WA7�R&UUFff W. N���l��rw rovv .- AGENDA BWL Board of Commissioners/City Council Meeting Thursday, September 27, 2007— 11:30 a.m. 1232 Haco Drive, BWL Boardroom Call To Order �- C-) Roll Call r} C Public Comments on Agenda Items 1. Update on Tree Trimming r; C 2. Update on Delta Township Water Agreement 3. Update on Organizational Structure and Strategic Plan 4. Update on Rules of Procedure :S= U-) CD r s 5. Update on Safety Improvements C-; 6. Update on Financials for Fiscal Year End 2007 7. Update on Removal of Lead Pipes r- CO 8. Update on Public Relations 9. Update from the Director of Internal Audit 10. Update on CSO Project 11. Update on Litigation Matters 12. Update on Management Positions Other Adjourn Posted 9-26-07 Rhonda Jones Corporate Secretary 702-6033 TOTAL P.02 SEP-26-2007 10: 17 1 517 7026855 P.02 CCI'"-G(-GVJU( 1U' 10 DL Ur W"1 ar" L 1 uln L J1 i i VGUUJJ ul ul W/U� GNT W. poor,— REVISED AGENDA 13WL Board of Commissioners/City Council Meeting r Thursday, September 27, 2007 — 11:30 a.m. 123211aco Drive, BWL Boardroom ` �. Call To Order Roll Call Public Comments on Agenda Items 1. Update on Tree Trimming 2. Update on Delta Township Water Agreement r: 1 3. Update on Rules of Procedure 4. Update on Safety Improvements '�-q•'t_ r 5. Update on Financials for Fiscal Year End 2007 6. Update on Removal of Lead Pipes 7. Update on Public Relations 8. Update from the Director of Internal Audit 9. Update on CSO Project 10. Update on Organizational Structure and Strategic Plan 11. Update on Litigation Matters Other Adjourn Posted 9-26-07 Rhonda Jones Corporate Secretary 702-6033 TOTAL P.01 SEP-27-2007 Oe:46 1 517 7026955 P.01 Preliminary—Subject to Board Approval on November 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, September 25, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Robert Cochran, Joseph Graves, Semone James, Peter Kramer, Santiago Rios, Julee Rodocker, and Sandra Zerkle. C�' Absent: Commissioner Robin Smith. , The Secretary declared a quorum present. :_= Chairperson Rios asked all to rise for the Pledge of Allegiance to the Flag. .' U Chairperson Rios called the meeting to order at 5:30 p.m. APPROVAL OF MINUTES By motion of Commissioner Zerkle, seconded by Commissioner Cochran the minutes of the July 24, 2007 regular 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. There were no public comments. COMMUNICATIONS Letter from Joseph D. Davis, Business Manager of IBEW Local 352 regarding, Changing of the Guard. The letter was presented at the July 24, 2007 Board meeting. Received and placed on file. Regular Board Meeting September 25,2007 Page 2 of 51 Letter from an anonymous person to J. Peter Lark, General Manager regarding actions taken on first day of employment. Received and placed on file. COMMITTEE REPORTS esolution 2007-9-1 COMMITTEE OF THE WHOLE August 21, 2007 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, August 21, 2007. Committee of the Whole Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Joseph Graves, Semone James, Julee Rodocker, Robin Smith and Sandra Zerkle. Absent: Commissioners Robert Cochran and Santiago Rios. Public Comments There were no public comments. Update on Rules of Procedure The Board of Commissioners Rules of Procedure amended November 28, 2006 was submitted to the City Attorney's office for approval as to form. Upon approval, the item would then be sent to City Council for consideration and final approval. As such, Brigham Smith, City Attorney proposed several changes to the amended Rules of Procedure and discussed with the Board of Commissioners the reasoning for said modifications relative to style, substance and form. Upon further discussion, the Committee of the Whole took the following actions: On motion by Commissioner Calkins, seconded by Commissioner Smith, the Committee of the Whole agreed to remove section 13.1.1 from the amended Rules of Procedure. Action: Carried unanimously. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Committee of the Whole agreed to approve the Rules of Procedure as amended by City Attorney, Brigham Smith and to move forward said item to the full Board for consideration and approval; at which time it would then be resubmitted to City Council for final approval. Discussion: The Commissioners further discussed whether or not there was agreement with the authority that Mr. Smith stipulated during their discussion of the rules and his explanation regarding various changes. Regular Board Meeting September 25,2007 Page 3 of 51 Action: Carried unanimously. Commissioner James introduced the new Associate Internal Auditor, Perez Goree. Replacing Alternate Designated Rep for the Acid Rain Program was pulled from the agenda. Replacement of MPPA Commissioners from BWL Peter Lark, General Manager noted that the primary reason for the change is to replace the former Senior Vice President of Operations who is no longer with the Board of Water and Light (BWL). The commissioner and the alternates represent the BWL on the Michigan Public Power Agency Board of Commissioners. As such, George Stojic, Director of Strategic Planning and Development were recommended as the BWL's commissioner to MPPA. It was also advised that Douglas Wood and David Bolan would remain as MPPA's first and second alternate commissioners, respectively. On motion by Commissioner Smith, seconded by Commissioner Graves, the Committee of the Whole agreed to forward the proposed resolution to Authorize Naming of Commissioner to Michigan Public Power Agency (MPPA) to the full Board for consideration. Discussion: Mr. Lark confirmed that Mr. Stojic's job title is correct as of now. However, it may change in the near future. Action: Carried unanimously. Stonehouse III Property Development Project Kellee Christensen, Manager of System Integrity and Customer Projects advised that Stonehouse III is a condominium development project in East Lansing, Michigan. As such, staff has come before the Board to ask permission to allow the General Manager to release any easements as related to the project. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Committee of the Whole agreed to forward the proposed resolution for the Stonehouse III Development Project: BWL Easement Transaction to the full Board for consideration. Action: Carried unanimously. National Safety Council Update Pete Thelen, Director of Safety reminded the Commissioners that in 2005 the National Safety Council (NSC) audited the BWL and made a series of recommendations. The audit results became a roadmap that the BWL is following in an effort to improve safety. The information in the packet materials contains a list of twenty-one (21) priority items that the NSC recommended the BWL improve. The list contains the activities, target dates and milestones. The NSC will be brought back to conduct another audit to substantiate the BWL efforts and make any further comments and recommendations it Regular Board Meeting September 25,2007 Page 4 of 51 deems appropriate. Mr. Thelen also advised the Commissioners of the cooperation he has received from the IBEW and improved communications made with employees. In addition, it was also noted that it has taken the BWL a long time to achieve a safety culture. General Manager's Goals and Objectives Peter Lark, General Manager submitted a list of twenty-seven (27) goals and objectives that included suggestions from himself, the Board of Commissioners, and Dick Peffley's previous objectives as Interim General Manager. Commissioner Graves noted that the list contains good ideas relative to strategic planning regarding new generation and aging plants, which are two issues that should be addressed by either Mr. Lark or George Stojic. He also advised that the BWL needs a comprehensive plan that addresses the needs of the state of Michigan and the BWL. Mr. Lark notified the Board that Mr. Stojic is in the process of developing a draft plan within the next 6-months that would address issues such as, renewable energy, energy efficiency, purchasing power, etc. In response to the Commissioners request to complete the draft in a shorter timeframe, Mr. Lark asked Mr. Stojic to complete the plan in 5- months with a note to the Board that he would request additional time to finish said draft if necessary. In addition, the Committee of the Whole also discussed whether or not the objectives dated August 16, 2007 reflect the measures that the Board would use to evaluate the General Manager's performance. After further discussion, the committee suggested that Mr. Lark submit to the Human Resource Committee a prioritized list of goals obtainable within a one-year timeframe. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Committee of the Whole agreed to approve the General Manager's Objectives document dated August 16, 2007 and to also have the General Manager prioritize the items. Discussion: The Commissioners discussed the need for criteria to be laid out in which to evaluate Mr. Lark. They also discussed the standard form that the Commissioners traditionally use to evaluate the General Manager and other appointees as well as the need to place the objectives within said format. The Committee of the Whole referred the prioritization matter and the development of a suitable evaluation format to the Human Resource Committee. Upon further discussion, Commissioner Smith introduced a friendly amendment to change the title of the document from"General Manager's Objectives' to -`B W L Priority Focus" that the General Manager will oversee. The amended document will also be submitted to the full Board for consideration and approval. Commissioner Calkins accepted the friendly amendment. Regular Board Meeting September 25,2007 Page 5 of 51 Action: Carried unanimously. Other Interim Director of Operations. The `interim' title for the Director of Operations position has been removed. Dick Peffley has formally accepted the position, which may be changed to Executive Director of Operations although, that decision has not yet been made. Mr. Lark has worked closely with Mr. Peffley who has an excellent working knowledge of Eckert and Erickson Station. He also advised that with the addition of Susan Devon, George Stojic, Dick Peffley and himself the BWL is second to no other utility company in the state of Michigan. Lead Pipe Replacement. Commissioner Calkins noted that he received a complaint that the BWL is leaving lead pipe in the ground when working on lead pipe replacements. Staff noted that the BWL attempts to pull the lead out through the ground as opposed to boring it. However, sometimes the lead will break depending on its strength. After brief discussion, Mr. Lark advised that he would note the matter regarding Commissioner Calkins request for further clarification regarding the aforementioned subject. He also notified the Commissioners that the BWL is currently pricing a new truck for both lead pipe removal and tree trimming, as he would like to accelerate the lead pipe replacement program. In addition, Mr. Lark verified that he has not reviewed the existing tree trimming contract. However, he is looking to increase BWL employee workload relative to tree trimming. The Commissioners discussed concerns surrounding tree-trimming issues and asked the General Manager to review the matter for future consideration. Delta Township Water Agreement Update. Peter Lark met with Joe Drolett of Delta Township and as such, they will continue to work together to resolve issues and correct matters regarding the water agreement. New Customer Load. The BWL is expecting new electric and water load with the building of a new 15-story condominium development project in downtown Lansing. The customer is now looking at taking steam and chilled water. As such, a meeting is scheduled for next week to further discuss the matter. In addition, Mr. Lark would like some marketing by way of Mr. Stojic and staff members, as the BWL may have opportunity for growth at the Triangle (State Police) location and Ottawa Station. The Commissioners noted the need for further discussion regarding steam, the cross subsidization of said utility, steam rates and the development of a strategic plan that takes those items into account. Executive Summaries. The Commissioners asked that executive summaries and presenters names be included with future presentations as a standard course of operation. In the past, it was found to be helpful when meeting and/or receiving information from staff members. Regular Board Meeting September 25,2007 Page 6 of 51 MMEA. The BWL rejoined the Michigan Municipal Electric Association (MMEA), which will be very beneficial in moving forward to address the 90% mercury rule and its affect on Eckert Station. Proposed Revision to Public Act 141. Mr. Lark is scheduled to meet with Frank Accavitti, Chairman of the Energy and Technology Committee in the House of Representatives to look at changing the decision date relative to the BWL's participation in deregulation. If the BWL chooses to participate then the city of Lansing will be protected from competition and outlaying areas would be open to competition. It was noted that the outlaying areas maybe protected due to the 425 Agreement. Lansing State Journal Editorial. Mr. Lark met with the Lansing State Journal's editorial board to discuss various issues. Executive Report. Commissioner Smith asked Mr. Lark to provide an executive report to the Board of Commissioners that highlights various items on a monthly basis via email. She also advised that if additional items arise then the Board would want to be aware of those topics as well. It was further noted that the executive report did not have to contain explicit explanations relative to its content. There being no further business, the meeting adjourned at 8:11 p.m. Respectfully submitted, Semone M. James, Chair Committee of the Whole Motion by Commissioner Zerkle, seconded by Commissioner Rodocker, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolution 2007-9-2 AD HOC COMMITTEE September 11, 2007 The Ad Hoc Committee on Workforce Development met at the Executive Offices, Lansing, beginning at 11:10 a.m. on Tuesday, September 11, 2007. Ad Hoc Committee Chair, Sandra Zerkle called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Cochran, Santiago Rios, Julee Rodocker(arrived at 11:21 a.m.) and Sandra Zerkle. Alternate committee member Joseph Graves (arrived at 11:26 a.m.) was also present. Absent: None Public Comments Regular Board Meeting September 25,2007 Page 7 of 51 There were no public comments. Discuss Parameters of Workforce Development Committee The Ad Hoc Committee on Workforce Development met to discuss the committee's parameters. As such, various topics were reviewed in relation to the development of the Board of Water and Light's (BWL) employee workforce. Listed below is a brief summary of the topics addressed during said meeting. Lineman shortage—It was suggested that the BWL re-establish hiring entry level persons such as groundsmen or truck drivers for a feeder program that would lead to a journeyman apprenticeship. The in-house program would provide employees the opportunity to show ability and aptitude for the journeyman apprenticeship while allowing the BWL to address lineman shortages with an internal program. It was noted that recent BWL wage increases have mad hourly wage rates competitive with other companies. However, there might be issue with the BWL's deferred compensation relative to other utilities. In addition, it was recommended that Denise Mulder, Human Resource Director seek non-monetary enhancements unique to the lineman that would give them a sense of pride and heightened value within the organization, i.e. lab coats, BWL shirts, etc. The Commissioners also suggested that Ms. Mulder provide a list of possible items to the Board of Commissioners for further consideration. Erickson Training Center—The lineman's training center at Erickson Station, which is currently 15-years old needs significant improvement. They are presently unable to provide compute training because there are no workstations and in addition, storage and lack of space also create an unappealing work environment. It was suggested that the BWL contact Lansing Community College (LCC) to discuss creating a partnership in which LCC would make recommendations for a new training facility that could also be used to provide LCC students with practical hands on experience. High School Partnerships—The committee discussed the possibility of creating a partnership with the Lansing School District that would expose area high school students to the skilled trades. It was noted that Michigan State University's Upward Bound program was a very effective means of mentoring and partnering area students with local business entities. In addition, it was suggested that J. Peter Lark, General Manager contact Lansing Superintendent, Dr. T.C. Wallace, Jr. for preliminary discussions surrounding the topic. Diversity—The committee expressed a desire to incorporate diversity into workforce development, recruitment of new hires, internal promotions, and procurement. It was noted that the committee would like the BWL Diversity Coordinator to attend a future Ad Hoc Committee meeting for further discussion on said topic. The General Manager may also have to address purported issues of frustration and lack of support from various supervisory levels relative to diversity initiatives. In addition, it is the committee's desire to ensure that the BWL is reaching out to a diverse population and that diversity is a part of the process. Regular Board Meeting September 25,2007 Page 8 of 51 Mr. Lark noted that in July 2007 Shan Shaw, Administrator/Diversity Omsbudmen was charged with the responsibility of creating and submitting a diversity plan by November 4, 2007. Mr. Lark also advised that they would be open to making sure that the BWL mirrors its community. Ms. Mulder further reported efforts by the Human Resource Department in an effort to draw a more diverse population, which include broader recruitment forms, campus recruiting, posting on college job boards, and increased electronic recruitment. The program will be finalized by January 2008. Accurate and Valid Data—In moving forward with developing and maintaining an adequate and well prepared workforce, it is necessary to receive accurate and factual information. A cost benefit analysis is an essential tool that would aid the Commissioners in making various decisions as they move forward. Contractor Work—The committee suggested reviewing the economic feasibility of allowing external contractors to do prime work for the Water Department. To this regard, the broader scope of the committee is to re-evaluate the BWL's capacity and what it should be, make decisions, give direction, and provide the resources and tools necessary for management to carry out the tasks at hand. A request was also made to receive definitive information from staff on the total number of dollars being spent on contractor work. In addition, it was noted that the Commissioners do not have enough sufficient information to express a specific opinion on the direction the BWL should take relative to utility rates and employee staffing levels. Mr. Lark noted that the BWL is in the process of securing two new trucks that will allow for the creation of a tree trimming and water crew. The BWL will hire 3-4 persons for each crew, which will allow for a decrease in work currently awarded to outside contractors. He also advised that the BWL is doing an outstanding job with tree trimming. As the former Chairman of Michigan Public Service Commission, they received a significant number of calls regarding tree trimming, which is the nature of the utility industry. Mr. Lark also reported that they are ahead of schedule with lead water replacements and the BWL is the only utility in the country with such a program. The grogram will eventually end and the BWL should be careful not to over hire for that particular project; although there is no danger of over hiring in the Water Department in and of itself. He further noted that a good estimated employee count for the BWL would be 850 employees. Energy Rates—It was advised that the BWL electric rates are lower than Consumers Energy (CE) due to smart investment decisions made within the last 5 — 10 years. CE's rates are approximately 20% higher than the B W L's and they also have a rate increase before the MPSC for$200,000,000. It was noted that based on certain items the BWL's rates should be lower than CE's. However, there are infrastructure improvements, water bond issues, environmental concerns, and future generation needs that the BWL must address in the near future. Regular Board Meeting September 25,2007 Page 9 of 51 Combined Sewer Overflow (CSO) Project—The BWL previously worked with the City of Lansing to replace and upgrade water mains due to the CSO Project. Over time the BWL eventually contracted the work out and Tetratech currently oversees the entire project on behalf of the City of Lansing. Discussion arose as to whether or not it is feasible for the BWL to return to changing its own water mains as opposed to contracting the work to another entity. Construction contracts are up for renewal in January 2008. Joint Technical Training Committee (JTTC) —Dolores Appling, President IBEW Local 352 announced that the BWL held its second JTTC meeting and they are in the process of sending surveys (due in 30 days) to assess departmental training needs. Department Training Committees are also being formed who will aid in determining respective departmental training needs. In addition, two Lansing Community College professors have donated their time twice a week to tutor apprenticeship students. After further discussion, the Ad Hoc Committee expressed its pleasure with the direction and optimism of the meeting. They also agreed to meet on a monthly basis and directed staff to report on the above items at the next meeting, which will be scheduled for October 2007. There being no further business, the meeting adjourned at 12:51 p.m. Respectfully submitted, Sandra Zerkle, Chair Ad Hoc Committee Motion by Commissioner James, seconded by Commissioner Cochran, to receive the Human Resource Committee report as presented. Action: Carried unanimously. esolution 2007-9-3 HUMAN RESOURCE COMMITTEE September 13, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:10 p.m. on Thursday, September 13, 2007. Human Resource Committee Chair, Julee Rodocker called the meeting to order and initially received information from staff. The Chair asked the secretary to call the roll after a quorum of members was available at 4:38 p.m. The following committee members were present: Commissioners Robert Cochran, Julee Rodocker, and Sandra Zerkle (arrived at 4:38 p.m.). Absent: Commissioner Joseph Graves. Public Comment Regular Board Meeting September 25,2007 Page 10 of 51 There were no public comments. General Manager Goals 2007-08 The Committee of the Whole met August 21, 2007 and directed J. Peter Lark, General Manager to submit a list of goals and objectives to be used in his performance evaluation for fiscal year end 2008. As such, Mr. Lark submitted the following items in response to the committee's direction. He also advised the Human Resource (HR) Committee that he has reviewed the evaluation materials forwarded to him, and he is fine with whatever evaluation tool the Board agrees to utilize. General Manager Goals FY 2007-08 1. Improve relations between management and the workforce, with particular emphasis on developing a more congenial and productive relationship with the union. Eliminate "Management vs. Union" mentality. 2. Improve external relations—develop a greater community presence by supporting key components of our community (e.g. Sparrow Foundation and educational resources.) 3. Improve relations with our fellow municipal utility entities, in particular the MMEA and the MPPA. 4. Re-visit the decision to withdraw from the MPPA Power Pool. 5. Prepare draft Strategic Plan for the potential development of added generation resources on the BWL system. 6. Work to reverse preliminary MDEQ mercury ruling that as of 2015 will effectively limit BWL to the operation of two of the three smaller units at Eckert, and none of the three larger units. 7. Continue working with Delta Township to resolve water wholesale contract issues. 8. Make recommendation for water bonding. 9. Develop economic development policy for existing and new customers. Commissioner Rodocker noted that the Human Resource Committee would reach consensus regarding, which evaluation tool to use for the General Manager and will notify him accordingly. It was further advised that the Board of Commissioners is attempting to utilize a forward thinking tool as they advance with the evaluation process. Denise Mulder, Human Resource Director advised that it is easy for Board appointees to be forgotten because they are not a part of the Board of Water and Light's (BWL) evaluation process. The BWL conducts performance evaluations after the close of the fiscal year. However, the appointees are on a contractual basis, which does not coincide Regular Board Meeting September 25,2007 Page I I of 51 with the fiscal period. As such, the Commissioners may want to consider altering the next contract length to allow the appointees performance reviews to fall within the BWL fiscal year cycle so that all reviews would take place at the same time. Ms. Mulder also noted that the HR Department is presently modifying their performance review format. Once finalized the HR Department could forward a copy of the format to the Board of Commissioners to consider using as a tool for the appointees, except for the General Manager who would typically have a slightly different format. The new format will be in place for the July 1, 2008 review cycle. After further discussion, the Human Resource Committee took the following actions: On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommended that the full Board approve the suggestion to place the appointees in the BWL system and adjust the contracts accordingly in each case and to also evaluate the new Human Resource Department form after it has been revised to see if it will work for the Board of Commissioners. In the meanwhile, it was further recommended that the Board continue to use its existing evaluation form until further notice. Action: Carried unanimously. On motion by Commissioner Cochran, seconded by Commissioner Rodocker, the Human Resource Committee agreed to approve the General Manager's Goals for Fiscal- Year 2008 as submitted. The item will be forwarded to the full Board for consideration and approval. Action: Carried unanimously. Discuss Six-Month Review Process for the Director of Internal Audit Susan Pifer, Director of Internal Audit began work at the BWL on March 26, 2007. As such, her six-month anniversary date is September 261h. Presently, the HR Committee is not scheduled to meet again until November 10`h, which would be Ms. Pifer's 71/2-month anniversary. After brief discussion, the HR Committee agreed to schedule another meeting for October 2007 in order to conduct the Director of Internal Audit's six-month performance review in a timely manner. It was also noted that the Board would utilize the same format as was used for the Corporate Secretary. In addition, Wendy Bradley, HR System Consultant will process the evaluation materials and compile the results on behalf of the Board of Commissioners. Ms. Pifer will also forward a copy of her performance factors to the HR Department. The HR Committee agreed to schedule another meeting for Tuesday, October 91h at 11:00 a.m. for the purpose of conducting the Director of Internal Audit's six-month performance review. Annual Performance Review of Corporate Secretary Regular Board Meeting September 25,2007 Page 12 of 51 Rhonda Jones, Corporate Secretary and Board appointee requested a closed session for the purpose of receiving her contractual year-end performance evaluation as permitted by Open Meetings Act exemption MCL 15.268(a). (4:55 p.m.) The roll was called. Yeas: Commissioners Cochran, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Graves. Carried unanimously. Moved by Commissioner Zerkle, seconded by Commissioner Cochran that the Human Resource Committee returns to open session. Carried unanimously. The Human Resource Committee meeting reconvened in open session at 5:12 p.m. Upon conclusion of the closed session, the Human Resource Committee took the following actions: On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommends to the full Board changing the cycles to agree with the company cycle, which represents reviews in August for the three appointees and adjust the contracts accordingly. Action: Carried unanimously On motion by Commissioner Cochran, seconded by Commissioner Zerkle, the Human Resource Committee recommends to the full Board that Rhonda Jones be reappointed as Corporate Secretary and that her wage be raised by 3.25% effective July 23, 2007. Discussion: Ms. Mulder recommended July 23, 2007 as the effective date of the wage increase, as it coincides with Secretary Jones' anniversary date. Action: Carried unanimously. There being no further business, the meeting adjourned at 5:19 p.m. Respectfully submitted, Julee M. Rodocker, Chair Human Resource Committee Motion by Commissioner Kramer, seconded by Commissioner Cochran, to receive the Human Resource Committee report as presented. Regular Board Meeting September 25,2007 Page 13 of 51 Action: Carried unanimously. esolution 2007-9- COMMITTEE OF THE WHOLE September 18, 2007 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, September 18, 2007. Committee of the Whole Chair, Semone James called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Peter Kramer, Santiago Rios,Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioner Joseph Graves Public Comments There were no public comments. Designated Development Fund J. Peter Lark, General Manager presented a proposed resolution in which staff sought approval for the creation of a designated development fund. The establishment of the fund would allow the Board of Water and Light (BWL) to take steps towards addressing future infrastructure needs. It was noted that the proposed resolution would also represent the Board's acceptance of the fund in theory with staff recommended guidelines to follow. The Committee of the Whole discussed the creation of the designated development fund and generally supported what is believed to be a good visionary idea. However, committee members expressed a desire to receive additional information and explanation regarding the theory of the fund, future funding options, whether or not the fund should be a part of the operations and maintenance budget, guidelines that speak to the specific purpose of the fund, and verbiage changes to the proposed resolution. The committee also expressed concern regarding the characterization of the funds as excess, rather than a more accurate terminology such as unallocated. After further discussion, the committee directed staff to provide additional information and re-present the proposal pending changes to the original resolution. Utility Rate Adjustments Susan Devon, Chief Financial Officer presented a proposed resolution regarding a public hearing concerning electric, water, and steam rate increases. The resolution proposed rate increases (of electric 4%, water 6%, steam 6%) similar to what was approved in the fiscal year 2008 budget on May 22, 2007. However, in addition to the original 4% electric rate increase, staff proposed an additional 1% electric rate change, whereas, the increase would help mitigate budgeted net losses and future infrastructure concerns. It also was noted that the BWL has certain statue guidelines that it must follow in order to Regular Board Meeting September 25,2007 Page 14 of 51 propose and approve utility adjustments. Therefore, the proposed resolution was presented in an effort to move forth a public hearing so that rate changes may take effect January 1, 2008. The committee members discussed the proposed resolution and explained to staff past practice whereas, staff would typically present various rate cases and supporting documentation to the Finance Committee, which would also include a PowerPoint presentation. It was also noted that although the fiscal year 2008 budget was passed with the aforementioned rate changes, the Board of Commissioners would like to receive additional data in order to determine if the budgeted rate adjustments should be modified. The committee also asked staff to present a budget that does not have a net loss in the first or second fiscal year. After further discussion, Commissioner James recommended that the matter be referred to the Finance Committee. Staff was also advised that they could request a special Finance Committee meeting if deemed necessary. In response to the committee's comments, Mr. Lark noted that staff attributed some strength to the fact that the Board previously approved the rate changes in theory at the May 22, 2007 board meeting. Nevertheless, he advised the committee that staff would present the requested information at the next Finance Committee meeting, as directed by the Committee of the Whole. It was also clarified that by doing so, there is a possibility that the rate change will not take effect January 1, 2008 as originally anticipated. And in response to a request to see capital outlays, Mr. Lark noted that they are presently unable to estimate capital outlay costs relative to possible future infrastructure projects at this time. Agenda Items for Joint BWL City Council Meeting The committee briefly reviewed the agenda items for the Joint BWL/City Council meeting scheduled for Thursday, September 27, 2007 at 11:30 a.m. located in the boardroom at Haco Drive. There were no changes to the agenda and it was confirmed that City Council has not provided any additional items at said time. The committee members directed staff to a provide a paragraph write up for each agenda item so that it maybe presented to the Board of Commissioners and City Council for review prior to the meeting. In addition, the committee also received a brief explanation from staff regarding the history of the CSO Project and the BWL's participation. Management Updates: Tree Trimming—Dick Peffley, Executive Director of Operations gave a brief update regarding tree trimming. It was noted that Wright Tree Service presently has seven (7) trucks/crews servicing BWL territories. However, that number should be reduced to five (5), as the BWL will have a company sponsored crew and the City of Lansing will also perform tree-trimming work on behalf of the BWL. in addition, it was noted that the BWL has finished its 5-year cycle tree trimming cycle and is currently pruning. In response to the report, the committee noted that it would be helpful to know in advance what areas the BWL is scheduled to transition to next. Regular Board Meeting September 25,2007 Page 15 of 51 Community Sponsorships—Cheval Breggins, Communications/Public Relations Representatives gave a brief update of community sponsorships for fiscal year to date 2008. The update provided information relative to sponsorship requests that were either approved and/or denied as well as a list of upcoming events that contain BWL involvement. Other New Commissioner. Commissioner James introduced Peter W. Kramer as the latest addition to the Board of Commissioners. Law School. The Commissioners congratulated Susan Pifer, Director of Internal Audit on her recent graduation from Thomas L. Cooley Law School. Legal Updates. Commissioner Smith asked that Brandie Ekren, Associate Attorney provide an update to the Board on the Joseph Pandy legal matter at a future date. There being no further business, the meeting adjourned at 7:10 p.m. Respectfully submitted, Semone James, Chair Committee of the Whole Motion by Commissioner James, seconded by Commissioner Cochran, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolution 2007-9- FINANCE COMMITTEE September 19,2007 The Finance Committee met at the Executive Offices, Lansing beginning at 4:00 p.m. on Wednesday, September 19, 2007. Finance Committee, Robin Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Semone James, Peter Kramer, and Robin Smith. Alternate committee member Robert Cochran was also present. Absent: Commissioner Santiago Rios. Public Comments There were no public comments. FY 2007 Audited Financial Statements: Enterprise & Trust Funds Regular Board Meeting September 25,2007 Page 16 of 51 Doug Rober, Managing Partner and Kristine Latchaw, Audit Manager of Plante &Moran were introduced to the Finance Committee. The auditors were present to review the year- end June 30, 2007 Audited Financial Statements for the Board of Water and Light (BWL) Enterprise Funds. Final copies of the audited reports were distributed, in addition to copies of the auditor and management letters, and copies of supplemental materials for Plante & Moran's presentation. Mr. Rober briefly reviewed the auditor letter and noted that samples of the organizations high risks areas were taken in order to provide an unqualified opinion. The letter also sited sensitive accounting estimates regarding the North Lake Lansing and Comfort Street landfills as well as fees in relation to the termination of the contractual agreement with General Motors under management judgments and accounting estimates. Mr. Rober noted that there were no significant adjustments made to the financial statements or disagreements with management. Unrecorded possible financial adjustments were not reported because they were deemed immaterial. A summary of the unrecorded possible adjustments was attached to the auditor's letter and includes the following: • Known misstatements: To record accounts payable that was not accrued at year-end due to late-arriving invoices or receiving's • Estimate Adjustments: To adjust outstanding CSO liability to calculated amount based on actual costs incurred to date on project and; • To record IBNR liability for worker's compensation self-insurance • Implied Adjustments: None Kristine Lachaw noted that all four reports that include the Enterprise Fund, Defined Benefit Plan, Pension Plan and the Retiree Benefit Plan and Trust were unqualified opinions, which is the highest rating that Plante & Moran could give. Ms. Lachaw reviewed the graphical information contained within the supplemental report that addressed the following topics • Comparison of Operating Revenue by utility category from 2004—2007. • Comparison of Operating Expenses by expense category from 2004—2007. • Comparison of Significant Power Costs from 2003 —2007. • Comparison of Operating Income (Loss) from 2003 —2007. • Comparison of Kilowatt Hours Generated Versus Purchased from 2003 —2007. • Comparison of Sales Source of Kilowatt Hours Generated from 2003 —2007. • Comparison of Bond Debt Service Requirements from 2007 —2012. Doug Rober briefly reviewed the Statement of Net Assets for the Enterprise Fund and noted that the accruals are consistent with no new disclosure requirements, as they are similar to what they were in the past. Kristine Latchaw also reviewed Plante &Moran's management letter comments, which also include BWL management responses. A brief summary of the manager comments are presented below: Regular Board Meeting September 25,2007 Page 17 of 51 New Auditing Standards—There were changes made to the auditing rules in 2006. The new standards significantly change how audits are conducted and communicated to the Board of Commissioners. In addition, the new standards will also bring nonpublic companies and governmental bodies into closer alignment with organizations currently under Sarbanes-Oxley. As part of the new guidelines, Plante & Moran also reported that they are not aware of any significant deficiencies in account procedures or internal controls. Therefore, nothing was reported. In addition, as a result of the new rules Plante &Moran will also work with management in reviewing and documentation of internal controls. In response to a committee question, Ms. Latchaw noted that the presentation materials will not change. However, time spent will increase and become more staggered throughout the year as opposed to primary year-end auditing work. Commissioner Smith asked that Plante &Moran provide guidance to Susan Pifer, Director of Internal Audit, as this will be a new process for the BWL. She also asked that it be communicated to the general public and City Council so as to ensure that the changes being made are not result of BWL past practice. Stores Inventory—The BWL conducts cycle counts of stores inventory items throughout the year. It was determined that cycle counts and system records are not sufficient for a year-end inventory, and physical year-end inventories are costly. Therefore, it was recommended that staff and the Internal Audit Department develop a cycle counting system that meets all reporting and auditing needs. Journal Entry Review and Approval—It was reported that several journal entries did not reflect evidence of a reviewer. As such, it was recommended that the BWL maintain adequate documentation of the review being performed, as it will aid in the implementation of the new auditing standards previously discussed. Capital Assets—Capital assets are the primary asset on BWL financial statements. Therefore, it is essential that they possess a thorough understanding of the assets, and that management and accounting staff reviews all procedures and internal control process related to said topic. It was also noted that self-constructed assets are difficult and audit risky because of the time and materials included and the possibility of manipulating those figures. Therefore, the process used relative to those items should be consistent with generally accepted accounting principles. Accounting for Derivatives—If the BWL decides to withdraw from the MPPA Power Pool and enter into arrangements with more risk then it could be considered derivatives for accounting purposes. Therefore, should the BWL engage in instruments designed to leverage or hedge risk in an effort to ear a higher return on power sales; then it should consider guidance from an outside third party to assist in implementing the accounting and internal control procedures. Business Continuation Planning—The BWL has a significant number of persons who are nearing retirement. It is critical that the BWL continue to take steps to plan and implement a business continuation plan to prepare for the departure of key personnel. Regular Board Meeting September 25,2007 Page 18 of 51 RFP for Investment and Banking Services Susan Pifer presented a proposed Finance Committee action, which indicated a change in committee members from Sue Flores, Charles Moore and Susan Pifer to Sue Devon (new Chief Financial Officer), Charles Moore and Susan Pifer. In addition, the committee also noted that a course of action will be recommended to the Finance Committee in October 2007 as opposed to July. In response to the Finance Committee's request, Ms. Pifer noted that the Subcommittee intends to present all responses, a matrix of said information and a recommendation regarding the request for proposal (RFP) to the Finance Committee. On motion by Commissioner James, seconded by Commissioner Cochran, the Finance Committee agreed to adopt the proposed committee action pertaining to the changes regarding the Subcommittee Plan. Action: Carried unanimously. Sarbanes-Oxley Subcommittee Ms. Pifer presented a proposed Finance Committee action whereas, she and Sue Devon, Chief Financial Officer will co-chair a subcommittee to study Sarbanes-Oxley or a equivalent internal controls implementation; and make a recommendation to the Finance Committee in November 2007 regarding said findings. Ms. Pifer also provided information regarding a one-day seminar in Metro Detroit, Michigan entitled, "Sarbanes-Oxley Benefiting from Compliance". The information was forwarded to the Board of Commissioners and various staff persons to determine their level of interest in attending. On motion by Commissioner James, seconded by Commissioner Cochran, the Finance Committee adopted the proposed committee action recommending the formation of a Sarbanes-Oxley Subcommittee with recommendations to be made to the Finance Committee in November 2007. Action: Carried unanimously. Signature Authorizations Sue Devon presented four proposed signature authorization resolutions necessary due to recent BWL staff and job title changes. The Finance Committee took the following actions: On motion by Commissioner Cochran, seconded by Commissioner James, the Finance Committee agreed to approve the Authority to Sign Checks resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. Regular Board Meeting September 25,2007 Page 19 of 51 On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Finance Committee agreed to approve the Delegation of Authority resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Finance Committee agreed to approve the Authority to Invest Operating and Pension Funds resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. On motion by Commissioner Cochran, seconded by Commissioner Kramer, the Finance Committee agreed to approve the Automated Transaction Clearing House (ACH) Policy resolution and forward it to the full Board for consideration and approval. Action: Carried unanimously. Other Commissioner Smith noted that she intends to recommend to the Executive Committee that they consider forming an Audit Committee so that they may separate Finance and Audit Committee items respectively. There being no further business, the meeting adjourned at 4:54 p.m. Respectfully submitted, Robin M. Smith, Chair Finance Committee Motion by Commissioner Rios, seconded by Commissioner Cochran, to receive the Finance Committee report as presented. Action: Carried unanimously. esolution EXECUTIVE COMMITTEE COMMITTEE September 20, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Thursday, September 20, 2007. Executive Committee Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Robert Cochran, Semone James, Santiago Rios, and Robin Smith. Absent: None Regular Board Meeting September 25,2007 Page 20 of 51 Public Comments There were no public comments. Board of Commissioners Budget The Executive Committee reviewed and discussed the Board of Commissioners budget update for fiscal year to date 2008. Following their discussion, the Executive Committee directed Susan Pifer, Director of Internal Audit to review the Commissioner's budget to ensure that the correct budget items are allocated to the appropriate responsibility areas (RA). They also asked Ms. Pifer to specifically review the cost and budget allocations associated with the Collaborative Economic Development Hope Loan and cellular phone costs. In addition, the committee asked that an itemized expense report be included with future Board budget updates. In response to a committee question, J. Peter Lark, General Manager noted that employees are allowed to utilize Board of Water and Light cell phones for personal use, provided they do not engender additional costs. Review Process for Expense Reports The Executive Committee reviewed the budget updates and expenses reports for Board appointed employees. Ms. Pifer noted that she intends to interview two firms in response to the RFP for the SAP Controls Assessment. As a result, the Board will be invited to sit in on the interviews if they choose to do so. In response to a committee question, staff was unsure if the BWL currently has a policy denoting a preference for local or Michigan based firms. Brankie Ekren, Associate Attorney will verify and follow-up with a response to said question. Discuss Board of Commissioners Retreat The Executive Committee discussed the possibility of holding a Board retreat in which the Board of Commissioners and executive staff would have opportunity to discuss recent and future changes as well as the strategic plan. It was suggested that the BWL conduct a 2-day retreat in which the Board of Commissioners would meet to discuss various issues on day one and then meet with executive staff on day two. After brief discussion, the Executive Committee took the following action: On motion by Commissioner James, seconded by Commissioner Cochran, the Executive Committee agreed to support the development of a cost effective 2-day Board retreat in which the Commissioners would meet together on day one and management would meet with the Board of Commissioners on day two. Action: Carried unanimously. Upon further discussion, the Executive Committee also agreed that a facilitator would be helpful in giving input on the strategic plan and maintaining focus during the Commissioners session. In addition, it also appears that a facilitator may not be necessary during the second phase of the retreat with the Board of Commissioners and executive staff. However, the committee agreed to allow Commissioner Rios to work Regular Board Meeting September 25,2007 Page 21 of 51 with Secretary Jones in planning the retreat as such, a proposal will be submitted to the Executive Committee at the next meeting. Discuss Legal Review Process The Executive Committee agreed to table the legal review process discussion until further notice. Other The General Manager provided Executive Committee with information pertaining to a potential business deal with the City of Lansing. There being no further business, the meeting adjourned at 5:28 p.m. Respectfully submitted, Santiago Rios, Chair Executive Committee Motion by Commissioner James, seconded by Commissioner Cochran, to receive the Executive Committee report as presented. Action: Carried unanimously. MANAGER'S RECOMMENDATIONS esolution 2007-9- A. Naming of Commissioner to Michigan Public Power Agency RESOLVED, That George Stojic, Executive Director of Strategic Planning and Development, be named as the BWL commissioner to MPPA; and RESOLVED FURTHER, That Douglas Wood and David Bolan remain as MPPA's first alternate commissioner and second alternate commissioner, respectively. -------------------- Staff Comments: The change of primary commissioner is necessary to replace William Cook Jr. who is no longer employed at the BWL. The commissioner and the alternates represent the BWL on the MPPA Board of Commissioners. The alternates represent the BWL in the event the commissioner is not available. -------------------- Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-9-7 for the Naming of Commissioner to Michigan Public Power Agency. Regular Board Meeting September 25,2007 Page 22 of 51 Action: Carried unanimously. esolution 2007-9- B. Stonehouse III Development Project: BWL Easement Transactions RESOLVED, That the Board of Commissioners hereby authorize the General Manager to release the easements related to the Stonehouse III development project as presented at the August 21, 2007, Committee of the Whole meeting, provided the Lansing Board of Water and Light receives adequate easements to meet its operational needs upon the General Manager's review. -------------------- Staff Comments: Stonehouse III, LLC and the City of East Lansing are developing a parcel of land in Downtown East Lansing. In order for the development project to proceed, Stonehouse III, LLC and the City of East Lansing have requested that the BWL release several easements. The facilities currently located in those easements will be moved to new easement areas, which should be sufficient for the BWL's operational needs. Additionally, the BWL will receive an additional easement for existing underground electrical facilities and new conduits that are currently without an easement. A summary of the relevant property transactions are attached. -------------------- Motion by Commissioner Rios, seconded by Commissioner James, to adopt Resolution 2007-9-8 for the Stonehouse Development Project: BWL Easement Transactions. Action: Carried unanimously. esolution 2007-9- C. Fiscal Year 2007 Audited Financial Statements RESOLVED, That the fiscal year 2007 Audited Financial Statements for the Board of Water and Light Enterprise Fund have been reviewed and is hereby accepted as presented. FURTHER RESOLVED, That the Corporate Secretary is hereby directed to file a copy of the fiscal year 2007 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) no later than December 31, 2007. FURTHER RESOLVED, That the Corporate Secretary is hereby directed to file a coy of the fiscal year 2007 Audited Financial Statements of the Board of Water and Light Enterprise Fund with the City of Lansing no later than October 15, 2007. Regular Board Meeting September 25,2007 Page 23 of 51 -------------------- Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-9-9 for the Fiscal Year 2007 Audited Financial Statements. Action: Carried unanimously. esolution 2007-9-I D. Authority to Sian Checks RESOLVED, That Board of Water and Light Policy 1-01 "Authority to Sign Checks" is hereby amended as follows: The signatures of not less than two (2) of the following officers shall be required to sign checks for the general checking account at National City Bank and the payroll/pension checking account at Standard Federal Bank. 1. General Manager 2. Chief Financial Officer 3. Corporate Secretary This resolution supersedes Resolution 2004-01-07. -------------------- Staff Comments: Due to organizational and title changes, this resolution is necessary to incorporate the new title of Chief Financial Officer. -------------------- Motion by Commissioner James, seconded by Commissioner Zerkle, to adopt Resolution 2007-9-10 for the Authority to Invest Operating and Pension Funds. Action: Carried unanimously. esolution 2007-9-11 E. Delegation of Authority RESOLVED, That Board of Water and Light Policy 1-03 "Delegation of Authority" is hereby amended as follows: In the General Manager's absence, the officers listed below shall have the full authority and responsibility for Board of Water and Light (BWL) operations, in the order in which they are listed, or as otherwise designated by the General Manager. Regular Board Meeting September 25,2007 Page 24 of 51 1. Executive Director of Operations. 2. Chief Financial Officer This resolution supersedes Resolution 2004-01-09. -------------------- Staff Comments: Due to organizational and title changes, this resolution is necessary to incorporate the new title changes. -------------------- Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-9-11 for the Delegation of Authority. Action: Carried unanimously. esolution 2007-9-12 F. Authority to Invest Operating and Pension Funds RESOLVED, That Board of Water and Light Policy 7-01 "Authority to Invest Operating and Pension Funds" is hereby amended as follows: RESOLVED, That the General Manager and/or one of the following designated representatives in the sequence listed below, shall be authorized to invest operating and pension funds in such securities as permitted by law and to purchase, sell, sign and endorse for transfer, certificates representing said securities and invested in the name of the Board of Water and Light (BWL): 1. Chief Financial Officer 2. Manager of Finance and Planning The Revenue Bond Act of 1933 (PA 94 of 1933, MSA 5.2731), as amended, and BWL Bond Resolution 89-10-3 govern and restrict the investment of BWL operating funds. Pension funds are governed by the Public Retirement System Investment Act (MCL 38.1132 et seq.), as amended. This resolution supersedes Resolution 2004-01-10. -------------------- Staff Comments: Due to organizational and title changes, this resolution is necessary to incorporate the Chief Financial Officer title. -------------------- Regular Board Meeting September 25,2007 Page 25 of 51 Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-9-12 for the Authority to Invest Operating and Pension Funds. Action: Carried unanimously. esolution 2007-9-1 G. Automated Transaction Clearing House (ACH) Policy WHEREAS, Act No. 738 of the Public Acts of 2002 authorizes the use of electronic transactions by designated officers of the Board of Water and Light; and WHEREAS, the Board of Commissioners deems that it is in the best interest of the Board of Water and Light to make certain financial transactions by using electronic transactions as described in the Act. RESOLVED, That the Board of Water and Light is authorized to utilize electronic transactions in compliance with written procedures and internal controls developed and recommended by the Chief Financial Officer and presented to the Commissioners as Electronic Transactions Procedures on this date. Authority The Chief Financial Officer may enter into ACH or electronic transaction agreements. Responsibility The Chief Financial Officer shall be responsible for establishing all ACH and electronic transaction arrangements, including payment approval, accounting, reporting, and overseeing compliance. The Chief Financial Officer shall be responsible for documentation detailing the goods of services purchased, the cost of the goods or services, the date of the payment, and the responsibility area and account charged. This information is contained in the BWL electronic general ledger software system and is available upon request. Internal Controls Electronic transactions are used to pay federal income tax withholding, FICA taxes, state income tax withholding, state sales tax and fees paid to credit card processors and other third party payment processors. Electronic transactions are used to process automatic bank deposits for employee payroll and retiree pension payments. Electronic transactions are used to deposit payments from customers via credit card or other third-party payment processors. Currently, only payments initiated by General Accounting or deposits processed through Remittance Processing are transacted electronically. In the future, if the volume of electronic payments demands it, additional internal controls may be desired. For the present, the following two rules are sufficient" Regular Board Meeting September 25,2007 Page 26 of 51 1. Payments made electronically are approved by the Supervisor or Manager responsible for approval and payment. The Manager sends the notice or invoice to Accounts payable prior to the date payment is requested. The Chief Financial Officer shall approve all electronic transactions before payment is made. Both approvals shall reside in General Accounting voucher files along with copies of the payment advices. 2. Payments received electronically from others are recorded in the daily bank statements. The cash receipts journal kept by Remittance Processing contains the payee, date and amount of each transaction. These records are contained in the electronic general ledger software system and are available upon request. This resolution supersedes Resolution 2004-01-11. -------------------- Staff Comments: Due to title changes, this resolution is necessary to incorporate the Chief Financial Officer title. Everything else remains the same. -------------------- Motion by Commissioner Graves, seconded by Commissioner James, to adopt Resolution 2007-9-13 for the Automated Transaction Clearing House (ACH) Policy. Action: Carried unanimously. Motion by Commissioner Cochran, seconded by Commissioner James, to amend the September 25, 2007 Board meeting agenda to include the following resolutions: Larch Substation To Be Declared Surplus and Honoring Joseph D. Davis. Action: Carried unanimously. esolution 2007-9-1 H. LARCH SUBSTATION TO BE DECLARED SURPLUS DECLARE BOARD OF WATER AND LIGHT (BWL) PROPERTY AT 1609 NORTH LARCH STREET, LANSING, MICHIGAN, AS SURPLUS AND NO LONGER NEEDED FOR OPERATONS AND AUTHORIZE THE SALE OF THE PROPERTY IN ACCORDANCE WITH CURRENT BWL PROPERTY DISPOSAL PROCEDURES. WHEREAS, the following described Larch Substation Property, located on the west side of North Larch Street north of North Street in Lansing, Ingham County, Michigan, has been identified as surplus and no longer needed for the operation of the Board of Water and Light(BWL); City of Lansing Parcel Number 33-01-01-09-235-031 described as LOTS 30 THRU 34 INCLUSIVE EXC.THAT PART LYING W.OF A LINE COMM. 15.28 FT E.OF THE S.W.COR.OF LOT 30:TH.N Regular Board Meeting September 25,2007 Page 27 of 51 10'24'32"E TO A POINT ON N.LINE OF LOT 32 THAT IS 34.36 FT E.OF THE N.W.COR.OF SAID LOT;TH.N 10'24'32"E 47.9 FT.;TH.N 54'50'51"E 30.35 FT.TO THE N.LINE OF LOT 34,EXC.THE N.4.25 FT.OF LOT 34, NELLERS SUB.NO. 1. WHEREAS, the BWL has been contacted by an adjacent property owner interested in purchasing the property; and WHEREAS, upon approval of the property as surplus by the Board of Commissioners, the BWL will proceed to dispose of the property in accordance with current BWL "Property Disposal Procedures;" RESOLVED, that the Board of Commissioners hereby declares the above described North Larch Substation property as surplus and no longer needed for Utility purposes and approves the sale of the property in accordance with current BWL "Property Disposal Procedures." RESOLVED FURTHER, that the General Manager and Corporate Secretary are authorized to sign all documents necessary to dispose of this parcel, subject to approval of the BWL Legal Department. FURTHER RESOLVED, That this sale is expressly conditioned upon compliance with the Lansing City Charter or Codified Ordinances of the City of Lansing, including approval of the sale by the Lansing City Council. Staff Commentary: This parcel was identified by staff in both the 2002 and 2006 Property Utilization Studies as no longer needed for BWL operations. Most of this real estate parcel was acquired by deed in 1930. In 1964, the northern part of this property was acquired from the State Highway Commissioner. Also in 1964, the western portion of the land acquired in 1930 was sold to the Michigan State Highway Department. Salvageable materials and equipment have been removed from the brick electrical substation building and the fenced substation yard located to the west of the substation building. ------------------- Comments: Doug Wood, Director of Engineering also advised the Board of Commissioners that the adjacent property owner who intends to hire additional staff is interested in purchasing the North Larch Street parcel in order to build a parking lot. It was further noted that the urgency of the request is due to pending weather changes that could prevent construction from proceeding if not done in a timely manner. Motion by Commissioner Rios, Commissioner Cochran, to adopt Resolution 2007-9-14 for the Larch Substation to be Declared Surplus. Action: Carried unanimously. UNFINISHED BUSINESS Regular Board Meeting September 25,2007 Page 28 of 51 There was no unfinished business. RESOLUTIONS esolution 2007-9-IS GENERAL MANAGER'S FISCAL 2007-08 GOALS WHEREAS, the Board of Commissioners met with the Director and General Manager on August 21, 2007 and September 13, 2007 in order to discuss and establish his performance objectives for Fiscal Year 2007-08. RESOLVED, That the Fiscal Year 2007-08 Performance Objectives for J. Peter Lark, the Director and General Manager, are as follows and hereby approved. FISCAL YEAR 2007-08 OBJECTIVES 1. Improve relations between management and the workforce, with particular emphasis on developing a more congenial and productive relationship with the union. Eliminate "Management vs. Union" mentality. 2. Improve external relations —develop a greater community presence by supporting key components of our community (e.g. Sparrow Foundation and educational resources.) 3. Improve relations with our fellow municipal utility entities, in particular the MMEA and the MPPA. 4. Re-visit the decision to withdraw from the MPPA Power Pool. 5. Prepare draft Strategic Plan for the potential development of added generation resources on the BWL system. 6. Work to reverse preliminary MDEQ mercury ruling that as of 2015 will effectively limit BWL to the operation of two of the three smaller units at Eckert, and none of the three larger units. 7. Continue working with Delta Township to resolve water wholesale contract issues. 8. Make recommendation for water bonding. 9. Develop economic development policy for existing and new customers. Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-9-15 for the General Manager's Fiscal 2007-08 Goals. Regular Board Meeting September 25,2007 Page 29 of 51 Discussion: Commissioner Rios noted that there was extensive discussion and input from the Commissioners and Peter Lark in developing the General Manager's goals. It is a joint effort and everyone takes ownership in assisting Mr. Lark in meeting the objectives, as they are important relative to the success of the entire organization. Commissioner Rios went onto thank everyone for their hard work regarding this endeavor. Action: Carried unanimously. esolutiion 2007-9-1 BOARD OF WATER AND LIGHT PRIORITY FOCUS WHEREAS, the Board of Commissioners met with the Director and General Manager on August 21, 2007 to discuss a number of goals and objectives as then presented by the Director and General Manager. RESOLVED, That the goals and objectives then presented at the August 21, 2007 meeting be deemed the Board of Water and Light's Priority Focus items, which are as follows and hereby approved. BWL PRIORITY FOCUS: 1. Improve relations between management and the workforce, with particular emphasis on developing a more congenial and productive relationship with the union. Eliminate "Management vs. Union" mentality. Deal with union issues from a human resources perspective as opposed to a confrontational/defensive perspective (It seems we spend a lot of time, effort, and money trying to prove the union "wrong" even when the facts don't support our action). 2. Develop a more positive view of the BWL through increased efforts to get our good work reported in the local media. 3. Improve external relations —develop a greater community presence by supporting key components of our community (e.g. Sparrow Foundation, educational resources— especially tie-ins with educational institutions—LCC, MSU, etc., stronger partnership with Common Ground.) 4. Improve relations with our fellow utility entities, in particular the MMEA and the MPPA. 5. Re-visit the decision to withdraw from the MPPA Power Pool. 6. Continue working on the recommendations from the IRP on an action plan for the potential development and/or equity interest of added generation on the BWL system. Prepare draft Feasibility Study within the next six (6) months. Regular Board Meeting September 25,2007 Page 30 of 51 7. Work to reverse preliminary MDEQ mercury ruling that as of 2015 will effectively limit BWL to the operation of two of the three smaller units at Eckert, and none of the three larger units. 8. Re-evaluate the entire tree-trimming program including development and implementation of a new tree-trimming program, multiple contractors, more in-house work, and working with the city. 9. Continue working with Delta Township (and other similar contracts) to resolve water wholesale contract issues. 10. Investigate CSO and lead service replacement program for best utilization of labor resources. 11. Update Strategic Plan for FY 2007-08. 12. Conduct a follow-up National Safety Council audit. 13. Continue working on a succession plan that will include staffing level recommendations. Establish a succession plan consistent with our strategic plan, which includes development of a realistic budget. 14. Complete Health Care Task Force. 15. Complete pension survey. 16. Continue to work on Ottawa development project. 17. Develop a long-term rate strategy. 18. Prepare for upcoming union contract negotiations. 19. Make recommendation for water bonding. 20. Continue working with General Motors to resolve steam contract issues. 21. Resolve HR Audit issues. 22. Water Department issues—deficient staffing and excess use of outside contractors. 23. Develop economic development policy for existing and new customers. 24. Review organization structure—eliminate redundant supervision. 25. Develop incentive program to reward employees for outstanding contributions. Regular Board Meeting September 25,2007 Page 31 of 51 26. Prepare recommendation regarding deregulation. 27. Effectively communicate with the Board of Commissioners; keep all Commissioners updated, especially on important issues. Motion by Commissioner Rios, seconded by Commissioner James, to adopt Resolution 2007-9-17 for the Board of Water and Light Priority Focus. Discussion: J. Peter Lark, General Manger noted that the BWL Priority Focus items are general areas of concern for the General Manager and the BWL. He further advised that there was significant discussion involving these items, which he and the BWL intend to work towards next year. Commissioner Rios added that there had been a lot of discussion, and it was exciting to have a meeting of the minds on specific objectives and general items that the BWL should be aware of at all times. He went onto to note that he is very pleased with the endeavor and believe that it will take the organization to great places. Action: Carried unanimously. esolution 2007-9-I 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, effective immediately, 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 Cochran, seconded by Commissioner Kramer, to adopt Resolution 2007-9-17 to amend the Rules of Procedure of the Board of Water and Light. Discussion: Commissioner Rios advised that the City Charter indicates that the Board of Commissioners is to designate certain positions that include the General Manager, Internal Auditor and Secretary. He is unaware of how or why the Secretary's title was changed to Corporate Secretary. However, Brigham Smith, City Attorney noticed the difference in titles between the City Charter and the Rules of Procedures and recommended that the Board adhere to the charter verbiage. Commissioner Rios also noted that there are other internal BWL documents, which denotes the Secretary position as Corporate Secretary. It was further reported that the City Charter also refers to the General Manager position as Director, which is another discrepancy between the two Regular Board Meeting September 25,2007 Page 32 of 51 documents. It was suggested that the Board of Commissioners approve the Rules of Procedure as amended and address the specific designation of staff persons at a later date. Action: Carried unanimously. BOARD OF WATER AND LIGHT OF THE CITY OF LANSING, MICHIGAN RULES OF PROCEDURE AS AMENDED 09/25/07 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 the preceding year. 1.2 Special Meetings 1.2.1 Special Meetings of the Board shall be called by the General Manager or 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 Secretary or someone designated by the Secretary. 1.3 Rescheduled Meetings 1.31. 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. Regular Board Meeting September 25,2007 Page 33 of 51 1.4 ConflictingTimes imes The schedule of regular Board meetings shall not conflict with regular meetings of the Lansing City Council. 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 and State law. 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 PostingN otice Notice of all meetings of the Board shall be posted in accordance with state law. 2.3 Designated Person The Secretary shall be responsible for posting notices. III. QUORUM FOR A REGULAR OR SPECIAL MEETING 3.1 Number Required Regular Board Meeting September 25,2007 Page 34 of 51 The presence of five members of the Board 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(s) designated in the public notice. 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 serving 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 expiration 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 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. See19.2.3. Regular Board Meeting September 25,2007 Page 35 of 51 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 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 lst 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 Regular Board Meeting September 25,2007 Page 36 of 51 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 most immediate past Chair of the Board who is not currently serving as Chair or Vice Chair of the Board shall be designated "Past Chair." If no Past Chair is serving on the Board, members of the Board shall select a member to assume the duties of the Past Chair as set forth in these Rules of Administrative Procedure. The Past Chair shall assume the duties of the Chair when neither the Chair nor the Vice Chair is present. VIII. CHARTER POSITIONS 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 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 or ad hoc 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 STANDING COMMITTEES 9.2.1 The following standing committees shall be appointed by the Chair as provided in 9.4: Regular Board Meeting September 25,2007 Page 37 of 51 Finance Human Resource Nominating Executive 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 Operations &Maintenance 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 I" of each year, nominate a slate of officers at its annual organizational meeting and shall endeavor to rotate officers of the Board annually. 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. 9.2.5 The Executive Committee shall, during the intervals between the Board of Commissioners' meetings, assist in the development of the BWL's position on major issues and submit and recommend the position to the Board for consideration and action. 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 Ad Hoc Committees Ad hoc committees shall convene whenever the need arises to address an issue or topic that would not appropriately fall within any of the other standing committees and would not require the attention of the Committee of the Whole. 9.4 Appointment of Standing and Ad Hoc Committees Regular Board Meeting September 25,2007 Page 38 of 51 The Chair shall appoint the standing committees and such other ad hoc committees as the Board may from time to time establish. The first member named on each committee shall be the Chair of the committee. Standing Committees: All standing 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 have four (4) members, including the Chair, Vice Chair and Past Chair and one (1) Commissioner elected by the Board, whose term shall be concurrent with the terms of the Officers. The Nominating Committee shall not consist of any members who intend to run for an officer position. Ad Hoc Committees: The Chair shall appoint members of any ad hoc committee. An ad hoc committee may have any number of members. 9.5 Sub-Committees Authorized The Executive Committee shall establish such sub-committees as deemed necessary. 9.6 Quorum for Committee Meetings A quorum for a standing or ad hoc committee shall be three (3). 9.7 Committee Meetings Meetings of standing or ad hoc committees may be called by the General Manager or Secretary on the request of the Chair of the Board, Chair of a committee or any two committee members. 9.8 Committee Reports Each standing or ad hoc 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 19.5. 9.9 Committee Resolutions Regular Board Meeting September 25,2007 Page 39 of 51 Committee reports recommending action by the Board shall have incorporated in the report the necessary resolutions or motions to accomplish the action. 9.10 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 Regular Board Meeting September 25,2007 Page 40 of 51 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 An 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 before 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 The time limits of Section 10.1.1.3 apply to all 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 extending time limits for comments under the circumstances, or in limiting remarks to the subject matter under discussion as provided in 10.1.1.3. 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. Regular Board Meeting September 25,2007 Page 41 of 51 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. 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 shall hold a public hearing at least thirty days before the effective date of any changes in rate structure. The Board shall comply with the requirements of Charter Section 5-205.2 for public hearings regarding changes in the 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. Regular Board Meeting September 25,2007 Page 42 of 51 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 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. Comments or conduct that disrupt the orderly conduct of meetings or hearings 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 Public Hearing on Rates: In the case of a rate hearing, the Board may hold a separate meeting or meetings after the rate hearing to discuss the proposed changes to the rate structure and vote on the proposed changes. If the Board's discussions after the rate hearing 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. 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. XIII. MEMBERS OF THE BOARD 13.1 Attendance Each member of the Board shall attend all meetings of the Board in person 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 may be grounds for removal by the City from the office as a member of the Board. 13.2 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 may be disqualified from voting on such matter as set forth in the Lansing City Charter. XIV. RECONSIDERATION OF ACTION Regular Board Meeting September 25,2007 Page 43 of 51 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. XV. MINUTES 15.1 Preparation and Filing The Secretary shall keep minutes of regular and Special Meetings of the Board and committees and shall file a copy of the Board minutes 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 is filed with the City Clerk. 15.2 Corrections Corrections in the regular or Special Meeting or committee 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. 15.3 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 they are filed with the City Clerk. Corrected minutes shall be available no later than the next subsequent meeting after correction. 15.4 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). XVI. CONFIDENTIALITY 16.1 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 Secretary. 16.2 Closed Session Regular Board Meeting September 25,2007 Page 44 of 51 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. XVII. 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. XVIII. 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. An affirmative a majority of members serving shall be required to amend the rules of procedure, after which the proposed revisions shall be forwarded to the City in compliance with Charter Section 5-105.8. XIX. MISCELLANEOUS 19.1 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." 19.2 News Media Regulations 19.2.1 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. 19.2.2 Following the adjournment of a Board meeting, members of the news media may request interviews of members of the Board. 19.2.3 All policy statements shall be made on behalf of the Board by the Chair. See 4.3. 19.3 Vacancy, Resignation, Absence of Elected Officers Regular Board Meeting September 25,2007 Page 45 of 51 19.3.1 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. 19.3.2 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, 19.4 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. 19.5 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. 19.6 Hiring Consultants The Board of Commissioners may hire external consultants, such as accountants, but not outside legal counsel. 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. All outside legal counsel must be hired by in-house counsel and in accordance with the Charter. Regular Board Meeting September 25,2007 Page 46 of 51 19.7 Reimbursement of Board Member Expenses 19.7.1 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 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. 19.7.2 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, 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, and 9/25/07. esolution 2007-9-I Reappointment of the Charter Position of Corporate Secretary The Board's Rules of Administrative Procedures specify that the Board is to appoint a Director and General Manager, Internal Auditor, and Corporate Secretary, respectively at Regular Board Meeting September 25,2007 Page 47 of 51 its first regular meeting following July 1" of each year or as soon thereafter as may be appropriate. RESOLVED, That the Board of Commissioners hereby reappoints the following individual to the Charter position of Corporate Secretary for fiscal year 2007-2008, or, until a successor is appointed, whichever last occurs: Rhonda Jones, Corporate Secretary RESOLVED, That Rhonda Jones' current employment contract is amended to reflect the new reappointment and contract commencement period of July 1, 2007. ---------------- Comments: Commissioner Rios explained that they annually review the performance of all Board appointees. As such, they receive assistance from the Human Resource Department regarding the collection of input and information for each individual. The process is very thorough in that it provides the Board and the individual being reviewed the opportunity to give input regarding their prior years performance. As part of the process, the Board is required to either reappoint the individual or do something different. In this particular matter, there was unanimous consent amongst the Board of Commissioners to reappoint Rhonda Jones as Corporate Secretary with a subsequent salary increase of three and a quarter percent (3.25%). Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-9-18 for the Reappointment of Rhonda Jones to the Charter Position of Corporate Secretary. Action: Carried unanimously. esolut on 2007-9-1 Performance Evaluation and Compensation Increase For Charter Position of Corporate Secretary RESOLVED, That the Corporate Secretary, Rhonda Jones, is hereby eligible to receive a salary adjustment effective as of July 1, 2007. RESOLVED FURTHER, That the Board of Commissioners authorizes a three and twe fifth a quarter percent (3.25%) salary adjustment for the Corporate Secretary, based on the evaluation of the employee's performance from July 24, 2006 through June 30, 2007. The percentage increase represents a compiled average of the recommended salary adjustment from the Board of Commissioners. Regular Board Meeting September 25,2007 Page 48 of 51 Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-9-19 for the Performance Evaluation and Compensation Increase for the Charter Position of Corporate Secretary. Action: Carried unanimously. esolution 2007-9-200 BOARD OF WATER AND LIGHT RESOLUTION HONORING JOSEPH D. DAVIS WHEREAS, Joseph D. Davis has been a Board of Water&Light employee for more than 17 years; WHEREAS Joe has been an active member in the International Brotherhood of Electrical Workers Local 352 for 16 years, serving as its Business Manager since 2003; WHEREAS Joe was IBEW Local 352 President from 1999 to 2003, and Vice President in 1998; WHEREAS Joe has served on the Joint Safety Committee, the Joint Apprenticeship and Licensing Committee and on various training committees; WHEREAS Joe began work at the BWL as a Laborer in Water Construction and has worked in various capacities at the Board, and departs the BWL as a Journeyman Electrician; WHEREAS Joe has demonstrated a commitment to community service through such events as the Chili Cook-off, Silver Bells in the City and Common Ground; WHEREAS Joe has been instrumental in promoting stronger ties between the IBEW and the Board of Water&Light; WHEREAS he has devoted countless hours to maintaining a strong work force, and a vibrant collective bargaining unit, whose mission is to further the well-being of its membership; WHEREAS, after these many years, Joe now has accepted a new challenge as an International Representative of the IBEW, representing 40 union locals in five states; THEREFORE BE IT RESOLVED: That the Board of Water&Light's governing Board of Commissioners congratulate Joseph D. Davis on his years of devoted service as an IBEW representative and as a BWL worker, and that all Commissioners join in bestowing all best wishes to Joe on his new endeavor. Regular Board Meeting September 25,2007 Page 49 of 51 BOARD OF COMMISSIONERS Santiago Rios, Chair Joseph E. Graves, Jr. Semone M. James, Vice Chair Peter W. Kramer Robin M. Smith, Past Chair Julee M. Rodocker Robert W. Cochran Sandra Zerkle --------------------- Comments: Commissioner Rios congratulated Joseph Davis, Business Manager of IBEW Local 352 on his recent appointment as IBEW International Representative. Mr. Davis was recognized for his promotion within the IBEW as he will now have responsibility for multiple bargaining units throughout five (5) states. Commissioner Rios also noted the pride that an organization receives when a BWL employee obtains recognition of that nature. It was further advised that Mr. Davis would no longer be at the BWL on a daily basis due to his new position. The resolution was read into record in its entirety. Motion by Commissioner Rios, seconded by Commissioner Graves, to adopt Resolution 2007-9-2007, Honoring Joseph D. Davis. Discussion: Commissioner Zerkle expressed pleasure in knowing and working with Mr. Davis over the years. She noted his belief in the advancement, safety and well being of employees. In addition to his desire to ensure that the company he worked for was healthy and responsive to the needs of the employees. Commissioner Cochran advised that he would be absent from Mr. Davis' upcoming celebration and wished him luck in his new endeavor. Action: Carried unanimously. Additional Comments: Joseph Davis introduced wife, Carol Davis and noted that he joined the BWL Water Construction Department seventeen (17) years ago as a temporary laborer. The BWL provided a decent job that allowed him to pay the bills and take care of his family of which the BWL is an extension. In addition, he noted that it feels significantly better coming to current Board meetings than in years past. He also advised that it is a great time to be at the BWL, as there is a great team in place and great people Regular Board Meeting September 25,2007 Page 50 of 51 within the organization. All of these items played a factor in his decision to accept a new position. Mr. Davis noted that Peter Lark and his team have good leadership and both the Commissioners and the management team have good vision. He went onto advise Commissioner Kramer that it is a great time to be a part of the Board, and he hopes to continue to do things that will help the BWL. MANAGER'S REMARKS J. Peter Lark, General Manager noted that the excitement factor has been large and the work gratifying. An excellent time has been had due in part to Joseph Davis who has been a great guy to work with in representing the union. Mr. Lark thanked Mr. Davis for all the work he has done in helping with management and labor relations, which Mr. Lark hopes to improve as they move forward. Connections Live! —Mr. Lark noted that the BWL recently held a consumer forum entitled, "Connections Live!" It was an opportunity for the BWL to reach into the community to its customers. With winter approaching the BWL thought it a good idea to explain and help customers know how to keep their bills down and where to receive assistance if needed. The occasion went well and the project received input and assistance from many members of the BWL staff. Mr. Lark went onto publicly thank staff for its efforts in this endeavor. COMMISSIONERS' REMARKS Commissioner Rios welcomed Ron Byrnes as the new Business Manager for IBEW Local 352. Commissioner Cochran advised Commissioner Kramer that the serenity Joseph Davis previously alluded to was a hard fight for everyone. Commissioner Rios officially welcomed the newest Board of Commissioner, Peter W. Kramer to the Board of Water and Light. Commissioner Kramer noted that he was very encouraged by the welcome from management and being able to tour the facilities. The organization is fantastic and he is looking forward to participating in its success. Commissioner Rios noted Calvin Jones' promotion to Governmental Relations Manager and offered congratulations. He also acknowledged his help to the BWL and the Commissioners in relation to political matters and City Council. Peter Lark went onto acknowledge the promotion and good work that Calvin Jones has done for many years. He also noted that Mr. Jones is a tremendous asset to the organization and as a result he was promoted from analyst to manager. EXUCSED ABSENCE Regular Board Meeting September 25,2007 Page 51 of 51 On motion by Commissioner James, seconded by Commissioner Zerkle, to excuse the absence of Commissioner Robin M. Smith. Action: Carried unanimously. PUBLIC COMMENTS There were no public comments. ADJOURNMENT On motion by Commissioner Cochran, seconded by Commissioner James, the meeting adjourned at 6:20 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk October 2, 2007 Approved by the Board: September 25, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday,July 24, 2007 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, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioner Joseph Graves .; ---- J , The Secretary declared a quorum present. C, r� C7 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 Cochran, seconded by Commissioner Rodocker the minutes of the May 22, 2007 regular meeting were unanimously approved. By motion of Commissioner Cochran, seconded by Commissioner James the minutes of the June 5, 2007 Special Board meeting were unanimously approved. By motion of Commissioner Calkins, seconded by Commissioner Cochran the minutes of the June 15, 2007 Special Board meeting were unanimously approved. Commissioner Smith welcomed new General Manager, J. Peter Lark. 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. Board Mtg.Minutes July 24,2007 167 Jim Sturdevant with Land Use Specialists, Inc. is the project planner for the Trans Development Group who is developing a piece of property in Delta Township. The property in question is adjacent to and immediately south of Erickson, which is owned by Board of Water and Light (BWL). There is a 36" storm drain on the BWL property that has been built and maintained by the road commission. As a result, they are requesting permission to connect into the storm facility for development of the property immediately to the south. It is a truck terminal facility that is servicing the General Motors facility in the area. Mr. Sturdevant noted that he had spoken to Brandie Ekren, Associate Attorney who was not yet clear on the procedure needed to obtain approval for said request. However, their construction schedule is such that they would like to start this fall. In order to accomplish this task it maybe necessary to obtain permissions from the Board of Commissioners, Lansing Planning Board, and City Council. Based on the next scheduled BWL Board meeting, the construction process maybe delayed until December 2007. Therefore, Mr. Sturdevant requested that the Board consider approval of the project for connection to the storm sewer on BWL property subject to approval from the Road Commission, Drain Commission and BWL Staff, which would allow him to place the application in front of the City of Lansing Planning Board for their August 2007 agenda. Commissioner Smith thanked Mr. Sturdevant for appearing before the Board and advised that she would refer the matter to the General Manager and staff for due diligence. At this time, the Board is not in a position to make a motion or ruling as it relates to the project because they do not have the information. Commissioner Smith thanked Mr. Studevant for providing information relative to the timetable for a fall project and acknowledged that the Board does have the ability to hold a Special Board meeting to make any rulings that might need to occur as it relates to this project or any other matter that comes before the Board. Mr. Studevant clarified that he has submitted a set of engineering drawings and a cover letter for said project to Brandie Ekren Associate Attorney, Rhonda Jones Corporate Secretary and Mark Witalec Surveyor. Commissioner Rios asked staff to respond quickly to the request and noted that he wants to ensure that the BWL has enough information to act. He advised Mr. Sturdevant that it would be up to him to ensure that the BWL has everything it needs, and went onto strongly suggest that Mr. Sturdevant communicate with whomever at the BWL is going to oversee the project. COMMUNICATIONS None. COMMITTEE REPORTS esolution 2007-7-I FINANCE COMMITTEE June 11, 2007 167 Board Mtg.Minutes July 24,2007 168 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 11:30 a.m. on Monday, June 11, 2007. 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 Gary Calkins, Semone James, Robin Smith and Sandra Zerkle. Commissioner Robert Cochran was also present. Absent: None. Public Comment There were no public comments. Internal Audit Report Susan Pifer, Director of Internal Audit presented the Internal Audit Report that gave an update for activities pertaining to coal inventory control, capital assets, internal controls— SAP, cash management and other audit business. Ms. Pifer noted the following items: • The coal program is complete. Fieldwork has been scheduled with Bob VanElls, Interim Director of Production and the audit will be done in conjunction with year- end evaluation procedures. The Internal Audit Department (IAD) will also participate in the fly over, €ems bore samples, and calculations for the valuation of coal inventory as of June 30, 2007. • Charles Moore, Interim Internal Auditor will work on the peeF impaired asset review in conjunction with the year-end valuation for Stores inventory. The fieldwork will be conducted on the morning of June 13, 2007. At which time, tests will be conducted to determine how Stores accounts for warehouse inventory. They have received a preliminary schedule of adjustments from Plante &Moran for$440,000. However, they expect a smaller number than what has been presented thus far. • Plante &Moran are bringing in new auditors to assist with the fiscal year 2007 audit, as there are 9-months worth of transactions in the legacy system and 3-months in SAP. The new auditor staff will partake in a plant tour on June 13, 2007 hosted by Dick Peffley, Interim General Manager. • A presentation to City Council's Ways and Means Committee will take place June 191h for the fiscal year 2006 audit. The activity is perfunctory but was previously postponed because the Board of Water and Light (BWL) did not have an Internal Auditor. 168 Board Mt-.Minutes July 24,2007 169 • The Associate Internal Auditor position was posted in the Lansing State Journal on June loth. An office space is reserved across from Customer Service and their preliminary assignment will involve the cash areas. • IAD anticipates utilizing Mr. Moore's services through September 2007 to address warehouse issues, as there is a new manager in the area and there was an adjustment made last year by the external auditors. This topic has been discussed with Mr. Moore and no further plans have been made for his services at this time. • A draft copy of the request for proposal (RFP) for an internal control assessment for the Board's SAP Enterprise Risk Planning (ERP) Financials implementation was included in the Finance Committee packet materials. It is believed that the BWL can consolidate the Defined Benefit (DB) and VEBA plan solicitations through a single RFP. The Finance Committee's approval will allow the BWL to launch an open ended RFP for advisory services whose responses maybe educational in nature. On motion by Commissioner Smith, seconded by Commissioner Zerkle, the Finance Committee agreed to the proposed committee action allowing the Internal Auditor to move forward with its solicitation and evaluation of proposals for the Internal Control Assessment for the Board's SAP Enterprise Risk Planning (ERP) Financial implementation. Discussion: IAD confirmed that the RFP is inline with American Public Power Association (APPA) recommendations recently received at an APPA conference. Commissioner James advised the committee members that the materials were brought before the committee because Ms. Pifer was asked to bring forth a plan to the Board of Commissioners for review and discussion. Action: Carried unanimously. RFP for Investment & Banking Services A draft copy of the RFP entitled, Pension and Benefit Plan Advisor was included in the Finance Committee packet materials, along with a copy of the sub-committee's plan of action. Ms. Pifer reviewed the plan of action compiled by the sub-committee, which consists of Sue Flores, Charles Moore and Susan Pifer. It is feasible to combine the Defined Benefit Gantr'bufie" and VEBA 4�Plans and, as such the sub-committee prepared a RFP to that effect. The RFP findings will be reported to the Finance Committee on July loth. Listed below is the sub-committee's proposed plan of action. 1. Defined Benefit (DB) and Retiree Benefit (VEBA) Plans: It is recommended that the Internal Audit Department (IAD) move forward with a RFP that solicit advisory services for both plans concurrently. After proposals are received and reviewed by the sub-committee, a course of action will be recommended to the Finance Committee on July 10, 2007, to either 169 Board Mtg.Minutes July 24,2007 170 a. Act on one or more proposals, or b. Extend the expiring purchase order for current advisory services related to the DB plan, pending further review of the investment solutions offered in the proposals. 2. Defined Contribution (DC) and 457 (ICMA) Plans: IAD will research and draft an RFP in conjunction with the Director of Human Resources that comprehends the results of the recent employee survey conducted relative to the DC Plan. The RFP will also consider the 457 plan currently administered by ICMA. Said RFP or progress related to said RFP will be presented to the Finance Committee on July 10, 2007. 3. Depository Accounts: IAD will continue to research and draft an RFP in conjunction with the Interim Chief Financial Officer that comprehends lock box services, investment sweeps, credit card processing and other treasury functions in Customer Service, Finance and General Accounting. Progress related to said RFP will be presented to the Finance Committee on July 10, 2007. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee agreed with the proposed committee action allowing the sub-committee to move forward with the solicitation of a request for proposal (RFP) for banking and investment services, and report said findings to the Finance Committee. Discussion: Commissioner Smith asked Susan Pifer if there is a cost savings? Ms. Pifer replied yes, as they are combining their dollars. She also noted that they do not have a monetary savings figure at this time. Action: Carried unanimously. Survey Results for Defined Contribution Plan Darold Oxender, Benefits Administrator gave an overview of the survey results for the DC plan. In a meeting held with union leadership December 2006, several questions were raised relative to the pension plan. In an effort to address the issues, a survey was developed to not only ask questions but to also act as an educational piece. The questionnaire was sent 710 employees and 463 replied. The total response rate was 65%. The overall results, which were very good basically, indicated that employees essentially understand their respective pension plans. Denise Mulder, Director of Human Resources advised that Mr. Oxender met with union leadership to review the survey results. The results were contradictory to what was originally indicated and in essence revealed that employees are generally happy with the plan and are in need of additional education. Mr. Oxender is beginning to move in that direction and will have the vendors visit additional BWL locations aside from Haco Drive in an effort to make themselves more readily accessible to employees. 170 Board Mtg.Minutes July 24,2007 171 Charles Moore suggested that a copy of the survey be included with the Investment and Banking Services RFP for informational purposes only. Commissioner Smith expressed concern that in light of the survey results, persons maybe happy with what they have because they do not know what else is available, which maybe a reason why there is some negative feedback. An employee may think that they are receiving a limited amount of information and would prefer more in order to have a better grasp of the subject. Ms. Mulder noted that that it is part of the additional education that employees need. Compared to the private sector the pension plans are exceedingly robust and possess a broad base of offerings with high contribution levels. A part of the education piece is educating employees on what they have and what they can do with it. After further discussion, the Commissioners advised that there maybe complacency at the BWL in that it has had a certain plan for so long that there is no longer the drive to seek better opportunities. It was also noted that union leadership was surprised by the results and had perhaps misread the employees. The results are clear in that the BWL does not have a problem. However, improvement can be reached through additional education. Employee concerns may also arise due to the transitional phase of going from a defined benefit to a defined contribution program. The committee commended staff on the survey and asked that Dick Peffley direct staff to contact Joseph Davis, Business Manager of IBEW Local 352 so that they may respond to a letter previously submitted by the union, to the Board of Commissioners regarding the pension plan. It is the Board's desire to know whether or not the survey results and subsequent employee education efforts addresses the bargaining units concerns. It was suggested that staff might also want to present the pension plan survey results at the Committee of the Whole meeting so that other Commissioners would have opportunity for input. Mr. Moore advised that they could meet with the union leadership as a part of the education piece when they send out the RFP for the Investment and Banking Services. Bill Cook, Senior Vice President of Operations noted that he and Mr. Peffley could speak with Ms. Mulder to determine how best to communicate the pension survey results to all employees. He also advised that they could respond to the union's initial pension plan letter relative to the survey results and ask that any remaining issues be brought forward. Staff also clarified that they cannot track the difference between bargaining and non- bargaining responses while continuing to maintain confidentiality. Commissioner Smith asked 1) if lowering the pension age was something they could look into and 2) is additional planning that specifically directs employee's investments going to be a challenge? Amy Cavanaugh, General Counsel noted that she would work with Steve Jurmu, outside counsel on the pension question. Mr. Oxender further advised that the BWL could not 171 Board Mtg.Minutes July 24,2007 172 tell employees what to invest in due to the Pension Protection Act and liability. However, they do plan to provide more specific education to various groups that could target for example, new hires, middle years, and those close to retirement. Investment Manager Search & Asset Allocation Rebalancing Sue Flores presented an overview of the fixed income investment manager search for asset allocation rebalancing, which included a review of the LCG Associates - Investment Manager Selection Report, Fixed Income Manager Search. As such, the following information regarding asset allocation rebalancing was presented to the committee for review. • With the approval of the LBWL investment policy in November, 2004, the LBWL began the process of moving away from holding individual securities in its Defined Benefit Pension fund and began utilizing investment managers or managed funds to meet its approved target asset allocation • Since that time, six investment managers/manager funds have been recommended by staff in conjunction with our Investment Advisor LCG Associates, and approved by the Human Resources Committee • The six previously selected managers are in the following categories of assets: Large Cap Growth, Large Cap Value, Small Cap Growth, Small Cap Value and International • During the Defined Benefit Fund quarterly performance review held February 7, 2007 with Investment Advisor, LCG Associates, review of the portfolio revealed that rebalancing and other adjustments were needed including: ■ Fixed income holdings needed to be increased from 25.1% to the 30-40% target range ■ International holdings were slightly over target allocation at 20.3% compared to the 10-20% ■ The remaining large cap core individual equity holdings should be liquated due to underperformance to generate the cash for the needed fixed income statement • LCG Associates proceeded with a search in accordance with policy guidelines for a Fixed Income Manager to supplement the current fixed income holdings and staff proceeded with the other fund adjustments with a goal of having the rebalancing complete by June 30, 2006 • The five candidates presented by LCG for consideration were reviewed by an internal group consisting of employees of Internal Audit, Finance, Human Resources and Operations on May 15, 2007 172 Board Mtg.Minutes July 24,2007 173 • The consensus of the group was Western Asset Core Plus due to its history of returns, strong performance against benchmarks and size Following the presentation, the Finance Committee took the following action. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Finance Committee agreed with the proposed committee action in which to recommend that Western Asset Core Plus be retained to manage a portion of the Defined Benefit Pension Fund in accordance with the Fund's investment policy. Discussion: Commissioner Cochran noted the current asset allocation rebalancing policy is in place for a reason and, as such he would like to see it left alone and in place. Commissioner James asked Charles Moore if the Board should ask staff to conduct a feasibility study? Mr. Moore responded that the BWL would probably receive one anyway and that it would be based on data and background information. He noted that although he was not a part of the asset allocation rebalance, he supports its position, and believes that the Board should wait until they receive the RFP recommendations before providing additional direction. Action: Carried unanimously. Copies of the LCG Associates - Investment Manager Selection Report, Fixed Income Manager Search dated April 2007 is on file in the Office of the Corporate Secretary. Board Compensation Amy Cavanaugh, General Counsel was asked by the Committee of the Whole to review the Board compensation question. A brief overview of those questions and corresponding answers are presented below. Q: Is compensation for the Board of Water and Light members legally permissible? A: Yes. Unlike other boards, the Board of Water and Light, Board of Commissioners is an administrative board (as opposed to an advisory board). As such, there is no specific language in the Lansing City Charter, which is the operative legal document that prohibits compensation for administrative boards. Q: Who decides whether the Board of Water and Light members will receive compensation, and in what amount? A: City Council would decide if BWL board members would receive compensation and if so, for what amount. They would also have to pass an ordinance subject to a public hearing to authorize such a measure. 173 Board Mtg.Minutes July 24,2007 174 Commissioner Cochran asked whether or not a procedure regarding this matter currently exist? He also noted that the board compensation data is for informational purposes only, as there is no proposal before the Board at this time. In response to Commissioner Cochran's question, Ms. Cavanaugh advised that she was unable to locate a procedural document regarding the above matter. Commissioner James noted that the board compensation inquiry was forwarded to the Finance Committee by the Committee of the Whole and as such, they are responding to the question. Commissioner James went on record stating that she had no opinion one way or the other and further noted that it was neither a good idea nor the appropriate time to ask such a question. After further discussion, the Finance Committee took the following action: On motion by Commissioner Cochran, seconded by Commissioner Smith, the Finance Committee unanimously agreed to table the board compensation item at the Finance Committee. Other General Manager(GM) Employment Contract. Commissioner Smith advised committee members that a review of the GM's employment contract is needed in preparation for hiring a new GM. She also clarified that it has traditionally been the role of the Executive Committee to address such matters. Amy Cavanaugh explained that the work would be outsourced, as she will be out of the office and unable to personally address the matter. Brandie Ekren, Associate Attorney would be available to address questions and work with outside counsel. Ms. Cavanaugh also advised that she believes the Board needs a draft contract as a basis for negotiation. As such, the committee members were asked if there was a preference as to which law firm they prefer to work with regarding the employment contract? After brief discussion, the Finance Committee agreed that they would prefer to use a firm that they have dealt with in the past regarding such matters. In absence of Dick Peffley, Bill Cook was asked to direct General Counsel to review and provide a template of the GM employment contract on behalf of the Board of Commissioners. There being no further business, the meeting adjourned at 12:45 p.m. Respectfully submitted Semone M. James, Chair Finance Committee 174 Board Mtg.Minutes July 24,2007 175 Motion by Commissioner James, Commissioner Calkins, to receive the Finance Committee report as presented. Action: Carried unanimously. esolution 2007-7-2 EXECUTIVE COMMITTEE June 19,2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 P.M. on Tuesday, June 19, 2007. Executive Committee 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, Robert Cochran, Santiago Rios and Robin Smith. Absent: None. Public Comment There were no public comments. General Manager Employment Contract Moved by Commissioner Calkins, seconded by Commissioner Rios, to go into closed session to discuss a privileged document received from Brandie Ekren, Associate Attorney protected by Open Meetings Act exemption MCL 15.268(h). (4:08 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Rios, and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Rios, that the Executive Committee meeting return to open session. Carried unanimously. The Executive Committee meeting reconvened in open session at 5:20 p.m. 175 Board Mtg.Minutes July 24,2007 176 Commissioner Smith reported that the Executive Committee discussed parameters regarding the General Manager's contract. There being no further business, the meeting adjourned at 5:21 p.m. Respectfully submitted Robin M. Smith, Chair Executive Committee Motion by Commissioner James, seconded by Commissioner Rodocker, to receive the Executive Committee report as presented. Action: Carried unanimously. esolution 2007-7-3� COMMITTEE OF THE WHOLE June 19, 2007 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, June 19, 2007. Committee of the Whole Chair, Santiago 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, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioners Semone James and Robin Smith Public Comment There were no public comments. State of Michigan—Federal Surplus Assistance Program Sue Flores, Manager of Finance and Planning gave a brief overview of the State of Michigan—Federal Surplus Assistance Program. The overview noted that the Board of Water and Light (BWL) desire to purchase items through the State's program. As such, the BWL is required to seek Board approval for authorization of signature forms required by the State in order to continue participating in the program. The board resolution will name Bruce Cook, Purchasing Manager as the BWL's signed representative. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Committee of the Whole recommended that the State of Michigan—Federal Surplus Assistance Program resolution be moved to the full board for consideration. 176 Board Mt-.Minutes July 24,2007 177 Discussion: Commissioner Rios asked how extensive is the BWL's use in the State's program? Staff replied that the BWL has purchased$27,000 worth of goods over the past 3 years, which typically consists of cold weather items. The BWL has not made a recent purchase. However, staff continues to regularly review the list of items available for sale. It was also noted that there is no monetary cost to the BWL to participate in said program. Action: Carried unanimously. SAP Update Gennie Eva, Manager of Financial Services addressed several questions regarding the status of SAP and its future endeavors. Listed below is a synopsis of those responses. Q: Why does the BWL need the mainframe for an additional 31/2 years? A: The Customer Information System (CIS) is still on the mainframe and it may take longer to changeover. The mainframe lease will end at approximately the same time and the maintenance agreement is going to increase. The BWL will attempt to extend the maintenance agreement, as the SAP project took longer than expected. Q: If the Board gave direction to complete the work in 11/2 year's could it be done? A: No Q: What are the impairments that make it impossible? A: Configuration. It took approximately 9-months for General Accounting and Materials Management to be configured with SAP. CIS is a much larger endeavor and the BWL does not have enough trained staff persons for the project. SAP can be configured in many different ways to tailor it to what is best for your business. It would be a large effort to get the system up and running for four (4) different utilities that are all billed differently with separate rate schedules. Q: Is it a correct observation to say that things are going pretty well? A: Yes. It is not perfect, as there are some enhancements and changes that staff would like to see implemented to increase efficiencies. Nevertheless, the work is getting done. There will be a dip in productivity because it is a new system and everyone will take longer to process the work. Hopefully, the employees have reached the bottom of the "dip" and are on their way up. Q: Are the obstacles listed in the presentation past obstacles? The obstacles in the presentation include: weak consultant guidance from finance lead, original unrealistic timeline, delays in hiring Project Manager, and unexpected configuration issues. A: The team consisted of three (3) parts that included Finance, Materials Management and Technical teams. The consultant for the finance lead was very knowledgeable about SAP but did not guide the BWL down the right path. As such, staff realized that some of the items had to be redone so that it would better suit the business needs of the BWL. 177 Board Mtg.Minutes July 24,2007 178 Q: Can it be assumed that SAP is better than the previous system? A: Yes. Its been said that after the I" year colleagues will love the system and it will take the rest of the organization a couple of years to realize its benefits. Q: Are there things that the BWL should do now relative to staffing and training that would help the process? Would it help to have more resources in terms of staff training dollars? A: Harvey Briggs, Manager of Information Technology (IT) has already begun the process by budgeting to provide training for some of the IT staff. The BWL also intends to consult with SAP to get a list of training courses that they believe would be beneficial to take before the BWL starts the next SAP phase for budgeting and payroll. Q: From an infrastructure standpoint and based on the amount of this project, is the BWL doing what it should to implement the program in an efficient manner? Is the BWL doing the minimum or being aggressive? A: Denise Mulder, Director of Human Resources (HR) commented that she had previous experience implementing a portion of the SAP system that involved HR and payroll. As such, bringing in new staff from outside is of no use because one must configure the system to the way you want it to operate. The only way to accomplish those goals is with current staff and modules. Three staff members have been identified who would be available and able to assist with the program. Therefore, adding additional staff in HR would be of no benefit. SAP has given a list of training courses that would be exceedingly beneficial for HR to take before they start the process versus afterwards. Commissioner Cochran advised staff that if they would like to do something for the good of the company then the Board would be open to the idea. He also noted that the Board made a note to themselves to submit a modified budget to the city, which would include a contingency clause. Corporate Sponsorship Policy Mark Nixon, Communications Director reviewed the community sponsorship policy that essentially formalizes a currently existing practice. The policy and a request form (filled out by all organizations requesting a donation) would help define what is permissible relative to donations for nonprofit organizations in the community. Sponsorships may include acting as a program sponsor, providing in-kind services, or paying for a specific attribute of a program or event, such as advertising. Sponsorships and contributions shall be given to nonprofit organizations that benefit the greater Lansing area, but do not advance a religious or political viewpoint. The Board noted that they understood the policy but the verbiage located in the third sentence of the proposed resolution needs grammatical correction. After brief discussion, the Board took the following action: 178 Board Mtg.Minutes July 24,2007 179 On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole agreed to move the proposed resolution for the Community Sponsorship Policy to the full Board for consideration subject to grammatical changes. Action: Carried unanimously. Steam Utility Plan Jan Nelson, Principle Engineer presented an overview of the BWL Steam Utility Plan. The presentation contained information pertinent to an action plan requested by the Board of Commissioners that would address rate issues, cost reductions, service improvements, plant retirements and other viable options. Listed below are highlighted exerts from the presentation materials. Economic evaluation of"stay in business" options Option Primary Backup % Change % Change % Change % Change Steam Steam From Base From Base From Base From Base w/o Electric w/Electric w/o Electric w/Electric Sales Impact Sales Impact Sales Impact Sales Impact 20-Year 20-Year 5-Year 5-Year Analysis Analysis Analysis Analysis 1 Status Quo Moores Pk Moores Pk Base Base Base Base 2 Retire MP Eckert 1-3 Eckert 4-611 -10.4 -1.0 -2.3 3.9 3 Retire MP Eckert 1-3 Eckert 4-6** -11.0 -2.1 -4.4 1.9 4 Retire MP Eckert 1-3 Gas Boiler -1.5 6.0 3.0 9.3 5 Retire MP Gas Boiler Eckert 1-3 41.7 44.4 29.1 31.0 6 Lay-up one Moores Pk Moores -2.4 -2.4 -3.4 -3.4 MP boiler Park/Eckert 1-3 7 Lay-up two Moores Pk Moores -2.8 -2.3 -3.7 -3.1 MP boilers Park/Eckert 1-3 8 Out of the Moores Pk Moores steam Park/Eckert business in 1-3 10 years 9 Partial Moores Pk Moores steam Park/Eckert system 1 1 1-3 Individual Present Value of Revenue "Headered Present Value of Revenue BWL Steam Utility Plata—Assumptions for a reduced steam system: • Assumed that 117 services cannot be converted togas • 35 other services are located along the steam mains that serve the non-convertible services 179 Board Mt-.Minutes July 24,2007 180 • Estimated cost to convert remaining 94 services is $3,100,000 • Total services reduced from 246 to 152 Economic evaluation to reduce steam system (20 year analysis): Option % Change From Base % Change From Base w/o Electric Sales w/Electric Sales Impact Impact l Status Quo Base Base 6 Lay-up one MP boiler -2.4 -2.4 9 Reduced steam system -6.7 -6.2 MP—Moores Park Conclusions regarding a reduced steam system: • Over the long term, this scenario is expected to have the lowest revenue requirements • In the short run, it is slightly better than a breakeven with the status quo • Based on the economic analysis, it is reasonable to move in the direction of a smaller steam system Getting out of the steam business: • Obligation to serve or convert customers • Under contract with GM for 10 years • Several buildings would be extremely difficult and costly to convert their heating source due to height, space limitations and lack of adequate gas supply • Same customers identified in the reduced steam utility scenario • Best scenario for an option to get out of the steam business would be to convert all but those that are impractical, build a gas boiler plant and seek a buyer Assumption for getting out of the steam business: • Convert customers to natural gas over next 5 years • Build a gas fired steam boiler plant in downtown Lansing • Serve non-convertible customers and existing customers on remaining steam lines until 2012 • Sell the downtown steam loop and boiler to a third party • Continue to provide steam to GM from Moores Park and Eckert until contract completion (end of 2017) Detailed evaluation to end the steam system (10 year analysis): Option % Change From % Change From Residual Base w/o Electric Base w/Electric Capital,$ Sales Impact Sales Impact (1,000) 1 Status Quo Base Base --- 8 Curtail the steam -17.4 -14.0 $ 15,265 180 Board Mtg.Minutes July 24,2007 181 business in 10 years Conclusions regarding getting out of the steam business: • Service ends to residential and commercial customers by 2012; industrial customers after 2017 • This option results in about $8,000,000 in savings ($800,000/yr) over the status quo (10 year analysis) • However, this option also has $15,000,000 in remaining debt service that would be written off or recovered in a sale to a third party: • This option may be feasible. However, it leaves steam customers in the most vulnerable state for future steam rates, reliability, and availability. • GM would be on their own for a thermal source after 2017 O&M Cost reduction strategies: • Continue to benchmark with other steam utilities • Steam main construction costs have been evaluated and are consistent with industry practice • Modify operating budget to lay-up one Moores Park boiler • Evaluated alternative cost allocations and A&G expenses • Reduced six year capital forecast for Moores Park by$5,000,000 from last year's forecast • Abandoned steam services and converted customers to another heating source in selected areas where it was not economic to provide continued steam service What about growing the steam business? • Steam Utility Market Plan indicates modest growth potential • Challenges for steam utility growth: o Limited service territory (Central District is approximately one square mile in size) o High construction costs (construction costs approximately $1,000-1,2000 per linear foot) o Price of steam compared to natural gas o Age infrastructure (steam main dates back to 1906) Rate increase strategy over the next 3-5 years included in the 6-year forecast: • Rate increase of 6.0% starting January 1, 2008 • Rate increase of 7.5% on January 1st in each year for 2009 through 2013 • Results in a cumulative net loss of$4,100,000 over the period but with a positive cumulative cash flow of$8,5000,000 due to anticipated GM contract termination fees • BWL would work to achieve further cost savings throughout this period Recommendations for a 3 to 5 Year Steam Utility Plan: • Continue to maintain a steam utility • Continue to rely on Moores Park as primary steam source • Lay-up one Moores Park boiler initially • Continue to abandon selective steam mains and services 181 Board Mtg.Minutes July 24,2007 182 • Reevaluate Moores Park options as environmental regulations materialize, electric wholesale market changes and upon results of converting customers to another heating source • Continue to selectively market steam to new customers • Implement steam rate increases in accordance with the FY08 Financial Plan currently anticipated at: 6.0% beginning January 1, 2008 and 7.5% beginning January 1, 2009 • Continue to seek cost reduction strategies Benefits of the 3 to 5 Year Steam Utility Plan: • Provides a more stable and dependable service for all steam customers • Initial steam utility savings of over $900,000 per year • Provides a flexible strategy to seek additional savings in the future • Maintains steam supply flexibility • Continues to take advantage of the electric wholesale market • Provides risk mitigation for potential new environmental regulations • Short-term steam pricing competitive to natural gas Upon completion of the presentation, the Board discussed the steam utility plan and noted General Motors (GM) early contract termination fees have not been completely resolved. At present, GM has agreed with the plant 1 termination fee and the debt service balance on the steam line servicing plant 6. However, the rate of return guarantee for plant 6 is still in dispute. Payment for all three items is unlikely until fiscal year 2010 per contract. The Board also noted the lack of monetary calculations for savings on reduced maintenance costs associated with the options presented by staff. As such, the Board acknowledged that the steam utility plan is a work in progress and represents one of many scenarios that that the BWL is currently reviewing. Staff noted that they did not calculate the savings associated with reduced maintenance costs at this time. However, it was advised that changes in steam and chilled water allocation methods and reductions in operating costs allowed the BWL to develop a lower rate strategy that included laying up one boiler at Moores Park. Staff expects a savings of$135,000 over fiscal year 2007, identified an additional savings of$400,000 in administrative and general costs, and $265,000 in other cost allocations based on reduced sales. As a result of the changes, the 6-year capital forecast for Moores Park was reduced by$5,000,000. Staff reported that they are not asking the Board to take action at this time. Instead, they have brought forth scenarios to use as a comparison in deciding how best to address the steam utility. Other observations noted by staff include the following: • It would cost approximately$3,100,000 to remove 94 customers from the steam system, which is significantly higher than the cost to maintenance those same lines (costs estimates were not available at the time of the meeting). • The steam system will become smaller over time as major capital projects develop • Incremental maintenance on the steam system is on a per pound basis, prorated over the load amount • Lead way for the steam utility was made by reducing plant cost thereby, generating plant savings 182 Board Mtg.Minutes July 24,2007 183 • The BWL does not anticipate major steam maintenance issues over the next 10 year period • The BWL expects the price of natural gas to decrease based on data published by the Department of Energy • Consumers Energy does not have a well-structured gas distribution system in the downtown Lansing area • Phoenix project—Dick Peffley, Interim General Manager advised that there is a developer looking at the Triangle Property and Ottawa Station. As such, the City of Lansing may approach the BWL for a contribution to aid with the projects development. Mr. Peffley noted that if the project proceeds he would recommend that the client take steam, which would drastically change that utility in a positive manner. A recommendation regarding the project was made to their Board of Commission and the BWL expects a response by mid-August. The BWL has also worked on the possibility of removing the chillers and steam system from the building, as the client will need all of the space available. After further discussion, the Board expressed pleasure with the substantial progress made with the steam utility plan and noted support for a reformatted recommendation for the 3- 5 year plan to be presented at a future date. The Board also advised of the need to discuss the issue of cross subsidization relative to the utilities and customer base (residential and commercial) from a policy standpoint. They further noted adjustments to the presentation were needed that would include a financial analysis of the costs incurred to maintain the steam system, information relative to cross subsidization, and specific staff recommendations. Copies of the BWL Stearn Utility Plan dated June 19, 2007 are available in the Office of the Corporate Secretary. Tree Trimming Dick Peffley discussed recent tree trimming newspaper articles that appeared in the Lansing State Journal. In addition, a summary of the vegetation management contract and tree trimming recommendations made by the BWL Citizens Focus Group dated April 2007 were included in the Committee of the Whole meeting materials. Commissioner Graves acknowledged the information pertaining to the news articles but also noted that negative information can also be received from other sources. As such, Commissioner Graves asked how does the BWL monitor the tree-trimming program? Bill Cook, Senior Vice President of Operations noted that the BWL tracks every tree trimming complaint that it receives, which totals approximately 100 calls per fiscal year. An estimated eighty percent (80%) of the calls pertain to clean up. However, the BWL will send people to remove the debris and attempts to make every customer happy. The BWL monitors the contractor, Wright Tree Service (WTS) and has an employee that specifically follows the work and addresses issues as they arise. It was further noted that WTS is not paid if the BWL is not happy with the work performed (e.g. picking up brush 183 Board Mtg.Minutes July 24,2007 184 and the number of tree trims). The BWL also formed a Citizen's Focus Group to discuss the issues and make recommendations. Commissioner Graves noted that he has been traveling the past few weeks and have heard comments regarding WTS from other states. He went onto ask staff if the BWL is comfortable with its existing contractor? Mr. Peffley advised that WTS could have done a better job minimizing the complaints. The BWL have received some legitimate concerns regarding WTS but it is not enough to warrant terminating the contract at this time. It was noted that the contract was competitively bid and it ends December 2008. The BWL has met with WTS regarding various issues, which have been addressed, but their actions have not been preventative in nature. WTS should be self-motivated, as they are paid by the trim and not hourly. It was confirmed that WTS is currently working under its second three-year agreement. Commissioner Graves asked if the BWL has considered having more than one (1) contractor for said project. Typically, when there are two (2) contractors doing the same work then one can establish a baseline comparison against the other, which can be helpful leading up to the next contractual period. Mr. Peffley agreed with the sentiment and noted that the BWL will complete the aggressive tree trimming cycle by the expiration date of the contract. Once the contract expires the BWL will review all options, as they will not need as many tree trimming crews presently in place. For the first time ever, the BWL will work with the City of Lansing in completing a small aspect of the trim work. The project can also be used as a comparison to see how the City performs relative to WTS. The work with the City of Lansing will foster a better relationship with the BWL and as the WTS contract ends it is Mr. Peffley's recommendation that the BWL take a hard look at their options. It was confirmed that the contract is not exclusive. Therefore, the BWL could hire other contractors if they choose to do so, which is how the BWL obtained the city contract. It was also clarified that the contractor guarantee means that WTS is guaranteeing the service and that the trim meets specifications. If it does not then WTS has to go back and re-trim. In 2006, two thousand (2,000) trims were performed and forty-five (44) trees were removed, which represents a typical year for the BWL. The Board noted the sensitivity and highly visible nature of the topic and recommended sending a strong message to WTS indicating their level of displeasure. At this time, the attention is on the complaints that were received but does not address those who did not complain. As such, it was recommended that the BWL determine what the internal workforce could do and to also develop a proactive leadership position with accountability and very specific and direct consequences for not following established guidelines. It was further noted that the BWL faces image issues when contracting out work because may appear that the BWL does not care. Mark Nixon, Communications Director advised that the Citizens Advisory Group was formed out of complaints received regarding the Fairview area. As such, a variety of 184 Board Mt-.Minutes July 24,2007 185 persons were asked to sit on the advisory group and provide input regarding the tree- trimming program. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Committee of the Whole agreed to direct staff to develop a comprehensive plan that incorporates the concerns raised by the Committee of the Whole and the focus group to present to the Board of Commissioners for consideration. Action: Carried unanimously. Nomination Committee Commissioner Rios announced that each Commissioner indicated their officer and committee preferences. As such, Chair Smith established the Nominations Committee, which contains the following members: Gary Calkins—Committee Chair, Joseph Graves, Julee Rodocker and Robin Smith. The alternates are Robert Cochran and Sandra Zerkle. Other Granger Contract. Dick Peffley announced that the Granger contract, which is a 21-year deal worth $83,000,000, was signed. A great deal of positive publicity will surround the event, which allows the BWL to start with 6 megawatts (mW) with an option to purchase all future generation up to 12 mW. Once online, the BWL will be at the Renewable Portfolio Standards (RPS) rate of 2% slated for December 21, 2008. Assuming that 12 mW are available for the future then the BWL will be close to its 5% goal slated for the year 2012. In an effort to cultivate a large unveiling, the BWL contacted the governors office, received inquires from various politicians and will coordinate schedules with the Board of Commissioners and Granger to ensure their participation. BWL Staffing. Commissioner Zerkle reported that she met with Dick Peffley, Denise Mulder, and union representatives to discuss BWL staffing concerns. They had a very forward moving conversation that involved discussions about the possibility of increasing staff to accommodate tree trimming and other departments. It was noted that Mr. Peffley is putting together staffing ideas for the Board to review. General Manager Objectives. Commissioner Rios noted that the Executive Committee would like a recap of Mr. Peffley's major objectives that are incomplete so that they can begin to develop objectives for the new General Manager. The committee would also like Mr. Peffley's input as to the status of those projects and any suggestions that he may have in terms of priority items for the upcoming year. It will be extremely important for the Board to continue the good work that it has since begun. There being no further business, the meeting adjourned at 7:07 p.m. Respectfully submitted, Santiago Rios, Chair Committee of the Whole 185 Board Mtg.Minutes July 24,2007 186 Motion by Commissioner Zerkle, seconded by Commissioner Cochran to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolution 2007-7- EXECUTIVE COMMITTEE July 2,2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 12:10 p.m. on Monday, July 2, 2007. Executive Committee Chair, Robin Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Santiago Rios and Robin Smith. Commissioner Semone James was also present. Absent: None Public Comment There were no public comments. General Manager Contract Discussion Moved by Commissioner Rios, seconded by Commissioner Cochran to go into closed session to discuss a privileged document received from Brandie Ekren, Associate Attorney and Melissa Jackson, Outside Counsel with Foster, Swift, Collins & Smith, P.C. protected by Open Meetings Act exemption MCL 15.268(h). (12:13 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, James, Rios, and Smith. Nays: None. Absent: None. Carried unanimously. Moved by Commissioner Rios, seconded by Commissioner Cochran that the Executive Committee returns to open session. Carried unanimously. The Executive Committee meeting reconvened in open session at 12:42 p.m. 186 Board Mtg.Minutes July 24,2007 187 On motion by Commissioner Cochran, seconded by Commissioner Calkins, to increase the salary amount offered to J. Peter Lark by$5,000 totaling $190,000 with clarification in regards pension benefits. Discussion: Commissioner Rios introduced a friendly amendment in response to three (3) items that Mr. Lark requested the Board consider relative to the General Manager's employment contract: 1) As a matter of policy, the Board of Commissioners will not consider a modification to the current benefit plan as the rates are based on employment start date, 2) based on Board discussion they would not extend a severance agreement, and 3) with respect to salary, the Executive Committee was authorized by the Board of Commissioners to negotiate a contract within the parameters of the salary range. He went onto note that he would support an offer of up to $190,000. Commissioner Cochran accepted the friendly amendment and after brief discussion the Executive Committee voted on the motion. Action: Carried unanimously. On motion by Commissioner Rios, seconded by Commissioner Calkins, that Commissioner Smith be authorized by the Executive Committee to contact J. Peter Lark as soon as possible to communicate the response to Mr. Lark's counteroffer. Discussion: The Executive Committee directed Associate Attorney Ekren to draft a letter regarding the committee's response to Mr. Lark's considerations. Commissioner Calkins noted that he would like to see if the Human Resource Department could revise the total rewards report to reflect current changes. Denise Mulder, Director of Human Resources advised that she would talk to Wendy Bradley and have said report forwarded to Corporate Secretary Jones and Associate Attorney Ekren. Commissioner Cochran introduced a friendly amendment to allow Commissioner Rios to attend the meeting with Commissioner Smith and Mr. Lark. Commissioner Rios accepted the friendly amendment and the Executive Committee voted on the motion. Action: Carried unanimously. There being no further business, the meeting adjourned at 12:53 p.m. Respectfully submitted, Robin M. Smith, Chair Executive Committee 187 Board Mt-.Minutes July 24,2007 188 Motion by Commissioner Rios, seconded by Commissioner James, to receive the Executive Committee report as presented. Action: Carried unanimously. esolution 2007-7- HUMAN RESOURCE COMMITTEE July 12, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:10 p.m. on Tuesday, July 12, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, and Julee Rodocker (arrived at 4:23 p.m.). Absent: Commissioner Santiago Rios. Public Comment There were no public comments. HIPAA Updated Provisions and Certification Brandie Ekren, Associate Attorney gave a brief overview of the updates for the Health Insurance Portability Accountability Act of 1996 (HIPPA) provisions and certification. As such, she noted that the Lansing Board of Water and Light (BWL) converted to a completely self-funded benefit plan, and as a result of that conversion the BWL's responsibilities under HIPPA increased. It required the BWL to update its certification, plan previsions and policy documents, as it relates to HIPPA obligations for privacy and security. The resolution represents the Board of Commissioners adoption of the following: • HIPAA Privacy Policy • HIPAA Security Policy • HIPAA Privacy and Security Provisions and Certification Commissioner Cochran suggested staff note the word, "original" on the first revision to clarify whether or not it is an original, draft or a revision. On motion by Commissioner Cochran, seconded by Commissioner Graves, the Human Resource Committee agreed to forward the proposed resolution to the full Board for consideration at the next regular Board meeting scheduled for July 24, 2007. Action: Carried unanimously. 188 Board Mtg.Minutes July 24,2007 189 Internal Auditor Performance Objectives Susan Pifer, Director of Internal Audit advised that the Finance Committee approved the priorities for the Internal Audit Department (IAD) on May 8, 2007. The item was subsequently moved to the full Board for approval on May 22, 2007 as resolution number 2007-5-13. As such, the Chairs of the Board of Commissioners and Finance Committee asked that the priorities be presented to the Human Resource Committee in the form of performance factors. With that in mind, a high-level work plan was created for each priority with deliverables and an estimated timeline. Denise Mulder, Director of Human Resources commented that Board appointees were not on the same performance review cycle as the rest of the organization due to their respective hire dates. It was suggested that it might be beneficial on a go forward basis to review the Board's appointees on the same cycle, as the BWL, which is July 1". It would allow the appointees to be in the performance review system so that they fall inline with the rest of the organization in a timely manner. Commissioner Cochran noted that in speaking to the Finance Committee Chair it was suggested that Ms. Pifer develop a gant chart (or something similar) to represent the IAD's activities, beginning and end date, description of the task, and its completion status. The chart system would be a helpful tool for the Board of Commissioners to use as a benchmark and to also follow the progress of each respective project. Commissioner Cochran asked Ms. Pifer if the services of C.L. Moore & Associates have been retained through October 2007 in the IAD's budget? Ms. Pifer noted that Mr. Moore has been retained through the year-end process, which ends August 2007. It was clarified that the financial statements will be published October 2007, and she will be involved with that process. It was also noted that Ms. Pifer would complete her juris doctorate in August 2007, which would be a benefit at no cost to the Board. Commissioner Cochran noted that he did not see a need to report every two (2) weeks but he was unsure of what has since been completed and what is presently in the works. He asked for a report as to what items have been completed thus far. As a result, Ms. Pifer gave an update on the coal inventory, which is going very well. There was six (6) days of fieldwork with an intention to complete 6 more days within the next 2 weeks. The initial document request was made and has since been satisfied. The results of the coal inventory yearend evaluation were not complete but they should be received within a week. Ms. Pifer is currently working on fuel burn metrics that are used to ascertain the coal that came in the door and the kilowatt-hours generated as a result. The process is extremely complicated and she is working to further develop her understanding. It also advised that the internal control issues for coal have been addressed. Shipping documents are now being forwarded to the Accounting Department and the receivers sign off on the receiving documents, which was not previously 189 Board Mtg.Minutes July 24,2007 190 occurring. Ms. Pifer noted that she is now comfortable with the internal controls in place for the coal inventory. In addition, a significant amount of time was spent at the purchasing warehouse with the new Purchasing Manager to complete a physical count, as the cycle counts were incomplete. At the completion of the physical count, they determined that there was $13,000 in shrink on $9,500,000 worth of inventory, which equals approximately .13%. Plant & Moran was very satisfied with the results and the manager would like to implement the process on a quarterly or biannual basis. The Human Resource Committee expressed a desire to ensure that the IAD's objectives were broader in view so that they would encompass the organization as a whole in addition to financial matters. For example, internal controls should pertain to the internal control environment of the entire organization and not simply that of SAP. After further discussion, Susan Pifer noted that she would work with Denise Mulder in an attempt to shorten each objective, note the expected outcome, and proposed dates. The Board would receive monthly updates via a gant chart denoting the progress of each respective project. It was also advised that the audit plan would be comprehended in performance factors, which would reflect a broader view of the BWL as whole. The Human Resource Committee concurred with the direction and as such Ms. Pifer will proceed with the above. Other Amy Cavanaugh, General Counsel gave an overview of the concerns expressed by Brigham Smith, City Attorney, regarding the BWL's amended Rules of Procedure. It was advised that the two major points of concern pertain to the Board's ability to participate in meetings via teleconference and the ability to hire outside counsel. It was clarified that the approval process involves City Attorney's approval as to form and then its submission from the City Attorney to City Council for final approval. After lengthy discussion, the Human Resource Committee expressed concern with the position that the City Attorney has taken regarding the BWL's amended Rules of Procedure. It was suggested that the Board of Commissioners write a letter to the Mayor and City Council expressing their opinion and desire to resolve said issues in light of the City Attorney's position and the length of time taken to approve said amendments. There being no further business, the meeting adjourned at 4:51 p.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner Rodocker, seconded by Commissioner Zerkle, to receive the Human Resource Committee report as presented. 190 Board Mt-.Minutes July 24,2007 191 Action: Carried unanimously. esolution 2007-7-6 NOMINATING COMMITTEE July 17, 2007 The Nominating Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 5:15 p.m. on Tuesday, July 17, 2007. Nominating Committee Chair, Gary Calkins called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Joseph Graves, and Julee Rodocker. Commissioner Robert Cochran was also present as an alternate. Absent: Commissioner Robin Smith. Public Comment There were no public comments. Nominate Board Officer Candidates for FY2008 The Nominating Committee met to review Commissioner survey responses for consideration of Board officer nominations for fiscal year 2008. As such, Commissioner Calkins confirmed with the committee members that they knew of no other interested parties aside from the ones noted on the survey response forms. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2007-08: Chair: Santiago Rios Vice Chair: Semone James Action: Carried unanimously. There being no further business, the meeting adjourned at 5:16 p.m. Respectfully submitted, Gary Calkins, Chair Nominating Committee Motion by Commissioner Calkins, seconded by Commissioner Cochran, to receive the Nominating Committee report as presented, which includes the slate of officers. 191 Board Mtg.Minutes July 24,2007 192 Discussion: It was verified by Commissioner Smith that there were no nominations from the floor for the office of Chair and Vice Chair respectively. Action: Carried unanimously. esolution 2007-7- COMMITTEE OF THE WHOLE July 17, 2007 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, July 17, 2007. Committee of the Whole Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Semone James, Julee Rodocker, Santiago Rios and Sandra Zerkle. Absent: Commissioners Joseph Graves and Robin Smith. Public Comment Joseph Davis, Business Manager of IBEW Local 352, welcomed new General Manager (GM), J. Peter Lark to the Board of Water and Light (BWL). He found the July 171h staff meeting and the new GM very interesting. Mr. Davis advised that in the past, he has gone on record saying that he hopes the BWL can make some changes throughout the organization. He also commented that the bargaining unit would play a very important role as the BWL moves forward. It was noted that the bargaining unit and management will not always see eye to eye but it is important to keep an eye on the prize, which is making the BWL a good place to work, do business, and serve the community. Mr. Davis notified the Board of the bargaining units new slate of officers that include the following: President Dolores Appling, Vice President Leslie Granell, Financial Secretary Lisa Ryan, and Executive Board Member, Dwayne Williams. Commissioner Rios formally welcomed J. Peter Lark to the BWL. It was noted that the Board looks forward to a long-standing relationship that will positively impact the community and allow them to reach higher levels of outstanding performance. The BWL has broken several records and has been nationally recognized as one of the premier public utilities in the country. The reason behind its success is the outstanding employees and people that are dedicated to their jobs, the organization, and fellow co-workers. It was further advised that the Board is here to provide advice and counsel as Mr. Lark sees fit and to also ensure that adequate resources are provided to both he and staff. Energy Policy Act of 2005—Amendments to PURPA Sue Warren, Marketing Specialist noted that the Energy Policy Act of 2005 — Amendments to PURPA have been brought before the Board on several occasions. In part, the act requires non-regulated electric utilities to consider smart metering and 192 Board Mtg.Minutes July 24,2007 193 interconnection standards. As such, a public hearing was held and recommendations to the Board regarding said items were made. Commissioner Cochran advised that a lot of attention was paid to industrial and commercial customers. However, he went onto ask if consideration has been given regarding the installation of smart metering on residential homes? Ms. Warren noted that there are utility's that have successfully implemented a smart metering pay as a go system for residential customers. The BWL has not looked at the technology but it continues to rapidly change. As a result, staff would like to report back to the Board on this topic in approximately one year, as 85% of the BWL's customer base is residential. Commissioner Cochran also reported that he attended a seminar on rates hosted by the American Public Power Association (APPA). At said time, he received information regarding smart metering systems and offered to share it with Ms. Warren. On motion by Commissioner Cochran, seconded by Commissioner James, the Committee of the Whole agreed to move both proposed resolutions for the Determination of Smart Metering Standard and the Determination of Interconnection Standard to the full Board for consideration at the next Board meeting scheduled for July 24, 2007. Action: Carried unanimously. Easement Exchange with A Winning Point, LLC Brandie Ekren, Associate Attorney noted that the BWL has an existing easement and would like to release said easement with A Winning Pointe, LLC (grantor) in exchange for a new easement located on the same parcel (111 E. Saginaw Street, East Lansing, Michigan). The BWL is requesting that the grantor grant its easement prior to preceding any further with said project. The proposed resolution included in the Committee of the Whole meeting materials authorizes the General Manager to proceed accordingly. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole agreed to forward the Easement Exchange with A Winning Pointe, LLC resolution to the full Board for consideration at the next regular Board meeting scheduled for July 24, 2007. Action: Carried unanimously. Corporate Balanced Scorecard Sue Flores, Manager of Finance and Planning reported that for the last three years the BWL has used a performance management measurement program known as the Corporate Balanced Scorecard (CBS). The CBS allow employees to focus their attention on eight measures in four different categories that include financial performance, customer service, operational excellence, and people excellence. Staff benchmarks 193 Board Mt-.Minutes July 24,2007 194 measures and targets every other year by reviewing other organizations, BWL historical performance, and industry standards. Team leader Steve Brennan, Manager of Production Support noted the minimal changes for 2007-08, which includes the following: • All measures remained the same • Added$/Ton-hrs to commodity costing • Updated Targets: o Increased Target—Speed of Answer, SIR, CAIDI o Stayed the same—Meters Read, New Services Installed,Breaker Actions, Fly Ash Sold, Variances, Training o Lowered—Availability (Erickson Outage) J. Peter Lark, General Manager, has not had opportunity to review and comment on said measures. Therefore, it was deemed appropriate to allow him time to review the Corporate Balanced Scorecard and bring the item forth at a later date. Sparrow Foundation Proposal The BWL previously received four sponsorship options from The Sparrow Foundation in exploring the possibility of giving a legacy gift to the new Sparrow Hospital wing. Mark Nixon, Communications Director advised that he received two additional sponsorship options on July 16, 2007. As a result, copies of the additional information were handed out during the meeting and Mr. Nixon advised that clarification regarding the medical oncology center option is needed to help further assess the options. Commissioner Rios noted that during a previous meeting everyone seemed to be positively inclined to enter into a relationship with The Sparrow Foundation, which included a review of the various options and the development of a plan to proceed accordingly. However, there are issues that need to be addressed, which include the following: 1) obtain the General Manager's viewpoint, 2) determine adequate project funding, and 3) decide how the project should be legally constricted to prevent future problems. These are questions/issues that the BWL needs to address prior to reviewing a specific recommendation. After further discussion, it was noted that there is flexibility in what the BWL decides to do, as The Sparrow Foundation is amendable to working with the BWL. Developing a partnership with Sparrow also allows the BWL positive exposure and opportunity to market the community. It was further noted that Mr. Nixon would continue to work with The Sparrow Foundation and General Counsel to determine what options are still available to the BWL and in addressing the above questions. Mr. Lark will review the project and provide an opinion regarding said options including that of the monetary contribution. Mr. Nixon will arrange a tour of the new Sparrow hospital wing for both Mr. Lark and Commissioner Cochran. In addition, it was suggested that the information including responses to the above questions be returned to the Commissioners prior to the next regular Board meeting scheduled for July 24, 2007. 194 Board Mtg.Minutes July 24,2007 195 Rules of Administrative Procedure Update The Board acknowledged that they had received information from Brigham Smith, City Attorney and former General Counsel, Amy Cavanaugh, which discussed the various issues that Mr. Smith expressed regarding the Board of Commissioners' amended Rules of Administrative Procedure. There were many minor changes and two significant items, which involved the Board's ability to participant in meetings via teleconference and their ability to directly hire outside counsel. Mr. Smith was unable to attend the Committee of the Whole meeting. However, he advised that he could attend the next Board meeting on July 24, 2007 to discuss said issues. It was noted that the BWL Rules of Administrative Procedure were last approved by City Council in 1991. However, the Board was operating under the belief that the last prior approval was approximately two years ago. The committee asked Mr. Lark to review the documents and provide input. In addition, Brandie Ekren was directed to contact Mr. Smith in an effort to raise the Board's concerns and provide clarity regarding the rules that he is citing relevant to the procedures. Commissioner Cochran noted that it is cumbersome for him to review the changes to the procedures due to the notations printed on the side of the document. As a result, Commissioner Rios suggested that staff provide a mark up and a clean copy to enhance the understanding of what changes were made the materials. General Manager's Goals and Objectives Dick Peffley was asked to provide a list of the goals and objectives that he worked on as Interim General Manager, as well as a list of suggestions for the new General Manager. As such, Mr. Peffley was thanked for submitting the list and Commissioner Rios recommended that each Commissioner submit any additions or changes to Corporate Secretary Jones so that a list maybe compiled for review. Once the list is complete, it will be sent to Mr. Lark to allow for review and a compilation of proposed objectives. Further Board discussion regarding the General Manager's goals and objectives will take place at the next Committee of the Whole meeting scheduled for August 21, 2007. Interim General Manager's Performance Update The Commissioners agreed that Dick Peffley took on a tremendous responsibility at a time when the BWL was going through a serious transition period. He did an excellent job of maintaining the organization and moving it forward especially in terms of the financial picture, employee morale, and positive relationship changes. Despite some rocky moments gratitude is extended to Mr. Peffley for all of the work he has done. The Board is excited about his continued involvement at the BWL and it is believed that Mr. Peffley's contributions will continue to be very important. Furthermore, it was noted that Mr. Peffley fixed two additional problems, which were mistrust of the data being brought forward to the Board and a returned sense of humor. In addition, it was advised that Mr. Peffley is a good leader, man and asset to the organization. Mr. Peffley advised that it was a tough road but he hopes that the company is better now than before. He looks forward to working with Mr. Lark and continuing to provide 195 Board Mtg.Minutes July 24,2007 196 support in whatever manner is needed. Mr. Peffley went onto thank the employees, executive staff, and the Board of Commissioners for their support. Mr. Lark noted that Mr. Peffley took him on a tour of the plants during the interview process for the General Manager position. It was impressive that everyone liked Mr. Peffley, which is a dynamic that he himself would also like to bring to the BWL. Mr. Lark went onto note that he visited the site of a water main break in Lansing. It was interesting to see the process but it more interesting to note Mr. Peffley's presence and to still see him onsite later the same evening. The employees respect Mr. Peffley, and Mr. Lark trusts and agrees with the Commissioners in that he has a great job. Other APPA National Conference. Commissioner Rios advised that the Commissioners recently attended the national convention for the American Public Power Association (APPA) in San Antonio, Texas. As such, several Commissioners picked up various presentations in written form and also took notes pertaining to different topics. He asked that all of the Commissioners submit their presentation materials to Corporate Secretary Jones so that a catalog of those items can be developed as a resource book. Two—three copies of said information would be available to staff for review if needed or so desired. The Commissioners also advised that the conference presentation materials can be downloaded to disk from APPA's website once available. General Manager's Contract. Brandie Ekren noted that while Mr. Lark was reviewing his benefit package, he noted that the defined contribution account would not begin until a 6-month probationary period had ended. In developing the total rewards package, a probationary period had not been considered, as that would have significantly changed the total rewards amount. In speaking to Commissioners Rios and Smith, it was determined that it would be feasible to clarify that Mr. Lark does not have a probationary period due to the nature of his contract and the employment offer previously presented. Ms. Ekren met with Denise Mulder, Human Resource Director and Darold Oxender, Benefits Administrator who were in the process of communicating to Prudential that Mr. Lark does not have a probationary period in the context of his contract. In addition, Ms. Mulder confirmed that Prudential has implemented the change. On motion by Commissioner Calkins, seconded by Commissioner Cochran, that the Board of Commissioners did not intend a probationary period for the General Manager. Action: Carried unanimously. There being no further business, the meeting adjourned at 6:20 p.m. Respectfully submitted, Santiago Rios, Chair Committee of the Whole 196 Board Mt.-.Minutes July 24,2007 197 Motion by Commissioner Rios, seconded by Commissioner Calkins, to receive the Committee of the Whole report as presented. Action: Carried unanimously. Commissioner Rios assumed the role of Chair, as Conhnhissioner Smith departed the meeting at 5:52 p.nh.due to another obligation. MANAGER'S RECOMMENDATIONS esolution 2007-7- A. State of Michigan—Federal Surplus Assistance Program WHEREAS, the Board of Water and Light, from time to time desires to purchase items through the State of Michigan Federal Surplus Assistance Program; and, WHEREAS, the State of Michigan requires a resolution to be adopted by the governing body of a participating entity, designating a coordinator as Surplus Property Donee and Custodian, to be responsible for the acceptance and accountability and authorized to sign for surplus property, and, WHEREAS, in the past the individual designated as the Donee and Custodian has been the Manager of Material Services Management; and, WHEREAS, Bruce Cook currently holds the position of Manager of Material Services Management. RESOLVED, that the Board Chair and Corporate Secretary are hereby authorized to sign the State of Michigan Federal Surplus Assistance Program Form, designating Bruce Cook as the Surplus Property Donee and Custodian. -------------------- Staff Comments: From time to time the Board of Water and Light desires to purchase items through the State of Michigan's Federal Surplus program for certain items at a substantial savings. Staff is requesting the Board's approval for authorization of signature on the forms required by the State to continue participating in this program. Forms are attached for review. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-7-8 for the State of Michigan—Federal Surplus Assistance Program. Action: Carried unanimously. esolution 2007-7- B. Community Sponsorship Policy 197 Board Mtg.Minutes July 24,2007 198 The Board of Commissioners believes it is vital for the Lansing Board of Water&Light to be an active partner with the community it serves by sponsoring events, programs, and activities that contribute to t his community's quality of life. Sponsorships may include acting as a program sponsor, providing in-kind services, or paying for a specific attribute of a program or event, such as advertising. Sponsorships and contributions are meant to support nonprofit organizations that benefit the greater Lansing area. Sponsorships and contributions shall be limited to events, programs, and activities that do not advance a religious or political viewpoint. The General Manager shall have the authority to establish and direct a community donations committee to carry out this policy. RESOLVED, that the Lansing Board of Water &Light's Board of Commissioners adopt this Community Sponsorship Policy in recognition that part of this public utility's mission is to serve the mid-Michigan community through various sponsorships, as described. -------------------- Staff Comments: The Board of Water & Light has a sustained, proud history of making donations —monetary, materials, and in-kind services—to area non-profit organizations. -------------------- Motion by Commissioner Cochran, seconded by Commissioner Rodocker, to adopt Resolution 2007-7-9 for the Community Sponsorship Policy. Discussion: Commissioner Rios verified that the resolution was the revised version previously requested. He then proceeded to comment that it was gratifying to see that they are affecting many lives in the community and that the BWL takes an interest in other organizations work. The organizations work is important to the BWL as a community, and most of the individuals are BWL customers. Commissioner Rios also advised Mark Nixon that he realizes the community efforts are time consuming. As a result, they may need to determine how to continue their efforts so that it does not take as much of Mr. Nixon's time so that he may delve into other efforts that are also important to the BWL. Commissioner Rios further complimented Mr. Nixon and staff for a job well done. Commissioner Cochran noted that he was equally impressed regarding the breadth of the list, and apparently they have been busier than he realized. He also advised that Mr. Nixon should ensure that this kind of information gets out, as he had no idea of the level of activity prior to receiving the report. Action: Carried unanimously. esolution 2007-7-I C. HIPAA Privacy and Security Provisions and Certification 198 Board Mtg.Minutes July 24,2007 199 RESOLVED, that the Board of Commissioners hereby adopt the Health Insurance Portability Accountability Act (HIPAA) Privacy and Security Provisions and Certification for the Lansing Board of Water and Light Group Health Plan, as attached hereto. FURTHER RESOLVED, the Board of Commissioners hereby adopts the Lansing Board of Water and Light HIPAA Privacy Policy, as attached hereto. FURTHER RESOLVED, the Board of Commissioners hereby adopts the Lansing Board of Water and Light HIPAA Security Policy, as attached hereto. -------------------- Staff Comments: In July of 2006, the BWL converted from a fully insured to self-funded arrangement for the group health plan (which includes Health, Dental, Prescription Drug, and Medical Reimbursement.) As a result, the BWL's privacy and security obligations for HIPAA required the adoption of specific provisions and certification for the group health plan. For your consideration and eventual adoption are three documents: 1. Lansing Board of Water and Light HIPAA Privacy Policy 2. Lansing Board of Water and Light HIPAA Security Policy 3. Lansing Board of Water and Light Group Health Plan HIPAA Privacy and Security Provisions and Certification -------------------- Motion by Commissioner Rodocker, seconded by Commissioner Cochran, to adopt Resolution 2007-7-10 for the HIPAA Privacy and Security Provisions and Certification. Action: Carried unanimously. esolution 2007-7-11 D. Determination of Smart Metering Standard WHEREAS, the Energy Policy Act of 2005 (EPAct 2005) amended the Public Utility Regulatory Policies Act of 1978 (PURPA) requiring covered utilities to consider adopting five new standards; and WHEREAS, the EPAct 2005 amendments to PURPA require covered utilities to begin consideration of the first two standards, Smart Metering and Interconnection, by August 8, 2006, with a public hearing and a determination made by August 8, 2007; and WHEREAS, the Board of Water and Light of the City of Lansing, Michigan (BWL), with electric retail sales in excess of 500 million kWh meets the definition of a non-regulated covered utility; and 199 Board Mtg.Minutes July 24,2007 200 WHEREAS, the governing boards of non-regulated covered utilities are required to consider implementing the standards; and WHEREAS, the governing board of the Board of Water and Light has conducted a public hearing to obtain comments on Smart Metering and Interconnection on March 27, 2007. NOW, THEREFORE, BE IT RESOLVED, that the Board of Commissioners for the Board of Water and Light of the City of Lansing, Michigan, determines that a Smart Metering Standard beyond that already in use for Time-of-Use Pricing is not in the best interest of its customers at this time. However, the General Manager is directed to: 1. Continue to monitor the market for new Smart Metering programs and technologies that would benefit both our customers and meet BWL financial investment requirements. 2. Evaluate the potential for a Critical Peak Pricing and/or Real Time Pricing rate structure that might be appropriate for our customers. Evaluation should include survey of customer interest and a costibenefit analysis. 3. Revisit the current Scheduled Curtailment/Interruptible Service Rider and revise as needed to ensure the parameters are applicable for our current customer base and today's market conditions. 4. Provide the Board of Commissioners with an update on the above by May 1, 2008. -------------------- Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-7-11 for the Determination of Smart Metering Standard. Action: Carried unanimously. esolution 2007-7-12 E. Determination of Interconnection Standard WHEREAS, the Energy Policy Act of 2005 (EPAct 2005) amended the Public Utility Regulatory Policies Act of 1978 (PURPA) requiring covered utilities to consider adopting five new standards; and WHEREAS, the EPAct 2005 amendments to PURPA require covered utilities to begin consideration of the first two standards, Smart Metering and Interconnection, by August 8, 2006, with a public hearing and a determination made by August 8, 2007; and WHEREAS, the Board of Water and Light of the City of Lansing, Michigan (BWL), with electric retail sales in excess of 500 million kWh meets the definition of a non-regulated covered utility; and 200 Board Mtg.Minutes July 24,2007 201 WHEREAS, the governing boards of non-regulated covered utilities are required to consider implementing the standards; and WHEREAS, the governing board of the Board of Water and Light has conducted a public hearing to obtain comments on Smart Metering and Interconnection on March 27, 2007. NOW, THEREFORE, BE IT RESOLVED, that the Board of Commissioners for the Board of Water and Light of the City of Lansing, Michigan, determines that the current BWL Interconnection Standard shall be modified to ensure that: 1. IEEE 1547 standard is explicitly referenced. 2. The Michigan Public Service Commission model is used as a basis in formalizing the process. 3. A formal procedure including an application process and fees/charges is used. 4. The name of"Parallel Power Sources" is changed to "Interconnection for Distribution Generators" in the Rules and Regulations for Electric Service. 5. That the above is ready for adoption in May 2008 as part of the FY09 Rules and Regulations for Electric Service. -------------------- Motion by Commissioner Cochran, seconded by Calkins, to adopt Resolution 2007-7-12 for the Determination of Interconnection Standard. Action: Carried unanimously. esolution 2007-7-13 F. Consideration of Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency Standards as Required by the Energy Policy Act of 2005 RESOLVED, that the Lansing Board of Water and Light will commence consideration of the Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency standards referenced in the Energy Policy Act of 2005 before August 8, 2007; and FURTHER RESOLVED, that the Lansing Board of Water and Light shall hold a public hearing to accept public comment on the Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency standards, to be scheduled in March 2008. -------------------- Staff'Comments: The Energy Policy Act of 2005 (EPAct05) amended Title I of the Public Utility Regulatory Policies Act of 1978 to require state regulatory agencies and covered non-regulated electric utilities (including municipal utilities with annual retail 201 Board Mtg.Minutes July 24,2007 202 sales of 500 million kWh or more, including the LBWL) to formally consider whether to adopt five new federal standards. The five new federal standards are: net metering, fuel diversity, fossil fuel efficiency, smart metering, and interconnection. EPAct05 specifies that a decision whether to adopt net metering, fuel diversity, fossil fuel generation efficiency standards must be made by August 8, 2008. The Resource and System Planning department of the LBWL will begin evaluating these standards before August 8, 2007, and will gain further insight from the public hearing to be held in March 2008. After the public hearing, but before August 8, 2008, Staff will bring a recommendation to the Board regarding whether to adopt the federal standards for net metering, fuel diversity, fossil fuel generation efficiency. -------------------- Motion by Commissioner James, seconded by Commissioner Rodocker, to adopt Resolution 2007-7-13 for the Consideration of Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency Standards as Required by the Energy Policy Act of 2005. Action: Carried unanimously. esolution 2007-7-1 G. Easement Exchange with A Winning Pointe,LLC RESOLVED, that the Board of Commissioners hereby authorizes the General Manager to release its Existing Easement (Attachment A) with A Winning Pointe, LLC in exchange for a new easement (Attachment B) granted by A Winning Pointe, LLC, which shall be located on the same parcel. -------------------- Staff Comments: The Lansing Board of Water & Light (BWL) has an easement (Liber 1203, Page 663 [BWL#3302 07 3006]) for its utility operations located at 111 E. Saginaw Street, East Lansing, Michigan, hereinafter referred to as "Existing Easement". The fee owner and successor grantor is A Winning Pointe, LLC, hereinafter referred to as "Grantor". Currently, the BWL does not utilize the Existing Easement and would like to relocate its facilities to another location on Grantor's property. Additionally, the Grantor would like to construct its own building within the Existing Easement area. The BWL and the Grantor would like to resolve their needs by exchanging easement interest. Therefore, it is requested that the Board of Commissioners authorize the release of its Existing Easement in exchange for a new easement of the same square footage on the same property that will meet the operational needs. The release would only occur after full execution and recording of the new easement document. -------------------- 202 Board Mtg.Minutes July 24,2007 203 Motion by Commissioner Zerkle, seconded by Commissioner Calkins, to adopt Resolution 2007-7-15 for the Easement Exchange with A Winning Pointe, LLC. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS Sparrow Foundation Update. Commissioner Rios announced that during the last Committee of the Whole meeting, the committee had lengthy discussion regarding the Sparrow Foundation proposal. The foundation proposed that the BWL enter into a relationship with Sparrow Foundation for the purpose of supporting their efforts. The partnership would give the BWL significant exposure in terms of a naming opportunity at Sparrow Hospital. BWL General Manager, J. Peter Lark was asked to arrange a visit with Sparrow leadership at the facility, and subsequent to the Committee of the Whole meeting, Mark Nixon completed extensive work with the foundation in developing several different options. Mr. Lark noted that he and Mr. Nixon toured the facility on July 23, 2007. As such, Mr. Lark was very impressed with the hospital and its efforts. The BWL and Sparrow Hospital are two great non-profit entities both serving the public good, which is in some ways the very fabric of the community. Therefore, anything they can do to help and assist is very positive and provides favorable exposure for the BWL. The project is favorable to the extent that the BWL can be a part of what is clearly a great effort for people of the entire area, more particularly City of Lansing residents. Mr. Lark also clarified that he did not have a specific recommendation at this time. The hospital outlined some good options; however, they are not ready to decide what part of the facility they should contribute to or have exposure at. There were some suggestions that the BWL give a significant sum upwards of$500,000. However, in review it would seem appropriate that the BWL should be at some level less than that amount. The naming rights and exposure value appears equally as great at$250,000 as it would be at $500,000. Therefore, Mr. Lark noted that they should look at the lesser of the two amounts and perhaps consider spreading it out over a number of years. It is also recommended that the contribution come from somewhere other than BWL revenues generated from the sale of electricity, water, chilled water and steam. There are fundraising efforts that they might be able to consider in the future and some that they have employed in the past. It is Mr. Lark's suggestion that they determine whether or not the BWL is able to generate enough charitable contributions to donate to the Sparrow Foundation. Commissioner Rios advised that he and Mr. Nixon had initial conversations with Lupe Izzo who is very much committed to the process. If the BWL enters into an agreement, Tom and Lupe Izzo have committed to assisting the BWL with additional to help meet or 203 Board Mtg.Minutes July 24,2007 204 exceed the commitment. Commissioner Rios also confirmed that minimum naming rights would involve a$250,000 commitment. On motion by Commissioner Rios, seconded by Commissioner James, that the Board of Commissioners direct the General Manager to pursue an opportunity as presented by Sparrow Foundation to make a significant contribution that would give the BWL naming rights at that facility; and at the same time incorporate into that an understanding with Sparrow that this would be a commitment over a period of years; and that Sparrow would commit to assisting the BWL in engaging in fundraising efforts for the BWL to meet this commitment. In addition, the motion also includes that this be reviewed annually by the Board of Commissioners to determine where they are and make any adjustments necessary on a yearly basis depending on the timeframe staff recommends. Discussion: Commissioner Calkins advised that it would be beneficial if there were ways to involve the community in the donation process by way of a matching program or something of that nature. Mr. Lark noted that he failed to mention community involvement but there are ways in which the BWL can successfully do it. Right now they are optimistically cautious but he thinks that this is something that could be done and would help improve the entire City of Lansing. In addition, it could be done favorably so that the BWL can contribute what appears to be a large amount from contributions engendered from others and not revenues. Commissioner James advised that if they are looking at other possible contribution amounts then she is so inclined to look at the $500,000 contribution level at perhaps over a longer period of time. After further discussion, it was determined that Mr. Lark and Mr. Nixon would develop a specific plan that helps to ensure that the BWL could achieve its contribution goals. In addition, it was noted that the plan may need to contain language that speaks to binding future boards, and it should also be reviewed on an annual basis. Action: Carried unanimously. RESOLUTIONS esolution 2007-7-I GENERAL MANAGER CONTRACT CLARITY WHEREAS, the Board of Commissioners have appointed J. Peter Lark as Director and General Manager of the Lansing Board of Water and Light. WHEREAS, the Board of Commissioners have entered into a one year employment agreement, dated July 16, 2007, with J. Peter Lark for his services as Director and General manager of the Lansing Board of Water and Light. 204 Board Mtg.Minutes July 24,2007 205 RESOLVED, as a point of clarity, the employment agreement between the Board of Commissioners and J. Peter Lark does not include a"probationary period". .................... Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-7-15 for the General Manager Contract Clarity. Action: Carried unanimously. MANAGER'S REMARKS Dick Peffley, Director of Production and Interim Director of Operations noted that they gave out five general manager awards to BWL employees who played a key role in the conversion to western fuel at Erickson Station. The project has proved to be very successful with an annual fuel savings to customers of$9,000,000 and lower nitrogen oxide and sulfur rates. The employees worked continuously but were not eligible for overtime. They instead received the general manager award, a $1,000 bonus, and lunch at the University Club. Mr. Peffley will request that Mr. Nixon write an article on the employees relative to the project and its success. J. Peter Lark commented on the strength of the BWL and the positive spirit and deep abiding allegiance that employees display regarding their work. He has been very impressed with the workforce, and now thinks they have a workforce in place that can move forward and accomplish some goals. In addition, two persons have been hired. One is Susan Devan, Chief Financial Officer and the other is George Stojic, Director of Strategic Planning and Development. Ms. Devan is scheduled to begin work at the BWL on August 6, 2007. She was the Chief Regulator with the Michigan Public Service Commission (MPSC) for all utilities in Michigan (except municipalities). She is a certified public account and has done this type of work with large utility companies for approximately 28 years. Very versed in accounting and utility accounting, Ms. Devan is also a member of the National Research Regulatory Institute and has presented her work to the Michigan Municipal Electric Association. In addition to national speaking engagements, she is very well known by utility persons in the State of Michigan and has a favorable reputation. Ms. Devan is also extraordinarily nice, which is one of the qualities Mr. Lark seeks when hiring people. The second newly hired individual is George Stojic, Director of Strategic Planning and Development. Mr. Stojic was instrumental in the development of the State of Michigan 21st Century Energy Plan. He is a highly respected individual and was indispensable to Mr. Lark while at the MPSC. It is good to have someone that is conversant with energy efficiency (i.e. renewable portfolio standards) and mercury rules. Mr. Lark has setup a meeting with the Department of Environmental Quality, BWL staff, and himself to discuss some of the issues surrounding the mercury rules. He went onto note that he believes they would need someone who can look at these issues and decide where to go 205 Board Mt-.Minutes July 24,2007 206 and Mr. Stojic will bring that knowledge to the BWL. In addition, Mr. Lark will have Mr. Stojic look at water development for potential expansion. He is also very nice individual and has a gift for being extremely credible, which in going forward will be a tremendous asset to the BWL. COMMISSIONERS' REMARKS Commissioner Calkins made remarks, as he anticipates that the July Board meeting will be the last that he attends in a Commissioner capacity. He went onto to note that he has enjoyed being a Commissioner. He has learned a lot and it was very enjoyable. The BWL is blessed with a lot of very nice people, and all that he has run into he has enjoyed. In addition, he enjoyed challenging some of the board members on different issues and he will continue to watch and see how they perform. The Commissioners noted that they have also enjoyed working with Commissioner Calkins as well and he will be missed. Commissioner Rios added that he would reserve his comments until Commissioner Calkins is really going away, as he maybe with the Board longer than he thinks. He further advised that Commissioner Smith is an incredibly busy person with a loud voice in the community and she had to leave for something else that is very important. Commissioner Rios also noted for the record that he has enjoyed serving on the Board under Commissioner Smith's leadership. He thinks much has been accomplished and he is humbled by the election to the Chair position because he knows that it is not an easy job. There is a lot of responsibility associated with it and it is not always easy to respond to things when this is not one's full time job. There are a lot of other distractions and sometimes it becomes an almost impossible task to keep up with everything that is going on while also providing leadership. However, he promised that he would work very hard to do just that and hopes that he can meet the high standard that Commissioner Smith has established for the Board. He knows that she hopes to continue to serve on the Board of Commissioners and he hopes that she does because she has done a tremendous job. He went onto advise that he hopes they have the opportunity to publicly thank both Commissioners Calkins and Smith. Commissioner Rios expressed heartfelt thanks to Dick Peffley for his service as Interim General Manager. It was a rocky road, yet he seemed to smooth out most of it and get a lot of things done, which is very admirable. The BWL was going through a difficult transition and like it or not they live in a political world and everybody has an opinion. They have seen a lot of discussion and debate, as to what they should or should not do but one thing has always been certain, the BWL has consistently done a fantastic job. Commissioner Rios explained that it goes back to Mr. Lark's observations in that the BWL has great quality people who are dedicated to their work, very talented, skilled and committed to the community. Dick Peffley certainly exemplifies that in a very big way and the Board thanks him for his service. Commissioner Cochran agreed with the sentiment and noted that Mr. Peffley brought calmness, serenity, and a feeling that the BWL was back together as a family. Mr. Peffley created an environment that brought a respect for the truth. Commissioner 206 Board Mtg.Minutes July 24,2007 207 Cochran thanked Mr. Peffley for his service and advised Mr. Lark that he has big shoes to fill of which he is sure can be done. However, Commissioner Cochran noted that it is wonderful to have a changed atmosphere. EXCUSED ABSENCE On motion by Commissioner James, seconded by Commissioner Cochran that the absence of Commissioner Graves be excused. Action: Carried unanimously. PUBLIC COMMENTS Dick Peffley thanked the Commissioners and employees for their fantastic support without which he could not have done it without their help. It is very important to note that the Board allowed him to live what he considers the American dream. He started out as a laborer and worked his way to the top, which shows that hard work is rewarded. The workers need to know that he is just your average person who worked his way up and is glad to have done it and he is also glad to be doing what he is doing now. Mr. Peffley also extended a great debt of gratitude to wife,.Sherry Peffley for her support and encouragement. Joe Wolfe, former Assistant General Manager with BWL for approximately 25 years commented that he has been away for nearly 10 years. He noted his surprise to read that certain high-level employees were no longer at the BWL. His first reaction was total shock, then anger and disappointment. Mr. Wolfe advised that he has never recalled a time in which something like this has happened to high-level employees at the BWL. He went onto note that he worked very closely with Bill Cook whom he helped to recruit and train. Mr. Cook was a good employee and he was unsure how Mr. Lark formed an opinion of him because his actions took place on his first day at the BWL. Mr. Cook was not yet eligible for retirement and he made a good salary. However, now he is gone at an age when it is difficult to find an equivalent position. Mr. Wolfe commented that he thought what happened was cruel and noted Mr. Cook's good performance ratings. He also advised that the BWL is enjoying things today that he and Mr. Cook worked to create. Mr. Wolfe went onto note that the Board has not commented on the events that took place and as such, have let the employees down. Roger Jeffers, BWL retiree with over 30 years of service noted that in October 2006, a proposal to adjust the retiree's defined benefit plan was submitted. Although, they did not receive exactly what they had hoped for, he thanked the Commissioners and Dick Peffley on behalf of the retirees. Mr. Jeffers noted that he enjoyed working with Mr. Peffley and hopes to work with Mr. Lark in the near future. Joseph Davis, Business Manager of IBEW Local 352 introduced new President of IBEW Local 352, Dolores Appling. He thanked her for accepting the nomination and going through the run off process to become President. Mr. Davis also extended thanks to 207 Board Mtg.Minutes July 24,2007 208 Commissioner Smith for her years of service as Chair. It has been difficult over the last couple of years but Mr. Peffley brought calm to the area and they supported him in the past and continue to do so. In addition, Mr. Davis reiterated the bargaining units support of the endeavors that the BWL would like to undertake regarding the Sparrow Foundation. A letter written by Mr. Davis was given to the Board of Commissioners and Mr. Nixon, which advises employees and the general public of his stance on the changing of the guard. Mr. Davis proceeded to read the letter in its entirety, a copy of which will be entered under communications for record purposes at the September 25, 2007 Board meeting. Dolores Appling, President of IBEW Local 352 commented that she had opportunity to spend a few moments with Mr. Lark and she was very impressed. The attitude and feeling of the employees is amazing. It is similar to the sentiment that occurred when Mr. Peffley became Interim General Manager but only better. They will continue to make the BWL exactly what it has always been, which is a premier utility. Ms. Appling considers herself fortunate to work with so many amazing, loving, compassionate, and outstanding people. She wishes that everyone would stop using the word"fence" because they are as one. They have to face the future as one or they will truly fail. She is appreciative of the many doors that have been opened and she is the block that is going to hold them open. Ms. Appling appreciates everyone's assistance and they are going to continue to work as a team to progress forward with the Board's guidance and leadership. Ron Byrnes, BWL retiree noted that there is a lot of love in the room, which has not always been the case. As Chairman of one of the retirees committees, Mr. Byrnes officially welcomed J. Peter Lark as the new General Manager and noted that they are available for dialogue at anytime whether it be official or not. Mr. Byrnes advised that the retirees are there to help and wished Mr. Lark great success in the future. He also congratulated Commissioners James and Rios on their officer appointments. Commissioner Rios thanked everyone who spoke during public comments and noted how impressed he is with attendance at Board and committee meetings. It is an indication that people really care about happens at the BWL and goes back to the love that people have for the community and the BWL. There are a lot of challenges and they are not always going to agree but it is good to know that everyone is on the same page relative to where they are going right now. There are persons coming to the BWL from the outside and Mr. Lark is making some difficult decisions and moving forward with those things in pursuit of making the BWL bigger, better and greater. Commissioner Rios noted that Mr. Lark deserves the Board's support and they are going to give it to him. He also thanked the IBEW for standing up and supporting their efforts in that regard but there is much work to do and the challenges are even greater. Change is always difficult to accept at first but time will tell that they are all working towards the same goals and objectives. Commissioner Rios thanked Mr. Davis for the presentation, as he takes his trust and statement of support from the IBEW very seriously. ADJOURNMENT 208 Board Mt'.Minutes July 24,2007 209 On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the meeting adjourned at 6:49 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 2, 2007 209 Approved by the Board: July 24, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT c_ c i ! Friday,June 15, 2007 .j r TheBoard of Commissioners met in the Boardroom of the Administrative Offices, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, Julee Rodocker, Robin Smith and Sandra Zerkle. 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 9:13 a.m. 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. There were no public comments. NEW BUSINESS Sandra Soltysiak, Executive Search Consultant with Varnum Consulting gave direction and clarity to the Board of Commissioners regarding the General Manager finalists' credentials and interview questions. After said discussion, the Board proceeded with the selection process and interviewed four (4) candidate finalists for the position of General Manager. The candidate finalists were as follows: Gregory Boettcher, Carroll French, Lawrence Schuster, and J. Peter Lark. Two candidates were interviewed in the morning and two in the afternoon. Each candidate finalists requested consideration of their application for appointment to be considered in confidence. Upon conclusion of the Special Board Mtg June 15,2007 Page 2 of 3 interviews, the Board entered into executive session to consider the candidate finalist's application for appointment per the finalist's request. EXECUTIVE SESSION Moved by Commissioner Calkins, seconded by Commissioner Cochran, to go into closed session to consider the candidate finalists' application for appointment per the request of each candidate finalist. The meeting is protection by the Open Meetings Act exemption MCL 15.268(f). (2:54 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, Smith and Zerkle. 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 3:40 p.m. Commissioner Rios reported that all of the candidate finalists requested closed session to consider their candidacy for the General Manager position. NEW BUSINESS CONTINUED The Board of Commissioners took the following action after the conclusion of executive session. On motion by Commissioner Rios, seconded by Commissioner Cochran, the Board of Commissioners agreed to extend an offer of employment for the General Manager position to J. Peter Lark. Action: Carried unanimously. Commissioner Rios assumed the role of Acting Chair,as Commissioner Smith momentarily stepped out of the meeting. On motion by Commissioner Cochran, seconded by Commissioner Graves, that the Board of Commissioners, Executive Committee be empowered to negotiate a contract with J. Peter Lark. Action: Carried unanimously. Special Board Mtg June 15,2007 Page 3 of 3 MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Graves complimented the entire Board for the time and effort put into the General Manager search process. He noted that he was pleased that they had reached a consensus. The remaining Commissioners shared the same sentiment together with Commissioner Calkins expressed pleasure with the quality of the candidate finalists. Commissioner James asked to be excused from the June 191h Committee of the Whole meeting due to a prior obligation. Commissioner Smith returned to the boardroom and advised that J. Peter Lark accepted the conditional offer of employment pending negotiation of an employment contract with the Executive Committee. EXCUSED ABSENCES None. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Cochran, the meeting adjourned at 3:51 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk June 22, 2007 Preliminary—Subject to Board Approval on July 24, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Friday,June 15, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices'--- Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone ! �` James, Santiago Rios, Julee Rodocker, Robin Smith and Sandra Zerra Absent: None V r-. ul 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 9:13 a.m. 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. There were no public comments. NEW BUSINESS Sandra Soltysiak, Executive Search Consultant with Varnum Consulting gave direction and clarity to the Board of Commissioners regarding the General Manager finalists' credentials and interview questions. After said discussion, the Board proceeded with the selection process and interviewed four (4) candidate finalists for the position of General Manager. The candidate finalists were as follows: Gregory Boettcher, Carroll French, Lawrence Schuster, and J. Peter Lark. Two candidates were interviewed in the morning and two in the afternoon. Each candidate finalists requested consideration of their application for appointment to be considered in confidence. Upon conclusion of the Special Board Mtg June 15,2007 Page 2of3 interviews, the Board entered into executive session to consider the candidate finalist's application for appointment per the finalist's request. EXECUTIVE SESSION Moved by Commissioner Calkins, seconded by Commissioner Cochran, to go into closed session to consider the candidate finalists' application for appointment per the request of each candidate finalist. The meeting is protection by the Open Meetings Act exemption MCL 15.268(f). (2:54 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, Smith and Zerkle. 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 3:40 p.m. Commissioner Rios reported that all of the candidate finalists requested closed session to consider their candidacy for the General Manager position. NEW BUSINESS CONTINUED The Board of Commissioners took the following action after the conclusion of executive session. On motion by Commissioner Rios, seconded by Commissioner Cochran, the Board of Commissioners agreed to extend an offer of employment for the General Manager position to J. Peter Lark. Action: Carried unanimously. Commissioner Rios assumed the role of Acting Chair,as Commissioner Smith momentarily stepped out of the meeting. On motion by Commissioner Cochran, seconded by Commissioner Graves, that the Board of Commissioners, Executive Committee be empowered to negotiate a contract with J. Peter Lark. Action: Carried unanimously. Special Board Mtg June 15,2007 Page 3 of 3 MANAGER'S REMARKS None. COMMISSIONERS' REMARKS Commissioner Graves complimented the entire Board for the time and effort put into the General Manager search process. He noted that he was pleased that they had reached a consensus. The remaining Commissioners shared the same sentiment together with Commissioner Calkins expressed pleasure with the quality of the candidate finalists. Commissioner James asked to be excused from the June 19th Committee of the Whole meeting due to a prior obligation. Commissioner Smith returned to the boardroom and advised that J. Peter Lark accepted the conditional offer of employment pending negotiation of an employment contract with the Executive Committee. EXCUSED ABSENCES None. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Cochran, the meeting adjourned at 3:51 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk June 22, 2007 Preliminary—Subject to Board Approval on September 25, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday,July 24, 2007 The Board of Commissioners met in the Boardroom of the Administrative Offices, 123i- Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Semone James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioner Joseph Graves 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 Cochran, seconded by Commissioner Rodocker the minutes of the May 22, 2007 regular meeting were unanimously approved. By motion of Commissioner Cochran, seconded by Commissioner James the minutes of the June 5, 2007 Special Board meeting were unanimously approved. By motion of Commissioner Calkins, seconded by Commissioner Cochran the minutes of the June 15, 2007 Special Board meeting were unanimously approved. Commissioner Smith welcomed new General Manager, J. Peter Lark. 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. Board Mtg.Minutes July 24,2007 Page 2 of 44 Jim Sturdevant with Land Use Specialists, Inc. is the project planner for the Trans Development Group who is developing a piece of property in Delta Township. The property in question is adjacent to and immediately south of Erickson, which is owned by Board of Water and Light (BWL). There is a 36" storm drain on the BWL property that has been built and maintained by the road commission. As a result, they are requesting permission to connect into the storm facility for development of the property immediately to the south. It is a truck terminal facility that is servicing the General Motors facility in the area. Mr. Sturdevant noted that he had spoken to Brandie Ekren, Associate Attorney who was not yet clear on the procedure needed to obtain approval for said request. However, their construction schedule is such that they would like to start this fall. In order to accomplish this task it maybe necessary to obtain permissions from the Board of Commissioners, Lansing Planning Board, and City Council. Based on the next scheduled BWL Board meeting, the construction process maybe delayed until December 2007. Therefore, Mr. Sturdevant requested that the Board consider approval of the project for connection to the storm sewer on BWL property subject to approval from the Road Commission, Drain Commission and BWL Staff, which would allow him to place the application in front of the City of Lansing Planning Board for their August 2007 agenda. Commissioner Smith thanked Mr. Sturdevant for appearing before the Board and advised that she would refer the matter to the General Manager and staff for due diligence. At this time, the Board is not in a position to make a motion or ruling as it relates to the project because they do not have the information. Commissioner Smith thanked Mr. Studevant for providing information relative to the timetable for a fall project and acknowledged that the Board does have the ability to hold a Special Board meeting to make any rulings that might need to occur as it relates to this project or any other matter that comes before the Board. Mr. Studevant clarified that he has submitted a set of engineering drawings and a cover letter for said project to Brandie Ekren Associate Attorney, Rhonda Jones Corporate Secretary and Mark Witalec Surveyor. Commissioner Rios asked staff to respond quickly to the request and noted that he wants to ensure that the BWL has enough information to act. He advised Mr. Sturdevant that it would be up to him to ensure that the BWL has everything it needs, and went onto strongly suggest that Mr. Sturdevant communicate with whomever at the BWL is going to oversee the project. COMMUNICATIONS None. COMMITTEE REPORTS esolution 2007-7-1 FINANCE COMMITTEE June 11,2007 Board Mtg.Minutes July 24,2007 Page 3 of 44 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 11:30 a.m. on Monday, June 11, 2007. 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 Gary Calkins, Semone James, Robin Smith and Sandra Zerkle. Commissioner Robert Cochran was also present. Absent: None. Public Comment There were no public comments. Internal Audit Report Susan Pifer, Director of Internal Audit presented the Internal Audit Report that gave an update for activities pertaining to coal inventory control, capital assets, internal controls— SAP, cash management and other audit business. Ms. Pifer noted the following items: • The coal program is complete. Fieldwork has been scheduled with Bob VanElls, Interim Director of Production and the audit will be done in conjunction with year- end evaluation procedures. The Internal Audit Department (IAD) will also participate in the fly over,€elm bore samples, and calculations for the valuation of coal inventory as of June 30, 2007. • Charles Moore, Interim Internal Auditor will work on the peef impaired asset review in conjunction with the year-end valuation for Stores inventory. The fieldwork will be conducted on the morning of June 13, 2007. At which time, tests will be conducted to determine how Stores accounts for warehouse inventory. They have received a preliminary schedule of adjustments from Plante &Moran for$440,000. However, they expect a smaller number than what has been presented thus far. • Plante &Moran are bringing in new auditors to assist with the fiscal year 2007 audit, as there are 9-months worth of transactions in the legacy system and 3-months in SAP. The new auditor staff will partake in a plant tour on June 13, 2007 hosted by Dick Peffley, Interim General Manager. • A presentation to City Council's Ways and Means Committee will take place June 191h for the fiscal year 2006 audit. The activity is perfunctory but was previously postponed because the Board of Water and Light (BWL) did not have an Internal Auditor. Board Mtg.Minutes July 24,2007 Page 4 of 44 • The Associate Internal Auditor position was posted in the Lansing State Journal on June loth. An office space is reserved across from Customer Service and their preliminary assignment will involve the cash areas. • IAD anticipates utilizing Mr. Moore's services through September 2007 to address warehouse issues, as there is a new manager in the area and there was an adjustment made last year by the external auditors. This topic has been discussed with Mr. Moore and no further plans have been made for his services at this time. • A draft copy of the request for proposal (RFP) for an internal control assessment for the Board's SAP Enterprise Risk Planning (ERP) Financials implementation was included in the Finance Committee packet materials. It is believed that the BWL can consolidate the Defined Benefit (DB) and VEBA plan solicitations through a single RFP. The Finance Committee's approval will allow the BWL to launch an open ended RFP for advisory services whose responses maybe educational in nature. On motion by Commissioner Smith, seconded by Commissioner Zerkle, the Finance Committee agreed to the proposed committee action allowing the Internal Auditor to move forward with its solicitation and evaluation of proposals for the Internal Control Assessment for the Board's SAP Enterprise Risk Planning (ERP) Financial implementation. Discussion: IAD confirmed that the RFP is inline with American Public Power Association (APPA) recommendations recently received at an APPA conference. Commissioner James advised the committee members that the materials were brought before the committee because Ms. Pifer was asked to bring forth a plan to the Board of Commissioners for review and discussion. Action: Carried unanimously. RFP for Investment & Banking Services A draft copy of the RFP entitled, Pension and Benefit Plan Advisor was included in the Finance Committee packet materials, along with a copy of the sub-committee's plan of action. Ms. Pifer reviewed the plan of action compiled by the sub-committee, which consists of Sue Flores, Charles Moore and Susan Pifer. It is feasible to combine the Defined Benefit and VEBA 4-5-7 Plans and, as such the sub-committee prepared a RFP to that effect. The RFP findings will be reported to the Finance Committee on July loth. Listed below is the sub-committee's proposed plan of action. 1. Defined Benefit (DB) and Retiree Benefit (VEBA) Plans: It is recommended that the Internal Audit Department (IAD) move forward with a RFP that solicit advisory services for both plans concurrently. After proposals are received and reviewed by the sub-committee, a course of action will be recommended to the Finance Committee on July 10, 2007, to either Board Mtg.Minutes July 24,2007 Page 5 of 44 a. Act on one or more proposals, or b. Extend the expiring purchase order for current advisory services related to the DB plan, pending further review of the investment solutions offered in the proposals. 2. Defined Contribution (DC) and 457 (ICMA) Plans: IAD will research and draft an RFP in conjunction with the Director of Human Resources that comprehends the results of the recent employee survey conducted relative to the DC Plan. The RFP will also consider the 457 plan currently administered by ICMA. Said RFP or progress related to said RFP will be presented to the Finance Committee on July 10, 2007. 3. Depository Accounts: IAD will continue to research and draft an RFP in conjunction with the Interim Chief Financial Officer that comprehends lock box services, investment sweeps, credit card processing and other treasury functions in Customer Service, Finance and General Accounting. Progress related to said RFP will be presented to the Finance Committee on July 10, 2007. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee agreed with the proposed committee action allowing the sub-committee to move forward with the solicitation of a request for proposal (RFP) for banking and investment services, and report said findings to the Finance Committee. Discussion: Commissioner Smith asked Susan Pifer if there is a cost savings? Ms. Pifer replied yes, as they are combining their dollars. She also noted that they do not have a monetary savings figure at this time. Action: Carried unanimously. Survey Results for Defined Contribution Plan Darold Oxender, Benefits Administrator gave an overview of the survey results for the DC plan. In a meeting held with union leadership December 2006, several questions were raised relative to the pension plan. In an effort to address the issues, a survey was developed to not only ask questions but to also act as an educational piece. The questionnaire was sent 710 employees and 463 replied. The total response rate was 65%. The overall results, which were very good basically, indicated that employees essentially understand their respective pension plans. Denise Mulder, Director of Human Resources advised that Mr. Oxender met with union leadership to review the survey results. The results were contradictory to what was originally indicated and in essence revealed that employees are generally happy with the plan and are in need of additional education. Mr. Oxender is beginning to move in that direction and will have the vendors visit additional BWL locations aside from Haco Drive in an effort to make themselves more readily accessible to employees. Board Mtg.Minutes July 24,2007 Page 6 of 44 Charles Moore suggested that a copy of the survey be included with the Investment and Banking Services RFP for informational purposes only. Commissioner Smith expressed concern that in light of the survey results, persons maybe happy with what they have because they do not know what else is available, which maybe a reason why there is some negative feedback. An employee may think that they are receiving a limited amount of information and would prefer more in order to have a better grasp of the subject. Ms. Mulder noted that that it is part of the additional education that employees need. Compared to the private sector the pension plans are exceedingly robust and possess a broad base of offerings with high contribution levels. A part of the education piece is educating employees on what they have and what they can do with it. After further discussion, the Commissioners advised that there maybe complacency at the BWL in that it has had a certain plan for so long that there is no longer the drive to seek better opportunities. It was also noted that union leadership was surprised by the results and had perhaps misread the employees. The results are clear in that the BWL does not have a problem. However, improvement can be reached through additional education. Employee concerns may also arise due to the transitional phase of going from a defined benefit to a defined contribution program. The committee commended staff on the survey and asked that Dick Peffley direct staff to contact Joseph Davis, Business Manager of IBEW Local 352 so that they may respond to a letter previously submitted by the union, to the Board of Commissioners regarding the pension plan. It is the Board's desire to know whether or not the survey results and subsequent employee education efforts addresses the bargaining units concerns. It was suggested that staff might also want to present the pension plan survey results at the Committee of the Whole meeting so that other Commissioners would have opportunity for input. Mr. Moore advised that they could meet with the union leadership as a part of the education piece when they send out the RFP for the Investment and Banking Services. Bill Cook, Senior Vice President of Operations noted that he and Mr. Peffley could speak with Ms. Mulder to determine how best to communicate the pension survey results to all employees. He also advised that they could respond to the union's initial pension plan letter relative to the survey results and ask that any remaining issues be brought forward. Staff also clarified that they cannot track the difference between bargaining and non- bargaining responses while continuing to maintain confidentiality. Commissioner Smith asked 1) if lowering the pension age was something they could look into and 2) is additional planning that specifically directs employee's investments going to be a challenge? Amy Cavanaugh, General Counsel noted that she would work with Steve Jurmu, outside counsel on the pension question. Mr. Oxender further advised that the BWL could not Board Mtg.Minutes July 24,2007 Page 7 of 44 tell employees what to invest in due to the Pension Protection Act and liability. However, they do plan to provide more specific education to various groups that could target for example, new hires, middle years, and those close to retirement. Investment Manager Search & Asset Allocation Rebalancing Sue Flores presented an overview of the fixed income investment manager search for asset allocation rebalancing, which included a review of the LCG Associates - Investment Manager Selection Report, Fixed Income Manager Search. As such, the following information regarding asset allocation rebalancing was presented to the committee for review. • With the approval of the LBWL investment policy in November, 2004, the LBWL began the process of moving away from holding individual securities in its Defined Benefit Pension fund and began utilizing investment managers or managed funds to meet its approved target asset allocation • Since that time, six investment managers/manager funds have been recommended by staff in conjunction with our Investment Advisor LCG Associates, and approved by the Human Resources Committee • The six previously selected managers are in the following categories of assets: Large Cap Growth, Large Cap Value, Small Cap Growth, Small Cap Value and International • During the Defined Benefit Fund quarterly performance review held February 7, 2007 with Investment Advisor, LCG Associates, review of the portfolio revealed that rebalancing and other adjustments were needed including: ■ Fixed income holdings needed to be increased from 25.1% to the 30-40% target range ■ International holdings were slightly over target allocation at 20.3% compared to the 10-20% ■ The remaining large cap core individual equity holdings should be Equated due to underperformance to generate the cash for the needed fixed income statement • LCG Associates proceeded with a search in accordance with policy guidelines for a Fixed Income Manager to supplement the current fixed income holdings and staff proceeded with the other fund adjustments with a goal of having the rebalancing complete by June 30, 2006 • The five candidates presented by LCG for consideration were reviewed by an internal group consisting of employees of Internal Audit, Finance, Human Resources and Operations on May 15, 2007 Board Mtg.Minutes July 24,2007 Page 8 of 44 • The consensus of the group was Western Asset Core Plus due to its history of returns, strong performance against benchmarks and size Following the presentation, the Finance Committee took the following action. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Finance Committee agreed with the proposed committee action in which to recommend that Western Asset Core Plus be retained to manage a portion of the Defined Benefit Pension Fund in accordance with the Fund's investment policy. Discussion: Commissioner Cochran noted the current asset allocation rebalancing policy is in place for a reason and, as such he would like to see it left alone and in place. Commissioner James asked Charles Moore if the Board should ask staff to conduct a feasibility study? Mr. Moore responded that the BWL would probably receive one anyway and that it would be based on data and background information. He noted that although he was not a part of the asset allocation rebalance, he supports its position, and believes that the Board should wait until they receive the RFP recommendations before providing additional direction. Action: Carried unanimously. Copies of the LCG Associates - Investment Manager Selection Report, Fixed Income Manager Search dated April 2007 is on file in the Office of the Corporate Secretary. Board Compensation Amy Cavanaugh, General Counsel was asked by the Committee of the Whole to review the Board compensation question. A brief overview of those questions and corresponding answers are presented below. Q: Is compensation for the Board of Water and Light members legally permissible? A: Yes. Unlike other boards, the Board of Water and Light, Board of Commissioners is an administrative board (as opposed to an advisory board). As such, there is no specific language in the Lansing City Charter, which is the operative legal document that prohibits compensation for administrative boards. Q: Who decides whether the Board of Water and Light members will receive compensation, and in what amount? A: City Council would decide if BWL board members would receive compensation and if so, for what amount. They would also have to pass an ordinance subject to a public hearing to authorize such a measure. Board Mtg,Minutes July 24,2007 Page 9 of 44 Commissioner Cochran asked whether or not a procedure regarding this matter currently exist? He also noted that the board compensation data is for informational purposes only, as there is no proposal before the Board at this time. In response to Commissioner Cochran's question, Ms. Cavanaugh advised that she was unable to locate a procedural document regarding the above matter. Commissioner James noted that the board compensation inquiry was forwarded to the Finance Committee by the Committee of the Whole and as such, they are responding to the question. Commissioner James went on record stating that she had no opinion one way or the other and further noted that it was neither a good idea nor the appropriate time to ask such a question.. After further discussion, the Finance Committee took the following action: On motion by Commissioner Cochran, seconded by Commissioner Smith, the Finance Committee unanimously agreed to table the board compensation item at the Finance Committee. Other General Manager(GM)Employment Contract. Commissioner Smith advised committee members that a review of the GM's employment contract is needed in preparation for hiring a new GM. She also clarified that it has traditionally been the role of the Executive Committee to address such matters. Amy Cavanaugh explained that the work would be outsourced, as she will be out of the office and unable to personally address the matter. Brandie Ekren, Associate Attorney would be available to address questions and work with outside counsel. Ms. Cavanaugh also advised that she believes the Board needs a draft contract as a basis for negotiation. As such, the committee members were asked if there was a preference as to which law firm they prefer to work with regarding the employment contract? After brief discussion, the Finance Committee agreed that they would prefer to use a firm that they have dealt with in the past regarding such matters. In absence of Dick Peffley, Bill Cook was asked to direct General Counsel to review and provide a template of the GM employment contract on behalf of the Board of Commissioners. There being no further business, the meeting adjourned at 12:45 p.m. Respectfully submitted Semone M. James, Chair Finance Committee Board Mtg,Minutes July 24,2007 Page 10 of 44 Motion by Commissioner James, Commissioner Calkins, to receive the Finance Committee report as presented. Action: Carried unanimously. esolution 2007-7-2 EXECUTIVE COMMITTEE June 19, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 P.M. on Tuesday, June 19, 2007. Executive Committee 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, Robert Cochran, Santiago Rios and Robin Smith. Absent: None. Public Comment There were no public comments. General Manager Employment Contract Moved by Commissioner Calkins, seconded by Commissioner Rios, to go into closed session to discuss a privileged document received from Brandie Ekren, Associate Attorney protected by Open Meetings Act exemption MCL 15.268(h). (4:08 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Rios, and Smith. Nays: None Absent: None Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Rios, that the Executive Committee meeting return to open session. Carried unanimously. The Executive Committee meeting reconvened in open session at 5:20 p.m. Board Mtg.Minutes July 24,2007 Page 11 of 44 Commissioner Smith reported that the Executive Committee discussed parameters regarding the General Manager's contract. There being no further business, the meeting adjourned at 5:21 p.m. Respectfully submitted Robin M. Smith, Chair Executive Committee Motion by Commissioner James, seconded by Commissioner Rodocker, to receive the Executive Committee report as presented. Action: Carried unanimously. esolution 2007-7-3 COMMITTEE OF THE WHOLE June 19, 2007 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, June 19, 2007. Committee of the Whole Chair, Santiago 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, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioners Semone James and Robin Smith Public Comment There were no public comments. State of Michigan—Federal Surplus Assistance Program Sue Flores, Manager of Finance and Planning gave a brief overview of the State of Michigan—Federal Surplus Assistance Program. The overview noted that the Board of Water and Light (BWL) desire to purchase items through the State's program. As such, the BWL is required to seek Board approval for authorization of signature forms required by the State in order to continue participating in the program. The board resolution will name Bruce Cook, Purchasing Manager as the BWL's signed representative. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Committee of the Whole recommended that the State of Michigan—Federal Surplus Assistance Program resolution be moved to the full board for consideration. Board Mtg.Minutes July 24,2007 Page 12 of 44 Discussion: Commissioner Rios asked how extensive is the BWL's use in the State's program? Staff replied that the BWL has purchased$27,000 worth of goods over the past 3 years, which typically consists of cold weather items. The BWL has not made a recent purchase. However, staff continues to regularly review the list of items available for sale. It was also noted that there is no monetary cost to the BWL to participate in said program. Action: Carried unanimously. SAP Update Gennie Eva, Manager of Financial Services addressed several questions regarding the status of SAP and its future endeavors. Listed below is a synopsis of those responses. Q: Why does the BWL need the mainframe for an additional 31/2 years? A: The Customer Information System (CIS) is still on the mainframe and it may take longer to changeover. The mainframe lease will end at approximately the same time and the maintenance agreement is going to increase. The BWL will attempt to extend the maintenance agreement, as the SAP project took longer than expected. Q: If the Board gave direction to complete the work in 1'/2 year's could it be done? A: No Q: What are the impairments that make it impossible? A: Configuration. It took approximately 9-months for General Accounting and Materials Management to be configured with SAP. CIS is a much larger endeavor and the BWL does not have enough trained staff persons for the project. SAP can be configured in many different ways to tailor it to what is best for your business. It would be a large effort to get the system up and running for four (4) different utilities that are all billed differently with separate rate schedules. Q: Is it a correct observation to say that things are going pretty well? A: Yes. It is not perfect, as there are some enhancements and changes that staff would like to see implemented to increase efficiencies. Nevertheless, the work is getting done. There will be a dip in productivity because it is a new system and everyone will take longer to process the work. Hopefully, the employees have reached the bottom of the "dip" and are on their way up. Q: Are the obstacles listed in the presentation past obstacles? The obstacles in the presentation include: weak consultant guidance from finance lead, original unrealistic timeline, delays in hiring Project Manager, and unexpected configuration issues. A: The team consisted of three (3) parts that included Finance, Materials Management and Technical teams. The consultant for the finance lead was very knowledgeable about SAP but did not guide the BWL down the right path. As such, staff realized that some of the items had to be redone so that it would better suit the business needs of the BWL. Board Mtg.Minutes July 24,2007 Page 13 of 44 Q: Can it be assumed that SAP is better than the previous system? A: Yes. Its been said that after the 1"year colleagues will love the system and it will take the rest of the organization a couple of years to realize its benefits. Q: Are there things that the BWL should do now relative to staffing and training that would help the process? Would it help to have more resources in terms of staff training dollars? A: Harvey Briggs, Manager of Information Technology(IT) has already begun the process by budgeting to provide training for some of the IT staff. The BWL also intends to consult with SAP to get a list of training courses that they believe would be beneficial to take before the BWL starts the next SAP phase for budgeting and payroll. Q: From an infrastructure standpoint and based on the amount of this project, is the BWL doing what it should to implement the program in an efficient manner? Is the BWL doing the minimum or being aggressive? A: Denise Mulder, Director of Human Resources (HR) commented that she had previous experience implementing a portion of the SAP system that involved HR and payroll. As such, bringing in new staff from outside is of no use because one must configure the system to the way you want it to operate. The only way to accomplish those goals is with current staff and modules. Three staff members have been identified who would be available and able to assist with the program. Therefore, adding additional staff in HR would be of no benefit. SAP has given a list of training courses that would be exceedingly beneficial for HR to take before they start the process versus afterwards. Commissioner Cochran advised staff that if they would like to do something for the good of the company then the Board would be open to the idea. He also noted that the Board made a note to themselves to submit a modified budget to the city, which would include a contingency clause. Corporate Sponsorship Policy Mark Nixon, Communications Director reviewed the community sponsorship policy that essentially formalizes a currently existing practice. The policy and a request form (filled out by all organizations requesting a donation) would help define what is permissible relative to donations for nonprofit organizations in the community. Sponsorships may include acting as a program sponsor, providing in-kind services, or paying for a specific attribute of a program or event, such as advertising. Sponsorships and contributions shall be given to nonprofit organizations that benefit the greater Lansing area, but do not advance a religious or political viewpoint. The Board noted that they understood the policy but the verbiage located in the third sentence of the proposed resolution needs grammatical correction. After brief discussion, the Board took the following action: Board Mtg.Minutes July 24,2007 Page 14 of 44 On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole agreed to move the proposed resolution for the Community Sponsorship Policy to the full Board for consideration subject to grammatical changes. Action: Carried unanimously. Steam Utility Plan Jan Nelson, Principle Engineer presented an overview of the BWL Steam Utility Plan. The presentation contained information pertinent to an action plan requested by the Board of Commissioners that would address rate issues, cost reductions, service improvements, plant retirements and other viable options. Listed below are highlighted exerts from the presentation materials. Economic evaluation of"stay in business" options Option Primary Backup % Change % Change % Change % Change Steam Steam From Base From Base From Base From Base w/o Electric w/Electric w/o Electric w/Electric Sales Impact Sales Impact Sales Impact Sales Impact 20-Year 20-Year 5-Year 5-Year Analysis Analysis Analysis Analysis 1 Status Quo Moores Pk Moores Pk Base Base Base Base 2 Retire MP Eckert 1-3 Eckert4-6* -10.4 -1.0 -2.3 3.9 3 Retire MP Eckert 1-3 Eckert 4-6** -11.0 -2.1 -4.4 1.9 4 Retire MP Eckert 1-3 Gas Boiler -1.5 6.0 3.0 9.3 5 Retire MP Gas Boiler Eckert 1-3 41.7 44.4 29.1 31.0 6 Lay-up one Moores Pk Moores -2.4 -2.4 -3.4 -3.4 MP boiler Park/Eckert 1-3 7 Lay-up two Moores Pk Moores -2.8 -2.3 -3.7 -3.1 MP boilers Park/Eckert 1-3 8 Out of the Moores Pk Moores steam Park/Eckert business in 1-3 10 years 9 Partial Moores Pk Moores steam Park/Eckert system 1-3 =k Individual Present Value of Revenue **Headered Present Value of Revenue BWL Steam Utility Plan—Assumptions for a reduced steam system: • Assumed that 117 services cannot be converted togas • 35 other services are located along the steam mains that serve the non-convertible services Board Mtg.Minutes July 24,2007 Page 15 of 44 • Estimated cost to convert remaining 94 services is $3,100,000 • Total services reduced from 246 to 152 Economic evaluation to reduce steam system (20 year analysis): Option % Change From Base % Change From Base w/o Electric Sales w/Electric Sales Impact Impact 1 Status Quo Base Base 6 Lay-up one MP boiler -2.4 -2.4 9 Reduced steam system -6.7 -6.2 MP—Moores Park Conclusions regarding a reduced steam system: • Over the long term, this scenario is expected to have the lowest revenue requirements • In the short run, it is slightly better than a breakeven with the status quo • Based on the economic analysis, it is reasonable to move in the direction of a smaller steam system Getting out of the steam business: • Obligation to serve or convert customers • Under contract with GM for 10 years • Several buildings would be extremely difficult and costly to convert their heating source due to height, space limitations and lack of adequate gas supply • Same customers identified in the reduced steam utility scenario • Best scenario for an option to get out of the steam business would be to convert all but those that are impractical, build a gas boiler plant and seek a buyer Assumption for getting out of the steam business: • Convert customers to natural gas over next 5 years • Build a gas fired steam boiler plant in downtown Lansing • Serve non-convertible customers and existing customers on remaining steam lines until 2012 • Sell the downtown steam loop and boiler to a third party • Continue to provide steam to GM from Moores Park and Eckert until contract completion (end of 2017) Detailed evaluation to end the steam system (10 year analysis): Option % Change From % Change From Residual Base w/o Electric Base w/Electric Capital,$ Sales Impact Sales Impact (1,000) 1 Status.Quo Base Base --- 8 Curtail the steam -17.4 -14.0 $ 15,265 Board Mtg.Minutes July 24,2007 Page 16 of 44 business in 10 years Conclusions regarding getting out of the steam business: • Service ends to residential and commercial customers by 2012; industrial customers after 2017 • This option results in about $8,000,000 in savings ($800,000/yr) over the status quo (10 year analysis) • However, this option also has $15,000,000 in remaining debt service that would be written off or recovered in a sale to a third party: • This option may be feasible. However, it leaves steam customers in the most vulnerable state for future steam rates, reliability, and availability. • GM would be on their own for a thermal source after 2017 O&M Cost reduction strategies: • Continue to benchmark with other steam utilities • Steam main construction costs have been evaluated and are consistent with industry practice • Modify operating budget to lay-up one Moores Park boiler • Evaluated alternative cost allocations and A&G expenses • Reduced six year capital forecast for Moores Park by$5,000,000 from last year's forecast • Abandoned steam services and converted customers to another heating source in selected areas where it was not economic to provide continued steam service What about growing the steam business? • Steam Utility Market Plan indicates modest growth potential • Challenges for steam utility growth: o Limited service territory (Central District is approximately one square mile in size) o High construction costs (construction costs approximately$1,000-1,2000 per linear foot) o Price of steam compared to natural gas o Age infrastructure (steam main dates back to 1906) Rate increase strategy over the next 3-5 years included in the 6 year forecast: • Rate increase of 6.0% starting January 1, 2008 • Rate increase of 7.5% on January lst in each year for 2009 through 2013 • Results in a cumulative net loss of$4,100,000 over the period but with a positive cumulative cash flow of$8,5000,000 due to anticipated GM contract termination fees • BWL would work to achieve further cost savings throughout this period Recommendations for a 3 to 5 Year Steam Utility Plan: • Continue to maintain a steam utility • Continue to rely on Moores Park as primary steam source • Lay-up one Moores Park boiler initially • Continue to abandon selective steam mains and services Board Mtg.Minutes July 24,2007 Page 17 of 44 • Reevaluate Moores Park options as environmental regulations materialize, electric wholesale market changes and upon results of converting customers to another heating source • Continue to selectively market steam to new customers • Implement steam rate increases in accordance with the FY08 Financial Plan currently anticipated at: 6.0% beginning January 1, 2008 and 7.5% beginning January 1, 2009 • Continue to seek cost reduction strategies Benefits of the 3 to 5 Year Steam Utility Plan: • Provides a more stable and dependable service for all steam customers • Initial steam utility savings of over$900,000 per year • Provides a flexible strategy to seek additional savings in the future • Maintains steam supply flexibility • Continues to take advantage of the electric wholesale market • Provides risk mitigation for potential new environmental regulations • Short-term steam pricing competitive to natural gas Upon completion of the presentation, the Board discussed the steam utility plan and noted General Motors (GM) early contract termination fees have not been completely resolved. At present, GM has agreed with the plant 1 termination fee and the debt service balance on the steam line servicing plant 6. However, the rate of return guarantee for plant 6 is still in dispute. Payment for all three items is unlikely until fiscal year 2010 per contract. The Board also noted the lack of monetary calculations for savings on reduced maintenance costs associated with the options presented by staff. As such, the Board acknowledged that the steam utility plan is a work in progress and represents one of many scenarios that that the BWL is currently reviewing. Staff noted that they did not calculate the savings associated with reduced maintenance costs at this time. However, it was advised that changes in steam and chilled water allocation methods and reductions in operating costs allowed the BWL to develop a lower rate strategy that included laying up one boiler at Moores Park. Staff expects a savings of$135,000 over fiscal year 2007, identified an additional savings of$400,000 in administrative and general costs, and $265,000 in other cost allocations based on reduced sales. As a result of the changes, the 6-year capital forecast for Moores Park was reduced by$5,000,000. Staff reported that they are not asking the Board to take action at this time. Instead, they have brought forth scenarios to use as a comparison in deciding how best to address the steam utility. Other observations noted by staff include the following: • It would cost approximately $3,100,000 to remove 94 customers from the steam system, which is significantly higher than the cost to maintenance those same lines (costs estimates were not available at the time of the meeting). • The steam system will become smaller over time as major capital projects develop • Incremental maintenance on the steam system is on a per pound basis, prorated over the load amount • Lead way for the steam utility was made by reducing plant cost thereby, generating plant savings Board Mtg.Minutes July 24,2007 Page 18 of 44 • The BWL does not anticipate major steam maintenance issues over the next 10 year period • The BWL expects the price of natural gas to decrease based on data published by the Department of Energy • Consumers Energy does not have a well-structured gas distribution system in the downtown Lansing area • Phoenix project—Dick Peffley, Interim General Manager advised that there is a developer looking at the Triangle Property and Ottawa Station. As such, the City of Lansing may approach the BWL for a contribution to aid with the projects development. Mr. Peffley noted that if the project proceeds he would recommend that the client take steam, which would drastically change that utility in a positive manner. A recommendation regarding the project was made to their Board of Commission and the BWL expects a response by mid-August. The BWL has also worked on the possibility of removing the chillers and steam system from the building, as the client will need all of the space available. After further discussion, the Board expressed pleasure with the substantial progress made with the steam utility plan and noted support for a reformatted recommendation for the 3- 5 year plan to be presented at a future date. The Board also advised of the need to discuss the issue of cross subsidization relative to the utilities and customer base (residential and commercial) from a policy standpoint. They further noted adjustments to the presentation were needed that would include a financial analysis of the costs incurred to maintain the steam system, information relative to cross subsidization, and specific staff recommendations. Copies of the BWL Stearn Utility Plan dated June 19, 2007 are available in the Office of the Corporate Secretary. Tree Trimming Dick Peffley discussed recent tree trimming newspaper articles that appeared in the Lansing State Journal. In addition, a summary of the vegetation management contract and tree trimming recommendations made by the BWL Citizens Focus Group dated April 2007 were included in the Committee of the Whole meeting materials. Commissioner Graves acknowledged the information pertaining to the news articles but also noted that negative information can also be received from other sources. As such, Commissioner Graves asked how does the BWL monitor the tree-trimming program? Bill Cook, Senior Vice President of Operations noted that the BWL tracks every tree trimming complaint that it receives, which totals approximately 100 calls per fiscal year. An estimated eighty percent (80%) of the calls pertain to clean up. However, the BWL will send people to remove the debris and attempts to make every customer happy. The BWL monitors the contractor, Wright Tree Service (WTS) and has an employee that specifically follows the work and addresses issues as they arise. It was further noted that WTS is not paid if the BWL is not happy with the work performed (e.g. picking up brush Board Mtg.Minutes July 24,2007 Page 19 of 44 and the number of tree trims). The BWL also formed a Citizen's Focus Group to discuss the issues and make recommendations. Commissioner Graves noted that he has been traveling the past few weeks and have heard comments regarding WTS from other states. He went onto ask staff if the BWL is comfortable with its existing contractor? Mr. Peffley advised that WTS could have done a better job minimizing the complaints. The BWL have received some legitimate concerns regarding WTS but it is not enough to warrant terminating the contract at this time. It was noted that the contract was competitively bid and it ends December 2008. The BWL has met with WTS regarding various issues, which have been addressed, but their actions have not been preventative in nature. WTS should be self-motivated, as they are paid by the trim and not hourly. It was confirmed that WTS is currently working under its second three-year agreement. Commissioner Graves asked if the BWL has considered having more than one (1) contractor for said project. Typically, when there are two (2) contractors doing the same work then one can establish a baseline comparison against the other, which can be helpful leading up to the next contractual period. Mr. Peffley agreed with the sentiment and noted that the BWL will complete the aggressive tree trimming cycle by the expiration date of the contract. Once the contract expires the BWL will review all options, as they will not need as many tree trimming crews presently in place. For the first time ever, the BWL will work with the City of Lansing in completing a small aspect of the trim work. The project can also be used as a comparison to see how the City performs relative to WTS. The work with the City of Lansing will foster a better relationship with the BWL and as the WTS contract ends it is Mr. Peffley's recommendation that the BWL take a hard look at their options. It was confirmed that the contract is not exclusive. Therefore, the BWL could hire other contractors if they choose to do so, which is how the BWL obtained the city contract. It was also clarified that the contractor guarantee means that WTS is guaranteeing the service and that the trim meets specifications. If it does not then WTS has to go back and re-trim. In 2006, two thousand (2,000) trims were performed and forty-five (44) trees were removed, which represents a typical year for the BWL. The Board noted the sensitivity and highly visible nature of the topic and recommended sending a strong message to WTS indicating their level of displeasure. At this time, the attention is on the complaints that were received but does not address those who did not complain. As such, it was recommended that the BWL determine what the internal workforce could do and to also develop a proactive leadership position with accountability and very specific and direct consequences for not following established guidelines. It was further noted that the BWL faces image issues when contracting out work because may appear that the BWL does not care. Mark Nixon, Communications Director advised that the Citizens Advisory Group was formed out of complaints received regarding the Fairview area. As such, a variety of Board Mtg.Minutes July 24,2007 Page 20 of 44 persons were asked to sit on the advisory group and provide input regarding the tree- trimming program. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Committee of the Whole agreed to direct staff to develop a comprehensive plan that incorporates the concerns raised by the Committee of the Whole and the focus group to present to the Board of Commissioners for consideration. Action: Carried unanimously. Nomination Committee Commissioner Rios announced that each Commissioner indicated their officer and committee preferences. As such, Chair Smith established the Nominations Committee, which contains the following members: Gary Calkins—Committee Chair, Joseph Graves, Julee Rodocker and Robin Smith. The alternates are Robert Cochran and Sandra Zerkle. Other Granger Contract. Dick Peffley announced that the Granger contract, which is a 21-year deal worth$83,000,000, was signed. A great deal of positive publicity will surround the event, which allows the BWL to start with 6 megawatts (mW) with an option to purchase all future generation up to 12 mW. Once online, the BWL will be at the Renewable Portfolio Standards (RPS) rate of 2% slated for December 21, 2008. Assuming that 12 mW are available for the future then the BWL will be close to its 5% goal slated for the year 2012. In an effort to cultivate a large unveiling, the BWL contacted the governors office, received inquires from various politicians and will coordinate schedules with the Board of Commissioners and Granger to ensure their participation. BWL Staffing. Commissioner Zerkle reported that she met with Dick Peffley, Denise Mulder, and union representatives to discuss BWL staffing concerns. They had a very forward moving conversation that involved discussions about the possibility of increasing staff to accommodate tree trimming and other departments. It was noted that Mr. Peffley is putting together staffing ideas for the Board to review. General Manager Objectives. Commissioner Rios noted that the Executive Committee would like a recap of Mr. Peffley's major objectives that are incomplete so that they can begin to develop objectives for the new General Manager. The committee would also like Mr. Peffley's input as to the status of those projects and any suggestions that he may have in terms of priority items for the upcoming year. It will be extremely important for the Board to continue the good work that it has since begun. There being no further business, the meeting adjourned at 7:07 p.m. Respectfully submitted, Santiago Rios, Chair Committee of the Whole Board Mtg.Minutes July 24,2007 Page 21 of 44 Motion by Commissioner Zerkle, seconded by Commissioner Cochran to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolution 2007-7- EXECUTIVE COMMITTEE July 2, 2007 The Executive Committee of the Board of Water and Light met at the Executive Offices, Lansing,beginning at 12:10 p.m. on Monday, July 2, 2007. Executive Committee Chair, Robin Smith called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Santiago Rios and Robin Smith. Commissioner Semone James was also present. Absent: None Public Comment There were no public comments. General Manner Contract Discussion Moved by Commissioner Rios, seconded by Commissioner Cochran to go into closed session to discuss a privileged document received from Brandie Ekren, Associate Attorney and Melissa Jackson, Outside Counsel with Foster, Swift, Collins & Smith, P.C. protected by Open Meetings Act exemption MCL 15.268(h). (12:13 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, James, Rios, and Smith. Nays: None. Absent: None. Carried unanimously. Moved by Commissioner Rios, seconded by Commissioner Cochran that the Executive Committee returns to open session. Carried unanimously. The Executive Committee meeting reconvened in open session at 12:42 p.m. Board Mtg.Minutes July 24,2007 Page 22 of 44 On motion by Commissioner Cochran, seconded by Commissioner Calkins, to increase the salary amount offered to J. Peter Lark by $5,000 totaling $190,000 with clarification in regards pension benefits. Discussion: Commissioner Rios introduced a friendly amendment in response to three (3) items that Mr. Lark requested the Board consider relative to the General Manager's employment contract: 1) As a matter of policy, the Board of Commissioners will not consider a modification to the current benefit plan as the rates are based on employment start date, 2) based on Board discussion they would not extend a severance agreement, and 3) with respect to salary, the Executive Committee was authorized by the Board of Commissioners to negotiate a contract within the parameters of the salary range. He went onto note that he would support an offer of up to $190,000. Commissioner Cochran accepted the friendly amendment and after brief discussion the Executive Committee voted on the motion. Action: Carried unanimously. On motion by Commissioner Rios, seconded by Commissioner Calkins, that Commissioner Smith be authorized by the Executive Committee to contact J. Peter Lark as soon as possible to communicate the response to Mr. Lark's counteroffer. Discussion: The Executive Committee directed Associate Attorney Ekren to draft a letter regarding the committee's response to Mr. Lark's considerations. Commissioner Calkins noted that he would like to see if the Human Resource Department could revise the total rewards report to reflect current changes. Denise Mulder, Director of Human Resources advised that she would talk to Wendy Bradley and have said report forwarded to Corporate Secretary Jones and Associate Attorney Ekren. Commissioner Cochran introduced a friendly amendment to allow Commissioner Rios to attend the meeting with Commissioner Smith and Mr. Lark. Commissioner Rios accepted the friendly amendment and the Executive Committee voted on the motion. Action: Carried unanimously. There being no further business, the meeting adjourned at 12:53 p.m. Respectfully submitted, Robin M. Smith, Chair Executive Committee Board Mtg.Minutes July 24,2007 Page 23 of 44 Motion by Commissioner Rios, seconded by Commissioner James, to receive the Executive Committee report as presented. Action: Carried unanimously. esolution 2007-7- HUMAN RESOURCE COMMITTEE July 12,2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:10 p.m. on Tuesday, July 12, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, and Julee Rodocker(arrived at 4:23 p.m.). Absent: Commissioner Santiago Rios. Public Comment There were no public comments. HIPAA Updated Provisions and Certification Brandie Ekren, Associate Attorney gave a brief overview of the updates for the Health Insurance Portability Accountability Act of 1996 (HIPPA) provisions and certification. As such, she noted that the Lansing Board of Water and Light (BWL) converted to a completely self-funded benefit plan, and as a result of that conversion the BWL's responsibilities under HIPPA increased. It required the BWL to update its certification, plan previsions and policy documents, as it relates to HIPPA obligations for privacy and security. The resolution represents the Board of Commissioners adoption of the following: • HIPAA Privacy Policy • HIPAA Security Policy • HIPAA Privacy and Security Provisions and Certification Commissioner Cochran suggested staff note the word, "original" on the first revision to clarify whether or not it is an original, draft or a revision. On motion by Commissioner Cochran, seconded by Commissioner Graves, the Human Resource Committee agreed to forward the proposed resolution to the full Board for consideration at the next regular Board meeting scheduled for July 24, 2007. Action: Carried unanimously. Board Mtg.Minutes July 24,2007 Page 24 of 44 Internal Auditor Performance Objectives Susan Pifer, Director of Internal Audit advised that the Finance Committee approved the priorities for the Internal Audit Department (IAD) on May 8, 2007. The item was subsequently moved to the full Board for approval on May 22, 2007 as resolution number 2007-5-13. As such, the Chairs of the Board of Commissioners and Finance Committee asked that the priorities be presented to the Human Resource Committee in the form of performance factors. With that in mind, a high-level work plan was created for each priority with deliverables and an estimated timeline. Denise Mulder, Director of Human Resources commented that Board appointees were not on the same performance review cycle as the rest of the organization due to their respective hire dates. It was suggested that it might be beneficial on a go forward basis to review the Board's appointees on the same cycle, as the BWL, which is July lst. It would allow the appointees to be in the performance review system so that they fall inline with the rest of the organization in a timely manner. Commissioner Cochran noted that in speaking to the Finance Committee Chair it was suggested that Ms. Pifer develop a gant chart (or something similar) to represent the IAD's activities, beginning and end date, description of the task, and its completion status. The chart system would be a helpful tool for the Board of Commissioners to use as a benchmark and to also follow the progress of each respective project. Commissioner Cochran asked Ms. Pifer if the services of C.L. Moore & Associates have been retained through October 2007 in the IAD's budget? Ms. Pifer noted that Mr. Moore has been retained through the year-end process, which ends August 2007. It was clarified that the financial statements will be published October 2007, and she will be involved with that process. It was also noted that Ms. Pifer would complete her juris doctorate in August 2007, which would be a benefit at no cost to the Board. Commissioner Cochran noted that he did not see a need to report every two (2) weeks but he was unsure of what has since been completed and what is presently in the works. He asked for a report as to what items have been completed thus far. As a result, Ms. Pifer gave an update on the coal inventory, which is going very well. There was six (6) days of fieldwork with an intention to complete 6 more days within the next 2 weeks. The initial document request was made and has since been satisfied. The results of the coal inventory yearend evaluation were not complete but they should be received within a week. Ms. Pifer is currently working on fuel burn metrics that are used to ascertain the coal that came in the door and the kilowatt-hours generated as a result. The process is extremely complicated and she is working to further develop her understanding. It also advised that the internal control issues for coal have been addressed. Shipping documents are now being forwarded to the Accounting Department and the receivers sign off on the receiving documents, which was not previously Board Mtg.Minutes July 24,2007 Page 25 of 44 occurring. Ms. Pifer noted that she is now comfortable with the internal controls in place for the coal inventory. In addition, a significant amount of time was spent at the purchasing warehouse with the new Purchasing Manager to complete a physical count, as the cycle counts were incomplete. At the completion of the physical count, they determined that there was $13,000 in shrink on $9,500,000 worth of inventory, which equals approximately .13%. Plant &Moran was very satisfied with the results and the manager would like to implement the process on a quarterly or biannual basis. The Human Resource Committee expressed a desire to ensure that the IAD's objectives were broader in view so that they would encompass the organization as a whole in addition to financial matters. For example, internal controls should pertain to the internal control environment of the entire organization and not simply that of SAP. After further discussion, Susan Pifer noted that she would work with Denise Mulder in an attempt to shorten each objective, note the expected outcome, and proposed dates. The Board would receive monthly updates via a gant chart denoting the progress of each respective project. It was also advised that the audit plan would be comprehended in performance factors, which would reflect a broader view of the BWL as whole. The Human Resource Committee concurred with the direction and as such Ms. Pifer will proceed with the above. Other Amy Cavanaugh, General Counsel gave an overview of the concerns expressed by Brigham Smith, City Attorney, regarding the BWL's amended Rules of Procedure. It was advised that the two major points of concern pertain to the Board's ability to participate in meetings via teleconference and the ability to hire outside counsel. It was clarified that the approval process involves City Attorney's approval as to form and then its submission from the City Attorney to City Council for final approval. After lengthy discussion, the Human Resource Committee expressed concern with the position that the City Attorney has taken regarding the BWL's amended Rules of Procedure. It was suggested that the Board of Commissioners write a letter to the Mayor and City Council expressing their opinion and desire to resolve said issues in light of the City Attorney's position and the length of time taken to approve said amendments. There being no further business, the meeting adjourned at 4:51 p.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner Rodocker, seconded by Commissioner Zerkle, to receive the Human Resource Committee report as presented. Board Mtg.Minutes July 24,2007 Page 26 of 44 Action: Carried unanimously. esolution NOMINATING COMMITTEE COMMITTEE July 17, 2007 The Nominating Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 5:15 p.m. on Tuesday, July 17, 2007. Nominating Committee Chair, Gary Calkins called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Joseph Graves, and Julee Rodocker. Commissioner Robert Cochran was also present as an alternate. Absent: Commissioner Robin Smith. Public Comment There were no public comments. Nominate Board Officer Candidates for FY2008 The Nominating Committee met to review Commissioner survey responses for consideration of Board officer nominations for fiscal year 2008. As such, Commissioner Calkins confirmed with the committee members that they knew of no other interested parties aside from the ones noted on the survey response forms. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Nominating Committee recommends the following slate of officer candidates for Fiscal Year 2007-08: Chair: Santiago Rios Vice Chair: Semone James Action: Carried unanimously. There being no further business, the meeting adjourned at 5:16 p.m. Respectfully submitted, Gary Calkins, Chair Nominating Committee Motion by Commissioner Calkins, seconded by Commissioner Cochran, to receive the Nominating Committee report as presented, which includes the slate of officers. Board Mtg.Minutes July 24,2007 Page 27 of 44 Discussion: It was verified by Commissioner Smith that there were no nominations from the floor for the office of Chair and Vice Chair respectively. Action: Carried unanimously. esolution 2007-7- COMMITTEE OF THE WHOLE July 17, 2007 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, July 17, 2007. Committee of the Whole Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins, Robert Cochran, Semone James, Julee Rodocker, Santiago Rios and Sandra Zerkle. Absent: Commissioners Joseph Graves and Robin Smith. Public Comment Joseph Davis, Business Manager of IBEW Local 352, welcomed new General Manager (GM), J. Peter Lark to the Board of Water and Light (BWL). He found the July 171h staff meeting and the new GM very interesting. Mr. Davis advised that in the past, he has gone on record saying that he hopes the BWL can make some changes throughout the organization. He also commented that the bargaining unit would play a very important role as the BWL moves forward. It was noted that the bargaining unit and management will not always see eye to eye but it is important to keep an eye on the prize, which is making the BWL a good place to work, do business, and serve the community. Mr. Davis notified the Board of the bargaining units new slate of officers that include the following: President Dolores Appling, Vice President Leslie Granell, Financial Secretary Lisa Ryan, and Executive Board Member, Dwayne Williams. Commissioner Rios formally welcomed J. Peter Lark to the BWL. It was noted that the Board looks forward to a long-standing relationship that will positively impact the community and allow them to reach higher levels of outstanding performance. The BWL has broken several records and has been nationally recognized as one of the premier public utilities in the country. The reason behind its success is the outstanding employees and people that are dedicated to their jobs, the organization, and fellow co-workers. It was further advised that the Board is here to provide advice and counsel as Mr. Lark sees fit and to also ensure that adequate resources are provided to both he and staff. Energy Policy Act of 2005—Amendments to PURPA Sue Warren, Marketing Specialist noted that the Energy Policy Act of 2005 — Amendments to PURPA have been brought before the Board on several occasions. In part, the act requires non-regulated electric utilities to consider smart metering and Board Mtg.Minutes July 24,2007 Page 28 of 44 interconnection standards. As such, a public hearing was held and recommendations to the Board regarding said items were made. Commissioner Cochran advised that a lot of attention was paid to industrial and commercial customers. However, he went onto ask if consideration has been given regarding the installation of smart metering on residential homes? Ms. Warren noted that there are utility's that have successfully implemented a smart metering pay as a go system for residential customers. The BWL has not looked at the technology but it continues to rapidly change. As a result, staff would like to report back to the Board on this topic in approximately one year, as 85% of the BWL's customer base is residential. Commissioner Cochran also reported that he attended a seminar on rates hosted by the American Public Power Association (APPA). At said time, he received information regarding smart metering systems and offered to share it with Ms. Warren. On motion by Commissioner Cochran, seconded by Commissioner James, the Committee of the Whole agreed to move both proposed resolutions for the Determination of Smart Metering Standard and the Determination of Interconnection Standard to the full Board for consideration at the next Board meeting scheduled for July 24, 2007. Action: Carried unanimously. Easement Exchange with A Winning Point,LLC Brandie Ekren, Associate Attorney noted that the BWL has an existing easement and would like to release said easement with A Winning Pointe, LLC (grantor) in exchange for a new easement located on the same parcel (111 E. Saginaw Street, East Lansing, Michigan). The BWL is requesting that the grantor grant its easement prior to preceding any further with said project. The proposed resolution included in the Committee of the Whole meeting materials authorizes the General Manager to proceed accordingly. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole agreed to forward the Easement Exchange with A Winning Pointe, LLC resolution to the full Board for consideration at the next regular Board meeting scheduled for July 24, 2007. Action: Carried unanimously. Corporate Balanced Scorecard Sue Flores, Manager of Finance and Planning reported that for the last three years the BWL has used a performance management measurement program known as the Corporate Balanced Scorecard (CBS). The CBS allow employees to focus their attention on eight measures in four different categories that include financial performance, customer service, operational excellence, and people excellence. Staff benchmarks Board Mtg.Minutes July 24,2007 Page 29 of 44 measures and targets every other year by reviewing other organizations, BWL historical performance, and industry standards. Team leader Steve Brennan, Manager of Production Support noted the minimal changes for 2007-08, which includes the following: • All measures remained the same • Added $/Ton-hrs to commodity costing • Updated Targets: o Increased Target—Speed of Answer, SIR, CAIDI o Stayed the same—Meters Read, New Services Installed, Breaker Actions, Fly Ash Sold, Variances, Training o Lowered—Availability(Erickson Outage) J. Peter Lark, General Manager, has not had opportunity to review and comment on said measures. Therefore, it was deemed appropriate to allow him time to review the Corporate Balanced Scorecard and bring the item forth at a later date. Sparrow Foundation Proposal The BWL previously received four sponsorship options from The Sparrow Foundation in exploring the possibility of giving a legacy gift to the new Sparrow Hospital wing. Mark Nixon, Communications Director advised that he received two additional sponsorship options on July 16, 2007. As a result, copies of the additional information were handed out during the meeting and Mr. Nixon advised that clarification regarding the medical oncology center option is needed to help further assess the options. Commissioner Rios noted that during a previous meeting everyone seemed to be positively inclined to enter into a relationship with The Sparrow Foundation, which included a review of the various options and the development of a plan to proceed accordingly. However, there are issues that need to be addressed, which include the following: 1) obtain the General Manager's viewpoint, 2) determine adequate project funding, and 3) decide how the project should be legally constructed to prevent future problems. These are questions/issues that the BWL needs to address prior to reviewing a specific recommendation. After further discussion, it was noted that there is flexibility in what the BWL decides to do, as The Sparrow Foundation is amendable to working with the BWL. Developing a partnership with Sparrow also allows the BWL positive exposure and opportunity to market the community. It was further noted that Mr. Nixon would continue to work with The Sparrow Foundation and General Counsel to determine what options are still available to the BWL and in addressing the above questions. Mr. Lark will review the project and provide an opinion regarding said options including that of the monetary contribution. Mr. Nixon will arrange a tour of the new Sparrow hospital wing for both Mr. Lark and Commissioner Cochran. In addition, it was suggested that the information including responses to the above questions be returned to the Commissioners prior to the next regular Board meeting scheduled for July 24, 2007. Board Mtg.Minutes July 24,2007 Page 30 of 44 Rules of Administrative Procedure Update The Board acknowledged that they had received information from Brigham Smith, City Attorney and former General Counsel, Amy Cavanaugh, which discussed the various issues that Mr. Smith expressed regarding the Board of Commissioners' amended Rules of Administrative Procedure. There were many minor changes and two significant items, which involved the Board's ability to participant in meetings via teleconference and their ability to directly hire outside counsel. Mr. Smith was unable to attend the Committee of the Whole meeting. However, he advised that he could attend the next Board meeting on July 24, 2007 to discuss said issues. It was noted that the BWL Rules of Administrative Procedure were last approved by City Council in 1991. However, the Board was operating under the belief that the last prior approval was approximately two years ago. The committee asked Mr. Lark to review the documents and provide input. In addition, Brandie Ekren was directed to contact Mr. Smith in an effort to raise the Board's concerns and provide clarity regarding the rules that he is citing relevant to the procedures. Commissioner Cochran noted that it is cumbersome for him to review the changes to the procedures due to the notations printed on the side of the document. As a result, Commissioner Rios suggested that staff provide a mark up and a clean copy to enhance the understanding of what changes were made the materials. General Manager's Goals and Objectives Dick Peffley was asked to provide a list of the goals and objectives that he worked on as Interim General Manager, as well as a list of suggestions for the new General Manager. As such, Mr. Peffley was thanked for submitting the list and Commissioner Rios recommended that each Commissioner submit any additions or changes to Corporate Secretary Jones so that a list maybe compiled for review. Once the list is complete, it will be sent to Mr. Lark to allow for review and a compilation of proposed objectives. Further Board discussion regarding the General Manager's goals and objectives will take place at the next Committee of the Whole meeting scheduled for August 21, 2007. Interim General Manager's Performance Update The Commissioners agreed that Dick Peffley took on a tremendous responsibility at a time when the BWL was going through a serious transition period. He did an excellent job of maintaining the organization and moving it forward especially in terms of the financial picture, employee morale, and positive relationship changes. Despite some rocky moments gratitude is extended to Mr. Peffley for all of the work he has done. The Board is excited about his continued involvement at the BWL and it is believed that Mr. Peffley's contributions will continue to be very important. Furthermore, it was noted that Mr. Peffley fixed two additional problems, which were mistrust of the data being brought forward to the Board and a returned sense of humor. In addition, it was advised that Mr. Peffley is a good leader, man and asset to the organization. Mr. Peffley advised that it was a tough road but he hopes that the company is better now than before. He looks forward to working with Mr. Lark and continuing to provide Board Mtg.Minutes July 24,2007 Page 31 of 44 support in whatever manner is needed. Mr. Peffley went onto thank the employees, executive staff, and the Board of Commissioners for their support. Mr. Lark noted that Mr. Peffley took him on a tour of the plants during the interview process for the General Manager position. It was impressive that everyone liked Mr. Peffley, which is a dynamic that he himself would also like to bring to the BWL. Mr. Lark went onto note that he visited the site of a water main break in Lansing. It was interesting to see the process but it more interesting to note Mr. Peffley's presence and to still see him onsite later the same evening. The employees respect Mr. Peffley, and Mr. Lark trusts and agrees with the Commissioners in that he has a great job. Other APPA National Conference. Commissioner Rios advised that the Commissioners recently attended the national convention for the American Public Power Association (APPA) in San Antonio, Texas. As such, several Commissioners picked up various presentations in written form and also took notes pertaining to different topics. He asked that all of the Commissioners submit their presentation materials to Corporate Secretary Jones so that a catalog of those items can be developed as a resource book. Two—three copies of said information would be available to staff for review if needed or so desired. The Commissioners also advised that the conference presentation materials can be downloaded to disk from APPA's website once available. General Manager's Contract. Brandie Ekren noted that while Mr. Lark was reviewing his benefit package, he noted that the defined contribution account would not begin until a 6-month probationary period had ended. In developing the total rewards package, a probationary period had not been considered, as that would have significantly changed the total rewards amount. In speaking to Commissioners Rios and Smith, it was determined that it would be feasible to clarify that Mr. Lark does not have a probationary period due to the nature of his contract and the employment offer previously presented. Ms. Ekren met with Denise Mulder, Human Resource Director and Darold Oxender, Benefits Administrator who were in the process of communicating to Prudential that Mr. Lark does not have a probationary period in the context of his contract. In addition, Ms. Mulder confirmed that Prudential has implemented the change. On motion by Commissioner Calkins, seconded by Commissioner Cochran, that the Board of Commissioners did not intend a probationary period for the General Manager. Action: Carried unanimously. There being no further business, the meeting adjourned at 6:20 p.m. Respectfully submitted, Santiago Rios, Chair Committee of the Whole Board Mtg.Minutes July 24,2007 Page 32 of 44 Motion by Commissioner Rios, seconded by Commissioner Calkins, to receive the Committee of the Whole report as presented. Action: Carried unanimously. Commissioner Rios assumed the role of Glair,as Commissioner•Sntith departed the meeting at 5:52 p.m. due to another obligation. MANAGER'S RECOMMENDATIONS esolution 2007-7- A. State of Michigan—Federal Surplus Assistance Program WHEREAS, the Board of Water and Light, from time to time desires to purchase items through the State of Michigan Federal Surplus Assistance Program; and, WHEREAS, the State of Michigan requires a resolution to be adopted by the governing body of a participating entity, designating a coordinator as Surplus Property Donee and Custodian, to be responsible for the acceptance and accountability and authorized to sign for surplus property, and, WHEREAS, in the past the individual designated as the Donee and Custodian has been the Manager of Material Services Management; and, WHEREAS, Bruce Cook currently holds the position of Manager of Material Services Management. RESOLVED, that the Board Chair and Corporate Secretary are hereby authorized to sign the State of Michigan Federal Surplus Assistance Program Form, designating Bruce Cook as the Surplus Property Donee and Custodian. -------------------- Staff Comments: From time to time the Board of Water and Light desires to purchase items through the State of Michigan's Federal Surplus program for certain items at a substantial savings. Staff is requesting the Board's approval for authorization of signature on the forms required by the State to continue participating in this program. Forms are attached for review. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-7-8 for the State of Michigan—Federal Surplus Assistance Program. Action: Carried unanimously. esolution 2007-7- B. Community Sponsorship Policy Board Mtg.Minutes July 24,2007 Page 33 of 44 The Board of Commissioners believes it is vital for the Lansing Board of Water&Light to be an active partner with the community it serves by sponsoring events, programs, and activities that contribute to t his community's quality of life. Sponsorships may include acting as a program sponsor, providing in-kind services, or paying for a specific attribute of a program or event, such as advertising. Sponsorships and contributions are meant to support nonprofit organizations that benefit the greater Lansing area. Sponsorships and contributions shall be limited to events, programs, and activities that do not advance a religious or political viewpoint. The General Manager shall have the authority to establish and direct a community donations committee to carry out this policy. RESOLVED, that the Lansing Board of Water& Light's Board of Commissioners adopt this Community Sponsorship Policy in recognition that part of this public utility's mission is to serve the mid-Michigan community through various sponsorships, as described. -------------------- Staff'Comments: The Board of Water & Light has a sustained, proud history of making donations —monetary, materials, and in-kind services—to area non-profit organizations. -------------------- Motion by Commissioner Cochran, seconded by Commissioner Rodocker, to adopt Resolution 2007-7-9 for the Community Sponsorship Policy. Discussion: Commissioner Rios verified that the resolution was the revised version previously requested. He then proceeded to comment that it was gratifying to see that they are affecting many lives in the community and that the BWL takes an interest in other organizations work. The organizations work is important to the BWL as a community, and most of the individuals are BWL customers. Commissioner Rios also advised Mark Nixon that he realizes the community efforts are time consuming. As a result, they may need to determine how to continue their efforts so that it does not take as much of Mr. Nixon's time so that he may delve into other efforts that are also important to the BWL. Commissioner Rios further complimented Mr. Nixon and staff for a job well done. Commissioner Cochran noted that he was equally impressed regarding the breadth of the list, and apparently they have been busier than he realized. He also advised that Mr. Nixon should ensure that this kind of information gets out, as he had no idea of the level of activity prior to receiving the report. Action: Carried unanimously. esolution 2007-7-I C. HIPAA Privacy and Security Provisions and Certification Board Mtg.Minutes July 24,2007 Page 34 of 44 RESOLVED, that the Board of Commissioners hereby adopt the Health Insurance Portability Accountability Act (HIPAA) Privacy and Security Provisions and Certification for the Lansing Board of Water and Light Group Health Plan, as attached hereto. FURTHER RESOLVED, the Board of Commissioners hereby adopts the Lansing Board of Water and Light HIPAA Privacy Policy, as attached hereto. FURTHER RESOLVED, the Board of Commissioners hereby adopts the Lansing Board of Water and Light HIPAA Security Policy, as attached hereto. -------------------- Staff Comments: In July of 2006, the BWL converted from a fully insured to self-funded arrangement for the group health plan (which includes Health, Dental, Prescription Drug, and Medical Reimbursement.) As a result, the BWL's privacy and security obligations for HIPAA required the adoption of specific provisions and certification for the group health plan. For your consideration and eventual adoption are three documents: 1. Lansing Board of Water and Light HIPAA Privacy Policy 2. Lansing Board of Water and Light HIPAA Security Policy 3. Lansing Board of Water and Light Group Health Plan HIPAA Privacy and Security Provisions and Certification -------------------- Motion by Commissioner Rodocker, seconded by Commissioner Cochran, to adopt Resolution 2007-7-10 for the HIPAA Privacy and Security Provisions and Certification. Action: Carried unanimously. esolution 2007-7-11 D. Determination of Smart Metering Standard WHEREAS, the Energy Policy Act of 2005 (EPAct 2005) amended the Public Utility Regulatory Policies Act of 1978 (PURPA) requiring covered utilities to consider adopting five new standards; and WHEREAS, the EPAct 2005 amendments to PURPA require covered utilities to begin consideration of the first two standards, Smart Metering and Interconnection, by August 8, 2006, with a public hearing and a determination made by August 8, 2007; and WHEREAS, the Board of Water and Light of the City of Lansing, Michigan (BWL), with electric retail sales in excess of 500 million kWh meets the definition of a non-regulated covered utility; and Board Mtg.Minutes July 24,2007 Page 35 of 44 WHEREAS, the governing boards of non-regulated covered utilities are required to consider implementing the standards; and WHEREAS, the governing board of the Board of Water and Light has conducted a public hearing to obtain comments on Smart Metering and Interconnection on March 27, 2007. NOW, THEREFORE, BE IT RESOLVED, that the Board of Commissioners for the Board of Water and Light of the City of Lansing, Michigan, determines that a Smart Metering Standard beyond that already in use for Time-of-Use Pricing is not in the best interest of its customers at this time. However, the General Manager is directed to: 1. Continue to monitor the market for new Smart Metering programs and technologies that would benefit both our customers and meet BWL financial investment requirements. 2. Evaluate the potential for a Critical Peak Pricing and/or Real Time Pricing rate structure that might be appropriate for our customers. Evaluation should include survey of customer interest and a cost/benefit analysis. 3. Revisit the current Scheduled Curtailment/Interruptible Service Rider and revise as needed to ensure the parameters are applicable for our current customer base and today's market conditions. 4. Provide the Board of Commissioners with an update on the above by May 1, 2008. -------------------- Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-7-11 for the Determination of Smart Metering Standard. Action: Carried unanimously. esolution 2007-7-12 E. Determination of Interconnection Standard WHEREAS, the Energy Policy Act of 2005 (EPAct 2005) amended the Public Utility Regulatory Policies Act of 1978 (PURPA) requiring covered utilities to consider adopting five new standards; and WHEREAS, the EPAct 2005 amendments to PURPA require covered utilities to begin consideration of the first two standards, Smart Metering and Interconnection, by August 8, 2006, with a public hearing and a determination made by August 8, 2007; and WHEREAS, the Board of Water and Light of the City of Lansing, Michigan (BWL), with electric retail sales in excess of 500 million kWh meets the definition of a non-regulated covered utility; and Board Mtg.Minutes July 24,2007 Page 36 of 44 WHEREAS, the governing boards of non-regulated covered utilities are required to consider implementing the standards; and WHEREAS, the governing board of the Board of Water and Light has conducted a public hearing to obtain comments on Smart Metering and Interconnection on March 27, 2007. NOW, THEREFORE,BE IT RESOLVED, that the Board of Commissioners for the Board of Water and Light of the City of Lansing, Michigan, determines that the current BWL Interconnection Standard shall be modified to ensure that: 1. IEEE 1547 standard is explicitly referenced. 2. The Michigan Public Service Commission model is used as a basis in formalizing the process. 3. A formal procedure including an application process and fees/charges is used. 4. The name of"Parallel Power Sources"is changed to "Interconnection for Distribution Generators" in the Rules and Regulations for Electric Service. 5. That the above is ready for adoption in May 2008 as part of the FY09 Rules and Regulations for Electric Service. -------------------- Motion by Commissioner Cochran, seconded by Calkins, to adopt Resolution 2007-7-12 for the Determination of Interconnection Standard. Action: Carried unanimously. esolution 2007-7-13 F. Consideration of Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency Standards as Required by the Energy Policy Act of 2005 RESOLVED, that the Lansing Board of Water and Light will commence consideration of the Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency standards referenced in the Energy Policy Act of 2005 before August 8, 2007; and FURTHER RESOLVED, that the Lansing Board of Water and Light shall hold a public hearing to accept public comment on the Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency standards, to be scheduled in March 2008. -------------------- Sta Comments: The Energy Policy Act of 2005 (EPAct05) amended Title I of the Public Utility Regulatory Policies Act of 1978 to require state regulatory agencies and covered non-regulated electric utilities (including municipal utilities with annual retail Board Mtg.Minutes July 24,2007 Page 37 of 44 sales of 500 million kWh or more, including the LBWL) to formally consider whether to adopt five new federal standards. The five new federal standards are: net metering, fuel diversity, fossil fuel efficiency, smart metering, and interconnection. EPAct05 specifies that a decision whether to adopt net metering, fuel diversity, fossil fuel generation efficiency standards must be made by August 8, 2008. The Resource and System Planning department of the LBWL will begin evaluating these standards before August 8, 2007, and will gain further insight from the public hearing to be held in March 2008. After the public hearing, but before August 8, 2008, Staff will bring a recommendation to the Board regarding whether to adopt the federal standards for net metering, fuel diversity, fossil fuel generation efficiency. -------------------- Motion by Commissioner James, seconded by Commissioner Rodocker, to adopt Resolution 2007-7-13 for the Consideration of Net Metering, Fuel Diversity and Fossil Fuel Generation Efficiency Standards as Required by the Energy Policy Act of 2005. Action: Carried unanimously. esolution 2007-7-1 G. Easement Exchange with A Winning Pointe,LLC RESOLVED, that the Board of Commissioners hereby authorizes the General Manager to release its Existing Easement (Attachment A) with A Winning Pointe, LLC in exchange for a new easement (Attachment B) granted by A Winning Pointe, LLC, which shall be located on the same parcel. -------------------- Staff Coinments: The Lansing Board of Water & Light (BWL) has an easement (Liber 1203, Page 663 [BWL#3302 07 3006]) for its utility operations located at 111 E. Saginaw Street, East Lansing, Michigan, hereinafter referred to as "Existing Easement". The fee owner and successor grantor is A Winning Pointe, LLC, hereinafter referred to as "Grantor". Currently, the BWL does not utilize the Existing Easement and would like to relocate its facilities to another location on Grantor's property. Additionally, the Grantor would like to construct its own building within the Existing Easement area. The BWL and the Grantor would like to resolve their needs by exchanging easement interest. Therefore, it is requested that the Board of Commissioners authorize the release of its Existing Easement in exchange for a new easement of the same square footage on the same property that will meet the operational needs. The release would only occur after full execution and recording of the new easement document. -------------------- Board Mtg.Minutes July 24,2007 Page 38 of 44 Motion by Commissioner Zerkle, seconded by Commissioner Calkins, to adopt Resolution 2007-7-15 for the Easement Exchange with A Winning Pointe, LLC. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS Sparrow Foundation Update. Commissioner Rios announced that during the last Committee of the Whole meeting, the committee had lengthy discussion regarding the Sparrow Foundation proposal. The foundation proposed that the BWL enter into a relationship with Sparrow Foundation for the purpose of supporting their efforts. The partnership would give the BWL significant exposure in terms of a naming opportunity at Sparrow Hospital. BWL General Manager, J. Peter Lark was asked to arrange a visit with Sparrow leadership at the facility, and subsequent to the Committee of the Whole meeting, Mark Nixon completed extensive work with the foundation in developing several different options. Mr. Lark noted that he and Mr. Nixon toured the facility on July 23, 2007. As such, Mr. Lark was very impressed with the hospital and its efforts. The BWL and Sparrow Hospital are two great non-profit entities both serving the public good, which is in some ways the very fabric of the community. Therefore, anything they can do to help and assist is very positive and provides favorable exposure for the BWL. The project is favorable to the extent that the BWL can be a part of what is clearly a great effort for people of the entire area, more particularly City of Lansing residents. Mr. Lark also clarified that he did not have a specific recommendation at this time. The hospital outlined some good options; however, they are not ready to decide what part of the facility they should contribute to or have exposure at. There were some suggestions that the BWL give a significant sum upwards of$500,000. However, in review it would seem appropriate that the BWL should be at some level less than that amount. The naming rights and exposure value appears equally as great at $250,000 as it would be at $500,000. Therefore, Mr. Lark noted that they should look at the lesser of the two amounts and perhaps consider spreading it out over a number of years. It is also recommended that the contribution come from somewhere other than BWL revenues generated from the sale of electricity, water, chilled water and steam. There are fundraising efforts that they might be able to consider in the future and some that they have employed in the past. It is Mr. Lark's suggestion that they determine whether or not the BWL is able to generate enough charitable contributions to donate to the Sparrow Foundation. Commissioner Rios advised that he and Mr. Nixon had initial conversations with Lupe Izzo who is very much committed to the process. If the BWL enters into an agreement, Tom and Lupe Izzo have committed to assisting the BWL with additional to help meet or Board Mtg.Minutes July 24,2007 Page 39 of 44 exceed the commitment. Commissioner Rios also confirmed that minimum naming rights would involve a$250,000 commitment. On motion by Commissioner Rios, seconded by Commissioner James, that the Board of Commissioners direct the General Manager to pursue an opportunity as presented by Sparrow Foundation to make a significant contribution that would give the BWL naming rights at that facility; and at the same time incorporate into that an understanding with Sparrow that this would be a commitment over a period of years; and that Sparrow would commit to assisting the BWL in engaging in fundraising efforts for the BWL to meet this commitment. In addition, the motion also includes that this be reviewed annually by the Board of Commissioners to determine where they are and make any adjustments necessary on a yearly basis depending on the timeframe staff recommends. Discussion: Commissioner Calkins advised that it would be beneficial if there were ways to involve the community in the donation process by way of a matching program or something of that nature. Mr. Lark noted that he failed to mention community involvement but there are ways in which the BWL can successfully do it. Right now they are optimistically cautious but he thinks that this is something that could be done and would help improve the entire City of Lansing. In addition, it could be done favorably so that the BWL can contribute what appears to be a large amount from contributions engendered from others and not revenues. Commissioner James advised that if they are looking at other possible contribution amounts then she is so inclined to look at the $500,000 contribution level at perhaps over a longer period of time. After further discussion, it was determined that Mr. Lark and Mr. Nixon would develop a specific plan that helps to ensure that the BWL could achieve its contribution goals. In addition, it was noted that the plan may need to contain language that speaks to binding future boards, and it should also be reviewed on an annual basis. Action: Carried unanimously. RESOLUTIONS esolution 2007-7-1 GENERAL MANAGER CONTRACT CLARITY WHEREAS, the Board of Commissioners have appointed J. Peter Lark as Director and General Manager of the Lansing Board of Water and Light. WHEREAS, the Board of Commissioners have entered into a one year employment agreement, dated July 16, 2007, with J. Peter Lark for his services as Director and General manager of the Lansing Board of Water and Light. Board Mtg.Minutes July 24,2007 Page 40 of 44 RESOLVED, as a point of clarity, the employment agreement between the Board of Commissioners and J. Peter Lark does not include a"probationary period". -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-7-15 for the General Manager Contract Clarity. Action: Carried unanimously. MANAGER'S REMARKS Dick Peffley, Director of Production and Interim Director of Operations noted that they gave out five general manager awards to BWL employees who played a key role in the conversion to western fuel at Erickson Station. The project has proved to be very successful with an annual fuel savings to customers of$9,000,000 and lower nitrogen oxide and sulfur rates. The employees worked continuously but were not eligible for overtime. They instead received the general manager award, a$1,000 bonus, and lunch at the University Club. Mr. Peffley will request that Mr. Nixon write an article on the employees relative to the project and its success. J. Peter Lark commented on the strength of the BWL and the positive spirit and deep abiding allegiance that employees display regarding their work. He has been very impressed with the workforce, and now thinks they have a workforce in place that can move forward and accomplish some goals. In addition, two persons have been hired. One is Susan Devan, Chief Financial Officer and the other is George Stojic, Director of Strategic Planning and Development. Ms. Devan is scheduled to begin work at the BWL on August 6, 2007. She was the Chief Regulator with the Michigan Public Service Commission (MPSC) for all utilities in Michigan (except municipalities). She is a certified public account and has done this type of work with large utility companies for approximately 28 years. Very versed in accounting and utility accounting, Ms. Devan is also a member of the National Research Regulatory Institute and has presented her work to the Michigan Municipal Electric Association. In addition to national speaking engagements, she is very well known by utility persons in the State of Michigan and has a favorable reputation. Ms. Devan is also extraordinarily nice, which is one of the qualities Mr. Lark seeks when hiring people. The second newly hired individual is George Stojic, Director of Strategic Planning and Development. Mr. Stojic was instrumental in the development of the State of Michigan 21s'Century Energy Plan. He is a highly respected individual and was indispensable to Mr. Lark while at the MPSC. It is good to have someone that is conversant with energy efficiency (i.e. renewable portfolio standards) and mercury rules. Mr. Lark has setup a meeting with the Department of Environmental Quality, BWL staff, and himself to discuss some of the issues surrounding the mercury rules. He went onto note that he believes they would need someone who can look at these issues and decide where to go Board Mtg.Minutes July 24,2007 Page 41 of 44 and Mr. Stojic will bring that knowledge to the BWL. In addition, Mr. Lark will have Mr. Stojic look at water development for potential expansion. He is also very nice individual and has a gift for being extremely credible, which in going forward will be a tremendous asset to the BWL. COMMISSIONERS' REMARKS Commissioner Calkins made remarks, as he anticipates that the July Board meeting will be the last that he attends in a Commissioner capacity. He went onto to note that he has enjoyed being a Commissioner. He has learned a lot and it was very enjoyable. The BWL is blessed with a lot of very nice people, and all that he has run into he has enjoyed. In addition, he enjoyed challenging some of the board members on different issues and he will continue to watch and see how they perform. The Commissioners noted that they have also enjoyed working with Commissioner Calkins as well and he will be missed. Commissioner Rios added that he would reserve his comments until Commissioner Calkins is really going away, as he maybe with the Board longer than he thinks. He further advised that Commissioner Smith is an incredibly busy person with a loud voice in the community and she had to leave for something else that is very important. Commissioner Rios also noted for the record that he has enjoyed serving on the Board under Commissioner Smith's leadership. He thinks much has been accomplished and he is humbled by the election to the Chair position because he knows that it is not an easy job. There is a lot of responsibility associated with it and it is not always easy to respond to things when this is not one's full time job. There are a lot of other distractions and sometimes it becomes an almost impossible task to keep up with everything that is going on while also providing leadership. However, he promised that he would work very hard to do just that and hopes that he can meet the high standard that Commissioner Smith has established for the Board. He knows that she hopes to continue to serve on the Board of Commissioners and he hopes that she does because she has done a tremendous job. He went onto advise that he hopes they have the opportunity to publicly thank both Commissioners Calkins and Smith. Commissioner Rios expressed heartfelt thanks to Dick Peffley for his service as Interim General Manager. It was a rocky road, yet he seemed to smooth out most of it and get a lot of things done, which is very admirable. The BWL was going through a difficult transition and like it or not they live in a political world and everybody has an opinion. They have seen a lot of discussion and debate, as to what they should or should not do but one thing has always been certain, the BWL has consistently done a fantastic job. Commissioner Rios explained that it goes back to Mr. Lark's observations in that the BWL has great quality people who are dedicated to their work, very talented, skilled and committed to the community. Dick Peffley certainly exemplifies that in a very big way and the Board thanks him for his service. Commissioner Cochran agreed with the sentiment and noted that Mr. Peffley brought calmness, serenity, and a feeling that the BWL was back together as a family. Mr. Peffley created an environment that brought a respect for the truth. Commissioner Board Mtg.Minutes July 24,2007 Page 42 of 44 Cochran thanked Mr. Peffley for his service and advised Mr. Lark that he has big shoes to fill of which he is sure can be done. However, Commissioner Cochran noted that it is wonderful to have a changed atmosphere. EXCUSED ABSENCE On motion by Commissioner James, seconded by Commissioner Cochran that the absence of Commissioner Graves be excused. Action: Carried unanimously. PUBLIC COMMENTS Dick Peffley thanked the Commissioners and employees for their fantastic support without which he could not have done it without their help. It is very important to note that the Board allowed him to live what he considers the American dream. He started out as a laborer and worked his way to the top, which shows that hard work is rewarded. The workers need to know that he is just your average person who worked his way up and is glad to have done it and he is also glad to be doing what he is doing now. Mr. Peffley also extended a great debt of gratitude to wife, Sherry Peffley for her support and encouragement. Joe Wolfe, former Assistant General Manager with BWL for approximately 25 years commented that he has been away for nearly 10 years. He noted his surprise to read that certain high-level employees were no longer at the BWL. His first reaction was total shock, then anger and disappointment. Mr. Wolfe advised that he has never recalled a time in which something like this has happened to high-level employees at the BWL. He went onto note that he worked very closely with Bill Cook whom he helped to recruit and train. Mr. Cook was a good employee and he was unsure how Mr. Lark formed an opinion of him because his actions took place on his first day at the BWL. Mr. Cook was not yet eligible for retirement and he made a good salary. However, now he is gone at an age when it is difficult to find an equivalent position. Mr. Wolfe commented that he thought what happened was cruel and noted Mr. Cook's good performance ratings. He also advised that the BWL is enjoying things today that he and Mr. Cook worked to create. Mr. Wolfe went onto note that the Board has not commented on the events that took place and as such, have let the employees down. Roger Jeffers, BWL retiree with over 30 years of service noted that in October 2006, a proposal to adjust the retiree's defined benefit plan was submitted. Although, they did not receive exactly what they had hoped for, he thanked the Commissioners and Dick Peffley on behalf of the retirees. Mr. Jeffers noted that he enjoyed working with Mr. Peffley and hopes to work with Mr. Lark in the near future. Joseph Davis, Business Manager of IBEW Local 352 introduced new President of IBEW Local 352, Dolores Appling. He thanked her for accepting the nomination and going through the run off process to become President. Mr. Davis also extended thanks to Board Mtg.Minutes July 24,2007 Page 43 of 44 Commissioner Smith for her years of service as Chair. It has been difficult over the last couple of years but Mr. Peffley brought calm to the area and they supported him in the past and continue to do so. In addition, Mr. Davis reiterated the bargaining units support of the endeavors that the BWL would like to undertake regarding the Sparrow Foundation. A letter written by Mr. Davis was given to the Board of Commissioners and Mr. Nixon, which advises employees and the general public of his stance on the changing of the guard. Mr. Davis proceeded to read the letter in its entirety, a copy of which will be entered under communications for record purposes at the September 25, 2007 Board meeting. Dolores Appling, President of IBEW Local 352 commented that she had opportunity to spend a few moments with Mr. Lark and she was very impressed. The attitude and feeling of the employees is amazing. It is similar to the sentiment that occurred when Mr. Peffley became Interim General Manager but only better. They will continue to make the BWL exactly what it has always been, which is a premier utility. Ms. Appling considers herself fortunate to work with so many amazing, loving, compassionate, and outstanding people. She wishes that everyone would stop using the word "fence"because they are as one. They have to face the future as one or they will truly fail. She is appreciative of the many doors that have been opened and she is the block that is going to hold them open. Ms. Appling appreciates everyone's assistance and they are going to continue to work as a team to progress forward with the Board's guidance and leadership. Ron Byrnes, BWL retiree noted that there is a lot of love in the room, which has not always been the case. As Chairman of one of the retirees committees, Mr. Byrnes officially welcomed J. Peter Lark as the new General Manager and noted that they are available for dialogue at anytime whether it be official or not. Mr. Byrnes advised that the retirees are there to help and wished Mr. Lark great success in the future. He also congratulated Commissioners James and Rios on their officer appointments. Commissioner Rios thanked everyone who spoke during public comments and noted how impressed he is with attendance at Board and committee meetings. It is an indication that people really care about happens at the BWL and goes back to the love that people have for the community and the BWL. There are a lot of challenges and they are not always going to agree but it is good to know that everyone is on the same page relative to where they are going right now. There are persons coming to the BWL from the outside and Mr. Lark is making some difficult decisions and moving forward with those things in pursuit of making the BWL bigger, better and greater. Commissioner Rios noted that Mr. Lark deserves the Board's support and they are going to give it to him. He also thanked the IBEW for standing up and supporting their efforts in that regard but there is much work to do and the challenges are even greater. Change is always difficult to accept at first but time will tell that they are all working towards the same goals and objectives. Commissioner Rios thanked Mr. Davis for the presentation, as he takes his trust and statement of support from the IBEW very seriously. ADJOURNMENT Board Mtg.Minutes July 24,2007 Page 44 of 44 On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the meeting adjourned at 6:49 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk August 2, 2007 Approved by the Board: July 24, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT j Tuesday,June 5, 2007 The Board of Commissioners met with the Sparrow Foundation on the 61h floor of the Sparrow Professional Building at 1200 E. Michigan Avenue, Lansing, Michigan. Present: Commissioners Gary Calkins, Semone James, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioners Robert Cochran and Joseph Graves. 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 4:44 p.m. 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. There were no public comments. NEW BUSINESS a. Sparrow Foundation Presentation. President, Joe Wald introduced Kevin Gray, Director and Rafael Marinez, Foundation Manager. Mr. Wald and Mr. Gray proceeded to provide an overview of the foundations work in relation to the new Sparrow Hospital wing addition. Highlights of the presentation include the following: • Presently constructing a 10-story addition to the already existing Sparrow Hospital • New emergency room scheduled to open January 2008. It will be three times as large as its predecessor. The older emergency room was built to receive 45,000 patients but they are currently seeing upwards of 100,000. Special Board Mtg June 5,2007 2 • Floors 7-10 will be shelled in so that it can built out whenever needed. • Sparrow Hospital provides approximately$50,000,000 worth of uncompensated care yet they are still able to make a marginal profit. • The capital campaign goal is $12,000,000 of which they have currently raised $8,500,000. • Sparrow is a non-profit hospital with a 3-5% margin that must be reinvested in the organization. • Total project cost is $190,000,000 and through research they determined that $12,000,000 is what the community can support. • New facility will house 145 beds with 38 private adult rooms and 14 children rooms. • Sparrow Hospital is a level 1 trauma center, which means that a specialist from every area is available 24-hours a day, 7 days a week, 365 days a year. • Private rooms will be wireless and possess advanced technology. West wing approved projects already in progress include: • Lower Level Surgery— 6 New Surgical Suites May 2008 • 1"Floor—Emergency Department January 2008 • 2nd Floor—Infrastructure/Mechanical • 3rd Floor—ICU/CCU February 2008 • 4th Floor—Heart & Vascular Center of Excellence May 2008 • 5th Floor— Oncology March 2008 • 61h Floor—Orthopedics January 2008 • 71h— 10'h Floors Shelled Commissioner Smith asked if Sparrow had looked at other hospitals and built their addition after an existing model? The rooms reminded her of the family friendly birthing centers and, as such she likes what she sees. Joe Wald stated that Sparrow put the project out to bid and took the best aspects of various hospitals in the nation and combined them. An architect was hired from Denver with offices in Detroit to design the facility. The hospital will also have lift capacity because of a new railing system that will allow them to move patients around the room thereby, reducing the physical strain on nurses. Mr. Wald further advised the importance of philanthropy in this endeavor. Rafael Marinez commented that he and Commissioner Rios grew up together and have raised money over the years for many different organizations. Commissioner Rios noted that he and Mr. Marinez have worked together both professionally and as philanthropists. As the society has matured, the needs are greater. It is time that they start looking at helping an organization that helps many others, which includes the people that the Board of Water and Light (BWL) serves. It was thought that this would be a great opportunity to join together in seeing how the BWL and Sparrow Foundation could work together. Special Board Mt- June 5,2007 3 Lupe Izzo thanked everyone for coming and noted that she and Tom Izzo thought of Coaches versus Cancer and the Jimmy V. Foundation. This year they raised$5,000,000 and presented the funds to Sparrow and, also renewed their commitment to the cause. Sparrow has great dedication and treats people with respect. She has visited the cancer center and recognizes its importance. Mrs. Izzo closed by stating that she would be happy to help with fundraisers in whatever way possible and asked the BWL to join them in the fight. Mark Nixon commented that 2010 marks the 1251h anniversary of the BWL and in his opinion they should make a legacy statement. He did not know what that could be and advised that it would be the Board of Commissioner's decision. However, he thought a giving program that could cumulate in 2010 would be an option. Commissioner Smith advised that the BWL could give in a concentrated effort by developing a comprehensive plan and approach on how they could work together in this endeavor. Commissioner Rios noted he did not think a specific gift amount had been discussed but the naming opportunity would require a minimum$250,000 donation. Commissioner Calkins asked if there is someway they could involve BWL customers in a match program? And in addition, Mrs. Izzo suggested using the BWL's newsletter as a means to advertise what the Board is doing with the program. Commissioner Smith noted both ideas were excellent. She also advised that they could develop a comprehensive program and/or use existing fundraisers such as the Chili Cook- off as a tie in. Dick Peffley, Interim General Manager reported that last weekend the IBEW Local 352 donated their time for a greenhouse project at Hunters Park. The project included the installation of water and electric services. Jim Dravenstatt-Moceri, Assistant Business Manager for IBEW Local 352 introduced Business Manager Joseph Davis and Assistant Business Manager Ron Byrnes. It was noted that the project grant for Hunters Park did not include funding for utilities. Therefore, the association asked for assistance. As such, the bargaining unit worked with Mark Nixon and were able to borrow BWL equipment to aid the organization in the installation of utility services. Motion by Commissioner Smith, seconded by Commissioner Rios, that Mark Nixon work with Joe Wald, Rafael Marinez and Lupe Izzo to come up with a comprehensive plan with many options to present to the Board in developing a partnership. Action: Carried unanimously. Special Board Mtg June 5,2007 4 b. Facility Tour. A tour of Sparrow Hospital's new wing addition took place after the adjournment of the Special Board meeting. MANAGER'S REMARKS Sparrow Foundation. Mr. Peffley noted that he looks forward to working with Sparrow, as one cannot build a world-class city without a work class hospital, and he felt that Sparrow Hospital is well on its way to doing so. Safety. Mr. Peffley reported that Eckert Station has gone 2 years without a safety incident and Erickson Station has gone 4.5 years respectively. In celebration of the zero safety incident rate for the month of April 2007, the BWL provided breakfast/lunches to the entire company of which he attended fifteen (15). COMMISSIONERS' REMARKS Commissioner Rios noted that the Capital Foundation for the Arts and Council (CFAC) hosted a very successful Colors of Salsa festival on June 2, 2007. The foundation wants to host more than just festivals. As such, Commissioner Rios introduced the group so that they could further speak on the topic at hand. Mark Marko with CFAC advised that the group was established in September 2006 as a non-profit organization. They are currently awaiting their tax exemption status and have seven (7) Board members. Originally they wanted to host a festival event but saw a need for a Latino foundation. It was reported that 3,000 people attended the festival along with 80 volunteers. They lost some money on the event but they are working to make up the difference. In the future, they seek to bring national acts to the area. Ultimately, their mission is to bring economic development through festivals to the area and to continue to do more cultural events. In 10 years, they would like to donate a stadium similar to the Wharton Center in East Lansing and Van Andel in Grand Rapids. Commissioner Smith reported that Lansing Community College, Cooley Law School and the City of Lansing are working towards a cultural center, and further noted that they look forward to working with CFAC in the future. Joseph Davis commented that they are challenging union membership to step up and be active in the community. He would also like the union to put its shoulder to the wheel and for there to be a Sparrow Foundation, BWL, and IBEW relationship. Mr. Davis went onto thank the Board of Commissioners for inviting the bargaining unit to the table. Mr. Wald closed by stating that they have a great relationship with the BWL and they are looking to build on it. Special Board Mtg June 5,2007 5 MOTION OF EXCUSED ABSENCE Motion by Commissioner Rios, seconded by Commissioner James, to excuse the absences of Commissioners Robert Cochran and Joseph Graves. Action: Carried unanimously. PUBLIC COMMENTS Jonathan Solice noted that he would hope to see Sparrow and the BWL form a big partnership. He further advised that his mother passed away from cancer and he recognizes the benefit of the services that the hospital provides. Joseph Davis reintroduced Ron Byrnes, Assistant Business Manager of IBEW Local 352 and commented that he and Jim Dravenstat-Moceri will be at the IBEW national conference during the General Manager (GM) facility tours. As such, Mr. Davis asked that Mr. Brynes be allowed to participate with the tours in their absence. Mr. Peffley noted that each GM candidate would have 30 minutes with union leadership, 30 minutes with executive staff and then a formal tour would take place. He agreed with Mr. Davis' request and noted that Mr. Byrnes was welcome to attend and bring additional leadership representation if needed. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Rios, the meeting adjourned at 5:41 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk June 13, 2007 Prelinzinary—Subject to Board Approval on July 24, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING !~ r-.3 LANSING BOARD OF WATER AND LIGHT 0 Tuesday,June 5, 2007 The Board of Commissioners met with the Sparrow Foundation on the 6'h floor of the Sparrow Professional Building at 1200 E. Michigan Avenue, Lansing, Michigan. Present: Commissioners Gary Calkins, Semone James, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioners Robert Cochran and Joseph Graves. 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 4:44 p.m. 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. There were no public comments. NEW BUSINESS a. Sparrow Foundation Presentation. President, Joe Wall introduced Kevin Gray, Director and Rafael Marinez, Foundation Manager. Mr. Wall and Mr. Gray proceeded to provide an overview of the foundations work in relation to the new Sparrow Hospital wing addition. Highlights of the presentation include the following: • Presently constructing a 10-story addition to the already existing Sparrow Hospital • New emergency room scheduled to open January 2008. It will be three times as large as its predecessor. The older emergency room was built to receive 45,000 patients but they are currently seeing upwards of 100,000. Special Board Mt- June 5,2007 Pa.-e 3 of 5 Lupe Izzo thanked everyone for coming and noted that she and Tom Izzo thought of Coaches versus Cancer and the Jimmy V. Foundation. This year they raised $5,000,000 and presented the funds to Sparrow and, also renewed their commitment to the cause. Sparrow has great dedication and treats people with respect. She has visited the cancer center and recognizes its importance. Mrs. Izzo closed by stating that she would be happy to help with fundraisers in whatever way possible and asked the BWL to join them in the fight. Mark Nixon commented that 2010 marks the 1251h anniversary of the BWL and in his opinion they should make a legacy statement. He did not know what that could be and advised that it would be the Board of Commissioner's decision. However, he thought a giving program that could cumulate in 2010 would be an option. Commissioner Smith advised that the BWL could give in a concentrated effort by developing a comprehensive plan and approach on how they could work together in this endeavor. Commissioner Rios noted he did not think a specific gift amount had been discussed but the naming opportunity would require a minimum$250,000 donation. Commissioner Calkins asked if there is someway they could involve BWL customers in a match program? And in addition, Mrs. Izzo suggested using the BWL's newsletter as a means to advertise what the Board is doing with the program. Commissioner Smith noted both ideas were excellent. She also advised that they could develop a comprehensive program and/or use existing fundraisers such as the Chili Cook- off as a tie in. Dick Peffley, Interim General Manager reported that last weekend the IBEW Local 352 donated their time for a greenhouse project at Hunters Park. The project included the installation of water and electric services. Jim Dravenstatt-Moceri, Assistant Business Manager for IBEW Local 352 introduced Business Manager Joseph Davis and Assistant Business Manager Ron Byrnes. It was noted that the project grant for Hunters Park did not include funding for utilities. Therefore, the association asked for assistance. As such, the bargaining unit worked with Mark Nixon and were able to borrow BWL equipment to aid the organization in the installation of utility services. Motion by Commissioner Smith, seconded by Commissioner Rios, that Mark Nixon work with Joe Wall, Rafael Marinez and Lupe Izzo to come up with a comprehensive plan with many options to present to the Board in developing a partnership. Action: Carried unanimously. Special Board Mtg June 5,2007 Page 5 of 5 MOTION OF EXCUSED ABSENCE Motion by Commissioner Rios, seconded by Commissioner James, to excuse the absences of Commissioners Robert Cochran and Joseph Graves. Action: Carried unanimously. PUBLIC COMMENTS Jonathan Solice noted that he would hope to see Sparrow and the BWL form a big partnership. He further advised that his mother passed away from cancer and he recognizes the benefit of the services that the hospital provides. Joseph Davis reintroduced Ron Byrnes, Assistant Business Manager of IBEW Local 352 and commented that he and Jim Dravenstat-Moceri will be at the IBEW national conference during the General Manager (GM) facility tours. As such, Mr. Davis asked that Mr. Brynes be allowed to participate with the tours in their absence. Mr. Peffley noted that each GM candidate would have 30 minutes with union leadership, 30 minutes with executive staff and then a formal tour would take place. He agreed with Mr. Davis' request and noted that Mr. Byrnes was welcome to attend and bring additional leadership representation if needed. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Rios, the meeting adjourned at 5:41 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk June 13, 2007 Approved by the Board: July 24, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING l _ LANSING BOARD OF WATER AND LIGHT L4j f-' Tuesday, May 22, 2007 '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, Semone James, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioner Robin Smith The Secretary declared a quorum present. Acting Chairperson Rios asked all to rise for the Pledge of Allegiance to the Flag. Acting Chairperson Rios called the meeting to order at 5:35 p.m. APPROVAL OF MINUTES By motion of Commissioner Cochran, seconded by Commissioner Calkins the minutes of the March 27, 2007 regular meeting were unanimously approved. PUBLIC COMMENT THE ACTING 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. Joseph Davis, Business Manager of IBEW Local 352, handed out a copy of a USA Today newspaper article and read a prepared statement. The prepared statement pertained to concerns regarding water department staffing issues, a special conference request, and succession planning. A copy of the letter will be placed on file and entered under communications. COMMUNICATIONS Letter from IBEW Local 352, Assistant Business Manager Jim Dravenstatt-Moceri dated April 10, 2007 regarding the General Manager search. Board Meeting Minutes Page 2 May 22,2007 Received and placed on file. Letter from MEW Local 352, Business Manager Joseph D. Davis dated April 12, 2007 regarding Water Department staffing levels. Received and referred to management. Letter from MEW Local 352, Business Manager Joseph D. Davis dated April 27, 2007 regarding a special conference request for water. Received and referred to management. Letter from MEW Local 352, Business Manager Joseph D. Davis dated May 22, 2007. (The letter was read during Public Comment and briefly addressed during Commissioner Remarks.) Received and placed on file. COMMITTEE REPORTS esolution 2007-5-1 Joint Meeting Lansing City Council and Board of Water and Light Commissioners March 29, 2007 Council President Leeman called the joint meeting to order at 11:42 a.m. The meeting was held at the Clara's Lansing Station, 637 E. Michigan Avenue, Lansing. Councilmember's Present: Sandy Allen, Harold Leeman, Derrick Quinney and Carol Wood. Absent: Councilmember's Kathy Dunbar, Brian Jeffries, Tim Kaltenbach, and Randy Williams. Commissioners Present: Gary Calkins, Robert Cochran, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioners Semone James and Joseph Graves. City Staff Present: City Attorney Brigham Smith, Mayor Chief of Staff Jerry Ambrose (arrived at 12:40 p.m.), and Interim Administrative Assistant Diane Bitely. BWL Staff Present: Interim General Manager Dick Peffley, Senior Vice President of Operations Bill Cook, Manager of Finance and Planning Sue Flores, Director or Internal Audit Susan Pifer, Corporate Secretary Rhonda Jones, and Governmental Affairs Analyst Calvin Jones. The purpose of the joint meeting was to present an update to City Council on the following topics: Public Comment Board Meeting Minutes Page 3 May 22,2007 Bryan Smith, 1007 Park Lane, noted that he was upset by some of the things that had taken place regarding tree trimming. However, he was pleased with the committee that was formed and further advised that the BWL has gone out of its way, including that of Mark Nixon, Communications Director to address the issue. Mr. Smith also noted that the committee would soon bring forth recommendations and he thought the process was going well. Board Chair Smith introduced the new BWL Director of Internal Audit, Susan Pifer. 1. Update on Delta Township Water Agreement. Board Chair Smith noted that the BWL is continuing to work with Delta Township to resolve its contractual differences. BWL staff advised that they are narrowing the areas of concern that amount to four primary items. It was also reported that Delta Township wants to remove the interruptible service clause in their contact due to its sensitivity and if done they would have to operate independently. Staff also noted that they are unsure of the financial impact at this time and they do not expect to resolve by June 2007. 2. Update on Tree Trimming. Board Chair Smith reported that the BWL is thru its first 5-year trim cycle and they are returning to Delta Township this calendar year. It was further noted that they do not anticipate doing much work in the City of Lansing until 2�2008 and it would begin in the southwest quadrant of the city. The anticipated FY2008 budget for tree trimming is $1.3 million, with 40% of the FY2008 budget slated for work in the city. It was further advised that the BWL anticipates that most of the work will occur on private property after January 1, 2008. Council asked if the BWL is looking at working with the City in the tree trimming process? They also asked if copies of the materials that were supplied to the focus group could be sent to Council to help in their continued review of the process? Staff noted that the BWL is looking to work with the City of Lansing for tree trimming work that would amount to $70,000 in the FY2008 budget. They also noted that they would send Council a copy of the focus group materials and any recommendations made from said group. 3. Update on Human Resource Audit. Board Chair Smith reported that the Human Resource audit was presented in December 2006 and subsequently made available to all employees. It was also noted that Dick Peffley, Interim General Manager updated employees in February 2007 of an action plan in response to the audit issues. 4. Update on the General Manager Search. Board Chair Smith gave a brief overview and noted that the General Manager position was posted and is scheduled to close on March 30, 2007. In response to Council's questions, it was further advised that the names of the candidates will not be released until the finalists are announced. It was also reported that they hope to fill the position by early June 2007. Council noted that during the previous process they were allowed to meet with the candidates for approximately 5-minutes and receive information during the meet and greet session. However, it was advised that the length of time given to Council was not sufficient. Board Meeting Minutes Page 4 May 22,2007 Board Chair Smith responded by noting that the Board of Commissioners has not made a decision regarding a meet and greet. However, they will take Council's concerns into consideration. 5. Update on Other Management Positions. Interim General Manager Peffley advised that the BWL received sixty-one (61) applications for the Human Resource Director position that included two internal candidates. It was reported that the interview team was comprised of bargaining and non-bargaining persons, and the candidates were sent to Varnum Consulting for additional testing. He also noted that there were high quality applicants with diversity and an offer had been made and accepted. The tentative start date for the new director is Monday, April 2nd pending physical and drug test results. Board Chair Smith noted that Susan Pifer who started on March 27, 2007 filled the Director of Internal Audit position. The Chief Financial Officer position will be filled by the new General Manager to allow them opportunity to establish their own team. The Director of Production position is currently being held for Dick Peffley (Interim General Manager). 6. IBEW— Union/Management Relationship. Board Chair Smith advised that they believe Union relations are improving. Grievances and employee comments at Board meetings have decreased and morale seems to be improving. She noted that an emphasis on increasing communication has begun and the BWL IRP results were presented to employees. It was further advised that Human Resource audit issues are also being addressed. Joseph Davis, Business Manager of IBEW Local 352 commented that the union-management relationship has improved and they are waiting for the Human Resource Director to begin the Healthcare Taskforce. He further commented that the human resource audit raised issues and one of questions is how does an organization train persons to move at the Board whether they are journeyman or professionals. Mr. Davis went onto advise that they are working with Delta Township and they see growth in that respective area. He closed by noting that they are looking forward to moving forward. Board Chair Smith noted that the BWL is making a cultural change that has been slow but good. It was also advised that the BWL has changed the CSO project process and currently have John Matuszak coordinating the project, which has resulted in decreased complaints. 7. Update on City/BWL Mutual Cooperation Present &Future. Board Chair Smith advised that BWL staff have been working with the City in the pursuit of mutual benefits. Those efforts include: BWL offered assistance in energy conservation program development and joint Purchasing Department efforts to identify combined purchasing opportunities such as fuel and office supplies. Other efforts include a pilot program in which the City may perform BWL tree trimming work and the coordination of CSO engineering, design, scheduling and contractors. Council made several inquires and observations that included an awareness that some streetlights were off in the district and the status of joint mowing and plowing projects. They also asked if the BWL has discussed delaying the rate break repayment agreement granted by the BWL a few Board Meeting Minutes Page 5 May 22,2007 years ago? Council went onto advise that they are interested in discussing the BWL's external audit performed by Plante &Moran at the Ways and Means Committee. In response to City Councils inquires, staff responded by noting that if half the streetlights in a block are off then it is typically a construction related problem or there maybe a fault. It was advised that if one notices a streetlight out then it should be reported to the BWL for repair. Board Chair Smith reported that they could not speak to the issue of a joint mowing and plowing project but they would obtain an update and report back to Council. It was also noted that there has not been any discussion at the BWL relative to delaying the rate break repayment. However, staff will look into the issue and update City Council. 8. Update on BWL Revenues/Expenses for FY06107 & Future. Sue Flores, Manager of Finance and Planning gave an overview of the BWL Financial Plan, FY08 Assumptions, which were originally presented at the BWL Finance Committee meeting on March 13, 2007 and the Financial Report, Seven Months Ended January 31, 2007. Ms. Flores briefly reviewed the sales forecast, revenue assumptions, operating expenses, capital expenditures, and net income. It was reported that the BWL expects a higher payment in lieu of taxes (PILOT) of$10,000,000 as opposed to the original projected amount of$9,200,000. Ms. Flores also noted that although she would prefer a 2-year rate strategy the BWL is currently looking at a January 2008 rate increase. During the rate discussion, City Council asked the BWL to be sensitive to the fact that sewer rate increases typically occur in October. They also asked the BWL what was being done relative to replacement generation? Interim General Manager Peffley responded by stating that they need to move forward in looking at replacement generation. He also advised that coal is the least expensive. However, they are still looking at biomass, wind, and solar energies. Council went onto ask about the vacancy rate at the BWL and whether or not they are currently employing contractors? Staff reported that the existing vacancy rate is 3-5% and the monetary cost is approximately $1,200,000 with 737 employees. It was also advised that while contractor numbers are decreasing they are currently involved in capital work, plant and CSO projects. Board Chair Smith departed at 1:00 p.nt.due to a prior obligation. 9. Update on Maintenance of Lights. Senior Vice President of Operations Cook advised that streetlight re-lamping for 2007 is on schedule. To date 5,000 of the 9,000 lights scheduled for re-lamping have been re-lamped. It was further noted that lamp out replacements are being accomplished on average within seven (7) days and streetlight plant replacements (cable faults) are being repaired on average within thirteen (13) days. He also reported that the BWL is working with the Michigan Department of Transportation relative to streetlight replacements on 1-496. Council President Leeman asked the BWL to look at antique lights relative to having a BWL employee drive by to ensure that they are working properly. It was noted that they are Board Meeting Minutes Page 6 May 22,2007 particularly interested in preventative maintenance for the antique lights in the downtown area, stadium district, and Michigan Avenue. 10. Update on Removal of Lead Pipes. Senior Vice President of Operations Cook gave a brief overview of the Lead in Drinking Water Status Update. The review discussed program objectives, lead service replacement statistics, typical lead service installation diagram, and the program budget. Council asked how much was outsourced and if the BWL expected additional federal regulations? It was noted that approximately 27-29% of the wok is contracted. It was also advised that the BWL is currently exceeding federal regulations in terms of lead pipe replacement. Furthermore, it was reported that BWL water quality presently meets or exceeds existing regulations. 11. Rules of Procedure. Vice Chair Rios noted that minor changes and clarification to the Rules of Procedure were presented to the City Attorney. The BWL asked for an update on where the rules stood relative to council approval. City Attorney Brigham Smith advised that he had spoken to General Counsel Amy Cavanaugh and the Rules of Procedure are currently on his desk waiting for review. 12. Legal Update Regarding the Pandy Matter, Cluley Matter and Any Other Litigation Pending Against the BWL. Staff noted that in the matter of the Virginia Cluley case, the Supreme Court ruled in favor of the BWL, and the Dave Cluley matter is currently in mediation. It was also reported that Mr. Pandy is seeking a reversal of the court of appeals decision regarding the issue related to his pension. It is anticipated that the matter would be resolved in the BWL's favor and at this point, insurance is covering the majority of cost for legal expenses. Staff further advised that there are no other employee suits of significance pending at this time. Other: Shut-off's for Non-payment. City Council asked the BWL what have they dealt with regarding turn off of services for non-payment. Staff noted that they have not seen an increase at this time. However, it was further advised that the BWL has a strict process that it follows before turning services off for non-payment, which is a combination of timing and the monetary amount owed. Staff also reported that there is $700,000 in write-offs and there are currently eighty (80) limiters in the system. It was also noted that they are working to improve the process. Steam Utility. Interim General Manager Peffley noted that the BWL is working on a steam utility plan that it will soon present. City Council asked if the BWL held the steam rate increases for downtown area churches, as they have not received any complaints since the rate increase took effect? Board Meeting Minutes Page 7 May 22,2007 Staff advised that the steam rate increase of 35% was not held for downtown area churches and it took effect accordingly. Chiller News. Council President Leeman asked if there was a projected sales increase for the chilled water system? Staff noted that sales are flat and there are no new customers coming onboard at this time. Ottawa Station. City Council inquired as to the status of Ottawa Station. Staff noted that the City of Lansing is making an effort to sale the Ottawa Station and the BWL is currently working with Robert Trezise in whatever way possible to aid in the process. It was also advised that there is interest in the property but the BWL is unaware of the developers involved and have only received limited information to that respect. Council President Leeman asked if there is a 90% chance that the property would be sold in 2007? Interim General Manager Peffley advised that he could not say if the Ottawa Station would sale this year, as they are working with the City in respect to the property. Wellness Center. Council President Leeman noted that there is graffiti writing on the exterior walls of the Wellness Center. He asked if the BWL is responsible for maintenance and if there are any deals in the works to sale the facility? Interim General Manager Peffley reported that the Wellness Center is a package deal and developers are currently looking at it. It was also noted that they would drive by the facility to check for graffiti, as they were unaware of such problems. The meeting adjourned at 1:24 p.m. Motion by Commissioner Zerkle, seconded by Commissioner Graves, to receive the Joint City Council/BWL Commissioner report as presented. Action: Carried unanimously. esolution 2007-5-2 COMMITTEE OF THE WHOLE April 10, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:12 p.m. on Tuesday, April 10, 2007. Acting Chair 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, Board Meeting Minutes page 8 May 22,2007 Joseph Graves, Semone James, Santiago Rios (4:24 p.m.), Julee Rodocker, and Robin Smith (4:15 P.m.). Absent: Commissioner Sandra Zerkle. Public Comment Jim Dravenstatt-Moreci, Assistant Business Manager for IBEW Local 352, 3315 S. Pennsylvania Avenue advised that Joseph Davis could not attend the meeting. Therefore, he came to speak on behalf of MEW Local 352. Mr. Dravenstatt-Moreci read a prepared statement, which essentially advised that the IBEW is interested in the General Manager search and would expect it to be a fair and transparent process that could withstand scrutiny. He went onto note that in the past non-bargaining employees and retirees were made a part of the interviewing process and they would hope that that would occur again with the current search. A copy of the prepared statement was given to Secretary Jones to be included as part of the minutes. See attachment. Acting Chair Commissioner Cochran turned the meeting over to Board Chair Smith at 4:16 p.m. Review General Manager Candidate Credentials—Varnum Consulting Sandra Soltysiak, Varnum Consulting (also known as Hiring Solutions) introduced Kathy Tungate, Senior Consultant, who assisted with the review of applicant credentials. The General Manager job posting closed on March 30, 2007 and a total of one hundred seventeen (117) applicants were received. All applicants were assigned a number in the interest of confidentiality. Ms. Soltysiak presented the Board with a packet, which contained details of the top seventeen (17) applicants based on the criteria established within the job announcement. Also included was additional information about those applicants that were current or former BWL employees. The top 17 applicants were grouped in terms of strongest and possible candidates. The presentation and assessment of each applicant was solely based on the written materials submitted by the applicant. Ms. Soltysiak recommended that the Board move forward the top eleven (11) candidates to the prescreening process and suggested further narrowing the pool to three (3) finalists. Commissioner Rios resumed Chair responsibilities at 4:24 p.m. It was further advised that both Ms. Soltysiak and Ms. Tungate would participate in the prescreening interview process to ensure its accuracy and completeness. Ms. Soltysiak cautioned against adding additional candidates to the initial 11 and advised if the Board decided to do so then she would recommend a discussion on reposting the position because the parameters would have changed in her opinion. She also noted that if a case could not be made for moving an individual from one specific grouping to another then the respective candidate should not be moved. After lengthy discussion, the Board requested additional lead-time to review all materials presented by Ms. Soltysiak and agreed to the following process: 1. Review the credentials of the top 17 applicants. 2. Send comments to Secretary Jones by Tuesday, April 17tn Board Meeting Minutes Page 9 May 22,2007 3. Once the comments have been received, advise Ms. Soltysiak of any suggested changes and the reasoning for said change if applicable. 4. Commissioner comments will not be shared with one another due to the Open Meetings Act. 5. If a Commissioner does not respond then that will be viewed as an indication that they agree with the candidate list as presented. 6. Each respective Commissioner's name will appear next to their comment and/or suggestion. 7. Each Commissioner will review the suggested onsite interview questions, which includes input from the Interim General Manager. Suggested changes to the onsite interview questions must be submitted by April 17th. Subsequently, the Board must also determine the following items in addition to the above. 1. Length of the final interviews 2. Time and date of the facility tours 3. The determination of an acceptable number of candidates Discuss General Manager Selection Process Meet and Greet. The Board discussed the possibility of hosting a meet and greet so that BWL employees, government officials and ratepayers would have opportunity to meet the finalists. It was noted that Lansing City Council expressed a desire to expand the timeframe granted to them to meet the candidates relative to the time allotted in the previous General Manager search. The specifics of the meet and greet still need to be determined. However, the Board was receptive to the concept in which finalists would give a brief introduction and greet the persons in attendance thereafter. Planning for the event is forthcoming. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to host a meet and greet with light refreshments. The Board of Commissioners also agreed to move the next Committee of the Whole meeting from April 171h to April 241h at 4:30 p.m. to further discuss the General Manager applicants and the remaining selection process. There being no further business, the meeting adjourned at 5:25 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tern 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 Minutes Page 10 May 22,2007 esolution 2007-5-3 COMMITTEE OF THE WHOLE April 24, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m. on Tuesday, April 24, 2007. Acting Chair 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, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: None. Public Comment There were no public comments. Review GM Candidates—Varnum Consulting Sandra Soltysiak, Varnum Consulting advised that she received the memorandum correspondence on behalf of the Board of Commissioners. The memorandum indicated that seven (7) of the eight (8) Commissioners recommended moving the top seventeen (17) General Manager applicants forward in the process. As such, Ms. Soltysiak discussed the job announcement criteria relative to the weight given to the applicants skill set and experience level. The Board noted that changing the weight relative to different skill sets does not change the job criteria. They would also look at the applicants as a whole and the General Manager's skill sets can be balanced against those already present at the Board of Water and Light (BWL). After further discussion, the Board introduced the following motion: Motion by Commissioner Calkins, seconded by Commissioner Cochran, to have Varnum Consulting prescreen all 17 candidates and return the results to the Board of Commissioners. Discussion: Commissioner James advised that the Board should define the prescreening parameters. Commissioner Graves noted that for clarification purposes, the Board would review the top 17 applicants, except for those who eliminate themselves from the process. Commissioner Rios requested that Varnum Consulting report to the Board all candidates that are eliminated (for whatever particular reason) prior to the Commissioners evaluation. Ms. Soltysiak reported that she removed one applicant from the process due to a lack of interpersonal skills. Board Meeting Minutes Page 1 1 May 22,2007 Commissioner Calkins noted that interpersonal skills were not one of the items that the Board asked Varnum Consulting to prescreen. The prescreening should include items such as, do they want the job, do they have bad credit, and did they falsify their credentials? It was noted that the Board would have judgment on the remaining items. The Board reiterated that they want Varnum Consulting to proceed with their normal prescreening evaluation process and bring the information forward to the Board. They want all top 17 applicants prescreened unless the applicant withdraws from the process. Once that information is received then the Board will decide how to move forward. Ms. Soltysiak confirmed that she would prescreen the top 17 applicants, provide a comment on all of them and forward that information to the Board for further action. The Board noted that this is the normal next phase in the process and that they have only given specific direction relative to the top 17 applicants and not the reduction of the number of candidates as a whole. Action: Carried unanimously. Further Discussion: Ms. Soltysiak advised that she would notify the applicants that their candidacy would be revealed at the next Commissioner meeting. She then asked the Board when should the names of the applicants be revealed in an effort to adhere to the Freedom of Information Act? After brief discussion and in response to Ms. Soltysiak's question, the Board introduced the following motion: Motion by Commissioner Calkins, seconded by Commissioner Cochran, to withhold the applicant names from the next list that they expect to receive from Varnum Consulting. Action: Carried unanimously. Ms. Soltysiak finalized the interview questions with edit comments received from the Board in the memo dated April 17, 2007 and noted that they will complete the background information and telephone screen. Varnum Consulting will appear before the Board at the next Committee of the Whole meeting scheduled for Tuesday, May 17th at 5:30 p.m. Community Sponsorship Policy Item was removed from the agenda. Silver Bells Sponsorship Mark Nixon, Communications Director gave a brief overview of the proposed Silver Bells sponsorship. The new sponsorship, which totals $50,000, would include a $40,000 cash Board Meeting Minutes Page 12 May 22,2007 contribution and a not to exceed contribution of$10,000 for in-kind services. The increased contribution to the Arts Council of Greater Lansing would allow the BWL to become the events, "Presenting" sponsor (also referred to as the "Signature" sponsor). It is a win-win situation that would enhance the BWL's recognition and provide much needed funding to the Arts Council of Great Lansing. Mr. Nixon will monitor the event to ensure that the BWL receives the appropriate recognition for its contribution and efforts. The sponsorship would not increase the communication budget, as they are reallocating funds from advertising. On motion by Commissioner Calkins, seconded by Commissioner James, the Committee of the Whole unanimously agreed to approve the Silver Bells Sponsorship proposal. Wholesale Power Sales Bill Cook, Senior Vice President of Operations advised that the Wholesale Power Sales presentation was for informational purposes only. The presentation materials spoke to pricing, how the operators work and how they leverage the BWL's assets. Fiscal year 2007 anticipates $45,000,000 in wholesales sales with an expectation that it will significantly decrease in FY2008 due to planned maintenance outages. The BWL leverages every asset it has and schedules to keep the units available so that the BWL may sell all megawatt hours. FY2008 wholesale sales are projected at $39,000,000, which is made up of capacity energy sales to the Michigan Public Power Agency (MPPA) power pool. During the mid-1990's the BWL received 10% of its revenue from the wholesale market. However, during FY2007 it is approaching 30%. The volatility of the wholesale market speaks to the issue of how much does one invest to support it. It was suggested that the margin on the wholesale market would be elastic because of where the BWL will receive the units. Commissioner Graves advised that there was reference in the packet materials to the withdrawal from MPPA. He inquired as to whether there was any additional information or legal challenges that the Board needed to be aware of. Mr. Cook did not have additional information. However, it was advised that since the MPPA contract provides preference on BWL power and describes to an extent how the power is priced, the BWL believes that it could do better in the wholesale market. There are no legal challenges with respect to the exit in 2010, as the BWL has already given appropriate notice accordingly. Although, it is a negotiated issue, the BWL would like to accelerate the timeframe for its exit. Currently, there are issues relative to increasing the BWL's margin, which the BWL is trying to address. Staff further advised that the MPPA has not taken any action at this time that would appease the BWL's concerns. However, a new General Manager was recently hired and they hope to forge better relations in moving forward. Commissioner Rios advised that the risk management analysis would be very important to the BWL in moving forward. He indicated hope that Susan Pifer, Director of Internal Audit will be up to speed, since it is going to be a critical topic, as the BWL moves forward in 2008. Board Meeting Minutes Page 13 May 22,2007 Commissioners Rios and Cochran also congratulated staff for their efforts in the area of wholesale power. Mr. Cook went onto briefly discuss the liabilities associated with futures trading and the real time energy market. The number of wholesale counterparts is decreasing due to market changes. It was advised that most of the Midwest Independent System Operators (MISO) transactions are financially firm, which means that once an organization commits then one has to supply the energy no matter the price. The BWL's standards and guidelines do not allow the organization to accept that level of risk. If the BWL offers a financially firm product then there are financial instruments that one can put into place to hedge against the volatility in the market. The BWL would not venture into this project lightly and intend to have the consultants return to speak about a very limited pilot program with quantifiable risk. Staff did not want to move forward until an Internal Auditor was in place and they are working to improve their position through the risk management efforts previously brought forth. The National Electric Reliability Council (NERC) guidelines may prevent the BWL from providing certain services. As a result, the action plan is to exit MPPA early, and reconfigure within MISO, in order to retrieve the revenue. Commissioner Calkins noted that he looked at another issue in that the BWL is anticipating a certain amount of revenue from a sale that could be higher/lower. It appears that it should be higher but while on tour he saw prices of$50 to $150, which he viewed as another variable. Charles Moore, Interim Internal Auditor advised that the futures market relative to electric wholesale sales was extremely volatile. The futures market, unlike the stock market, demands payment today and not in the future. The risk management consultant is not going to accept any responsibility for the BWL's decisions. It was noted that the BWL is not in the wholesale sales market, which is typically very low but growing, as a result Mr. Moore cautioned the Board with respect to the risk level involved. Mr. Cook acknowledged Mr. Moore's sentiment and reported that the consultant advised companies, the size of the BWL's are moving slowly. Therefore, the BWL would start with a policy recommendation and a small pilot program. If the BWL starts to have problems with the unit then its limited counterparties would back out. Currently, it is beneficial for buyers to stay with the BWL but they are not going to continue to do so if the BWL starts to recall. Mr. Cook closed by noting that it is a situation in which doing nothing may not be the solution. Copies of the Electric Wholesale Power Sales presentation are on file in the Office of the Corporate Secretary. Lead Replacement Program Update Dick Peffley reported that in 2006, 1,645 lead services were replaced; BWL employees completed 625 (40%), of which 146 were priority services. Once the priority services were complete, the crews remained with the lead replacement program as opposed to returning to spot services and maintenance work, and subsequently replaced an additional 479 services. The BWL outsourced 30% of the lead replacement project cost, which represented 60% of the work. Therefore, BWL employees replaced 40% of the services and contractors 60%. According to Board Meeting Minutes Page 14 May 22,2007 staff, there was no record of any documentation, which stipulated BWL employees would account for 50% of the work for said program. Different scenarios for completing the project were presented to the Committee of the Whole in 2005. One of the recommendations suggested utilizing a combination of CSO contractors and BWL contractors with BWL crews completing sensitive populations and spot service work. In March 2005, a Board meeting took place in which there was management action to assemble and assign two BWL crews for lead service replacement. The BWL's cost compared to contractors was initially very high. However, the BWL has since increased efficiencies, decreased costs, and provided good workmanship. The contractors contractual agreement expires this year and the BWL will look at whether or not BWL employees should increase the number of services it currently replaces. Staff continues to look at this area and would like more conversation regarding the matter with Joseph Davis, Business Manager of IBEW Local 352. Presently, the Water and Steam Distribution Department is budgeted for forty-eight (48) employees, of which they have forty-five (45) individuals with one on long-term disability. Commissioner James departed the meeting at 5:33 p.m. Commissioner Rios noted that he did not recall specific numbers relative to BWL employees and outside contractors. When the project budget was approved he recalled discussion, agreement, and clear policy direction by the Board to ensure BWL employees would complete as much of the work as was reasonably and economically feasible. He clearly recalls that the Water Department has an apparent inability to maintain adequate staffing levels and is consistently understaffed by five (5) to eight (8) employees. Commissioner Rios noted that a determination of the proper number of employees necessary for the department and staff should be made, as they consider the budget for FY2008. It is not acceptable for the budget request to represent a number of employees but the department itself is staffed well below that number. He further commented that capacity besets volume so that if one does not have capacity then you will not achieve your goals. Commissioner Smith advised that this was not a new situation, as staffing levels have been a source of aggravation. The initial problems included the number of inspectors, who was going to do the inspections, and were the BWL able to commit to employees where it made economic sense to do so. It was advised that once a Project Manager was hired then greater oversight occurred. However, it was assumed that the project was going well since Commissioners were no longer receiving complaints. Prior to the acquisition of a Project Manager, the Board received several complaints and customer's regularly attended Board meetings to express their concerns. Aside from complaints, the other issues were the lack of foresight to ensure adequate staffing levels relative to the project and appropriate training. The Board advised that they agreed that it would not do anything to the detriment of the BWL, which meant that they would look at the economical feasibility of using BWL employees as opposed to outside contractors. Joseph Davis noted that staffing issues have been an ongoing item in the Water Department for several years. He referenced a report entitled, "2004 Annual Report—Lead Service Line Replacement Team", dated November 30, 2004. After further discussion, it became apparent that staff had not recently viewed the document in question. The report acted as a source document that was utilized in developing the program of which modifications were made. It Board Meeting Minutes Page 15 May 22,2007 spoke to issues involving the Water Department budget, contractors and the RFP process, and the workforce among other items. Mr. Davis gave an overview of the history of service replacements prior to 2004 and noted changes that occurred since inception of the lead service replacement program. He advised that he did not believe it necessary to present the report again, as it is a working document that was given to him as a team member. Commissioner James rejoined the Committee of the Whole meeting via teleconference at 5:49 p.m. Staff clarified that Mr. Davis's report was a draft document that occurred early in the lead service replacement program process in route to determining the final document. The final result indicated that the BWL would outsource the majority of the work, outsource two CSO contractors while they were in the area for CSO replacements, BWL employees would handle all priority services, and a BWL inspector would oversee all outsourced work. The Board of Commissioners also authorized the addition of two water crews and an administrative clerical person assigned to the project, which has since been completed. In addition, it was noted that customers are opting for customer choice, which has lead to a decrease in workload for the Water Department. Commissioner Graves advised that the document in question is not an operational plan for how to address the lead replacement issue. He separated normal Water Department staffing issues from staffing concerns relative to the lead replacement program. It was noted that decisions were made to address lead replacement for public safety and other considerations and he did not want to re-debate those choices. However, it was noted that regardless of the department staffing concerns should be addressed with the employee group and management. It is not his role to determine staffing levels, due to lack of experience, and expertise, nor is it their role as a Board to get involved in those types of discussions. To the extent that they allow themselves to debate those issues then they are becoming a part of management and usurping managements daily discretion as it relates to appropriate staffing levels throughout the BWL. It appeared to be disagreement between the bargaining unit and management, as to the spirit of the agreement and whether or not it called for set maintained staffing levels in the Water Department, in addition to the designated staffing for the lead service replacement program. The Board agreed that it is not their role to determine staffing levels. However, if there is an agreement that speaks to set staffing guidelines then management should give rationale as to why it has not occurred and/or a plan to address it for the future. The Commissioners acknowledged both parties concerns and referred the matter to Dick Peffley with a recommendation that the bargaining unit and management meet to address the issue. The BWL must operate in good faith with open and frank discussion and in keeping with its process. The Board also advised they would take this into consideration relative to managements recommendation on how to resolve the matter while reviewing the upcoming fiscal year budget. The issues involving the lead service replacement program to BWL policy, budget, and staffing levels. The Board further noted that it should be a collaborative process in which everyone should share and communicate the same understanding regardless of whether or not they agree. Copies of the Board of Water and Light, Lead in Drinking Water Annual Status Update report dated March 2007 are available in the Office of the Corporate Secretary. Board Meeting Minutes Page 16 May 22,2007 FY 2008 Budget Update Sue Flores,Manager of Finance and Planning gave an overview of the BWL Financial Plan FY2008 update. The review specifically noted the budget calendar year and preliminary information relative to sales and revenue forecast, operating expenses, budget and utility comparison, cash flow, rate analysis as well as a discussion regarding allocation methods. The increase in wholesale sales increased cash reserves and staff will look at what role that plays in how the BWL moves forward relative to rate increases and the six-year forecast. The Board asked staff to ensure that the following items are included at the next budget presentation meeting: 1. An analysis of a percentage increase number relative to the cash reserves that the Board could use to defray rate increases if deemed appropriate and a staff recommendation regarding the analysis, and 2. The inclusion of budget comparisons relative to projected, actual,budgeted, restated, and filed numerical figures for fiscal year 2007. Ms. Flores noted that there are two types of operating expenses, one is direct cost and the other is allocated. The total preliminary FY08 operating expenses are$215,915,585 of which $171,903,139 was direct costs and $44,012,446 was allocated. Direct costs were defined as costs identifiable to a specific utility including direct labor benefits. Allocated costs were defined as those not easily identifiable to a specific utility. The external auditors review the allocation methods at a high level from year to year for reasonableness and consistency. She provided brief scenarios of alternative allocation methods and confirmed that the information is similar to what was presented by Charles Moore but with actual FY2008 figures. Mr. Moore noted that the Board passed a resolution, which stated that they would approve allocation methods. It was noted that the allocation method chosen would directly affect each respective utility and its potential rate increase. Commissioner James advised that she wants to ensure that in addition to management, Charles Moore and Susan Pifer would also make a recommendation regarding the allocation methods. She also noted that the auditors should sign off on management's allocation recommendation once made available. Susan Pifer, Director of Internal Auditor asked the Board if there were any specific objectives in mind with the rate design, as the allocation methods have a direct result on utility rates? The Board replied that there was nothing formal and further advised that they would like to receive various allocation options and methodologies as well as the rationale for said allocations. Once the information is received the Board would decide how to move forward. Staff concurred with the Board's request and confirmed that once the budget is finalized, they would present different methods with the end results and thereby, receive direction from the Board at that time. Board Meeting Minutes Page 17 May 22,2007 Mr. Moore also asked Ms. Pifer to review bonding because the funds are not actually placed in the bank. If the BWL does not bond for water then they are effectively borrowing from one utility to benefit another, which speaks to the issue of subsidization. Copies of the BWL Financial Plan Fiscal Year 2008 Update presentation are available in the Office of the Corporate Secretary. a. Budget Update—Board of Commissioners The Board of Commissioners reviewed its itemized budget summary for fiscal period 2006 through year-to-date, including 2008 projected budget figures. During the review, the Board discussed the possibility of implementing a Board stipend to cover expenses not already covered and/or reimbursed. The Board discussed the need to proceed with caution and justification for said stipend. A suggestion was also made as to whether or not the stipend could be applied per meeting or per month. They further acknowledged that there are legal questions as to the Board's authority to implement such a stipend and after brief discussion, suggested that they receive a legal opinion regarding the ramifications for enacting said policy. The Board did not have adequate information to make a decision or move forward at this point and unanimously agreed to move the agenda item to the Finance Committee for further discussion. The Board also asked to receive additional FY2008 projected budget information for the office of the General Manager, Director of Internal Audit, and Corporate Secretary. b. Budget Planning • Black Start Generators—Dick Peffley reported that the project was justified based on reliability issues raised during the August 2004 blackout. The budget overrun occurred because the budgeted amount included the equipment purchase price but not the installation cost. Formal employee discipline did not take place. However, it was noted on the employee's personnel record and reflected in their annual pay increase. Charles Moore explained that the biggest issue is reporting data, as the current reporting system is poor and antiquated. It was advised that they are looking at an external audit to review the control mechanisms. Commissioner Smith noted that in moving forward, the Board wants to ensure that Susan Pifer and Charles Moore work together and that staff acts upon their recommendations. Copies of the Black Start &Dye/Cedar Generator Projects Update presentation are on file in the Office of the Corporate Secretary. • East Lansing (E.L.) Substation Retirement- Doug Wood, Director of Engineering reported that the sale and early retirement of the E. L. Substation is complete. The relocation project allowed the BWL to retire a seventy (70) year old substation and upgrade area circuits. Developers paid for the relocation and all BWL distribution rework was finished ahead of schedule in December 2006, There still remain poles with third party fiber attached that will be removed by the BWL after the fiber is removed. The project was a win-win situation that Board Meeting Minutes Page 18 May 22,2007 financially allowed the early retirement of an aged facility, which also enabled the advancement of a commercial and residential redevelopment project in the City of East Lansing. Copies of the East Lansing Substation Retirement presentation are on file in the Office of the Corporate Secretary. Other The Board of Commissioners discussed the pre-audit meeting with Plante &Moran and the nature of said meeting. The number of Commissioners who wish to participate would determine whether or not there is need to post the meeting. In response to the question regarding the nature of the meeting, Commissioner James advised that there was some oversight in the control inventory process that needs to be addressed and the meeting would also act as an educational opportunity for new Commissioners and Ms. Pifer. Ms. Pifer further advised that the meeting is more for the purpose of gaining an understanding of the genesis of what was presented in the previous management letter. In light of the above, the Board discussed the necessity and productivity of having a Board member present at such a meeting and suggested having the internal auditors meet with Plante & Moran and report their findings back to the Board. It was also noted that no individual Commissioner should direct information received by the Board. Commissioner James advised that she thought it important for her to be present as she is the Finance Committee Chair. It was also noted that it is not her intention to direct what materials should be sent to the Board, as she is inclusive and not exclusive. Executive Session Moved by Commissioner Cochran, seconded by Commissioner Calkins to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel protected by the Open Meetings Act exemption MCL 15.268(h). (7:27 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James (teleconference), Rios, Rodocker, Smith, and Zerkle. Nays: None. Absent: None. Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Calkins that the Committee of the Whole meeting return to open session. Board Meeting Minutes Page 19 May 22,2007 Carried unanimously. The Committee of the Whole meeting reconvened in open session at 7:41 p.m. Commissioner Rios advised that the Board had discussion and received an update from General Counsel regarding a privileged document. There being no further business, the meeting adjourned at 7:42 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Graves, seconded by Commissioner Cochran, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolutiozz 2007-5- FINANCE COMMITTEE May 8,2007 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 6:00 p.m. on Tuesday, May 8, 2007. 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 Gary Calkins, Semone James and Sandra Zerkle. Commissioner Robert Cochran, alternate and Julee Rodocker were also present. Absent: Commissioner Robin Smith. Public Comment There were no public comments. FY2008 Budget Presentation Sue Flores, Manager of Finance and Planning presented an overview of the fiscal year 2008 financial plan. The budget presentation included a number of items such as the sales forecast, revenue assumptions, operating expenses, allocated expenses, cash flow assumptions, budgeted net income/cash flow, comparative financials and a preliminary review of the six-year forecast. THE SALES FORECAST FOR FY 2008 WAS COMPARED WITH FY 2007: Board Meeting Minutes Page 20 May 22,2007 % '08 Budget Utility FY08 Forecast FY07 Forecast To '07 Budget Electric—Retail 2,275,881 2,227,675 2.2% Electric—Wholesale 909,322 974,802 -6.7% Electric (mwh) 3,185,203 3,202,477 -0.5% Water(ccf) 10,782,933 11,725,381 -8.0% Steam(mlb) 749,719 784,350 -4.4% Chilled Water(tnhrs) 8,613,560 8,600,691 0.1% Electric: • Modest residential & commercial load growth, 1-1.5% • Industrial forecast is up 6.9% due to Delta Plant at full load • Wholesale volumes reduced due to anticipated Major Belle River outage Water: • Retail load is approximately flat • Wholesale volumes decreased over FY07 budgeted levels for Delta Township and ELMWA Steam: • Steam loads for GM approximately flat, reduction in Steam commercial due to conservation efforts Chilled Water: • Chilled Water loads approximately flat REVENUE ASSUMPTIONS • Projected rate increases, January, 2008: - Electric: 4.0% _ $2.7 million additional net revenue - Water: 6.0% _$608,000 additional net revenue - Steam: 6.0% _ $308,000 additional net revenue - Note: Requires Public Hearing Process for implementation • Chilled Water based on minimum bill level, no rate increase • Electric Wholesale - Lower revenue due to extended Belle River outage - Electric Wholesale margin: FY07 Budget= $10.4 mm FY07 Projected= $20.4 mm FY08 Budget= $8.5 mm • Water Wholesale—Rates being negotiated Board Meeting Minutes Page 21 May 22,2007 OPERATING EXPENSES Reviews held with each department Increase of 3 full-time employees Salary increases - Bargaining = 3% effective 11-1-2007 per contract - Non-Bargaining= 3% effective 7-1-2007 +$100K for equity adjustments/top performers • Increase in Health Care cost = 12% • 1st Full year of coal contract effective 1-1-2007 • Continue amortization of Environmental Expenditures - $1.1 mm Depreciation expense increased -$3m over FY07 budget, due to one time accounting change (-$1m) and higher capital costs ALLOCATED EXPENSES - CURRENT METHOD AND ALTERNATIVES REVIEWED Current methodology-recommended by Finance Department: Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 75.6% 18.7% 4.7% 1.0% $ $33,307,350 $8,255,786 $2,090,169 $425,934 $44,079,238 Alternative 1: - Incremental assumptions for Steam & Chilled Water on Support areas- recommended by Senior Staff.- Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 76.7% 18.9% 3.8% 0.5% $ $33,804,974 $8,341,958 $1,689,878 $242,428 $44,079,238 Alternative 2: - Incremental assumptions for Steam & Chilled Water on all allocations: Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 77.5% 19.1% 2.9% 0.5% $ $34,177,998 $8,423,119 $1,267,171 $210,950 $44,079,238 Alternative 3: - Incremental assumptions for Water, Steam & Chilled Water on Support areas: Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 79.6% 16.0% 3.8% 0.5% $ 35,093,933 $7,052,999 $1,689,878 $242,428 $44,079,238 CASH FLOW ASSUMPTIONS • Use of accumulated cash balances to mitigate FY2008 net loss • Total Capital expenditures = $49.1 million - Electric: $26.1 mm -Water: $18.9 mm - Steam: $ 3.6 mm Board Meeting Minutes Page 22 May 22,2007 - Chilled Water: $ .4 mm. • Proposed Bond issues of$20 million to fund water utility projects in FY08 and FY09 • Electric Utility fund for future environmental, new generation established at $2 million per year Financial Projections: Six-year Forecast for FY2008—FY2013 -Assumptions Projected sales levels —conservative growth • Rate increases: Cash balances used to stabilize rate increases - Electric (January) =4% in FY08, 3% in FY09, 2.5% FY10 -FY13 - Water (January) = 6% each year FY08 -FY13 - Steam (January) = 6% in FY08, 7.5% in FY09 - FY13 Chilled Water(July) = 3% in FY09 - FY13 • Begins with FY08 Operating expenses (included allocations) with 2.5% inflation in FY09- FY13, benefits at 5% Capital and environmental expenditures per six year forecast • $20 mm bond issue for Water in FY08/09 only • Conservative assumptions on GM termination fees (Steam) to be received in FYI 1, amortized with asset deferral, FY09-FY13 • Includes $4m per year drawn from Belle River fund, $2m in fund for future generation, environmental expenditures Credit Issues: Financial Goals • Maintain credit quality • Ensure adequate liquidity • Maintain rate competitiveness • Efficient & appropriate use of capital • Financially Independent Utilities Bill Cook, Senior Vice President of Operations presented the FY 2008 Capital Budget. The FY 2008 capital budget includes the following assumptions: • Revenue producing customer driven capital additions and those projects justified by 7-year cost/benefit analysis (will be noted as "Revenue Projects") • Lead service replacement program budgeted at$4,500,000 • CSO related expenses budgeted to coincide with most recent City of Lansing schedule • Environmental Compliance Projects included as required to meet mercury and other projected future emissions regulations • Production facility projects reflect GM plant closings, IRP and Steam Utility Plan results • Next phase of converting financial systems (HR and payroll) to SAP environment Board Meeting Minutes Page 23 May 22,2007 The recommended FY 2008 capital budget itemized by the four utilities, which also includes common facilities totals $49,157,000. The six-year capital forecast for FY 2008 —FY 2013 was also represented. Following discussion the Finance Committee took the following action: On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Finance Committee unanimously recommended that the Board approve the proposed annual operating and maintenance budget and the capital budget for FY 2008, which also incorporates proposed utility rates. Further, the Corporate Secretary is to file the budgets with the City Clerk and the Mayor's Office in accordance with the Lansing City Charter. A formal resolution regarding these items will be placed on the Board meeting agenda under General Manager Recommendations for May 22nd Charles Moore Coal and Investment Letters Charles Moore, Interim Internal Auditor reviewed the coal and investment letters dated February 28, 2007 and March 5, 2007 respectively. As such, Mr. Moore recommended that the Board issue a Request for Proposal (RFP) for cash management and investment advisory services. It was advised that the RFP would seek to improve efficiencies in the process and help utilize best practices. The second recommendation also included an annual review of the investment portfolio by the Internal Audit Department (IAD). After lengthy discussion, the Finance Committee unanimously agreed to move forward to the full Board a recommendation for Sue Flores, Charles Moore and Susan Pifer to work together to provide a more concrete proposal and draft RFP relative to the cash management and investment advisory services. They also unanimously agreed to move forward to the full Board Charles Moore's second recommendation that the Internal Audit Department review the investment portfolio on an annual basis. Construction in Progress Mr. Moore reviewed the construction in progress letter dated April 6, 2007. As such, he noted that the BWL had an antiquated record system that should improve with the implementation of SAP. The recommendation included a suggestion to bid a RFP in which an external firm would assess the internal controls system wide. After which, the IAD would review the SAP process in six (6) months to ensure that it would further strengthen internal controls related to construction in progress. The second item relative to the review of capital projects in going forward recommended either reducing the amount of capital projects to an amount where cash is not significantly hampered, or the consideration of bonding to cover those capital costs. It was noted that staff has already brought forward the issue and acted on the second recommendation. Update on Coal Inventory Mr. Moore noted that in his previous report there were issues with segregation of duties in the coal inventory process. There was a review for potential conflict of interest and a testing of transactions from the beginning of the process to delivery and payment. As part of the testing, Page 24 Board Meeting Minutes May 22,2007 Mr. Moore requested a copy of the documented checklist for the receipt of the coal in the inventory system, which he found to be unavailable. Dick Peffley, Interim General Manager noted that he did not have opportunity to communicate with Mr. Moore. However, the term `unavailable' does not mean that the BWL does not have the documented checklist, as they are stored at Eckert and Erickson station. It was noted that the checklist in question was not available at the time of Mr. Moore's request but the BWL does have possession of said document. The coal operator fills out a sheet and loads the information in the computer system at which time the packing slip is stored at one of the respective stations. Dick Peffley and Susan Pifer visited a station and randomly choose a couple of dates of which the operators were able to produce the sheets. Ms. Pifer advised that she intends to conduct additional work on coal that would include samples of transactions and the following of the entire process. Mr. Moore also noted that there was follow-up by the Accounting Department to his internal audit recommendation. The subsequent memo by Gennie Eva, Manager of Financial Services dated February 22, 2007 speaks to changes made in the coal approval process to strengthen internal controls. Internal Auditor Transition Susan Pifer, Director of Internal Audit noted that the internal auditor transition also consists of a means to establish an internal shop sustainable within the organization. In discussing the establishment of standards,benchmarks and the audit charter, Ms. Pifer advised that there are a myriad of standards that the BWL is subject to that makes financial reporting difficult. Some of those standards include the Financial Accounting Standards Board (FASB), Governmental Accounting Standards Board (GASB), and the Federal Energy Regulatory Commission (FERC). The combination of standards from the private and governmental sector increases the length of time needed to develop staff and institutionalize. There are few accounting firms that specialize in utility accounting or have the knowledge to make an assessment of whether or not it is accurate. Therefore, it is pivotal that the auditors understand accounting and auditing standards. Ms. Pifer noted that the Internal Audit Charter (Attachment A) was suitable and recommended moving forward with the charter unless the Board of Commissioners felt otherwise. It was further advised that time was spent with the external, interim and previous internal auditors to understand risks that were identified during the course of their work at the BWL. Although, a formal risk assessment is still warranted a recommendation was made to move forward with the following items: 1. Coal Inventory Control: A systemic approach to an audit with firm objectives and audit programs. 2. Capital Assets: IAD must test transactions and reporting in the new system for accuracy and completeness, as well as make workflow recommendations to correct any deficiencies. The indirect cost rates applied to capital projects must also be reviewed by the IAD for accuracy, including an evaluation of alternative allocation structures for the Commissioners' review. Board Meeting Minutes Page 25 May 22,2007 3. Internal Controls—SAP: Although external auditors are budgeted to perform a review, the IAD must also provide assurances that the system effectively and accurately processes financial and operational information for internal purposes, e.g. management reporting, interim financial reporting, actionable operational reporting, etc. In addition, it is recommended that the IAD manage the RFP process for these services and that consideration be given to rotating external auditors for purposes of the internal control review, i.e. consider alternatives to the external auditors responsible for financial statements. 4. Cash Management: The Director concurs with Mr. Moore's recommendation to solicit an RFP for banking and investment services. Consideration for lock-box services to improve current remittance processing and prompt investment of those cash deposits is also recommended, as lock-box services solicited as a"carve-out" from other banking services is cost prohibitive. 5. Mr. Moore intends to complete his review of healthcare, impaired assets (obsolete inventory), contracts and staff overtime. Additional follow up by the IAD may be required after his initial review of these topics. In addition, the external audit of financial statements typically requires extensive involvement of internal audit staff(currently scheduled for late summer). Furthermore, audit programs and procedures must be developed for the other processes to be considered by the IAD in the first year of operation. Priorities and time lines for these other areas will be presented to the Board at the next Finance Committee meeting. The former internal auditor and the current interim internal auditor both laid out a comprehensive list of auditable entities. The latter acts as a task list and the initial schedule that lists 29 processes and 70 sub-processes was previously presented to the Committee of the Whole on January 26, 2006. The IAD recommended the inclusion of mapping of key processes in the development of audit programs for each of the entities. A draft copy of a coal procurement audit was presented. It was also stated that a similar audit program should be developed for all of the audit processes within the BWL. This will enhance accountability to the Board of Commissioners and act as a task schedule for the IAD. In reference to coal, two modules were written by the former internal auditor, two written by Susan Pifer and two additional modules are still needed based on the audit plan received from the consulting firm that conducts fuel procurement audits for public utilities. The IAD suggested that the work could be done in approximately 4—5 weeks while also pulling samples and reviewing transactions from the beginning to the end. SAP would also need a six-month window to allow transactions to flow into the process before a thorough analysis can be conducted. In the interim, work has already begun in reviewing the system as it is laid out, the infrastructure, and determining how it is meant to operate so that a determination can be made as to whether or not the information is flowing appropriately and being recorded back to the operators. Ms. Pifer advised a need to play an active role in learning the SAP system, being aware of its internal controls, making sure they are in place, and understanding the configurations. The IAD would also like to play a more critical role in the external audit of financial statements. Plante & Moran have agreed to provide a copy of their narratives and audit programs to enhance understanding, reduce redundancies and create proper synergies between the internal and Page 26 _ Board Meeting Minutes May 22,2007 external auditors. It will take approximately 12— 18 months to review all of the processes for the first time. Included in the proposed budget for the Office of the Internal Auditor are two full time employees (Director of Internal Auditor and Assistant Auditor) as well as outside services that could be equivalent to an intern or professional auditing services if needed. It was determined that the new Assistant Auditor position would benefit from a senior auditor with 2— 3 years who could assist in developing programs. Commissioner Calkins noted that the former internal auditor created a purchasing program relative to procedures. He asked Ms. Pifer if she had opportunity to review the program, determine the impact of SAP on the recommendations and assess its current standings. Ms. Pifer noted that she had not located a purchasing program and the former internal auditor had not mentioned one. However, she would follow-up and report back to the Board of Commissioners. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Finance Committee unanimously agreed to accept Susan Pifer, Director of Internal Audit, proposal and budget recommendations. She was also charged with the responsibility of initiating the process of seeking an Assistant Internal Auditor subject to budget approval. A formal resolution regarding these items will be placed on the Board meeting agenda under Resolutions for May 22nd There being no further business, the meeting adjourned at 8:08 p.m. Respectfully submitted Semone James, Chair Finance Committee Motion by Commissioner Graves, seconded by Commissioner Cochran, to receive the.Finance Committee report as presented. Action: Carried unanimously. esolution 2007-5- HUMAN RESOURCE COMMITTEE May 10, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Thursday, May 10, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, Santiago Rios and Julee Rodocker. Absent: None. Board Meeting Minutes Page 27 May 22,2007 Public Comment There were no public comments. Skill Family Range/Performance Matrix Recommendations Wendy Bradley, Human Resource Consultant for Employee Relations,Wage & Salary provided an overview of the Fiscal Year (FY) 2008 Skill Family Range Adjustments and Merit Budget. She noted that since 1999 the Board of Water and Light's (BWL) pay philosophy is to attract, retain, develop and reward a quality workforce. They also act to ensure BWL pay plans are competitive and cost effective for the BWL. In conjunction with the BWL's annual review, the HayGroup was hired to evaluate the current compensation, performance management, and rewards performance programs. In conducting the study, the HayGroup held a series of senior management interviews, employee focus groups, a performance management survey, and collected data from the BWL's department market analysis. As such, the HayGroup's executive summary findings are as follows: • Employees do not appear to appreciate all of their employment rewards. • LBWL offers market competitive pay opportunities that are differentiated by the level of impact jobs have on the organization. • Employee aggregate base salaries are approximately at the market rate. - 94% of employees have compa-ratios (base salary/market rate) equal to or greater than 90%; 55% of employees have compa-ratios equal to or greater than 100%. Almost all job families have aggregate compa-ratios around 100%. • Salary ranges are constructed consistently and soundly (range spreads and midpoint progressions) and offer market competitive pay opportunities. • The level of detail of the compensation program for the communication program may be overwhelming to employees. • LBWL offers market competitive salary opportunities. • LBWL has an appropriate set of skill families. • LBWL performs very thorough market pricing. - LBWL utilizes a robust number of compensation surveys to market price positions. - Market data cuts are appropriately concentrated on utilities, not-for-profits, and Michigan employers. - LBWL appears to be appropriately aging market data and applying geographic wage differentials. - LBWL accurately market price jobs (i.e.,job model matches are accurate). It was noted that the BWL also worked with Michael Goree of Growth Strategies Consulting, Inc., who disagreed with the HayGroup and felt that the BWL had enough skill families and the current compensation system, was too complicated. Mr. Goree recommended that the BWL collapse some of the common grades with those that shared similarities. As a result, the BWL proposed a reduction of the number of grades from sixty-six (66) to twelve (12) effective FY 2009. The director grades would retain more levels to allow for flexibility, as those positions are typically harder to recruit. Page 28 Board Meeting Minutes May 22,2007 Staff noted that in relation to the first study finding, the BWL must improve employee communication and education relative to the benefit package. The Human Resource Department sends an annual total rewards report but it does not include comparison information. Dick Peffley, Interim General Manager advised that one of the goals of the new Human Resource Director would be to work with Mark Nixon, Communications Director to improve BWL efforts in this area. Ms. Bradley advised that a suggestion was made to have the total rewards report sent from the General Manager to give it renewed emphasis. The Commissioners encouraged staff to improve its communication efforts in educating employees about the benefits of their existing compensation package. They also suggested highlighting the opportunity to receive shift premiums and overtime when applicable and deemed appropriate by the department's respective needs. The Commissioners discussed the percentage of employees at or above market rate in relation to the percentage of those who are not. Commissioner Graves asked staff to provide a copy of the overtime statistics, standby call-in and premium shift information in aggregate form. Mr. Peffley acknowledged Commissioner Graves request and advised that the information could be provided. He also noted that some of the employees who are under market rate would be addressed during the next fiscal year. Staff has proposed a$100,000 budget for all other increases including that of top performers and equity adjustments. The Human Resource Director, Process Director and the General Manager will manage the additional funding to ensure proper handling. All employees would not be at 100% of market rate, as one must allot for new employees and progression through the pay scale system. Ms. Bradley noted that in determining the merit budget they took the following internal and external factors into consideration: • External - state of the economy (CPI); and projections from other businesses and utilities • Internal—pay for performance system, retention, and the BWL's ability to pay BWL compares its locality for the rate of inflation to the Detroit/Ann Arbor/Flint area, which increased by 1.7%. Projected salary increases of areas employers and other utilities were also taken into consideration. It was clarified that `other increases' include promotional equity adjustment reclassification, which is an equity adjustment, made to satisfy a problem that the existing compensation system does not currently resolve. Ms. Bradley noted internal factors to consider and provided summary recommendations for the skill family range adjustments and merit budget for fiscal year 2007 —2008. Internal Factors to Consider • Pay for performance - need to adequately fund in order for it to be effective. • Retention - All utilities are losing talent (knowledge, skills, abilities) unique to the utility industry due to an aging workforce. - Competition for this talent is increasing amongst utilities. Board Meeting Minutes Page 29 May 22,2007 Summary Recommendations • Maintain current Skill Family Ranges • 3% Merit Budget $100,000 additional budget for other increases (Top Performers and Equity Adjustments) Staff advised the Commissioners of the performance system in which goals and objectives are annually established on July 1st. Goals are tied to the balanced scorecard and a mid-year review takes place to keep employees abreast of their progress. It was noted that directors report their results on a monthly basis. Commissioner Cochran noted in his personal opinion, the BWL should think long range about its employees, similar to the thinking associated with long term generation and the wholesale market. It is a little disturbing that all employees are not at market rate because there is competition. He wondered why the BWL does not want to be superior in this area to ensure employees remain with the company. Especially, in light of its financial performance and electric rates significantly below that of Consumers Energy. The Commissioners went onto discuss the BWL's overall compensation package in relation to other local entities, and reiterated the need to improve employee communications in this area. It was also noted that employees would eventually have to take more responsibility for the organization, which has provided so much. It further advised that based on the BWL's competitive rates, the organization should be able to fill vacant positions, or deem them unnecessary and remove the positions from the budget. After discussion, the Human Resource Committee took the following action: On motion by Commissioner Rios, seconded by Commissioner Graves, the Human Resource Committee unanimously agreed to forward management's recommended skill family range adjustments and merit budget for fiscal year 2007-2008 to the full Board for approval. This item will be placed on the regular meeting agenda under General Manager's Recommendations for Board action on May 22nd There being no further business, the Human Resource Committee adjourned at 4:48 p.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner James, seconded by Commissioner Zerkle, to receive the Human Resource Committee report as presented. Action: Carried unanimously. [Resolution 2007-5- COMMITTEE OF THE WHOLE Board Meeting Minutes Page 30 May 22,2007 May 15,2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m. on Tuesday, May 15, 2007. Committee of the Whole Chair, Santiago 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 Sandra Zerkle. Absent: Commissioner Robin Smith Public Comment Joseph Davis, Business Manager of IBEW Local 352 spoke regarding the General Manager process and indicated the need for a strong leader in moving forward. In the past he has gone on record in support of building a new power plant and putting the Board of Water and Light (BWL) in a position to do so. The BWL has a good workforce but they need to have a trained workforce, as there are over 300 people who could retire within the course of 36-48 months. The BWL needs to think forward, be proactive and work together. Dick Peffley, Interim General Manager introduced the new Human Resource Director, Denise Mulder. Review GM Candidates—Varnum Consulting Sandra Soltysiak, Varnum Consulting forwarded the results of the top seventeen (17) applicants prescreen information to the Board of Commissioners on May 11, 2007. The communication noted that two (2) additional candidates were added to the applicant pool and as such, recommended a total of eight (8) candidates be considered in moving the process forward. The communication materials also asked each Commissioner to review the information and determine their five (5) strongest candidates for discussion at the Committee of the Whole meeting scheduled for May 15, 2007. During the Committee of the Whole meeting held on May 15th each Commissioner stated their strongest candidates and tally was taken to assess the results. As such, the Committee of the Whole unanimously agreed to move candidate number 2, 8, 16, and 123 forward for interviews for the position of General Manager. The finalist's names continue to be concealed and Ms. Soltysiak will reveal their names after each applicant is made aware of their candidacy standing. In addition, Ms. Soltysiak suggested that the candidates have opportunity to partake in a facility tour prior to the interviews, which should be lead by a management and bargaining unit representative. Ms. Soltysiak will coordinate the facility tours with Dick Peffley. Upon further discussion, the Commissioners determined that a Special Board meeting for the interviews would begin on Friday, June 151h at 9:00 a.m. to be held at Board of Water and Light. A second Special Board meeting will also take place on Monday, June 18th to discuss and Board Meeting Minutes Page 31 May 22,2007 announce the results of the General Manager interviews. A reception in lieu of a meet and greet would commence at 4:00 p.m. immediately following the Special Board meeting. Commissioner Cochran provided Ms. Soltysiak with an additional question to be added to the interview process. Ms. Soltysiak acknowledged the change and advised that it would be added to the existing list. Rules & Regulations for Utilities Kellee Christensen, Manager of System Integrity and Customer Projects presented the annual update of the Rules and Regulations for utility service that includes applicable fees and charges. A summary of the recommended fiscal year 2008 changes included the following: Electric, Water and Steam and Chilled Water • Revision of Rule 4— Use of Service A section was added called Discontinuation of Service describing the voluntary and involuntary ways that service may be discontinued. • Revision of Rule 7.4 Responsibility for Payment of Bills, Account Security Deposit to change the security deposit factor from 1.5 times the average monthly bill to 2 times the average bill. • Updated fees and charges for current actual, estimate cost or market conditions. • Several minor housekeeping issues to format and consistency of text. • Electric—No significant changes. • Water—Revision of Rule 11 Services, a section was added, 11.7 Lead Service Pull Ahead Program, to define how and what credit will be received when a customer wishes to have their service replaced before the schedule replacement date. • Steam—No significant changes. • Chilled Water—No significant changes. The Commissioners discussed the Lead Service Pull Ahead Program, its impact and the reasoning, as to why BWL crews will not handle the additional work. Ms. Christensen advised that the program addresses persons who do not like the existing lead replacement schedule and are not a part of the sensitive population. The Lead Service Pull Ahead Program would not affect the overall schedule, the financing process, or current priority listing, as the choice program would handle the additional the work. Bill Cook, Senior Vice President of Operations noted that contractors currently address the mass production work for the lead service replacement program. As the BWL moves to the future, management will review the possibility of allowing the BWL crews to takeover some of the workload relative to the lead replacement program. Board Meeting Minutes Page 32 May 22,2007 On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to move the Rules and Regulations Update to the full Board for consideration. The resolution will appear under General Manager's Recommendations at the next Board meeting scheduled for May 22na Renewable Energy Portfolio Standards (RPS) Nick Burwell, Manager of Special Projects advised that there are no significant changes to the Granger landfill renewable energy power purchase agreement since it was initially presented to the Board of Commissioners. It was originally believed that the BWL had lost opportunity to pursue this agreement. However, Consumers Energy pulled all of their Request For Proposals (RFP) throughout the State of Michigan, which freed the Granger RFP and provided the BWL with a renewed opportunity to pursue it. The BWL is working with the Michigan Public Power Association (MPPA) and the issue will be before their Board for a vote on June 13, 2007. The pricing is aimed at being slightly below the BWL's retail rate and indexed towards the future so that it would never surpass it. One of the advantages of obtaining renewable power prior to state established portfolio standards is the ability to take advantage of early pricing before the real market establishes it. The power will connect directly into the BWL's distribution center, which would reduce cost. Bill Cook reiterated that the BWL is paying a premium so that they can offer green power and meet the renewable portfolio standards. The renewable energy power purchase agreement with Granger is a 20-year contractual arrangement at an estimated cost of$80,000,000. Mr. Burwell advised that the BWL could buy coal-fired generation on the wholesale market significantly cheaper but they are paying a premium to have renewable energy now. In the future, they anticipate that the premium cost would dramatically increase as demand increases. It was clarified that the BWL would estimate future cost to help maintain pricing below the retail level. Mr. Burwell agreed that the project is being driven by future anticipated state and federal requirements to develop a portfolio. It was also advised that the Board of Commissioners has already established a policy with certain percentages relative to the RPS. Commissioner Graves asked what is the rationale for the general public for the BWL to change to a higher rate than could be purchased off the grid? Mr. Burwell advised that there are two reasons: 1) The general public has said yes to green power and want to move forward on environmental issues; and 2) By acting now the BWL is protecting itself against going above the retail rate Currently, thirty (30) states have portfolio standards and there are two (2) senate bills and one (1) house bill currently out regarding portfolio standards. Governor Granholm has said that the state will move in this direction and it would shorten the BWL's move toward the 2 1"century report. The Commissioners congratulated staff on their efforts regarding the RPS and highly encouraged them to ensure that the appropriate communication efforts are in place to announce the BWL's Board Meeting Minutes Page 33 May 22,2007 accomplishments in this area. It was noted that this is a move in the right direction relative to Board policy. The project cannot be characterized in terms of cost because it is going to place the BWL in front of regulatory policy for good reasons. The Board went onto suggest that the BWL involve its lobbyist and the Governor relative to the announcement of the Granger agreement. Mark Nixon, Communications Director was present and acknowledged the Board's sentiment. He also advised that Granger is interested in holding a press conference to announce the agreement and subsequent information. The Communication Department will work to ensure that proper care is given to said project. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to move the Renewable Energy Power Purchase Agreement with Granger Electric to the full Board for consideration. The resolution will appear under General Manager's Recommendations at the next Board meeting scheduled for May 22nd Copies of the Board of Water and Light and Granger Landfill-Gas-to-Energy, "Hometown Power from Hometown Trash"presentation dated May 15, 2007 are on file in the Office of the Corporate Secretary. Corporate Secretary— Goals and Objectives Rhonda Jones, Corporate Secretary and the Board of Commissioners briefly discussed the six- month performance review feedback memo dated April 24, 2007. As such, the Commissioners agreed with the goals and objectives as stated and suggested adding the task of creating a Corporate Secretary manual that was alluded to in the memo. The Commissioners encouraged Secretary Jones to attend the upcoming 2007 National American Public Power Association Conference. The purpose of the conference would serve to meet people from other utilities in an attempt to obtain more knowledge and experience. The Commissioners also encouraged Secretary Jones to contact former Corporate Secretary, Mary Sova for assistance with constructing the manual, as they consider her to be a valid resource and want her to made available if needed. It was further advised that if it requires the Board to compensate the former Corporate Secretary then the Board would be willing to do so. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to accept the Corporate Secretary's short-term and fiscal year 2008 goals and objectives as amended. Section 125 Compliance—Closed Session Moved by Commissioner Graves, seconded by Commissioner Calkins to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel and Brandie Ekren, Associate Attorney protected by the Open Meetings Act exemption MCL 15.268(h). (5:21 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Board Meeting Minutes Page 34 May 22,2007 Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Calkins that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole meeting reconvened in open session at 5:38 p.m. Commissioner Rios advised that the Board had discussion and gave General Counsel direction in relation to the Section 125 compliance matter. Discuss Attorney-Client Privilege Matter— Closed Session Moved by Commissioner Graves, seconded by Commissioner Zerkle to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel and protected by the Open Meetings Act exemption MCL 15.268(h). (5:40 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Graves, 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 5:54 p.m. Commissioner Rios advised that the Board had discussion and gave General Counsel direction regarding a legal matter. Other Employee Stang Dick Peffley brought two items to the attention of the Board of Commissioners and noted that he would refer them to the Finance Committee after the budget is approved. He expressed concern that the BWL continues to operate at twenty-five (25) people under budget. The BWL is allotted for 737 people and is currently 25 persons below that number. Although, the new Human Resource (HR) Director, Denise Mulder has only been onboard for 2-days he challenged her to determine how to return to full staffing. Eight (8) of the vacancies are bargaining unit positions and seventeen (17) are management employees. The Commissioners have approved a budgeted employee amount and that is where the BWL strives to be. It was noted that the BWL is not at full employee capacity because the HR Department has struggled to fill positions. However, it is believed that the new leadership will address that issue. Currently, it takes 45 —60 days to fill a Board Meeting Minutes Page 35 May 22,2007 position. Mr. Peffley has already spoken to Ms. Mulder who indicated that the BWL should be proactive in filling positions that they know will be vacant and the hiring process is twice as long as it should be. Secondly, there is a succession plan without any funding. A HR Director was needed to help determine the appropriate funding amount. As they fill the positions, the BWL will be in a better position to determine the needs for succession planning. They have talked about expanding the generating portfolio and as such, will need staff to accomplish those goals. In working with the HR Director the BWL will need qualified employees, as they have not properly planned for anticipated future retirements, which is a big challenge. Mr. Peffley noted that they may return to the Finance Committee and ask for a variance or bring forth a detailed plan, as they want to be proactive in this matter. No action was required at this time, as management simply wanted to give the Board notice of their upcoming intentions. Commissioner Rios advised that it was great and necessary for planning who the BWL wants to be and if they intend to build a new plant then one must have the people to do so. The BWL must incorporate attrition relative to persons retiring and build a development plan in the budget. Commissioner James agreed with Commissioner Rios' sentiment and welcomed the project for the Finance Committee. Mr. Peffley also noted that as they move forward he believes that they would displace contractors who are currently doing BWL work. In Production, they previously had 10% of the capital work done in-house and 90% was farmed out; and now it is 80% in-house. Mr. Cook is seeking to move the Delivery Group to the same area, as they start to take over some of the services that the BWL can do competitively in a controlled and expeditious fashion. Budget Amendments Commissioner Rios noted that during the last meeting there was preliminarily discussion regarding the possibility of expanding the Commissioners budget. The current reimbursement policy is adequate to cover expenses that some Commissioners are not availing themselves to in terms of seeking reimbursement. It was suggested that they budget an amount per Commissioner to designate expenses that have not been previously dealt with directly, as they are operating without a budget. It was clarified that the travel budget is separate from administrative expenses. On motion by Commissioner Rios, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to amend the Board of Commissioners fiscal year 2008 budget by $12,000 for administrative expenses. Further Discussion: Commissioner James asked if the budget for administrative expenses is in lieu of the Board compensation issue? Commissioner Rios clarified that the Board does not specifically budget for other expenses aside for travel but they should. Therefore, the Board compensation discussion is going to continue. Board Meeting Minutes Page 36 May 22,2007 Commissioner Rios asked staff if there are any extra laptop computers that could be made available to the Board of Commissioners on an as need basis? It was also advised that it would be helpful for the Board to have a laptop available to them for use while traveling. Mr. Peffley advised that he could check with the IT Department, as they generally have 1-2 laptops available for use. He would also talk to IT to determine how to make that available to the Commissioners should one be needed. Following discussion, the Board took the following action. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Committee of the Whole unanimously agreed to purchase two wireless laptops with sufficient programming for use by the Board of Commissioners. There being no further business, the meeting adjourned at 6:09 p.m. Respectfully submitted, Santiago Rios, Chair Committee of the Whole Motion by Commissioner Calkins, seconded by Commissioner Graves, to receive the Committee of the Whole report as presented. Action: Carried unanimously. MANAGER'S RECOMMENDATIONS esolution 2007-5- A. FY 2008 Operating and Capital Budgets RESOLVED, that the annual Operating and Maintenance Budget covering Fiscal Year 2008 is hereby approved as presented; RESOLVED, that the Capital Budget for Fiscal Year 2008 is hereby approved as presented; RESOLVED, that the forecast for capital expenditures for the Fiscal Years 2008-2013 is hereby accepted as presented; and, 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. -------------------- Staff Comments: Staff recommends an operating and maintenance expense budget of$216.0 million and a capital program of$49.1 million for Fiscal Year 2008 to maintain ongoing services to customers and maintain and enhance facilities for continued future use. Capital expenditures for the Fiscal Year 2008-2013 are estimated to be $263 million. The budgets are presented as Board Meeting Minutes Page 37 May 22,2007 recommended by the Finance Committee on May 8, 2007, with the changes requested at the May 15, 2007 Committee of the Whole meeting. -------------------- Motion by Commissioner Calkins, seconded by Commissioner James, to adopt Resolution 2007- 5-7 for the Fiscal Year 2008 Operating and Capital Budgets. Discussion: Commissioner Rios stated that he understood Interim General Manager Dick Peffley was reviewing the budget to determine how to address attrition issues. Mr. Peffley noted.that he is working with Human Resource Director, Denise Mulder to develop a plan and review the budget. It was advised that eight (8) bargaining unit positions are open, four (4) of which have been posted. Mr. Peffley also clarified that he believes the staffing numbers stated in Joseph Davis' prepared statement (read during Public Comments) are staffing levels that the bargaining unit would like to see at the BWL. Commissioner Rios commented that what Mr. Peffley is currently doing is good. However, they also need to look at planning if the BWL is to move forward in building a plant. Ms. Mulder noted that she is meeting with executive staff and each member of the Human Resource Department to determine the issues and develop a plan to meet goals. Commissioner Rios encouraged Ms. Mulder to also meet with the bargaining unit, as they have ideas on how to meet some of those goals. Commissioner Cochran noted that the BWL is doing well financially. However, he is disappointed that that the BWL is not staffed at capacity. Action: Carried unanimously. esolution 2007-5- B. FY 2007-2008 Skill Family Salary Range Adjustments - Non-Bargaining Unit Employees The Board of Commissioners is responsible for setting salary ranges for the Board of Water and Light non-bargaining unit employees. The Human Resources department, with the concurrence of the General Manager, has recommended to the Human Resources Committee that the Board of Commissioners approve the recommendation to maintain the current (FY 2006-2007) skill family salary ranges and to reduce the number of levels (grades) with the salary system, with an implementation date beginning FY 2008-2009. The Board of Commissioners has been advised as to the justification that supports these recommendations, and has had an opportunity to discuss its merits. Board Meeting Minutes Page 38 May 22,2007 RESOLVED, that the Board of Commissioners adopt the attached non-bargaining unit skill family salary ranges. FURTHER RESOLVED, that the General Manager is authorized to develop all procedures necessary for the implementation of the recommendations above. -------------------- 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. In addition, the HayGroup consulting firm conducted an audit on the salary system. 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 Calkins, seconded by Commissioner Graves, to adopt Resolution 2007-5-8 for the Fiscal Year 2007-08 Skill Family Range Adjustments. Action: Carried unanimously. esolution 2007-5- C. FY 2007-2008 Merit Budget- Non-Bargaining Unit Employees The Board of Commissioners is responsible for approving the merit budget for the Board of Water and Light's non-bargaining unit employees. The Human Resources department, with the concurrence of the General Manager, recommended to the Human Resources Committee, that the merit budget for non-bargaining unit employees be 3% plus $100,000 to be used for all other increases (top performers and equity adjustments). The Board of Commissioners has been advised as to the recommendations. RESOLVED, that the Board of Commissioners adopt the recommendations of the Human Resources Committee by granting a 3% increase to non-bargaining unit employees and an additional $100,000 for all other increases for Fiscal Year 2007-2008. FURTHER RESOLVED, that the General Manager is authorized to develop any procedures necessary for implementation. -------------------- Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-5-9 for the Fiscal Year 2007-08 Performance Increase Matrix. Discussion: Commissioner Rios asked for a rationale regarding the $100,000. Board Meeting Minutes Page 39 May 22,2007 Mr. Peffley noted that the $100,000 allows the BWL to make equity changes, as this is a task that has been done in the past but it was not previously budgeted. It was confirmed that the equity change is similar to what was done for the lineman. Commissioner Cochran asked if the BWL looks at the budget in approximately 5-months and then determines that it needs to be adjusted? He also asked if the BWL has ever thought about setting aside funding to account for anomalies? Mr. Peffley noted that staff could come before the Board of Commissioners with any anomalies that may arise. He also noted that they do not traditionally set aside funding for anomalies, as those funds could be used elsewhere in the company. Action: Carried unanimously. esolution 2007-5-1 D. 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, 2007 (see attachments.) -------------------- Staff Comments: The attached documents were presented at the Committee of the Whole meeting on May 15, 2007. -------------------- Motion by Commissioner James, seconded by Commissioner Cochran, to adopt Resolution 2007-5-10 regarding the Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services. Action: Carried unanimously. esolution 2007-5-I1 E. Renewable Energy Power Purchase Agreement with Granger Electric WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has approved a Resolution establishing goals (Resolution#2007-1-9 -Renewable Energy Portfolio Standard); and, Board Meeting Minutes Page 40 May 22,2007 WHEREAS, renewable energy creates energy diversity for long-term security of our economy and environment and is consistent with assuring reliable, safe, clean and affordable energy for our citizens; and, WHEREAS, the Renewable Energy Portfolio Standard established an initial goal of 2% of retail sales being from renewable energy by the end of 2008; and, WHEREAS, the Granger landfill gas-to-energy facility at 16800 Wood Road, Lansing, MI 48906 qualifies as a renewable energy facility; and, WHEREAS, the Granger facility will connect directly to our distribution system, avoiding the cost and cost volatility of the MISO system- which, depending on the location, could add significant transmission costs (the current average cost across the entire MISO system currently ranges from an average of about$2.50/MW for off peak to nearly $5.00/MW for on peak); and, WHEREAS, the Granger facility would become a hometown power source, and Granger has agreed in the proposed contract to allowing not only BWL signage on the facility as a partner, but access for tours or presentations - the synergy from this hometown alliance and the value it adds beyond power would be to both parties' advantage (Hometown Power from Hometown Trash); and, WHEREAS, as we anticipated, the 21St Century Report from the MPSC, proposed legislative bills requiring Renewable Portfolio Standards, and expectations of some kind of Renewable Portfolio Standard from the Governor are already triggering an increase in the demand for Renewable Energy; and, WHEREAS, it is appropriate and prudent for the Board of Water and Light of the city of Lansing to move forward with ensuring Renewable Energy sources for the future. NOW, THEREFORE, BE IT RESOLVED, that the General Manager is authorized, through MPPA until our Power Pool agreement is terminated and after that directly to the BWL, to enter into a 20 year agreement with Granger to supply the BWL all existing and future renewable energy from its Wood Road landfill facility at an initial price equal to 2% below the BWL average retail electric rate with an annual index for the term of the agreement. -------------------- Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-5-11 regarding the approval to enter into a Renewable Energy Power Purchase Agreement with Granger Electric. Discussion: Dick Peffley explained the traditional Request for Proposal (RFP) process and advised that Granger Electric did not respond to the initial request, as there was some miscommunication regarding whether or not they needed to respond at that time. Therefore, the RFP falls under the category of a sole source contract. Board Meeting Minutes Page 41 May 22,2007 Commissioner James asked Director of Internal Audit, Susan Pifer her opinion regarding the matter. Ms. Pifer noted that although she would have preferred the RFP be left open for a longer period of time so that others could apply, there was no injury, and no one else can provide the service. Therefore, she gave her approval for the project. Action: Carried unanimously. UNFINISHED BUSINESS Motion by Commissioner Cochran, seconded by Commissioner Zerkle, to formally adopt Resolution 2007-3-12 previously presented and discussed but not voted on at the March 27, 2007 Board meeting regarding the Corporate Secretary's Six-month Performance Increase. Action: Carried unanimously. NEW BUSINESS None. RESOLUTIONS esolutions 2007-5-I2 INTERNAL AUDIT CHARTER RESOLVED, That the Board of Commissioners hereby approves the Internal Audit Charter, appended to the May 8, 2007 Finance Committee meeting minutes and the resolution as Attachment A, which conforms to the International Standards for the Professional Practice of Internal Auditing and the Statements of Auditing Standards promulgated by the American Institute of Certified Public Accountants. On March 22, 2005 the Internal Audit Charter was approved by the Board of Commissioners and hereto referenced by Resolution 2005-3-14. It was subsequently resubmitted and discussed at the Finance Committee meeting held May 8, 2007 and deemed suitable for continued use without amendment. --------------- Motion by Commissioner James, seconded by Commissioner Cochran, to adopt Resolution 2007-5-12 regarding the Internal Audit Charter. Action: Carried unanimously. esolution 2007-5-13 INTERNAL AUDIT TRANSITION PLAN Board Meeting Minutes Page 42 May 22,2007 RESOLVED, That the Board of Commissioners hereby approves the Internal Audit Transition Plan, known as Attachment B, for the remainder of Fiscal Year 2007, and the Internal Auditor Budget for Fiscal Year 2008. The Internal Audit Transition Plan, which includes the staffing addition of an Assistant Auditor was submitted and discussed at the Finance Committee meeting held on May 8, 2007. The plan is subject to modification pending executive-level risk assessment, staffing levels and open issues remaining after the contract for the interim internal auditor expires. -------------- Motion by Commissioner James, seconded by Commissioner Rodocker, to adopt Resolution 2007-5-13 for the Internal Audit Transition Plan. Action: Carried unanimously. esolution 2007-5-I AMENDMENT TO TRAVEL POLICY FOR THE BOARD OF COMMISSIONERS RESOLVED, That the "Meal" section of the Travel Policy for the Board of Commissioners be amended retroactive to January 23, 2007 as approved by the Committee of the Whole during said meeting: Reimbursement will be based on a per diem meal rate of $100.00. --------------- Motion by Commissioner Graves, seconded by Commissioner Calkins, to adopt Resolution 2007-5-14.regarding the Amendment to the Travel Policy for the Board of Commissioners. The motion also included the adoption of$1500.00 business expense per Commissioner and sufficient funding within the Board of Commissioner's budget to purchase two (2) laptops. Action: Carried unanimously. MANAGER'S REMARKS Chief Financial Officer(CFO) Position. Dick Peffley advised the Board that they have posted but do not intend to fill the CFO position. Posting the position allows them to get ahead of the planning process so that the new General Manager (GM) will have the resumes and could move forward once he/she is onboard at the BWL. Mr. Peffley also noted that he thought it best to advise Varnum Consulting that the position is posted and asked the Board if they thought the candidates should be advised of said posting. Therefore, if the GM finalists have persons in mind for the position then those individuals would have opportunity to apply. Commissioner Cochran initially advised that he was unsure of how to answer the question and wanted time to think about his response. Board Meeting Minutes Page 43 May 22,2007 Commissioner Rios noted that his only concern is that the GM may want buy in regarding the posting and the position. Commissioners James and Zerkle indicated that they did not see any harm in posting the job, as it speeds up the process. Commissioner Graves asked if the GM could hire someone who does not apply for the position? Mr. Peffley responded yes, and advised that the GM has that discretion. Commissioner Cochran noted that Mr. Peffley is the current GM and the Board gave him authority to act on that basis. Therefore, he should proceed accordingly. Safety. Mr. Peffley announced that the BWL had no recordable injuries for the month of April and the Production Department has gone 3-months without a recordable injury. The Board of Commissioners commended staff on its efforts regarding safety improvements. Executive Session On motion by Commissioner James, seconded by Commissioner Zerkle, Interim General Manager Dick Peffley requested an executive session to discuss a pending litigation matter protected by Open Meetings Act exemption MCL 15.268 (e). (6:27 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Graves that the Regular Board meeting return to open session. Carried unanimously. The Regular Board meeting reconvened in open session at 6:33 p.m. Commissioner Rios noted that the Board received a report from staff on a pending litigation matter. COMMISSIONERS' REMARKS Officer Positions. Commissioner Calkins asked who was interested in running for an officer position on the Board of Commissioners. He went onto advise that he was not interested in running at this time, as he was unsure of his re-appointment. Board Meeting Minutes Page 44 May 22,2007 The following Commissioners noted their interest as follows: Commissioner Rios— Chair position Commissioner Graves—Vice Chair position Commissioner Cochran—Not interested Commissioner James —Maybe interested in the Finance Chair position It was noted that the Chair and Vice Chair positions are the only officer seats on the Board of Commissioners and the Committee Chair seats are by appointment. The Board typically forms a Nominating Committee in June with elections and installation to occur at the July 2007 Board meeting. Any persons interested in holding an officer position must make their intentions know to the Chair, as those persons interested in holding an officer position cannot sit on the Nominating Committee. Staffing Levels. Commissioner Zerkle advised that she wanted the public to know that the Board of Commissioners is interested in staffing levels. As such, she is going to attend a meeting with Dick Peffley and the bargaining unit. Commissioner Cochran asked Commissioner Zerkle if she was attending the meeting in a Commissioner capacity? Commissioner Zerkle replied that she would be present to simply observe. Carlos Muldoon.Fundraiser. Commissioner Rios thanked Jim Dravenstat-Moceri and those involved in the success of the Carlos Muldoon St. Patrick's Day Fundraiser. Eight thousand ($8,000) was raised, of which fifty five hundred ($5,500) was given to Multiple Sclerosis Association of Mid Michigan, and twenty five hundred ($2,500) was given to LNZ Public Radio Station at Lansing Community College. EXCUSED ABSENCE On motion by Commissioner Calkins, seconded by Commissioner Cochran that the absence of Commissioner Smith be excused. Carried unanimously. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Rios, seconded by Commissioner Cochran, the meeting adjourned at 6:39 p.m. /s/Rhonda Jones, Corporate Secretary Board Meeting Minutes Page 45 May 22,2007 Filed with Lansing City Clerk May 25, 2007 Board Meeting Minutes Page 46 May 22,2007 ATTACHMENT A Lansing Board of Water and Light Internal Audit Charter Mission: The mission of internal audit is to provide independent, objective auditing and consulting services to the Board of Commissioners, enabling the Board to better serve customers, employees, and the community. Purpose: Internal audit's purpose is to add value and improve operations. It helps BWL.accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Independence: The Internal Auditor is appointed annually by the Board of Commissioners, and reports to them through the Chair of the Finance Committee. For administrative purposes, the Internal Auditor also reports to the Director and General Manager. To ensure independence, the internal audit function shall have no direct responsibility or any authority over any of the activities or operations of the BWL. Authority: Internal Audit shall have unrestricted access to all activities, records, properties and personnel. All processes, activities, and responsibility areas are subject to audit. Responsibility and Scope: Management is responsible for establishing and maintaining risk management, control, and governance processes. Internal audit is responsible to determine whether management's processes are adequate and functioning in a manner to ensure: • Risks are appropriately identified and managed. • Significant financial, managerial, and operating information is accurate, reliable, and timely. • Resources are acquired economically, used efficiently, and adequately protected. • Employees' actions are in compliance with policies, procedures, standards, laws, regulations and contracts. • Programs, plans; and objectives are achieved. Standards: The Internal Auditor shall comply with the International Standards for the Professional Practice of Internal Auditing of The Institute of Internal Auditors. The Internal Auditor shall consider and, where appropriate, comply with Statements on Auditing Standards of the American Institute of Certified Public Accountants. Board Meeting Minutes Page 47 May 22,2007 ATTACHMENT B Internal Auditor Transition Plan 1 . Coal Inventory Control: A systemic approach to an audit with firm objectives and audit programs. 2. Capital Assets: IAD must test transactions and reporting in the new system for accuracy and completeness, as well as make workflow recommendations to correct any deficiencies. The indirect cost rates applied to capital projects must also be reviewed by the IAD for accuracy, including an evaluation of alternative allocation structures for the Commissioners' review. 3. Internal Controls — SAP: Although external auditors are budgeted to perform a review, the IAD must also provide assurances that the system effectively and accurately processes financial and operational information for internal purposes, e.g. management reporting, interim financial reporting, actionable operational reporting, etc. In addition, it is recommended that the IAD manage the RFP process for these services and that consideration be given to rotating external auditors for purposes of the internal control review, i.e. consider alternatives to the external auditors responsible for financial statements. 4. Cash Management: The Director concurs with Mr. Moore's recommendation to solicit an RFP for banking and investment services. Consideration for lock-box services to improve current remittance processing and prompt investment of those cash deposits is also recommended, as lock-box services solicited as a "carve-out" from other banking services is cost prohibitive. 5. Mr. Moore intends to complete his review of healthcare, impaired assets (obsolete inventory), contracts and staff overtime. Additional follow up by the IAD may be required after his initial review of these topics. In addition, the external audit of financial statements typically requires extensive involvement of internal audit staff (currently scheduled for late summer). Preliminary—Subject to Board Approval on July 24, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT --J Tuesday, May 22, 2007 r•� C7 The Board of Commissioners met in the Boardroom of the Administrative Offices, 1232-Hach ' f r! Drive, Lansing, Michigan. - _ N Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone fames, Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioner Robin Smith The Secretary declared a quorum present. Acting Chairperson Rios asked all to rise for the Pledge of Allegiance to the Flag. Acting Chairperson Rios called the meeting to order at 5:35 p.m. APPROVAL OF MINUTES By motion of Commissioner Cochran, seconded by Commissioner Calkins the minutes of the March 27, 2007 regular meeting were unanimously approved. PUBLIC COMMENT THE ACTING 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. Joseph Davis, Business Manager of IBEW Local 352, handed out a copy of a USA Today newspaper article and read a prepared statement. The prepared statement pertained to concerns regarding water department staffing issues, a special conference request, and succession planning. A copy of the letter will be placed on file and entered under communications. COMMUNICATIONS Letter from IBEW Local 352, Assistant Business Manager Jim Dravenstatt-Moceri dated April 10, 2007 regarding the General Manager search. Board Meeting Minutes May 22,2007 Page 2 of 46 Received and placed on file. Letter from IBEW Local 352, Business Manager Joseph D. Davis dated April 12, 2007 regarding Water Department staffing levels. Received and referred to management. Letter from IBEW Local 352, Business Manager Joseph D. Davis dated April 27, 2007 regarding a special conference request for water. Received and referred to management. Letter from IBEW Local 352, Business Manager Joseph D. Davis dated May 22, 2007. (The letter was read during Public Comment and briefly addressed during Commissioner Remarks.) Received and placed on file. COMMITTEE REPORTS esohttioyt 2007-5-I Joint Meeting Lansing City Council and Board of Water and Light Commissioners March 29,2007 Council President Leeman called the joint meeting to order at 11:42 a.m. The meeting was held at the Clara's Lansing Station, 637 E. Michigan Avenue, Lansing. Councilmember's Present: Sandy Allen, Harold Leeman, Derrick Quinney and Carol Wood. Absent: Councilmember's Kathy Dunbar, Brian Jeffries, Tim Kaltenbach, and Randy Williams. Commissioners Present: Gary Calkins, Robert Cochran, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: Commissioners Semone James and Joseph Graves. City Staff Present: City Attorney Brigham Smith, Mayor Chief of Staff Jerry Ambrose (arrived at 12:40 p.m.), and Interim Administrative Assistant Diane Bitely. BWL Staff Present: Interim General Manager Dick Peffley, Senior Vice President of Operations Bill Cook, Manager of Finance and Planning Sue Flores, Director or Internal Audit Susan Pifer, Corporate Secretary Rhonda Jones, and Governmental Affairs Analyst Calvin Jones. The purpose of the joint meeting was to present an update to City Council on the following topics: Public Comment Board Meeting Minutes May 22,2007 Page 3 of 46 Bryan Smith, 1007 Park Lane, noted that he was upset by some of the things that had taken place regarding tree trimming. However, he was pleased with the committee that was formed and further advised that the BWL has gone out of its way, including that of Mark Nixon, Communications Director to address the issue. Mr. Smith also noted that the committee would soon bring forth recommendations and he thought the process was going well. Board Chair Smith introduced the new BWL Director of Internal Audit, Susan Pifer. 1. Update on Delta Tovnship Water Agreement. Board Chair Smith noted that the BWL is continuing to work with Delta Township to resolve its contractual differences. BWL staff advised that they are narrowing the areas of concern that amount to four primary items. It was also reported that Delta Township wants to remove the interruptible service clause in their contact due to its sensitivity and if done they would have to operate independently. Staff also noted that they are unsure of the financial impact at this time and they do not expect to resolve by June 2007. 2. Update on Tree Trimming. Board Chair Smith reported that the BWL is thru its first 5-year trim cycle and they are returning to Delta Township this calendar year. It was further noted that they do not anticipate doing much work in the City of Lansing until 2007 and it would begin in the southwest quadrant of the city. The anticipated FY2008 budget for tree trimming is $1.3 million, with 40% of the FY2008 budget slated for work in the city. It was further advised that the BWL anticipates that most of the work will occur on private property after January 1, 2008. Council asked if the BWL is looking at working with the City in the tree trimming process? They also asked if copies of the materials that were supplied to the focus group could be sent to Council to help in their continued review of the process? Staff noted that the BWL is looking to work with the City of Lansing for tree trimming work that would amount to $70,000 in the FY2008 budget. They also noted that they would send Council a copy of the focus group materials and any recommendations made from said group. 3. Update on Human Resource Audit. Board Chair Smith reported that the Human Resource audit was presented in December 2006 and subsequently made available to all employees. It was also noted that Dick Peffley, Interim General Manager updated employees in February 2007 of an action plan in response to the audit issues. 4. Update on the General Manager Search. Board Chair Smith gave a brief overview and noted that the General Manager position was posted and is scheduled to close on March 30, 2007. In response to Council's questions, it was further advised that the names of the candidates will not be released until the finalists are announced. It was also reported that they hope to fill the position by early June 2007. Council noted that during the previous process they were allowed to meet with the candidates for approximately 5-minutes and receive information during the meet and greet session. However, it was advised that the length of time given to Council was not sufficient. Board Meeting Minutes May 22,2007 Page 4 of 46 Board Chair Smith responded by noting that the Board of Commissioners has not made a decision regarding a meet and greet. However, they will take Council's concerns into consideration. 5. Update on Other Management Positions. Interim General Manager Peffley advised that the BWL received sixty-one (61) applications for the Human Resource Director position that included two internal candidates. It was reported that the interview team was comprised of bargaining and non-bargaining persons, and the candidates were sent to Varnum Consulting for additional testing. He also noted that there were high quality applicants with diversity and an offer had been made and accepted. The tentative start date for the new director is Monday, April 2nd pending physical and drug test results. Board Chair Smith noted that Susan Pifer who started on March 27, 2007 filled the Director of Internal Audit position. The Chief Financial Officer position will be filled by the new General Manager to allow them opportunity to establish their own team. The Director of Production position is currently being held for Dick Peffley (Interim General Manager). 6. IBEW— Union/Management Relationship. Board Chair Smith advised that they believe Union relations are improving. Grievances and employee comments at Board meetings have decreased and morale seems to be improving. She noted that an emphasis on increasing communication has begun and the BWL IRP results were presented to employees. It was further advised that Human Resource audit issues are also being addressed. Joseph Davis, Business Manager of IBEW Local 352 commented that the union-management relationship has improved and they are waiting for the Human Resource Director to begin the Healthcare Taskforce. He further commented that the human resource audit raised issues and one of questions is how does an organization train persons to move at the Board whether they are journeyman or professionals. Mr. Davis went onto advise that they are working with Delta Township and they see growth in that respective area. He closed by noting that they are looking forward to moving forward. Board Chair Smith noted that the BWL is making a cultural change that has been slow but good. It was also advised that the BWL has changed the CSO project process and currently have John Matuszak coordinating the project, which has resulted in decreased complaints. 7. Update on City/BWL Mutual Cooperation Present &Future. Board Chair Smith advised that BWL staff have been working with the City in the pursuit of mutual benefits. Those efforts include: BWL offered assistance in energy conservation program development and joint Purchasing Department efforts to identify combined purchasing opportunities such as fuel and office supplies. Other efforts include a pilot program in which the City may perform BWL tree trimming work and the coordination of CSO engineering, design, scheduling and contractors. Council made several inquires and observations that included an awareness that some streetlights were off in the district and the status of joint mowing and plowing projects. They also asked if the BWL has discussed delaying the rate break repayment agreement granted by the BWL a few Board Meeting Minutes May 22,2007 Page 5 of 46 years ago? Council went onto advise that they are interested in discussing the BWL's external audit performed by Plante &Moran at the Ways and Means Committee. In response to City Councils inquires, staff responded by noting that if half the streetlights in a block are off then it is typically a construction related problem or there maybe a fault. It was advised that if one notices a streetlight out then it should be reported to the BWL for repair. Board Chair Smith reported that they could not speak to the issue of a joint mowing and plowing project but they would obtain an update and report back to Council. It was also noted that there has not been any discussion at the BWL relative to delaying the rate break repayment. However, staff will look into the issue and update City Council. 8. Update on BWL Reventies/Expenses for FY06107 & Future. Sue Flores, Manager of Finance and Planning gave an overview of the BWL Financial Plan, FY08 Assumptions, which were originally presented at the BWL Finance Committee meeting on March 13, 2007 and the Financial Report, Seven Months Ended January 31, 2007. Ms. Flores briefly reviewed the sales forecast, revenue assumptions, operating expenses, capital expenditures, and net income. It was reported that the BWL expects a higher payment in lieu of taxes (PILOT) of$10,000,000 as opposed to the original projected amount of$9,200,000. Ms. Flores also noted that although she would prefer a 2-year rate strategy the BWL is currently looking at a January 2008 rate increase. During the rate discussion, City Council asked the BWL to be sensitive to the fact that sewer rate increases typically occur in October. They also asked the BWL what was being done relative to replacement generation? Interim General Manager Peffley responded by stating that they need to move forward in looking at replacement generation. He also advised that coal is the least expensive. However, they are still looking at biomass, wind, and solar energies. Council went onto ask about the vacancy rate at the BWL and whether or not they are currently employing contractors? Staff reported that the existing vacancy rate is 3-5% and the monetary cost is approximately $1,200,000 with 737 employees. It was also advised that while contractor numbers are decreasing they are currently involved in capital work, plant and CSO projects. Board Chair Smith departed at 1:00 p.m.due to a prior obligation. 9. Update on Maintenance of Lights. Senior Vice President of Operations Cook advised that streetlight re-lamping for 2007 is on schedule. To date 5,000 of the 9,000 lights scheduled for re-lamping have been re-lamped. It was further noted that lamp out replacements are being accomplished on average within seven (7) days and streetlight plant replacements (cable faults) are being repaired on average within thirteen (13) days. He also reported that the BWL is working with the Michigan Department of Transportation relative to streetlight replacements on I-496. Council President Leeman asked the BWL to look at antique lights relative to having a BWL employee drive by to ensure that they are working properly. It was noted that they are Board Meeting Minutes May 22,2007 Page 6 of 46 particularly interested in preventative maintenance for the antique lights in the downtown area, stadium district, and Michigan Avenue. 10. Update on Removal of Lead Pipes. Senior Vice President of Operations Cook gave a brief overview of the Lead in Drinking Water Status Update. The review discussed program objectives, lead service replacement statistics, typical lead service installation diagram, and the program budget. Council asked how much was outsourced and if the BWL expected additional federal regulations? It was noted that approximately 27-29% of the wok is contracted. It was also advised that the BWL is currently exceeding federal regulations in terms of lead pipe replacement. Furthermore, it was reported that BWL water quality presently meets or exceeds existing regulations. 11. Rules of Procedure. Vice Chair Rios noted that minor changes and clarification to the Rules of Procedure were presented to the City Attorney. The BWL asked for an update on where the rules stood relative to council approval. City Attorney Brigham Smith advised that he had spoken to General Counsel Amy Cavanaugh and the Rules of Procedure are currently on his desk waiting for review. 12. Legal Update Regarding the Pandy Matter, Cluley Matter and Any Other Litigation Pending Against the BWL. Staff noted that in the matter of the Virginia Cluley case, the Supreme Court ruled in favor of the BWL, and the Dave Cluley matter is currently in mediation. It was also reported that Mr. Pandy is seeking a reversal of the court of appeals decision regarding the issue related to his pension. It is anticipated that the matter would be resolved in the BWL's favor and at this point, insurance is covering the majority of cost for legal expenses. Staff further advised that there are no other employee suits of significance pending at this time. Other: Shttt-off's for Non-payment. City Council asked the BWL what have they dealt with regarding turn off of services for non-payment. Staff noted that they have not seen an increase at this time. However, it was further advised that the BWL has a strict process that it follows before turning services off for non-payment, which is a combination of timing and the monetary amount owed. Staff also reported that there is $700,000 in write-offs and there are currently eighty (80) limiters in the system. It was also noted that they are working to improve the process. Steam Utility. Interim General Manager Peffley noted that the BWL is working on a steam utility plan that it will soon present. City Council asked if the BWL held the steam rate increases for downtown area churches, as they have not received any complaints since the rate increase took effect? Board Meeting Minutes May 22,2007 Page 7 of 46 Staff advised that the steam rate increase of 35% was not held for downtown area churches and it took effect accordingly. Chiller Nevvs. Council President Leeman asked if there was a projected sales increase for the chilled water system? Staff noted that sales are flat and there are no new customers coming onboard at this time. Ottawa Station. City Council inquired as to the status of Ottawa Station. Staff noted that the City of Lansing is making an effort to sale the Ottawa Station and the BWL is currently working with Robert Trezise in whatever way possible to aid in the process. It was also advised that there is interest in the property but the BWL is unaware of the developers involved and have only received limited information to that respect. Council President Leeman asked if there is a 90% chance that the property would be sold in 2007? Interim General Manager Peffley advised that he could not say if the Ottawa Station would sale this year, as they are working with the City in respect to the property. Wellness Center. Council President Leeman noted that there is graffiti writing on the exterior walls of the Wellness Center. He asked if the BWL is responsible for maintenance and if there are any deals in the works to sale the facility? Interim General Manager Peffley reported that the Wellness Center is a package deal and developers are currently looking at it. It was also noted that they would drive by the facility to check for graffiti, as they were unaware of such problems. The meeting adjourned at 1:24 p.m. Motion by Commissioner Zerkle, seconded by Commissioner Graves, to receive the Joint City Council/BWL Commissioner report as presented. Action: Carried unanimously. esolution 2007-5-2 COMMITTEE OF THE WHOLE April 10, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:12 p.m. on Tuesday, April 10, 2007. Acting Chair 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, Board Meeting Minutes May 22,2007 Page 8 of 46 Joseph Graves, Semone James, Santiago Rios (4:24 P.m.), Julee Rodocker, and Robin Smith (4:15 P. Absent: Commissioner Sandra Zerkle. Public Commeizt Jim Dravenstatt-Moreci, Assistant Business Manager for IBEW Local 352, 3315 S. Pennsylvania Avenue advised that Joseph Davis could not attend the meeting. Therefore, he came to speak on behalf of IBEW Local 352. Mr. Dravenstatt-Moreci read a prepared statement, which essentially advised that the IBEW is interested in the General Manager search and would expect it to be a fair and transparent process that could withstand scrutiny. He went onto note that in the past non-bargaining employees and retirees were made a part of the interviewing process and they would hope that that would occur again with the current search. A copy of the prepared statement was given to Secretary Jones to be included as part of the minutes. See attachment. Acting Chair Commissioner Cochran turned the meeting over to Bona!Chair Smith at 4:16 p.nt. Review General Manager Candidate Credentials—Varnum Consulting Sandra Soltysiak, Varnum Consulting (also known as Hiring Solutions) introduced Kathy Tun-ate, Senior Consultant, who assisted with the review of applicant credentials. The General Manager job posting closed on March 30, 2007 and a total of one hundred seventeen (117) applicants were received. All applicants were assigned a number in the interest of confidentiality. Ms. Soltysiak presented the Board with a packet, which contained details of the top seventeen (17) applicants based on the criteria established within the job announcement. Also included was additional information about those applicants that were current or former BWL employees. The top 17 applicants were grouped in terms of strongest and possible candidates. The presentation and assessment of each applicant was solely based on the written materials submitted by the applicant. Ms. Soltysiak recommended that the Board move forward the top eleven (11) candidates to the prescreening process and suggested further narrowing the pool to three (3) finalists. Commissioner Rios restuned Chair responsibilities at 4:24 p.nt. It was further advised that both Ms. Soltysiak and Ms. Tungate would participate in the prescreening interview process to ensure its accuracy and completeness. Ms. Soltysiak cautioned against adding additional candidates to the initial 11 and advised if the Board decided to do so then she would recommend a discussion on reposting the position because the parameters would have changed in her opinion. She also noted that if a case could not be made for moving an individual from one specific grouping to another then the respective candidate should not be moved. After lengthy discussion, the Board requested additional lead-time to review all materials presented by Ms. Soltysiak and agreed to the following process: 1. Review the credentials of the top 17 applicants. 2. Send comments to Secretary Jones by Tuesday, April 17th Board Meeting Minutes May 22,2007 Page 9 of 46 3. Once the comments have been received, advise Ms. Soltysiak of any suggested changes and the reasoning for said change if applicable. 4. Commissioner comments will not be shared with one another due to the Open Meetings Act. 5. If a Commissioner does not respond then that will be viewed as an indication that they agree with the candidate list as presented. 6. Each respective Commissioner's name will appear next to their comment and/or suggestion. 7. Each Commissioner will review the suggested onsite interview questions, which includes input from the Interim General Manager. Suggested changes to the onsite interview questions must be submitted by April 17th Subsequently, the Board must also determine the following items in addition to the above. 1. Length of the final interviews 2. Time and date of the facility tours 3. The determination of an acceptable number of candidates Discuss General Manager Selection Process Meet and Greet. The Board discussed the possibility of hosting a meet and greet so that BWL employees, government officials and ratepayers would have opportunity to meet the finalists. It was noted that Lansing City Council expressed a desire to expand the timeframe granted to them to meet the candidates relative to the time allotted in the previous General Manager search. The specifics of the meet and greet still need to be determined. However, the Board was receptive to the concept in which finalists would give a brief introduction and greet the persons in attendance thereafter. Planning for the event is forthcoming. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to host a meet and greet with light refreshments. The Board of Commissioners also agreed to move the next Committee of the Whole meeting from April 171h to April 24th at 4:30 p.m. to further discuss the General Manager applicants and the remaining selection process. There being no further business, the meeting adjourned at 5:25 p.m. Respectfully submitted, Santiago Rios, 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 Minutes May 22,2007 Page 10 of 46 esolution 2007-5-3 COMMITTEE OF THE WHOLE April 24, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m. on Tuesday, April 24, 2007. Acting Chair 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, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: None. Public Comment There were no public comments. Review GM Candidates —Varnum Consulting Sandra Soltysiak, Varnum Consulting advised that she received the memorandum correspondence on behalf of the Board of Commissioners. The memorandum indicated that seven (7) of the eight (8) Commissioners recommended moving the top seventeen (17) General Manager applicants forward in the process. As such, Ms. Soltysiak discussed the job announcement criteria relative to the weight given to the applicants skill set and experience level. The Board noted that changing the weight relative to different skill sets does not change the job criteria. They would also look at the applicants as a whole and the General Manager's skill sets can be balanced against those already present at the Board of Water and Light (BWL). After further discussion, the Board introduced the following motion: Motion by Commissioner Calkins, seconded by Commissioner Cochran, to have Varnum Consulting prescreen all 17 candidates and return the results to the Board of Commissioners. Discussion: Commissioner James advised that the Board should define the prescreening parameters. Commissioner Graves noted that for clarification purposes, the Board would review the top 17 applicants, except for those who eliminate themselves from the process. Commissioner Rios requested that Varnum Consulting report to the Board all candidates that are eliminated (for whatever particular reason) prior to the Commissioners evaluation. Ms. Soltysiak reported that she removed one applicant from the process due to a lack of interpersonal skills. Board Meeting Minutes May 22,2007 Page I I of 46 Commissioner Calkins noted that interpersonal skills were not one of the items that the Board asked Varnum Consulting to prescreen. The prescreening should include items such as, do they want the job, do they have bad credit, and did they falsify their credentials? It was noted that the Board would have judgment on the remaining items. The Board reiterated that they want Varnum Consulting to proceed with their normal prescreening evaluation process and bring the information forward to the Board. They want all top 17 applicants prescreened unless the applicant withdraws from the process. Once that information is received then the Board will decide how to move forward. Ms. Soltysiak confirmed that she would prescreen the top 17 applicants, provide a comment on all of them and forward that information to the Board for further action. The Board noted that this is the normal next phase in the process and that they have only given specific direction relative to the top 17 applicants and not the reduction of the number of candidates as a whole. Action: Carried unanimously. Further Discussion: Ms. Soltysiak advised that she would notify the applicants that their candidacy would be revealed at the next Commissioner meeting. She then asked the Board when should the names of the applicants be revealed in an effort to adhere to the Freedom of Information Act? After brief discussion and in response to Ms. Soltysiak's question, the Board introduced the following motion: Motion by Commissioner Calkins, seconded by Commissioner Cochran, to withhold the applicant names from the next list that they expect to receive from Varnum Consulting. Action: Carried unanimously. Ms. Soltysiak finalized the interview questions with edit comments received from the Board in the memo dated April 17, 2007 and noted that they will complete the background information and telephone screen. Varnum Consulting will appear before the Board at the next Committee of the Whole meeting scheduled for Tuesday, May 17th at 5:30 p.m. Community Sponsorship Policy Item was removed from the agenda. Silver Bells Sponsorship Mark Nixon, Communications Director gave a brief overview of the proposed Silver Bells sponsorship. The new sponsorship, which totals $50,000, would include a $40,000 cash Board Meeting Minutes May 22,2007 Page 12 of 46 contribution and a not to exceed contribution of$10,000 for in-kind services. The increased contribution to the Arts Council of Greater Lansing would allow the BWL to become the events, "Presenting" sponsor (also referred to as the "Signature" sponsor). It is a win-win situation that would enhance the BWL's recognition and provide much needed funding to the Arts Council of Great Lansing. Mr. Nixon will monitor the event to ensure that the BWL receives the appropriate recognition for its contribution and efforts. The sponsorship would not increase the communication budget, as they are reallocating funds from advertising. On motion by Commissioner Calkins, seconded by Commissioner James, the Committee of the Whole unanimously agreed to approve the Silver Bells Sponsorship proposal. Wholesale Power Sales Bill Cook, Senior Vice President of Operations advised that the Wholesale Power Sales presentation was for informational purposes only. The presentation materials spoke to pricing, how the operators work and how they leverage the BWL's assets. Fiscal year 2007 anticipates $45,000,000 in wholesales sales with an expectation that it will significantly decrease in FY2008 due to planned maintenance outages. The BWL leverages every asset it has and schedules to keep the units available so that the BWL may sell all megawatt hours. FY2008 wholesale sales are projected at $39,000,000, which is made up of capacity energy sales to the Michigan Public Power Agency (MPPA) power pool. During the mid-1990's the BWL received 10% of its revenue from the wholesale market. However, during FY2007 it is approaching 30%. The volatility of the wholesale market speaks to the issue of how much does one invest to support it. It was suggested that the margin on the wholesale market would be elastic because of where the BWL will receive the units. Commissioner Graves advised that there was reference in the packet materials to the withdrawal from MPPA. He inquired as to whether there was any additional information or legal challenges that the Board needed to be aware of. Mr. Cook did not have additional information. However, it was advised that since the MPPA contract provides preference on BWL power and describes to an extent how the power is priced, the BWL believes that it could do better in the wholesale market. There are no legal challenges with respect to the exit in 2010, as the BWL has already given appropriate notice accordingly. Although, it is a negotiated issue, the BWL would like to accelerate the timeframe for its exit. Currently, there are issues relative to increasing the BWL's margin, which the BWL is trying to address. Staff further advised that the MPPA has not taken any action at this time that would appease the BWL's concerns. However, a new General Manager was recently hired and they hope to forge better relations in moving forward. Commissioner Rios advised that the risk management analysis would be very important to the BWL in moving forward. He indicated hope that Susan Pifer, Director of Internal Audit will be up to speed, since it is going to be a critical topic, as the BWL moves forward in 2008. Board Meeting Minutes May 22,2007 Page 13 of 46 Commissioners Rios and Cochran also congratulated staff for their efforts in the area of wholesale power. Mr. Cook went onto briefly discuss the liabilities associated with futures trading and the real time energy market. The number of wholesale counterparts is decreasing due to market changes. It was advised that most of the Midwest Independent System Operators (MISO) transactions are financially firm, which means that once an organization commits then one has to supply the energy no matter the price. The BWL's standards and guidelines do not allow the organization to accept that level of risk. If the BWL offers a financially firm product then there are financial instruments that one can put into place to hedge against the volatility in the market. The BWL would not venture into this project lightly and intend to have the consultants return to speak about a very limited pilot program with quantifiable risk. Staff did not want to move forward until an Internal Auditor was in place and they are working to improve their position through the risk management efforts previously brought forth. The National Electric Reliability Council (NERC) guidelines may prevent the BWL from providing certain services. As a result, the action plan is to exit MPPA early, and reconfigure within MISO, in order to retrieve the revenue. Commissioner Calkins noted that he looked at another issue in that the BWL is anticipating a certain amount of revenue from a sale that could be higher/lower. It appears that it should be higher but while on tour he saw prices of$50 to $150, which he viewed as another variable. Charles Moore, Interim Internal Auditor advised that the futures market relative to electric wholesale sales was extremely volatile. The futures market,unlike the stock market, demands payment today and not in the future. The risk management consultant is not going to accept any responsibility for the BWL's decisions. It was noted that the BWL is not in the wholesale sales market, which is typically very low but growing, as a result Mr. Moore cautioned the Board with respect to the risk level involved. Mr. Cook acknowledged Mr. Moore's sentiment and reported that the consultant advised companies, the size of the BWL's are moving slowly. Therefore, the BWL would start with a policy recommendation and a small pilot program. If the BWL starts to have problems with the unit then its limited counterparties would back out. Currently, it is beneficial for buyers to stay with the BWL but they are not going to continue to do so if the BWL starts to recall. Mr. Cook closed by noting that it is a situation in which doing nothing may not be the solution. Copies of the Electric Wholesale Power Sales presentation are on file in the Office of the Corporate Secretary. Lead Replacement Program Update Dick Peffley reported that in 2006, 1,645 lead services were replaced; BWL employees completed 625 (40%), of which 146 were priority services. Once the priority services were complete, the crews remained with the lead replacement program as opposed to returning to spot services and maintenance work, and subsequently replaced an additional 479 services. The BWL outsourced 30% of the lead replacement project cost, which represented 60% of the work. Therefore, BWL employees replaced 40% of the services and contractors 60%. According to Board Meeting Minutes May 22,2007 Page 14 of 46 staff, there was no record of any documentation, which stipulated BWL employees would account for 50% of the work for said program. Different scenarios for completing the project were presented to the Committee of the Whole in 2005. One of the recommendations suggested utilizing a combination of CSO contractors and BWL contractors with BWL crews completing sensitive populations and spot service work. In March 2005, a Board meeting took place in which there was management action to assemble and assign two BWL crews for lead service replacement. The BWL's cost compared to contractors was initially very high. However, the BWL has since increased efficiencies, decreased costs, and provided good workmanship. The contractors contractual agreement expires this year and the BWL will look at whether or not BWL employees should increase the number of services it currently replaces. Staff continues to look at this area and would like more conversation regarding the matter with Joseph Davis, Business Manager of IBEW Local 352. Presently, the Water and Steam Distribution Department is budgeted for forty-eight (48) employees, of which they have forty-five (45) individuals with one on long-term disability. Commissioner Janes departed the meeting at 5:33 p.m. Commissioner Rios noted that he did not recall specific numbers relative to BWL employees and outside contractors. When the project budget was approved he recalled discussion, agreement, and clear policy direction by the Board to ensure BWL employees would complete as much of the work as was reasonably and economically feasible. He clearly recalls that the Water Department has an apparent inability to maintain adequate staffing levels and is consistently understaffed by five (5) to eight (8) employees. Commissioner Rios noted that a determination of the proper number of employees necessary for the department and staff should be made, as they consider the budget for FY2008. It is not acceptable for the budget request to represent a number of employees but the department itself is staffed well below that number. He further commented that capacity besets volume so that if one does not have capacity then you will not achieve your goals. Commissioner Smith advised that this was not a new situation, as staffing levels have been a source of aggravation. The initial problems included the number of inspectors, who was going to do the inspections, and were the BWL able to commit to employees where it made economic sense to do so. It was advised that once a Project Manager was hired then greater oversight occurred. However, it was assumed that the project was going well since Commissioners were no longer receiving complaints. Prior to the acquisition of a Project Manager, the Board received several complaints and customer's regularly attended Board meetings to express their concerns. Aside from complaints, the other issues were the lack of foresight to ensure adequate staffing levels relative to the project and appropriate training. The Board advised that they agreed that it would not do anything to the detriment of the BWL, which meant that they would look at the economical feasibility of using BWL employees as opposed to outside contractors. Joseph Davis noted that staffing issues have been an ongoing item in the Water Department for several years. He referenced a report entitled, "2004 Annual Report—Lead Service Line Replacement Team", dated November 30, 2004. After further discussion, it became apparent that staff had not recently viewed the document in question. The report acted as a source document that was utilized in developing the program of which modifications were made. It spoke to issues involving the Water Department budget, contractors and the RFP process, and the Board Meeting Minutes May 22,2007 Page 15 of 46 workforce among other items. Mr. Davis gave an overview of the history of service replacements prior to 2004 and noted changes that occurred since inception of the lead service replacement program. He advised that he did not believe it necessary to present the report again, as it is a working document that was given to him as a team member. Commissioner James rejoined the Committee of the Whole meeting via teleconference at 5:49 p.m. Staff clarified that Mr. Davis's report was a draft document that occurred early in the lead service replacement program process in route to determining the final document. The final result indicated that the BWL would outsource the majority of the work, outsource two CSO contractors while they were in the area for CSO replacements, BWL employees would handle all priority services, and a BWL inspector would oversee all outsourced work. The Board of Commissioners also authorized the addition of two water crews and an administrative clerical person assigned to the project, which has since been completed. In addition, it was noted that customers are opting for customer choice, which has lead to a decrease in workload for the Water Department. Commissioner Graves advised that the document in question is not an operational plan for how to address the lead replacement issue. He separated normal Water Department staffing issues from staffing concerns relative to the lead replacement program. It was noted that decisions were made to address lead replacement for public safety and other considerations and he did not want to re-debate those choices. However, it was noted that regardless of the department staffing concerns should be addressed with the employee group and management. It is not his role to determine staffing levels, due to lack of experience, and expertise, nor is it their role as a Board to get involved in those types of discussions. To the extent that they allow themselves to debate those issues then they are becoming a part of management and usurping managements daily discretion as it relates to appropriate staffing levels throughout the BWL. It appeared to be disagreement between the bargaining unit and management, as to the spirit of the agreement and whether or not it called for set maintained staffing levels in the Water Department, in addition to the designated staffing for the lead service replacement program. The Board agreed that it is not their role to determine staffing levels. However, if there is an agreement that speaks to set staffing guidelines then management should give rationale as to why it has not occurred and/or a plan to address it for the future. The Commissioners acknowledged both parties concerns and referred the matter to Dick Peffley with a recommendation that the bargaining unit and management meet to address the issue. The BWL must operate in good faith with open and frank discussion and in keeping with its process. The Board also advised they would take this into consideration relative to managements recommendation on how to resolve the matter while reviewing the upcoming fiscal year budget. The issues involving the lead service replacement program to BWL policy, budget, and staffing levels. The Board further noted that it should be a collaborative process in which everyone should share and communicate the same understanding regardless of whether or not they agree. Copies of the Board of Water and Light, Lead in Drinking Water Annual Status Update report dated March 2007 are available in the Office of the Corporate Secretary. Board Meeting Minutes May 22,2007 Page 16 of 46 FY 2008 Budget Update Sue Flores, Manager of Finance and Planning gave an overview of the BWL Financial Plan FY2008 update. The review specifically noted the budget calendar year and preliminary information relative to sales and revenue forecast, operating expenses, budget and utility comparison, cash flow, rate analysis as well-as a discussion regarding allocation methods. The increase in wholesale sales increased cash reserves and staff will look at what role that plays in how the BWL moves forward relative to rate increases and the six-year forecast. The Board asked staff to ensure that the following items are included at the next budget presentation meeting: 1. An analysis of a percentage increase number relative to the cash reserves that the Board could use to defray rate increases if deemed appropriate and a staff recommendation regarding the analysis, and 2. The inclusion of budget comparisons relative to projected, actual, budgeted, restated, and filed numerical figures for fiscal year 2007. Ms. Flores noted that there are two types of operating expenses, one is direct cost and the other is allocated. The total preliminary FY08 operating expenses are $215,915,585 of which $171,903,139 was direct costs and $44,012,446 was allocated. Direct costs were defined as costs identifiable to a specific utility including direct labor benefits. Allocated costs were defined as those not easily identifiable to a specific utility. The external auditors review the allocation methods at a high level from year to year for reasonableness and consistency. She provided brief scenarios of alternative allocation methods and confirmed that the information is similar to what was presented by Charles Moore but with actual FY2008 figures. Mr. Moore noted that the Board passed a resolution, which stated that they would approve allocation methods. It was noted that the allocation method chosen would directly affect each respective utility and its potential rate increase. Commissioner James advised that she wants to ensure that in addition to management, Charles Moore and Susan Pifer would also make a recommendation regarding the allocation methods. She also noted that the auditors should sign off on management's allocation recommendation once made available. Susan Pifer, Director of Internal Auditor asked the Board if there were any specific objectives in mind with the rate design, as the allocation methods have a direct result on utility rates? The Board replied that there was nothing formal and further advised that they would like to receive various allocation options and methodologies as well as the rationale for said allocations. Once the information is received the Board would decide how to move forward. Staff concurred with the Board's request and confirmed that once the budget is finalized, they would present different methods with the end results and thereby, receive direction from the Board at that time. Board Meeting Minutes May 22,2007 Page 17 of 46 Mr. Moore also asked Ms. Pifer to review bonding because the funds are not actually placed in the bank. If the BWL does not bond for water then they are effectively borrowing from one utility to benefit another, which speaks to the issue of subsidization. Copies of the BWL Financial Plan Fiscal Year 2008 Update presentation are available in the Office of the Corporate Secretary. a. Budget Update—Board of Commissioners The Board of Commissioners reviewed its itemized budget summary for fiscal period 2006 through year-to-date, including 2008 projected budget figures. During the review, the Board discussed the possibility of implementing a Board stipend to cover expenses not already covered and/or reimbursed. The Board discussed the need to proceed with caution and justification for said stipend. A suggestion was also made as to whether or not the stipend could be applied per meeting or per month. They further acknowledged that there are legal questions as to the Board's authority to implement such a stipend and after brief discussion, suggested that they receive a legal opinion regarding the ramifications for enacting said policy. The Board did not have adequate information to make a decision or move forward at this point and unanimously agreed to move the agenda item to the Finance Committee for further discussion. The Board also asked to receive additional FY2008 projected budget information for the office of the General Manager, Director of Internal Audit, and Corporate Secretary. b. Budget Planning • Black Start Generators —Dick Peffley reported that the project was justified based on reliability issues raised during the August 2004 blackout. The budget overrun occurred because the budgeted amount included the equipment purchase price but not the installation cost. Formal employee discipline did not take place. However, it was noted on the employee's personnel record and reflected in their annual pay increase. Charles Moore explained that the biggest issue is reporting data, as the current reporting system is poor and antiquated. It was advised that they are looking at an external audit to review the control mechanisms. Commissioner Smith noted that in moving forward, the Board wants to ensure that Susan Pifer and Charles Moore work together and that staff acts upon their recommendations. Copies of the Black Start &Dye/Cedar Generator Projects Update presentation are on file in the Office of the Corporate Secretary. • East Lansing (E.L.) Substation Retirement - Doug Wood, Director of Engineering reported that the sale and early retirement of the E. L. Substation is complete. The relocation project allowed the BWL to retire a seventy (70) year old substation and upgrade area circuits. Developers paid for the relocation and all BWL distribution rework was finished ahead of schedule in December 2006. There still remain poles with third party fiber attached that will be removed by the BWL after the fiber is removed. The project was a win-win situation that financially allowed the early retirement of an aged facility, which also enabled the Board Meeting Minutes May 22,2007 Page 18 of 46 advancement of a commercial and residential redevelopment project in the City of East Lansing. Copies of the East Lansing Substation Retirement presentation are on file in the Office of the Corporate Secretary. Otlier The Board of Commissioners discussed the pre-audit meeting with Plante &Moran and the nature of said meeting. The number of Commissioners who wish to participate would determine whether or not there is need to post the meeting. In response to the question regarding the nature of the meeting, Commissioner James advised that there was some oversight in the control inventory process that needs to be addressed and the meeting would also act as an educational opportunity for new Commissioners and Ms. Pifer. Ms. Pifer further advised that the meeting is more for the purpose of gaining an understanding of the genesis of what was presented in the previous management letter. In light of the above, the Board discussed the necessity and productivity of having a Board member present at such a meeting and suggested having the internal auditors meet with Plante & Moran and report their findings back to the Board. It was also noted that no individual Commissioner should direct information received by the Board. Commissioner James advised that she thought it important for her to be present as she is the Finance Committee Chair. It was also noted that it is not her intention to direct what materials should be sent to the Board, as she is inclusive and not exclusive. Executive Session Moved by Commissioner Cochran, seconded by Commissioner Calkins to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel protected by the Open Meetings Act exemption MCL 15.268(h). (7:27 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James (teleconference), Rios, Rodocker, Smith, and Zerkle. Nays: None. Absent: None. Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Calkins that the Committee of the Whole meeting return to open session. Carried unanimously. Board Meeting Minutes May 22,2007 Page 19 of 46 The Committee of the Whole meeting reconvened in open session at 7:41 p.m. Commissioner Rios advised that the Board had discussion and received an update from General Counsel regarding a privileged document. There being no further business, the meeting adjourned at 7:42 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Graves, seconded by Commissioner Cochran, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolutioiz FINANCE COMMITTEE COMMITTEE May 8,2007 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 6:00 p.m. on Tuesday, May 8, 2007. 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 Gary Calkins, Semone James and Sandra Zerkle. Commissioner Robert Cochran, alternate and Julee Rodocker were also present. Absent: Commissioner Robin Smith. Public Comment There were no public comments. FY2008 Budget Presentation Sue Flores, Manager of Finance and Planning presented an overview of the fiscal year 2008 financial plan. The budget presentation included a number of items such as the sales forecast, revenue assumptions, operating expenses, allocated expenses, cash flow assumptions, budgeted net income/cash flow, comparative financials and a preliminary review of the six-year forecast. THE SALES FORECAST FOR FY 2008 WAS COMPARED WITH FY 2007: Board Meeting Minutes May 22,2007 Page 20 of 46 % '08 Budget Utility FY08 Forecast FY07 Forecast To '07 Budget Electric—Retail 2,275,881 2,227,675 2.2% Electric—Wholesale 909,322 974,802 -6.7% Electric (mwh) 3,185,203 3,202,477 -0.5% Water(ccf) 10,782,933 11,725,381 -8.0% Steam (mlb) 749,719 784,350 -4.4% Chilled Water(tnhrs) 8,613,560 8,600,691 0.1% Electric: • Modest residential &commercial load growth, 1-1.5%0 • Industrial forecast is up 6.9% due to Delta Plant at full load • Wholesale volumes reduced due to anticipated Major Belle River outage Water: • Retail load is approximately flat • Wholesale volumes decreased over FY07 budgeted levels for Delta Township and ELMWA Steam: • Steam loads for GM approximately flat, reduction in Steam commercial due to conservation efforts Chilled Water: • Chilled Water loads approximately flat REVENUE ASSUMPTIONS • Projected rate increases, January, 2008: - Electric: 4.0% = $2.7 million additional net revenue - Water: 6.0% _ $608,000 additional net revenue - Steam: 6.0% = $308,000 additional net revenue - Note: Requires Public Hearing Process for implementation • Chilled Water based on minimum bill level, no rate increase • Electric Wholesale - Lower revenue due to extended Belle River outage - Electric Wholesale margin: FY07 Budget= $10.4 mm FY07 Projected = $20.4 mm FY08 Budget= $8.5 mm • Water Wholesale—Rates being negotiated Board Meeting Minutes May 22,2007 Page 21 of 46 OPERATING EXPENSES • Reviews held with each department • Increase of 3 full-time employees • Salary increases - Bargaining = 3% effective 11-1-2007 per contract - Non-Bargaining= 3% effective 7-1-2007 +$100K for equity adjustments/top performers • Increase in Health Care cost= 12% • 1"Full year of coal contract effective 1-1-2007 • Continue amortization of Environmental Expenditures - $1.1 mm • Depreciation expense increased -$3m over FY07 budget, due to one time accounting change (-$1 m) and higher capital costs ALLOCATED EXPENSES - CURRENT METHOD AND ALTERNATIVES REVIEWED Current methodology-recommended by Finance Department: Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 75.6% 18.7% 4.7% 1.0% $ $33,307,350 $8,255,786 $2,090,169 $425,934 $44,079,238 Alternative 1: - Incremental assumptions for Steam & Chilled Water on Support areas- recommended by Senior Staff:• Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 76.7% 18.9% 3.8% 0.5% $ $33,804,974 $8,341,958 $1,689,878 $242,428 $44,079,238 Alternative 2: - Incremental assumptions for Steam & Chilled Water on all allocations: Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 77.5% 19.1% 2.9% 0.5% $ $34,177,998 $8,423,119 $1,267,171 $210,950 $44,079,238 Alternative 3: - Incremental assumptions for Water, Steam & Chilled Water on Support areas: Resulting Allocations: Electric Water Steam Ch Water Total Expenses % 79.6% 16.0% 3.8% 0.5% $ 35,093,933 $7,052,999 $1,689,878 $242,428 $44,079,238 CASH FLOW ASSUMPTIONS • Use of accumulated cash balances to mitigate FY2008 net loss • Total Capital expenditures = $49.1 million - Electric: $26.1 mm - Water: $18.9 mm - Steam: $ 3.6 mm - Chilled Water: $ .4 mm Board Meeting Minutes May 22,2007 Page 22 of 46 • Proposed Bond issues of$20 million to fund water utility projects in FY08 and FY09 • Electric Utility fund for future environmental, new generation established at $2 million per year Financial Projections: Six-year Forecast for FY2008—FY2013 -Assumptions • Projected sales levels —conservative growth • Rate increases: Cash balances used to stabilize rate increases - Electric (January) =4% in FY08, 3% in FY09, 2.5% FY10 - FY13 - Water (January) = 6% each year FY08 - FY13 - Steam (January) = 6% in FY08, 7.5% in FY09 - FY13 - Chilled Water (July) = 3% in FY09 - FY13 • Begins with FY08 Operating expenses (included allocations) with 2.5% inflation in FY09- FY13, benefits at 5% • Capital and environmental expenditures per six year forecast • $20 mm bond issue for Water in FY08/09 only • Conservative assumptions on GM termination fees (Steam) to be received in FY11, amortized with asset deferral, FY09-FY13 • Includes $4m per year drawn from Belle River fund, $2m in fund for future generation, environmental expenditures Credit Issues: Financial Goals • Maintain credit quality • Ensure adequate liquidity • Maintain rate competitiveness • Efficient & appropriate use of capital • Financially Independent Utilities Bill Cook, Senior Vice President of Operations presented the FY 2008 Capital Budget. The FY 2008 capital budget includes the following assumptions: • Revenue producing customer driven capital additions and those projects justified by 7-year cost/benefit analysis (will be noted as "Revenue Projects") • Lead service replacement program budgeted at $4,500,000 • CSO related expenses budgeted to coincide with most recent City of Lansing schedule • Environmental Compliance Projects included as required to meet mercury and other projected future emissions regulations • Production facility projects reflect GM plant closings, IRP and Steam Utility Plan results • Next phase of converting financial systems (HR and payroll) to SAP environment Board Meeting Minutes May 22,2007 Page 23 of 46 The recommended FY 2008 capital budget itemized by the four utilities, which also includes common facilities totals $49,157,000. The six-year capital forecast for FY 2008 —FY 2013 was also represented. Following discussion the Finance Committee took the following action: On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Finance Committee unanimously recommended that the Board approve the proposed annual operating and maintenance budget and the capital budget for FY 2008, which also incorporates proposed utility rates. Further, the Corporate Secretary is to file the budgets with the City Clerk and the Mayor's Office in accordance with the Lansing City Charter. A formal resolution regarding these items will be placed on the Board meeting agenda under General Manager Recommendations for May 22"d Charles Moore Coal and Investment Letters Charles Moore, Interim Internal Auditor reviewed the coal and investment letters dated February 28, 2007 and March 5, 2007 respectively. As such, Mr. Moore recommended that the Board issue a Request for Proposal (RFP) for cash management and investment advisory services. It was advised that the RFP would seek to improve efficiencies in the process and help utilize best practices. The second recommendation also included an annual review of the investment portfolio by the Internal Audit Department (IAD). After lengthy discussion, the Finance Committee unanimously agreed to move forward to the full Board a recommendation for Sue Flores, Charles Moore and Susan Pifer to work together to provide a more concrete proposal and draft RFP relative to the cash management and investment advisory services. They also unanimously agreed to move forward to the full Board Charles Moore's second recommendation that the Internal Audit Department review the investment portfolio on an annual basis. Construction in Progress Mr. Moore reviewed the construction in progress letter dated April 6, 2007. As such, he noted that the BWL had an antiquated record system that should improve with the implementation of SAP. The recommendation included a suggestion to bid a RFP in which an external firm would assess the internal controls system wide. After which, the IAD would review the SAP process in six (6) months to ensure that it would further strengthen internal controls related to construction in progress. The second item relative to the review of capital projects in going forward recommended either reducing the amount of capital projects to an amount where cash is not significantly hampered, or the consideration of bonding to cover those capital costs. It was noted that staff has already brought forward the issue and acted on the second recommendation. Update on Coal Inventory Mr. Moore noted that in his previous report there were issues with segregation of duties in the coal inventory process. There was a review for potential conflict of interest and a testing of transactions from the beginning of the process to delivery and payment. As part of the testing, Board Meeting Minutes May 22,2007 Page 24 of 46 Mr. Moore requested a copy of the documented checklist for the receipt of the coal in the inventory system, which he found to be unavailable. Dick Peffley, Interim General Manager noted that he did not have opportunity to communicate with Mr. Moore. However, the term `unavailable' does not mean that the BWL does not have the documented checklist, as they are stored at Eckert and Erickson station. It was noted that the checklist in question was not available at the time of Mr. Moore's request but the BWL does have possession of said document. The coal operator fills out a sheet and loads the information in the computer system at which time the packing slip is stored at one of the respective stations. Dick Peffley and Susan Pifer visited a station and randomly choose a couple of dates of which the operators were able to produce the sheets. Ms. Pifer advised that she intends to conduct additional work on coal that would include samples of transactions and the following of the entire process. Mr. Moore also noted that there was follow-up by the Accounting Department to his internal audit recommendation. The subsequent memo by Gennie Eva, Manager of Financial Services dated February 22, 2007 speaks to changes made in the coal approval process to strengthen internal controls. Internal Auditor Transition Susan Pifer, Director of Internal Audit noted that the internal auditor transition also consists of a means to establish an internal shop sustainable within the organization. In discussing the establishment of standards, benchmarks and the audit charter, Ms. Pifer advised that there are a myriad of standards that the BWL is subject to that makes financial reporting difficult. Some of those standards include the Financial Accounting Standards Board (FASB), Governmental Accounting Standards Board (GASB), and the Federal Energy Regulatory Commission (FERC). The combination of standards from the private and governmental sector increases the length of time needed to develop staff and institutionalize. There are few accounting firms that specialize in utility accounting or have the knowledge to make an assessment of whether or not it is accurate. Therefore, it is pivotal that the auditors understand accounting and auditing standards. Ms. Pifer noted that the Internal Audit Charter (Attachment A) was suitable and recommended moving forward with the charter unless the Board of Commissioners felt otherwise. It was further advised that time was spent with the external, interim and previous internal auditors to understand risks that were identified during the course of their work at the BWL. Although, a formal risk assessment is still warranted a recommendation was made to move forward with the following items: 1. Coal Inventory Control: A systemic approach to an audit with firm objectives and audit programs. 2. Capital Assets: IAD must test transactions and reporting in the new system for accuracy and completeness, as well as make workflow recommendations to correct any deficiencies. The indirect cost rates applied to capital projects must also be reviewed by the IAD for accuracy, including an evaluation of alternative allocation structures for the Commissioners' review. Board Meeting Minutes May 22,2007 Page 25 of 46 3. Internal Controls — SAP: Although external auditors are budgeted to perform a review, the IAD must also provide assurances that the system effectively and accurately processes financial and operational information for internal purposes, e.g. management reporting, interim financial reporting, actionable operational reporting, etc. In addition, it is recommended that the IAD manage the RFP process for these services and that consideration be given to rotating external auditors for purposes of the internal control review, i.e. consider alternatives to the external auditors responsible for financial statements. 4. Cash Management: The Director concurs with Mr. Moore's recommendation to solicit an RFP for banking and investment services. Consideration for lock-box services to improve current remittance processing and prompt investment of those cash deposits is also recommended, as lock-box services solicited as a"carve-out" from other banking services is cost prohibitive. 5. Mr. Moore intends to complete his review of healthcare, impaired assets (obsolete inventory), contracts and staff overtime. Additional follow up by the IAD may be required after his initial review of these topics. In addition, the external audit of financial statements typically requires extensive involvement of internal audit staff(currently scheduled for late summer). Furthermore, audit programs and procedures must be developed for the other processes to be considered by the IAD in the first year of operation. Priorities and time lines for these other areas will be presented to the Board at the next Finance Committee meeting. The former internal auditor and the current interim internal auditor both laid out a comprehensive list of auditable entities. The latter acts as a task list and the initial schedule that lists 29 processes and 70 sub-processes was previously presented to the Committee of the Whole on January 26, 2006. The IAD recommended the inclusion of mapping of key processes in the development of audit programs for each of the entities. A draft copy of a coal procurement audit was presented. It was also stated that a similar audit program should be developed for all of the audit processes within the BWL. This will enhance accountability to the Board of Commissioners and act as a task schedule for the IAD. In reference to coal, two modules were written by the former internal auditor, two written by Susan Pifer and two additional modules are still needed based on the audit plan received from the consulting firm that conducts fuel procurement audits for public utilities. The IAD suggested that the work could be done in approximately 4—5 weeks while also pulling samples and reviewing transactions from the beginning to the end. SAP would also need a six-month window to allow transactions to flow into the process before a thorough analysis can be conducted. In the interim, work has already begun in reviewing the system as it is laid out, the infrastructure, and determining how it is meant to operate so that a determination can be made as to whether or not the information is flowing appropriately and being recorded back to the operators. Ms. Pifer advised a need to play an active role in learning the SAP system, being aware of its internal controls, making sure they are in place, and understanding the configurations. The IAD would also like to play a more critical role in the external audit of financial statements. Plante & Moran have agreed to provide a copy of their narratives and audit programs to enhance understanding, reduce redundancies and create proper synergies between the internal and Board Meeting Minutes May 22,2007 Page 26 of 46 external auditors. It will take approximately 12— 18 months to review all of the processes for the first time. Included in the proposed budget for the Office of the Internal Auditor are two full time employees (Director of Internal Auditor and Assistant Auditor) as well as outside services that could be equivalent to an intern or professional auditing services if needed. It was determined that the new Assistant Auditor position would benefit from a senior auditor with 2— 3 years who could assist in developing programs. - Commissioner Calkins noted that the former internal auditor created a purchasing program relative to procedures. He asked Ms. Pifer if she had opportunity to review the program, determine the impact of SAP on the recommendations and assess its current standings. Ms. Pifer noted that she had not located a purchasing program and the former internal auditor had not mentioned one. However, she would follow-up and report back to the Board of Commissioners. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Finance Committee unanimously agreed to accept Susan Pifer, Director of Internal Audit, proposal and budget recommendations. She was also charged with the responsibility of initiating the process of seeking an Assistant Internal Auditor subject to budget approval. A formal resolution regarding these items will be placed on the Board meeting agenda under Resolutions for May 22nd There being no further business, the meeting adjourned at 8:08 p.m. Respectfully submitted Semone James, Chair Finance Committee Motion by Commissioner Graves, seconded by Commissioner Cochran, to receive the Finance Committee report as presented. Action: Carried unanimously. esolution HUMAN RESOURCE RESOURCE COMMITTEE May 10, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Thursday, May 10, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, Santiago Rios and Julee Rodocker. Absent: None. Board Meeting Minutes May 22,2007 Page 27 of 46 Public Comment There were no public comments. Skill Family Range/Performance Matrix Recommendations Wendy Bradley, Human Resource Consultant for Employee Relations, Wage & Salary provided an overview of the Fiscal Year (FY) 2008 Skill Family Range Adjustments and Merit Budget. She noted that since 1999 the Board of Water and Light's (BWL) pay philosophy is to attract, retain, develop and reward a quality workforce. They also act to ensure BWL pay plans are competitive and cost effective for the BWL. In conjunction with the BWL's annual review, the HayGroup was hired to evaluate the current compensation, performance management, and rewards performance programs. In conducting the study, the HayGroup held a series of senior management interviews, employee focus groups, a performance management survey, and collected data from the BWL's department market analysis. As such, the HayGroup's executive summary findings are as follows: • Employees do not appear to appreciate all of their employment rewards. • LBWL offers market competitive pay opportunities that are differentiated by the level of impact jobs have on the organization. • Employee aggregate base salaries are approximately at the market rate. - 94% of employees have compa-ratios (base salary/market rate) equal to or greater than 90%; 55% of employees have compa-ratios equal to or greater than 100%. - Almost all job families have aggregate compa-ratios around 100%. • Salary ranges are constructed consistently and soundly (range spreads and midpoint progressions) and offer market competitive pay opportunities. • The level of detail of the compensation program for the communication program may be overwhelming to employees. • LBWL offers market competitive salary opportunities. • LBWL has an appropriate set of skill families. • LBWL performs very thorough market pricing. - LBWL utilizes a robust number of compensation surveys to market price positions. - Market data cuts are appropriately concentrated on utilities, not-for-profits, and Michigan employers. - LBWL appears to be appropriately aging market data and applying geographic wage differentials. - LBWL accurately market price jobs (i.e.,job model matches are accurate). It was noted that the BWL also worked with Michael Goree of Growth Strategies Consulting, Inc., who disagreed with the HayGroup and felt that the BWL had enough skill families and the current compensation system, was too complicated. Mr. Goree recommended that the BWL collapse some of the common grades with those that shared similarities. As a result, the BWL proposed a reduction of the number of grades from sixty-six (66) to twelve (12) effective FY 2009. The director grades would retain more levels to allow for flexibility, as those positions are typically harder to recruit. Board Meeting Minutes May 22,2007 Page 28 of 46 Staff noted that in relation to the first study finding, the BWL must improve employee communication and education relative to the benefit package. The Human Resource Department sends an annual total rewards report but it does not include comparison information. Dick Peffley, Interim General Manager advised that one of the goals of the new Human Resource Director would be to work with Mark Nixon, Communications Director to improve BWL efforts in this area. Ms. Bradley advised that a suggestion was made to have the total rewards report sent from the General Manager to give it renewed emphasis. The Commissioners encouraged staff to improve its communication efforts in educating employees about the benefits of their existing compensation package. They also suggested highlighting the opportunity to receive shift premiums and overtime when applicable and deemed appropriate by the department's respective needs. The Commissioners discussed the percentage of employees at or above market rate in relation to the percentage of those who are not. Commissioner Graves asked staff to provide a copy of the overtime statistics, standby call-in and premium shift information in aggregate form. Mr. Peffley acknowledged Commissioner Graves request and advised that the information could be provided. He also noted that some of the employees who are under market rate would be addressed during the next fiscal year. Staff has proposed a$100,000 budget for all other increases including that of top performers and equity adjustments. The Human Resource Director, Process Director and the General Manager will manage the additional funding to ensure proper handling. All employees would not be at 100% of market rate, as one must allot for new employees and progression through the pay scale system. Ms. Bradley noted that in determining the merit budget they took the following internal and external factors into consideration: • External - state of the economy (CPI); and projections from other businesses and utilities • Internal—pay for performance system, retention, and the BWL's ability to pay BWL compares its locality for the rate of inflation to the Detroit/Ann Arbor/Flint area, which increased by 1.7%. Projected salary increases of areas employers and other utilities were also taken into consideration. It was clarified that `other increases' include promotional equity adjustment reclassification, which is an equity adjustment, made to satisfy a problem that the existing compensation system does not currently resolve. Ms. Bradley noted internal factors to consider and provided summary recommendations for the skill family range adjustments and merit budget for fiscal year 2007 —2008. Internal Factors to Consider • Pay for performance - need to adequately fund in order for it to be effective. • Retention - All utilities are losing talent (knowledge, skills, abilities) unique to the utility industry due to an aging workforce. - Competition for this talent is increasing amongst utilities. Board Meeting Minutes May 22,2007 Page 29 of 46 Summary Recommendations • Maintain current Skill Family Ranges • 3% Merit Budget • $100,000 additional budget for other increases (Top Performers and Equity Adjustments) Staff advised the Commissioners of the performance system in which goals and objectives are annually established on July 1st. Goals are tied to the balanced scorecard and a mid-year review takes place to keep employees abreast of their progress. It was noted that directors report their results on a monthly basis. Commissioner Cochran noted in his personal opinion, the BWL should think long range about its employees, similar to the thinking associated with long term generation and the wholesale market. It is a little disturbing that all employees are not at market rate because there is competition. He wondered why the BWL does not want to be superior in this area to ensure employees remain with the company. Especially, in light of its financial performance and electric rates significantly below that of Consumers Energy. The Commissioners went onto discuss the BWL's overall compensation package in relation to other local entities, and reiterated the need to improve employee communications in this area. It was also noted that employees would eventually have to take more responsibility for the organization, which has provided so much. It further advised that based on the BWL's competitive rates, the organization should be able to fill vacant positions, or deem them unnecessary and remove the positions from the budget. After discussion, the Human Resource Committee took the following action: On motion by Commissioner Rios, seconded by Commissioner Graves, the Human Resource Committee unanimously agreed to forward management's recommended skill family range adjustments and merit budget for fiscal year 2007-2008 to the full Board for approval. This item will be placed on the regular meeting agenda under General Manager's Recommendations for Board action on May 22"d There being no further business, the Human Resource Committee adjourned at 4:48 p.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner James, seconded by Commissioner Zerkle, to receive the Human Resource Committee report as presented. Action: Carried unanimously. esolution 2007-5- COMMITTEE OF THE WHOLE Board Meeting Minutes May 22,2007 Page 30 of 46 May 15, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m. on Tuesday, May 15, 2007. Committee of the Whole Chair, Santiago 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 Sandra Zerkle. Absent: Commissioner Robin Smith Public Comment Joseph Davis, Business Manager of IBEW Local 352 spoke regarding the General Manager process and indicated the need for a strong leader in moving forward. In the past he has gone on record in support of building a new power plant and putting the Board of Water and Light (BWL) in a position to do so. The BWL has a good workforce but they need to have a trained workforce, as there are over 300 people who could retire within the course of 36-48 months. The BWL needs to think forward, be proactive and work together. Dick Peffley, Interim General Manager introduced the new Human Resource Director, Denise Mulder. Review GM Candidates —Varnum Consulting Sandra Soltysiak, Varnum Consulting forwarded the results of the top seventeen (17) applicants prescreen information to the Board of Commissioners on May 11, 2007. The communication noted that two (2) additional candidates were added to the applicant pool and as such, recommended a total of eight (8) candidates be considered in moving the process forward. The communication materials also asked each Commissioner to review the information and determine their five (5) strongest candidates for discussion at the Committee of the Whole meeting scheduled for May 15, 2007. During the Committee of the Whole meeting held on May 151h each Commissioner stated their strongest candidates and tally was taken to assess the results. As such, the Committee of the Whole unanimously agreed to move candidate number 2, 8, 16, and 123 forward for interviews for the position of General Manager. The finalist's names continue to be concealed and Ms. Soltysiak will reveal their names after each applicant is made aware of their candidacy standing. In addition, Ms. Soltysiak suggested that the candidates have opportunity to partake in a facility tour prior to the interviews, which should be lead by a management and bargaining unit representative. Ms. Soltysiak will coordinate the facility tours with Dick Peffley. Upon further discussion, the Commissioners determined that a Special Board meeting for the interviews would begin on Friday, June 151h at 9:00 a.m. to be held at Board of Water and Light. A second Special Board meeting will also take place on Monday, June 181h to discuss and announce the results of the General Manager interviews. A reception in lieu of a meet and greet would commence at 4:00 p.m. immediately following the Special Board meeting. Board Meeting Minutes May 22,2007 Page 31 of 46 Commissioner Cochran provided Ms. Soltysiak with an additional question to be added to the interview process. Ms. Soltysiak acknowledged the change and advised that it would be added to the existing list. Rules & Regulations for Utilities Kellee Christensen, Manager of System Integrity and Customer Projects presented the annual update of the Rules and Regulations for utility service that includes applicable fees and charges. A summary of the recommended fiscal year 2008 changes included the following: Electric, Water and Steam and Chilled Water • Revision of Rule 4— Use of Service A section was added called Discontinuation of Service describing the voluntary and involuntary ways that service may be discontinued. • Revision of Rule 7.4 Responsibility for Payment of Bills, Account Security Deposit to change the security deposit factor from 1.5 times the average monthly bill to 2 times the average bill. • Updated fees and charges for current actual, estimate cost or market conditions. • Several minor housekeeping issues to format and consistency of text. • Electric—No significant changes. • Water—Revision of Rule 11 Services, a section was added, 11.7 Lead Service Pull Ahead Program, to define how and what credit will be received when a customer wishes to have their service replaced before the schedule replacement date. • Steam—No significant changes. • Chilled Water—No significant changes. The Commissioners discussed the Lead Service Pull Ahead Program, its impact and the reasoning, as to why BWL crews will not handle the additional work. Ms. Christensen advised that the program addresses persons who do not like the existing lead replacement schedule and are not a part of the sensitive population. The Lead Service Pull Ahead Program would not affect the overall schedule, the financing process, or current priority listing, as the choice program would handle the additional the work. Bill Cook, Senior Vice President of Operations noted that contractors currently address the mass production work for the lead service replacement program. As the BWL moves to the future, management will review the possibility of allowing the BWL crews to takeover some of the workload relative to the lead replacement program. Board Meeting Minutes May 22,2007 Page 32 of 46 On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to move the Rules and Regulations Update to the full Board for consideration. The resolution will appear under General Manager's Recommendations at the next Board meeting scheduled for May 22nd Renewable Energy Portfolio Standards (RPS) Nick Burwell, Manager of Special Projects advised that there are no significant changes to the Granger landfill renewable energy power purchase agreement since it was initially presented to the Board of Commissioners. It was originally believed that the BWL had lost opportunity to pursue this agreement. However, Consumers Energy pulled all of their Request For Proposals (RFP) throughout the State of Michigan, which freed the Granger RFP and provided the BWL with a renewed opportunity to pursue it. The BWL is working with the Michigan Public Power Association (MPPA) and the issue will be before their Board for a vote on June 13, 2007. The pricing is aimed at being slightly below the BWL's retail rate and indexed towards the future so that it would never surpass it. One of the advantages of obtaining renewable power prior to state established portfolio standards is the ability to take advantage of early pricing before the real market establishes it. The power will connect directly into the BWL's distribution center, which would reduce cost. Bill Cook reiterated that the BWL is paying a premium so that they can offer green power and meet the renewable portfolio standards. The renewable energy power purchase agreement with Granger is a 20-year contractual arrangement at an estimated cost of$80,000,000. Mr. Burwell advised that the BWL could buy coal-fired generation on the wholesale market significantly cheaper but they are paying a premium to have renewable energy now. In the future, they anticipate that the premium cost would dramatically increase as demand increases. It was clarified that the BWL would estimate future cost to help maintain pricing below the retail level. Mr. Burwell agreed that the project is being driven by future anticipated state and federal requirements to develop a portfolio. It was also advised that the Board of Commissioners has already established a policy with certain percentages relative to the RPS. Commissioner Graves asked what is the rationale for the general public for the BWL to change to a higher rate than could be purchased off the grid? Mr. Burwell advised that there are two reasons: 1) The general public has said yes to green power and want to move forward on environmental issues; and 2) By acting now the BWL is protecting itself against going above the retail rate Currently, thirty (30) states have portfolio standards and there are two (2) senate bills and one (1) house bill currently out regarding portfolio standards. Governor Granholm has said that the state will move in this direction and it would shorten the BWL's move toward the 21"century report. The Commissioners congratulated staff on their efforts regarding the RPS and highly encouraged them to ensure that the appropriate communication efforts are in place to announce the BWL's accomplishments in this area. It was noted that this is a move in the right direction relative to Board Meeting Minutes May 22,2007 Page 33 of 46 Board policy. The project cannot be characterized in terms of cost because it is going to place the BWL in front of regulatory policy for good reasons. The Board went onto suggest that the BWL involve its lobbyist and the Governor relative to the announcement of the Granger agreement. Mark Nixon, Communications Director was present and acknowledged the Board's sentiment. He also advised that Granger is interested in holding a press conference to announce the agreement and subsequent information. The Communication Department will work to ensure that proper care is given to said project. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to move the Renewable Energy Power Purchase Agreement with Granger Electric to the full Board for consideration. The resolution will appear under General Manager's Recommendations at the next Board meeting scheduled for May 22nd Copies of the Board of Water and Light and Granger Landfill-Gas-to-Energy, "Hometown Power from Hometown Trash"presentation dated May 15, 2007 are on file in the Office of the Corporate Secretary. Corporate Secretary— Goals and Objectives Rhonda Jones, Corporate Secretary and the Board of Commissioners briefly discussed the six- month performance review feedback memo dated April 24, 2007. As such, the Commissioners agreed with the goals and objectives as stated and suggested adding the task of creating a Corporate Secretary manual that was alluded to in the memo. The Commissioners encouraged Secretary Jones to attend the upcoming 2007 National American Public Power Association Conference. The purpose of the conference would serve to meet people from other utilities in an attempt to obtain more knowledge and experience. The Commissioners also encouraged Secretary Jones to contact former Corporate Secretary, Mary Sova for assistance with constructing the manual, as they consider her to be a valid resource and want her to made available if needed. It was further advised that if it requires the Board to compensate the former Corporate Secretary then the Board would be willing to do so. On motion by Commissioner Calkins, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to accept the Corporate Secretary's short-term and fiscal year 2008 goals and objectives as amended. Section 125 Compliance— Closed Session Moved by Commissioner Graves, seconded by Commissioner Calkins to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel and Brandie Ekren, Associate Attorney protected by the Open Meetings Act exemption MCL 15.268(h). (5:21 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Board Meeting Minutes May 22,2007 Page 34 of 46 Carried unanimously. Moved by Commissioner Cochran, seconded by Commissioner Calkins that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole meeting reconvened in open session at 5:38 p.m. Commissioner Rios advised that the Board had discussion and gave General Counsel direction in relation to the Section 125 compliance matter. Discuss Attorney-Client Privilege Matter— Closed Session Moved by Commissioner Graves, seconded by Commissioner Zerkle to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel and protected by the Open Meetings Act exemption MCL 15.268(h). (5:40 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Graves, 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 5:54 p.m. Commissioner Rios advised that the Board had discussion and gave General Counsel direction regarding a legal matter. Other Employee Stang Dick Peffley brought two items to the attention of the Board of Commissioners and noted that he would refer them to the Finance Committee after the budget is approved. He expressed concern that the BWL continues to operate at twenty-five (25) people under budget. The BWL is allotted for 737 people and is currently 25 persons below that number. Although, the new Human Resource (HR) Director, Denise Mulder has only been onboard for 2-days he challenged her to determine how to return to full staffing. Eight (8) of the vacancies are bargaining unit positions and seventeen (17) are management employees. The Commissioners have approved a budgeted employee amount and that is where the BWL strives to be. It was noted that the BWL is not at full employee capacity because the HR Department has struggled to fill positions. However, it is believed that the new leadership will address that issue. Currently, it takes 45 —60 days to fill a position. Mr. Peffley has already spoken to Ms. Mulder who indicated that the BWL should be Board Meeting Minutes May 22,2007 Page 35 of 46 proactive in filling positions that they know will be vacant and the hiring process is twice as long as it should be. Secondly, there is a succession plan without any funding. A HR Director was needed to help determine the appropriate funding amount. As they fill the positions, the BWL will be in a better position to determine the needs for succession planning. They have talked about expanding the - generating portfolio and as such, will need staff to accomplish those goals. In working with the HR Director the BWL will need qualified employees, as they have not properly planned for anticipated future retirements, which is a big challenge. Mr. Peffley noted that they may return to the Finance Committee and ask for a variance or bring forth a detailed plan, as they want to be proactive in this matter. No action was required at this time, as management simply wanted to give the Board notice of their upcoming intentions. Commissioner Rios advised that it was great and necessary for planning who the BWL wants to be and if they intend to build a new plant then one must have the people to do so. The BWL must incorporate attrition relative to persons retiring and build a development plan in the budget. Commissioner James agreed with Commissioner Rios' sentiment and welcomed the project for the Finance Committee. Mr. Peffley also noted that as they move forward he believes that they would displace contractors who are currently doing BWL work. In Production, they previously had 10% of the capital work done in-house and 90% was farmed out; and now it is 80% in-house. Mr. Cook is seeking to move the Delivery Group to the same area, as they start to take over some of the services that the BWL can do competitively in a controlled and expeditious fashion. Budget Amendments Commissioner Rios noted that during the last meeting there was preliminarily discussion regarding the possibility of expanding the Commissioners budget. The current reimbursement policy is adequate to cover expenses that some Commissioners are not availing themselves to in terms of seeking reimbursement. It was suggested that they budget an amount per Commissioner to designate expenses that have not been previously dealt with directly, as they are operating without a budget. It was clarified that the travel budget is separate from administrative expenses. On motion by Commissioner Rios, seconded by Commissioner Cochran, the Committee of the Whole unanimously agreed to amend the Board of Commissioners fiscal year 2008 budget by $12,000. for administrative expenses. Further Discussion: Commissioner James asked if the budget for administrative expenses is in lieu of the Board compensation issue? Commissioner Rios clarified that the Board does not specifically budget for other expenses aside for travel but they should. Therefore, the Board compensation discussion is going to continue. Board Meeting Minutes May 22,2007 Page 36 of 46 Commissioner Rios asked staff if there are any extra laptop computers that could be made available to the Board of Commissioners on an as need basis? It was also advised that it would be helpful for the Board to have a laptop available to them for use while traveling. Mr. Peffley advised that he could check with the IT Department, as they generally have 1-2 laptops available for use. He would also talk to IT to determine how to make that available to the Commissioners should one be needed. Following discussion, the Board took the following action. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Committee of the Whole unanimously agreed to purchase two wireless laptops with sufficient programming for use by the Board of Commissioners. There being no further business, the meeting adjourned at 6:09 p.m. Respectfully submitted, Santiago Rios, Chair Committee of the Whole Motion by Commissioner Calkins, seconded by Commissioner Graves, to receive the Committee of the Whole report as presented. Action: Carried unanimously. MANAGER'S RECOMMENDATIONS esolution 2007-5- A. FY 2008 Operating and Capital Budgets RESOLVED, that the annual Operating and Maintenance Budget covering Fiscal Year 2008 is hereby approved as presented; RESOLVED, that the Capital Budget for Fiscal Year 2008 is hereby approved as presented; RESOLVED, that the forecast for capital expenditures for the Fiscal Years 2008-2013 is hereby accepted as presented; and, 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. -------------------- Staff Comments: Staff recommends an operating and maintenance expense budget of$216.0 million and a capital program of$49.1 million for Fiscal Year 2008 to maintain ongoing services to customers and maintain and enhance facilities for continued future use. Capital expenditures for the Fiscal Year 2008-2013 are estimated to be $263 million. The budgets are presented as Board Meeting Minutes May 22,2007 Page 37 of 46 recommended by the Finance Committee on May 8, 2007, with the changes requested at the May 15, 2007 Committee of the Whole meeting. -------------------- Motion by Commissioner Calkins, seconded by Commissioner James, to adopt Resolution 2007- 5-7 for the Fiscal Year 2008 Operating and Capital Budgets. Discussion: Commissioner Rios stated that he understood Interim General Manager Dick Peffley was reviewing the budget to determine how to address attrition issues. Mr. Peffley noted that he is working with Human Resource Director, Denise Mulder to develop a plan and review the budget. It was advised that eight (8) bargaining unit positions are open, four (4) of which have been posted. Mr. Peffley also clarified that he believes the staffing numbers stated in Joseph Davis' prepared statement (read during Public Comments) are staffing levels that the bargaining unit would like to see at the BWL. Commissioner Rios commented that what Mr. Peffley is currently doing is good. However, they also need to look at planning if the BWL is to move forward in building a plant. Ms. Mulder noted that she is meeting with executive staff and each member of the Human Resource Department to determine the issues and develop a plan to meet goals. Commissioner Rios encouraged Ms. Mulder to also meet with the bargaining unit, as they have ideas on how to meet some of those goals. Commissioner Cochran noted that the BWL is doing well financially. However, he is disappointed that that the BWL is not staffed at capacity. Action: Carried unanimously. esolution 2007-5- B. FY 2007-2008 Skill Family Salary Range Adjustments - Non-Bargaining Unit Employees The Board of Commissioners is responsible for setting salary ranges for the Board of Water and Light non-bargaining unit employees. The Human Resources department, with the concurrence of the General Manager, has recommended to the Human Resources Committee that the Board of Commissioners approve the recommendation to maintain the current (FY 2006-2007) skill family salary ranges and to reduce the number of levels (grades) with the salary system, with an implementation date beginning FY 2008-2009. The Board of Commissioners has been advised as to the justification that supports these recommendations, and has had an opportunity to discuss its merits. Board Meeting Minutes May 22,2007 Page 38 of 46 RESOLVED, that the Board of Commissioners adopt the attached non-bargaining unit skill family salary ranges. FURTHER RESOLVED, that the General Manager is authorized to develop all procedures necessary for the implementation of the recommendations above. -------------------- 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. In addition, the HayGroup consulting firm conducted an audit on the salary system. 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 Calkins, seconded by Commissioner Graves, to adopt Resolution 2007-5-8 for the Fiscal Year 2007-08 Skill Family Range Adjustments. Action: Carried unanimously. esolution 2007-5- C. FY 2007-2008 Merit Budget - Non-Bargaining Unit Employees The Board of Commissioners is responsible for approving the merit budget for the Board of Water and Light's non-bargaining unit employees. The Human Resources department, with the concurrence of the General Manager, recommended to the Human Resources Committee, that the merit budget for non-bargaining unit employees be 3% plus $100,000 to be used for all other increases (top performers and equity adjustments). The Board of Commissioners has been advised as to the recommendations. RESOLVED, that the Board of Commissioners adopt the recommendations of the Human Resources Committee by granting a 3% increase to non-bargaining unit employees and an additional $100,000 for all other increases for Fiscal Year 2007-2008. FURTHER RESOLVED, that the General Manager is authorized to develop any procedures necessary for implementation. -------------------- Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-5-9 for the Fiscal Year 2007-08 Performance Increase Matrix. Discussion: Commissioner Rios asked for a rationale regarding the $100,000. Board Meeting Minutes May 22,2007 Page 39 of 46 Mr. Peffley noted that the $100,000 allows the BWL to make equity changes, as this is a task that has been done in the past but it was not previously budgeted. It was confirmed that the equity change is similar to what was done for the lineman. Commissioner Cochran asked if the BWL looks at the budget in approximately 5-months and then determines that it needs to be adjusted? He also asked if the BWL has ever thought about setting aside funding to account for anomalies? Mr. Peffley noted that staff could come before the Board of Commissioners with any anomalies that may arise. He also noted that they do not traditionally set aside funding for anomalies, as those funds could be used elsewhere in the company. Action: Carried unanimously. esolution 2007-5-I D. 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, 2007 (see attachments.) -------------------- Staff'Comments: The attached documents were presented at the Committee of the Whole meeting on May 15, 2007. -------------------- Motion by Commissioner James, seconded by Commissioner Cochran, to adopt Resolution 2007-5-10 regarding the Rules and Regulations for Electric, Water, Steam, and Chilled Water Utility Services. Action: Carried unanimously. esolution 2007-5-11 E. Renewable Energy Power Purchase Agreement with Granger Electric WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has approved a Resolution establishing goals (Resolution#2007-1-9 -Renewable Energy Portfolio Standard); and, WHEREAS, renewable energy creates energy diversity for long-term security of our economy and environment and is consistent with assuring reliable, safe, clean and affordable energy for our citizens; and, Board Meeting Minutes May 22,2007 Page 40 of 46 WHEREAS, the Renewable Energy Portfolio Standard established an initial goal of 2% of retail sales being from renewable energy by the end of 2008; and, WHEREAS, the Granger landfill gas-to-energy facility at 16800 Wood Road, Lansing, MI 48906 qualifies as a renewable energy facility; and, WHEREAS, the Granger facility will connect directly to our distribution system, avoiding the cost and cost volatility of the MISO system- which, depending on the location, could add significant transmission costs (the current average cost across the entire MISO system currently ranges from an average of about $2.50/MW for off peak to nearly$5.001MW for on peak); and, WHEREAS, the Granger facility would become a hometown power source, and Granger has agreed in the proposed contract to allowing not only BWL signage on the facility as a partner, but access for tours or presentations - the synergy from this hometown alliance and the value it adds beyond power would be to both parties' advantage (Hometown Power from Hometown Trash); and, WHEREAS, as we anticipated, the 21st Century Report from the MPSC, proposed legislative bills requiring Renewable Portfolio Standards, and expectations of some kind of Renewable Portfolio Standard from the Governor are already triggering an increase in the demand for Renewable Energy; and, WHEREAS, it is appropriate and prudent for the Board of Water and Light of the city of Lansing to move forward with ensuring Renewable Energy sources for the future. NOW, THEREFORE, BE IT RESOLVED, that the General Manager is authorized, through MPPA until our Power Pool agreement is terminated and after that directly to the BWL, to enter into a 20 year agreement with Granger to supply the BWL all existing and future renewable energy from its Wood Road landfill facility at an initial price equal to 2% below the BWL average retail electric rate with an annual index for the term of the agreement. -------------------- Motion by Commissioner Cochran, seconded by Commissioner James, to adopt Resolution 2007-5-11 regarding the approval to enter into a Renewable Energy Power Purchase Agreement with Granger Electric. Discussion: Dick Peffley explained the traditional Request for Proposal (RFP) process and advised that Granger Electric did not respond to the initial request, as there was some miscommunication regarding whether or not they needed to respond at that time. Therefore, the RFP falls under the category of a sole source contract. Commissioner James asked Director of Internal Audit, Susan Pifer her opinion regarding the matter. Board Meeting Minutes May 22,2007 Page 41 of 46 Ms. Pifer noted that although she would have preferred the RFP be left open for a longer period of time so that others could apply, there was no injury, and no one else can provide the service. Therefore, she gave her approval for the project. Action: Carried unanimously. UNFINISHED BUSINESS Motion by Commissioner Cochran, seconded by Commissioner Zerkle, to formally adopt Resolution 2007-3-12 previously presented and discussed but not voted on at the March 27, 2007 Board meeting regarding the Corporate Secretary's Six-month Performance Increase. Action: Carried unanimously. NEW BUSINESS None. RESOLUTIONS esolutions 2007-5-12 INTERNAL AUDIT CHARTER RESOLVED, That the Board of Commissioners hereby approves the Internal Audit Charter, appended to the May 8, 2007 Finance Committee meeting minutes and the resolution as Attachment A, which conforms to the International Standards for the Professional Practice of Internal Auditing and the Statements of Auditing Standards promulgated by the American Institute of Certified Public Accountants. On March 22, 2005 the Internal Audit Charter was approved by the Board of Commissioners and hereto referenced by Resolution 2005-3-14. It was subsequently resubmitted and discussed at the Finance Committee meeting held May 8, 2007 and deemed suitable for continued use without amendment. --------------- Motion by Commissioner James, seconded by Commissioner Cochran, to adopt Resolution 2007-5-12 regarding the Internal Audit Charter. Action: Carried unanimously. esolution 2007-5-13 INTERNAL AUDIT TRANSITION PLAN RESOLVED, That the Board of Commissioners hereby approves the Internal Audit Transition Plan, known as Attachment B, for the remainder of Fiscal Year 2007, and the Internal Auditor Budget for Fiscal Year 2008. The Internal Audit Transition Plan, which includes the staffing addition of an Assistant Auditor was submitted and discussed at the Finance Committee meeting Board Meeting Minutes May 22,2007 Page 42 of 46 held on May 8, 2007. The plan is subject to modification pending executive-level risk assessment, staffing levels and open issues remaining after the contract for the interim internal auditor expires. -------------- Motion by Commissioner James, seconded by Commissioner Rodocker, to adopt Resolution 2007-5-13 for the Internal Audit Transition Plan. Action: Carried unanimously. esolution 2007-5-I AMENDMENT TO TRAVEL POLICY FOR THE BOARD OF COMMISSIONERS RESOLVED, That the "Meal" section of the Travel Policy for the Board of Commissioners be amended retroactive to January 23, 2007 as approved by the Committee of the Whole during said meeting: Reimbursement will be based on a per diem meal rate of $100.00. --------------- Motion by Commissioner Graves, seconded by Commissioner Calkins, to adopt Resolution 2007-5-14 regarding the Amendment to the Travel Policy for the Board of Commissioners. The motion also included the adoption of$1500.00 business expense per Commissioner and sufficient funding within the Board of Commissioner's budget to purchase two (2) laptops. Action: Carried unanimously. MANAGER'S REMARKS Chief Financial Officer(CFO)Position. Dick Peffley advised the Board that they have posted but do not intend to fill the CFO position. Posting the position allows them to get ahead of the planning process so that the new General Manager (GM) will have the resumes and could move forward once he/she is onboard at the BWL. Mr. Peffley also noted that he thought it best to advise Varnum Consulting that the position is posted and asked the Board if they thought the candidates should be advised of said posting. Therefore, if the GM finalists have persons in mind for the position then those individuals would have opportunity to apply. Commissioner Cochran initially advised that he was unsure of how to answer the question and wanted time to think about his response. Commissioner Rios noted that his only concern is that the GM may want buy in regarding the posting and the position. Board Meeting Minutes May 22,2007 Page 43 of 46 Commissioners James and Zerkle indicated that they did not see any harm in posting the job, as it speeds up the process. Commissioner Graves asked if the GM could hire someone who does not apply for the position? Mr. Peffley responded yes, and advised that the GM has that discretion. Commissioner Cochran noted that Mr. Peffley is the current GM and the Board gave him authority to act on that basis. Therefore, he should proceed accordingly. Safety. Mr. Peffley announced that the BWL had no recordable injuries for the month of April and the Production Department has gone 3-months without a recordable injury. The Board of Commissioners commended staff on its efforts regarding safety improvements. Executive Session On motion by Commissioner James, seconded by Commissioner Zerkle, Interim General Manager Dick Peffley requested an executive session to discuss a pending litigation matter protected by Open Meetings Act exemption MCL 15.268 (e). (6:27 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Graves that the Regular Board meeting return to open session. Carried unanimously. The Regular Board meeting reconvened in open session at 6:33 p.m. Commissioner Rios noted that the Board received a report from staff on a pending litigation matter. COMMISSIONERS' REMARKS Officer Positions. Commissioner Calkins asked who was interested in running for an officer position on the Board of Commissioners. He went onto advise that he was not interested in running at this time, as he was unsure of his re-appointment. The following Commissioners noted their interest as follows: Commissioner Rios —Chair position Commissioner Graves— Vice Chair position Commissioner Cochran—Not interested Board Meeting Minutes May 22,2007 Page 44 of 46 Commissioner James —Maybe interested in the Finance Chair position It was noted that the Chair and Vice Chair positions are the only officer seats on the Board of Commissioners and the Committee Chair seats are by appointment. The Board typically forms a Nominating Committee in June with elections and installation to occur at the July 2007 Board meeting. Any persons interested in holding an officer position must make their intentions know to the Chair, as those persons interested in holding an officer position cannot sit on the Nominating Committee. Staffing Levels. Commissioner Zerkle advised that she wanted the public to know that the Board of Commissioners is interested in staffing levels. As such, she is going to attend a meeting with Dick Peffley and the bargaining unit. Commissioner Cochran asked Commissioner Zerkle if she was attending the meeting in a Commissioner capacity? Commissioner Zerkle replied that she would be present to simply observe. Carlos Muldoon Fundraiser. Commissioner Rios thanked Jim Dravenstat-Moceri and those involved in the success of the Carlos Muldoon St. Patrick's Day Fundraiser. Eight thousand ($8,000) was raised, of which fifty five hundred ($5,500) was given to Multiple Sclerosis Association of Mid Michigan, and twenty five hundred ($2,500) was given to LNZ Public Radio Station at Lansing Community College. EXCUSED ABSENCE On motion by Commissioner Calkins, seconded by Commissioner Cochran that the absence of Commissioner Smith be excused. Carried unanimously. PUBLIC COMMENTS None. ADJOURNMENT On motion by Commissioner Rios, seconded by Commissioner Cochran, the meeting adjourned at 6:39 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk May 25, 2007 Board Meeting Minutes May 22,2007 Page 45 of 46 ATTACHMENT A Lansing Board of Water and Light Internal Audit Charter Mission: The mission of internal audit is to provide independent, objective auditing and consulting services to the Board of Commissioners, enabling the Board to better serve customers, employees, and the community. Purpose: Internal audit's purpose is to add value and improve operations. It helps BWL accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Independence: The Internal Auditor is appointed annually by the Board of Commissioners, and reports to them through the Chair of the Finance Committee. For administrative purposes, the Internal Auditor also reports to the Director and General Manager. To ensure independence, the internal audit function shall have no direct responsibility or any authority over any of the activities or operations of the BWL. Authority: Internal Audit shall have unrestricted access to all activities, records, properties and personnel. All processes, activities, and responsibility areas are subject to audit. Responsibility and Scope: Management is responsible for establishing and maintaining risk management, control, and governance processes. Internal audit is responsible to determine whether management's processes are adequate and functioning in a manner to ensure: • Risks are appropriately identified and managed. • Significant financial, managerial, and operating information is accurate, reliable, and timely. • Resources are acquired economically, used efficiently, and adequately protected. • Employees' actions are in compliance with policies, procedures, standards, laws, regulations and contracts. • Programs, plans, and objectives are achieved. Standards: The Internal Auditor shall comply with the International Standards for the Professional Practice of Internal Auditing of The Institute of Internal Auditors. The Internal Auditor shall consider and, where appropriate, comply with Statements on Auditing Standards of the American Institute of Certified Public Accountants. Board Meeting Minutes May 22,2007 Page 46 of 46 ATTACHMENT B Internal Auditor Transition Plan 1. Coal Inventory Control: A systemic approach to an audit with firm objectives and audit programs. 2. Capital Assets: IAD must test transactions and reporting in the new system for accuracy and completeness, as well as make workflow recommendations to correct any deficiencies. The indirect cost rates applied to capital projects must also be reviewed by the IAD for accuracy, including an evaluation of alternative allocation structures for the Commissioners' review. 3. Internal Controls — SAP: Although external auditors are budgeted to perform a review, the IAD must also provide assurances that the system effectively and accurately processes financial and operational information for internal purposes, e.g. management reporting, interim financial reporting, actionable operational reporting, etc. In addition, it is recommended that the IAD manage the RFP process for these services and that consideration be given to rotating external auditors for purposes of the internal control review, i.e. consider alternatives to the external auditors responsible for financial statements. 4. Cash Management: The Director concurs with Mr. Moore's recommendation to solicit an RFP for banking and investment services. Consideration for lock-box services to improve current remittance processing and prompt investment of those cash deposits is also recommended, as lock-box services solicited as a "carve-out" from other banking services is cost prohibitive. 5. Mr. Moore intends to complete his review of healthcare, impaired assets (obsolete inventory), contracts and staff overtime. Additional follow up by the IAD may be required after his initial review of these topics. In addition, the external audit of financial statements typically requires extensive involvement of internal audit staff (currently scheduled for late summer). Approved by the Board: May 22, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, March 27, 2007 c" The Board of Commissioners met in the Boardroom of the Administrative Offices,1232" Haco Drive, Lansing, Michigan. - -a Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semoq­e; -- James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra ZerkfE. 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 5:35 p.m. APPROVAL OF MINUTES By motion of Commissioner Graves, seconded by Commissioner Cochran the minutes of the January 23, 2007 regular meeting were unanimously approved. By motion of Commissioner Graves, seconded by Commissioner Cochran the minutes of the February 7 and 13, 2007 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. Joseph Davis, Business Manager of IBEW Local 352 noted that the Corporate Secretary is scheduled for a six-month review and advised that he is supportive of the work she has is doing and her dedication. He also advised the Board that many are interested in their actions regarding the Corporate Secretary. Board Mtg,Minutes March 27,2007 Page 2 of 38 COMMUNICATIONS None. COMMMITTEE REPORTS esolutions 2007-3-1 COMMITTEE OF THE WHOLE February 20, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m. on Tuesday, February 20, 2007. 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 Sandra Zerkle. Absent: Commissioner Robin Smith Public Comment Joseph Davis, Business Manager for IBEW 352, thanked the Board for allowing him to submit information he thought important for the leadership regarding the General Manager search. He stated that it was the first time an opportunity of this nature had ever been extended to the bargaining unit. Mr. Davis also advised, the bargaining group welcomes and supports whatever role they can play in the search process. He thanked Sheryl Hudson, Acting Human Resource Director for speaking to the bargaining group and utilizing a team approach for the Human Resource Director search as one of their members is currently participating in the process. Mr. Davis further explained that he would work closely with the new Director. He also noted that having a good relationship with the Director would require someone that has a value system, which supports the organization in moving from where they were to where they want to go. Mr. Davis reiterated that the bargaining group wants to be involved in the process and they welcome it being done in a timely and expeditious manner. He further explained that as they go forward he hopes the BWL does not loose its focus on safety. It was also advised that the BWL is making money right now but they want to continue focusing on the job as well as taking care of one another. Lastly, Mr. Davis reported that he attended meetings regarding the Integrated Resource Plan in which professionals recommended building a power plant. He suggested the BWL build a plant and not delay with this matter. Commissioner Cochran asked Mr. Davis, how does the union view the progress that the Interim General Manager has made thus far in implementing the results of the Human Resource audit? Board Mtg.Minutes March 27,2007 Page 3 of 38 Mr. Davis responded by stating that in the Call Center there are different people but he thinks they have a good manager in Robert Perialas. He also stated that it is a tough group with a lot of issues and he would assess there is still work to be done. Mr. Davis further noted that in his opinion and at this point, the General Manager has given good direction. Commissioner Cochran asked Mr. Davis if he was satisfied that there is progress being made and if he is pleased about the progress? Mr. Davis replied by acknowledging that progress is being made. Update on Implementation of the HR Report Commissioner Graves noted that the agenda item should be properly reworded as an update on the implementation of the Human Resource report, related to the performance of the General Manager. He further clarified that Michael Goree of Growth Strategies Consulting, Inc.; author of the Human Resource audit is present to speak to the issues related to the report and his view of the findings. Commissioner Graves advised that he felt it would be beneficial to have Mr. Goree's input in order to facilitate a meaningful discussion. He also acknowledged that it is the General Manager's right to request a closed session and asked Dick Peffley, Interim General Manager to consider the request. Mr. Peffley noted that he did not have issue with going into closed session to discuss the topic. Amy Cavanaugh, General Counsel clarified that to the extent that the Board is going into closed session to conduct a performance evaluation is fine with respect to the Open Meetings Act. However, she expressed concern with the roll that Mr. Goree would play in the evaluation process. Ms. Cavanaugh also noted that it is completely within Mr. Peffley's right to reopen the meeting at anytime especially, if an unwanted person is present in closed session. Commissioner Graves further advised that he was seeking a discussion related to the General Manager's performance relative to the Human Resource report. He also explained that as they further delve into this item, he thought it important to have an opportunity to discuss it in closed session to provide some degree of candor. After further discussion, it was explicitly made clear that Mr. Goree was not present to evaluate the General Manager's performance, as that is the sole responsibility of the Board of Commissioners. It was also clarified that the General Manager has the authority to request a closed session relative to his performance review and to decidedly open the meeting if he did not agree with the persons selected to sit in on said evaluation. Motion by Commissioner Graves, seconded by Commissioner James to conduct a performance evaluation relating to the General Manager's performance with respect to the Human Resource Audit. Board Mt9.Minutes March 27,2007 Pa.le 4 of 38 Carried unanimously. Executive Session Request made by Dick Peffley, Interim General Manager to go into executive session to receive his performance evaluation by the Board of Commissioners protected by the Open Meetinzn gs Act exemption MCL 15.268(a). (4:47 p.m.) The Committee of the Whole reconvened in open session at 5:43 p.m. Commissioner Rios advised there was a closed session to discuss the General Manager's performance relative to the Human Resource audit. The Board continued discussion in open session relative to the audit. Commissioner Calkins departed the meeting at 5:43 p.m. dne to a prior-obligation. Continued Discussion on the Update on Implementation of the HR Report Commissioner Graves suggested the Board hear from Michael Goree so that he could give a more in depth review and limit the discussion to exclude specific names and speak to the issues outside of the Human Resource Department. In summary Mr. Goree noted the following information: • He was retained to review the recruitment and selection process and they have conducted some initial new testing with regards to assessment to find a more expeditious way to bring people into the system. • There are still problems with certain individuals in the Human Resource Department and whether or not they have the knowledge base and/or capacity to do what is being asked of them. This is a challenge that needs to be addressed by the new Human Resource Director. (Mr. Goree clarified that he has discussed this issue with Mr. Peffley and that he is aware of the names of those persons.) • It was noted that the Interim Human Resource Director has the thought process, knowledge base, leadership skills, and strategic thinking to be the Human Resource Director. Mr. Goree advised the Board that he wholeheartedly and without reservation believes the current Interim person should be the Human Resource Director. Commissioner Rios asked if the application period was still open and where are they in the process? He also asked if the Interim Human Resource Director is one of the candidates? Mr. Peffley responded by stating that the application period is closed and they are currently in the process of narrowing the applicant pool to those that they are going to interview. Mr. Peffley also advised that the Interim Human Resource Director did not apply for the position. Board Mtg.Minutes March 27,2007 Page 5 of 38 Commissioner Graves went onto ask that although they are into the process of recruitment,if the Interim Director were to make themselves available then is it possible that the General Manager could make a decision to go into that direction and simply close the process? Mr. Peffley replied yes and indicated that it was an option for the General Manager and he could hire whomever he wants for the position. Mr. Goree continued the report and noted the following additional information: • Some of the human resource group spent time regarding their branding and image with participation by individuals in the Human Resource Department. In this they developed the phase, "Together We Achieve Success". Those that bought into process have applied that language to begin the process of mending the Human Resource Department. • Met with the compensation and benefit committee to determine that the pay system needed assistance. • Worked with Wendy Bradley, BWL Employment/Compensation Administrator to streamline the system and resolve some of the issues relatively quickly. The proposed streamlined compensation system was presented and well received to a group of managers on February 14, 2007. There are additional details to address and additional recommendations regarding recruitment selection can be made. However, it was noted that he is currently assisting with the compensation and performance appraisal system. • Ms. Bradley asked if he could train the supervisors on performance management of which he responded yes. However, he advised that he was not retained to do that work but he would be happy to help in anyway he could. • Outside of Human Resources there are major concerns with some individuals in certain departments, which was previously stated. There are issues with how individuals get placed, when they get placed, and errors that are made in certain departments, which are unfortunate and begin to jeopardize the integrity of the BWL. • It was reiterated that he has never seen a more dedicated workforce. For example, he believes Robert Perialas has done a superb job in Customer Service. However, there is some restructuring that would make it even better. It is his recommendation that they not only look at Customer Service but also at CARS,Meter Reading, Remittance, etc. and begin to do things that would relieve some of the concerns and issues, and address some of the shortfalls of the individuals who are in an authoritative role. • There are individuals in the Environmental Department in leadership roles that are neither well versed in the environmental language nor arena, which leads to unnecessary errors that are beginning to jeopardize the BWL. • Some of the decision-making processes for placing individuals reinforces the good ole boy network. • The engineering report indicated that there were some restructuring issues. However, there are still people in leadership positions that are causing some of the same problems. He did not recommend firing those individuals but intervention is not there. Board Mtg.Minutes March 27,2007 Page 6 of 38 • Training modules instruct persons on what to do but not on how to do it. In the absence of a mentoring system, the quality decision-making process is absence. • Mr. Goree sited a former BWL employee's frustrations with co-workers, peers and other supervisors in attempting to do what is appropriate and obtain the proper support from management. The issue of responsibility and accountability was raised relative to the supervisory and managerial level. • If you want to do something then he is your best ally but if you just say you want to do something then he could become your worse nightmare. He also has a huge passion for the success of his clients. • The BWL has an absolutely wonderful organization with some individuals that need stronger intervention in Human Resources, Engineering, Water Department, Environmental, and Communications. • He noted that he has shared the above information with Mr. Peffley in detail. • In the original report one of the important items they talked about was being open to the free exchange of information, proactive decision making at all levels, enabling employees to be owners of their work, promoting and participating in innovation, and encouraging a positive relationship among all employees. He noted this language was in the contract, three contracts ago and further advised that had this taken place at all levels of the organization then there would be no need for this conversation. • Originally, the Human Resource Department was chastised for not doing x, y, or z. However, no one helped the department understand how, which is not fair. • There will always be one or two at the organization that do not belong at the BWL and there are some of those at the managerial, director and bargaining unit level. • The BWL must have the right supervisors who can do the right things and the right directors and managers who understand what pulling in the right direction actually means. • If the BWL hires a new General Manager without taking action then that person will come here and say what are we doing? Subsequently, they will wait to determine all of the politics and the BWL will end up in the same position that it was in 1 1/2 years ago. • The immensely good news article on Sue Warren in the Lansing State Journal was noted as a good example of the positive public relations that the BWL should seek. • Mr. Goree noted that he does two things: 1) problem identification and 2) solution implementation. Charles Moore, Interim Internal Auditor asked if there were some conclusions to the report and if there are going to be additional recommendations? Mr. Goree replied yes, and indicated there are some additional recommendations he believe necessary to move the organization forward. He also advised that he and Mr. Peffley could review some additional concerns, which were discovered within the last 3-4 weeks. Commissioner Cochran asked Mr. Goree a series of questions that included the following: Board Mtg.Minutes March 27,2007 Page 7 of 38 1) Many years ago he heard that when a formal organization fails, an informal one starts to form from the inside out. Is that taking place at the BWL? 2) Is it adding another layer, more layers or changing recording roles by mutual agreement? 3) How big is it and has this been communicated to Mr. Peffley? Mr. Goree responded by stating that yes, it is happening. He also noted that it does not change recording roles, it is a defensive mechanism to maintain the status quo. Mr. Goree responded to the last question by stating that if nothing is done then it would solidify before the new General Manager is in place. He also advised that he has not communicated this to Mr. Peffley in strong enough words. Commissioner Rodocker stated that she appreciated the report and is interested in results driven progress. She explained that she would like to hear information on topics such as is the BWL top heavy, succession planning, are there too many people in the same outfit, do we need to rotate to different jobs, etc. Commissioner Rodocker went onto say that she needs plans on how the BWL becomes more efficient and effective. Mr. Goree noted that to a degree those items have been discussed. He also reported that he believes there are a number of additional supervisors and managers that may not be necessary to the organization. Mr. Goree continued to advise that the succession planning process is not necessarily knowledge capture driven so much as it is body filled driven. Whereby, when an employee leaves, another body is put in its place. He further stated that he has not seen the capture of knowledge versus the replacing of bodies, which represents a big difference and an issue that people need to discuss. Commissioner Graves stated that for the record, when the human resource audit was being proposed and lobbied for by groupings within the BWL as well as individuals outside of the BWL, he was not supportive of it. He noted that he lobbied against it, didn't want and didn't think it necessary, which was a huge mistake on his part. After engaging the consultant, who went about the business of looking at the human side of the BWL, shared with the Board his report, and further shared in more detail some of the things presented today; it is not a report that he thinks they should simply put on the shelves and allow it to collect dusk. Commissioner Graves noted that he thinks that the Board needs to act on those items. He further stated that Commissioner Cochran suggested that he attended the governance workshop, which he did not have the opportunity to attend,but apparently the rest of the Board did and they talked about his historical position. Commissioner Graves further advised that his historical position is the same position that Commissioner Cochran spoke to and that is, what is the role of management and what is the role of the Board? He went onto note that he thinks that traditionally the Board has had very little role to play as it relates to the functioning on the management's side. However, given the scope of the issues that they just heard he struggles with trying to figure it out. Commissioner Graves went onto state that they have an Interim General Manager who may or may not apply for the General Manager position. They have a search firm who is busy with the search process and he does not want to see another General Manager come in without there being movement in all the Board Mtg.Minutes March 27,2007 Page 8 of 38 areas they just heard about. He also advised that this situation brings an exception to where he would normally be, which is that there is a role for the Board as a subset until a permanent General Manager is in place. He noted that it would essentially work with the General Manager in an oversight role as it relates to addressing the issues they just heard about and the issues articulated in the written report. Commissioner Graves noted that he understood everyone would not have the time or flexibility to serve in that capacity. However, he would certainly make time to serve and he would also ask Commissioners Calkins and James to serve, as he believes they also have the flexibility. Therefore, they would have a three-person oversight committee. Motion by Commissioner Graves, seconded by Commissioner James to create a three- person oversight committee that would act as a subset of the Board of Commissioners in which the committee would essentially work with the Interim General Manager as it relates to addressing the issues relative to the Human Resource audit report. Furthermore, the oversight committee members would consist of Commissioners Calkins, Graves and James. Discussion: Some Commissioners expressed concern with the motion and noted the following reasons as to why they would not support it. • Did not think it appropriate and suggested additional meetings to accomplish the above recommended tasks • Do not want to micromanage the process and felt an oversight committee was unprecedented • Suggested providing the General Manager with additional direction if needed • The Board is currently asking more questions and increasing their expectations, which are gradually being met • The Board is an eight-member committee and oversight of the General Manager is not their responsibility; a subset committee for super oversight is not needed • If the Interim General Manager is going to apply for the permanent position then it throws a cloud over the General Manager if the Board is stating that they have not approved of his performance in the last six-months There were other Commissioners who felt the oversight committee was needed and gave several reasons in support of the motion, which are listed below. • Not fair to ratepayers to incur costs related to processes that are not functioning properly • Desire to leave the Board in a better position than when they arrived • Individuals are vested in maintaining the status quo without adjusting and/or making changes • There is a capacity issue in which individuals may not have the capacity to do what needs to be done • Do not recommend micromanaging the process or directing the General Manager in their day-to-day activities. Instead propose an oversight committee that would have more time and energy to talk to the General Manager regarding some of the issues that were outlined and a strategy to address those concerns. As a result, the General Board Mtg.Minutes March 27,2007 Page 9 of 38 Manager would still have the freedom to go about tackling problems in whatever manner he chooses. • There are deeply embedded problems at the Board that need to be addressed • It was noted that while the Interim General Manager may not have had a tremendous amount of time to effectuate change, there are things that have been identified that need to be addressed • The Interim General Manager may feel that some tasks cannot be carried out due to certain relationships that are currently in place and the precarious position it would place him in once he returns to the general body • It was noted that one of the reasons why Ms. Hudson may not want the Human Resource Director position is because she does not know if she would have the support of the Interim General Manager nor the new General Manager. However, Ms. Hudson was encouraged to apply for the permanent position • The General Manager was encouraged to call upon the Board for assistance if needed After further brief discussion, the motion failed by the following roll call vote: Yeas: Commissioners Graves, James, and Rodocker. Nays: Commissioners Cochran, Rios, and Zerkle. Absent: Commissioners Calkins (left meeting at 5:43 p.m.) and Smith. Commissioners Graves, James and Zerkle left the meeting at 6:34 p.In. clue to a prior obligation. Due to time constraints the following agenda items were moved to the next Committee of the Whole meeting: Rossman Group—Communication and Marketing Efforts, Outside Counsel Recommendation and Discuss Legal Review Process. Risk Assessment Presentation Bill Cook, Senior Vice President of Operations advised that over the past several years the Board has heard about wholesale market risk and the fact that the BWL's wholesale business is approaching 33% of its total business, which is a risky position. He went onto note that with new initiation wholesale market pricing becoming even more volatile, the problem that the BWL will encounter in the near future is that the utility market is changing and standard products on the wholesale market involve a higher level of risk. Mr. Cook further explained that the BWL currently sales recallable power, which means that if the BWL sells everything it has and needs the power back then it can be recalled for the BWL's own usage. However, today's market is moving forward with sales of power on a financially firm basis, which means that you are obligated to provide power if you sign a contract. He went onto report that a number of customers who are currently willing to buy the BWL's recallable product are dwindling. Mr. Cook reported that the BWL is doing well this year but as the market matures it will become more of a problem. Therefore, if the BWL is going to continue to take risks of that nature for the 1/3 revenue then they are going to have to look at financial instruments to ensure that if they take those risks then they are not jeopardizing the BWL's financial future. Mr. Cook further noted that they are not making recommendations, as the BWL neither has a permanent Chief Financial Officer nor an Internal Auditor in place. However, this is the first step and they wanted to acknowledge that they have looked at a Risk Management Policy on Board Mtg.Minutes March 27,2007 Page 10 of 38 how to protect the BWL in moving forward. The Risk Assessment presentation was scheduled to give the Board a brief overview of what has been accomplished thus far. Dan Conway, Principle with RMI Consulting, Inc. indicated that the presentation would be educational in terms of its structure and content. He also noted that some of the items he would like to address include: an overview of what is risk management, what is happening in the industry, where does BWL fit in terms of the municipality clients they serve, steps they initially reviewed in terms of their risk assessment and, markets and price volatility. Mr. Conway further reported that the BWL is trying to protect a revenue stream but in the future the BWL will have a moving energy target of prices that is becoming more volatile. He also advised that there are counterparts who are potentially going to transact business with the BWL to buy its excess power that will continue the revenue stream. However, the industry is moving towards a financial transaction environment. The purpose of the presentation is to layout some of the policy directions and term where they might be heading in the next 6 - 12 months. Charles Moore, Interim Internal Auditor asked if they are moving towards a futures market? He also stated that it sounds as if they are in between a futures market and the stock exchange in which they are in essence going to require that the BWL make payments the next day? Mr. Conway confirmed Mr. Moore's sentiment and further stated that currently, there is a futures market in electricity that has developed within the last 2 - 5 years, similar to the natural gas market that developed in the early 1990's after deregulation. He advised that to have a successful futures market, you have to have an overlay of a strong physical market, which is what the BWL currently transacts within now. Mr. Conway indicated that the futures market is another venue for BWL to participate and protect its revenue stream. However, the BWL may see a potential attractive price to lock in some revenue in year 2007 or 2008 and because of the type of physical contract that the BWL currently uses, less and less people are willing to participate in that type of structure. Mr. Conway reiterated that the futures market allows the BWL to have that type of opportunity and protect revenue. Mr. Moore asked if the basis is to move from a restrictive market to a futures market in nature? Mr. Conway confirmed that it was and advised that a futures market involved financial contracts and derivatives. He also noted that one does not go from being a solely physical transaction environment to a financial market without having a policy structure in place to ensure the Board that all control processes, authorizations and all levels of risk are being managed. Mr. Conway further advised that the BWL has a unique situation in that it is long on power and has generation to potentially sell out. He also reported that municipalities unlike regulated utilities are normally less risky on a risk spectrum perspective, whereas, the cost of energy is passed onto the customer in a regulated utility. It was also noted that within risk management they attempt to identify, control and minimize exposure to price movement by developing a hedge plan. Mr. Conway Board Mtg.Minutes March 27,2007 Page I I of 38 continued his review of the presentation and noted the assessment findings and several recommendations contained within the body of the report. 2006 Assessment Findings Summary: RMI's main conclusion is that BWL, given its status as a municipal utility with excess power and its current agreement with the MPPA, has a unique current risk profile versus its post-MPPA position in the marketplace. RMI Recommendations: Operational Risk Mitigation Policies and Procedures • Work to establish policy adapted to current MPPA environment Oversight and Governance • Establish cross functional risk oversight and operations committees • Conduct periodic risk management education updates Authority Limits • Continue current schedule of authorizations with GM designee in absence • Continue efforts on sub-net long MPPA committee authorization Segregation of Duties • Designate non-transacting personnel to assist with compliance for BWL and MPPA activity Risk Monitoring and Reporting • Require key management reports • Ensure adequate systems are in place Credit Risk Mitigation Establish credit procedure • Work to establish policy for non-MPPA activity and beyond MPPA • Give ROC credit risk management accountability Perform credit evaluations and specify/monitor credit limits • Perform periodic check of MPPA and MIS credit information • Establish BWL evaluation and limit setting practices for non-MPPA activity Obtain Appropriate Securities to Support Limit Compliance • Consider exchange-cleared account to minimize credit risk • In post MPPA-environment work to establish more equitable thresholds • Update master agreements to include `netting' credit mitigation tool Market Risk Mitigation RMI Recommendations Given BWL Status: Develop Overall Hedge Plans Coal Board Mtg.Minutes March 27,2007 Page 12 of 38 • Consider products to protect against price spikes • Create a budget-driven coal procurement plan to take advantage of lower markets Wholesale Sales • Determine whether or not revenue margin risk on the low side is too great for the municipality to endure and hedge accordingly if needed • Develop a longer-term hedging approach of 2-3 years versus the current 12-18 months • Create a wholesale sale methodology to establish execution triggers and limits, which encompass a combination of historical price-driven, time-driven and budget protection components tied to a know cost for fuel Mr. Conway clarified that revenue protection pertains to any type of forward sales on known input cost, be it coal, or any another type of cost structure. He also noted this refers to protecting the margin and knowing the input cost as well as having the ability to sell at the top of the margin or a more profitable margin than the budget forecast. Mr. Conway further advised that whether the BWL decides to sell or not, in looking at the forward market and power prices, at some period of time the price is moving up and down. He continued by noting the current three step structure as one transitions into the future: 1) enhance the current risk management practices that the BWL currently has thru MPPA, 2) the BWL could develop its own infrastructure in the interim while it is still associated with the pool, and 3) look at longer term revenue protection. Commissioner Cochran asked when you sell that future price do you receive payment today and deliver at a later date? Staff noted that the gain in position goes to the seller at the time of the transaction. Thereby, one is contracting a certain price at that time and the buyer has to purchase it at a set price. Mr. Moore noted that in his opinion, the BWL should limit its futures market participation due to the fact that it is a governmental body and the risk factors involved in trading. Mr. Cook explained that they agree with Mr. Moore but also noted that doing nothing is a risk in and of itself. Therefore, based on what has been learned they are looking at assembling a pilot project with a quantitative amount of risk that will allow them to learn the market, determine the positives and negatives, and assess whether or not it will meet the needs of the BWL. Mr. Conway closed by advising that their current client base all began with a pilot program structure, which allows the customer, City Council, and management to understand what they are doing. He also noted that if the BWL looks at the amount of generation and revenue that its brings in on a yearly basis, which is a small percentage of what one would look at in the forward market, 2-3 years from now the BWL may have fewer potential counterparts. Board Mtg.Minutes March 27,2007 Page 13 of 38 Copies of the "Risk Management Introduction and Risk Assessment Summary" presentation are on file in the Office of the Corporate Secretary. Update on Delta Township Mr. Peffley advised that they are still working with the customer and the township supervisor was out of the office and thereby unable to meet. It was also noted that the materials requested for Mr. Moore are forthcoming. Varnum Consulting—GM Selection Process Sandra Soltysiak, Varnum Consulting advised that the job description and summary for the General Manager position were included in the packet of materials previously sent. She also reported that they are ready to begin the advertising phase of the project and gave the Board a list of potential advertising options. Ms. Soltysiak reminded the Commissioners that they are going to cast a wide net to help ensure that they receive as many candidates as possible. She also asked that all interested candidates apply via the website, by fax or email. Ms. Soltysiak noted that the next step in the process would be a meeting with the Interim General Manager and anyone else he deems important and she would also like to take a facility tour. Ms. Soltysiak reported that the posting would close on March 30, 2007 upon which time she will present the top 5-6 candidates to the Board. The additional prescreening process will also take place prior to the next meeting, which she hopes will be in five weeks and the position filled in 10 weeks. Ms. Soltysiak noted that her firm would call all of the utilities in Michigan and start asking for referrals and indicated that that is where they would receive good candidates. She further advised the Board that if they have any other place that they would like her to call then feel free to forward the information via email and she will follow up in order to try and obtain a large pool of candidates. Ms. Soltysiak also reported that public comments are welcome and would be noted on the posting in the Lansing State Journal along with an email address for which the public can send comments. The Board agreed with the language for the General Manager position announcement. They also indicated that they would decide at a later date as to whether or not they would host a candidate meet and greet or any other public forum of said nature. Ms. Soltysiak confirmed that it is common practice to send a board-wide communication to the organization indicating that the General Manager position is being posted and they are accepting applications. If a BWL employee knows of anyone interested in the position then they should be directed to the website, www.hiringsolutionsinc.com. Ms. Soltysiak also commented that if BWL employees have any comments then they are welcome to forward them to her via email. Mr. Peffley advised that he would make sure that the communication is sent to all BWL employees. There being no further business, the meeting ended at 7:20 p.m. Board Mtg.Minutes March 27,2007 Page 14 of 38 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. esolution 2007-3-2 HUMAN RESOURCE COMMITTEE March 8, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Thursday, March 8, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, and Julee Rodocker. Absent: Commissioner Santiago Rios. Public Comment There were no public comments. Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election Brandie Ekren, Associate Attorney advised that during the past few year's staff has reviewed the benefit plan documents to bring them up to date, ensure compliancy and restatement. As such, they have proposed a document restatement and plan changes to reflect current practices, changes in applicable laws, compliance with the Internal Revenue Service Code and greater administrative flexibility. The changes would affect both Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election and the Post Retirement Benefit Plan Document. The first of said documents is in essence the plan, which gives employees and retirees the decision to either receive a taxable cash benefit or health and prescription drugs. It was noted that if an employee or retiree wants to receive cash in lieu of health and prescription then they must possess alternative healthcare coverage. The restatement includes items that are necessary since the Health Insurance Portability and Accountability Act (HIPAA) and Consolidated Omnibus Budget Reconciliation Act (COBRA) references came into effect. Commissioner Graves inquired as to whether or not there would be a cost savings to the BWL if retirees were required to sign up for Medicare Part D. He also noted that State of Board Mtg.Minutes March 27,2007 Page 15 of 38 Michigan employees are required to sign up at the age of 65 for prescription drugs, which makes the federal government the first billable option and the State of Michigan, the second billable option. Mr. Oxender advised that it would be a change to the BWL's existing plan and there are some wraparound plans, which are administratively cumbersome at this point. He then indicated that it is something that the Healthcare Taskforce could review and make recommendations. Executive Session Moved by Commissioner Graves, seconded by Commissioner Rodocker, to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel and Brandie Erken, Associate Attorney protected by the Open Meetings Act exemption MCL 15.268(h). (4:21 p.m.) The roll was called. Yeas: Commissioners Cochran, Graves, and Rodocker. Nays: None. Absent: Commissioner Rios. Carried unanimously. Moved by Commissioner Graves, seconded by Commissioner Rodocker that the Human Resource Committee meeting return to open session. Carried unanimously. The Human Resource Committee reconvened in open session at 4:30 p.m. Continued Discussion On: Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Restatement of Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election resolution forward to the full Board for consideration. Post Retirement Benefit Plan Document Ms. Ekren reported that the Post Retirement Benefit Plan Document specifically outlines the benefit options available to retirees by meeting certain eligibility requirements. In an effort to review and update the document, it was restated to reflect changes in applicable laws, compliance with the Internal Revenue Service Code and greater administrative flexibility. Ms. Ekren noted that the previous plan document implied `piggy-back' vesting whereas; if one were vested in the pension plan then one was automatically vested in healthcare. Since that was not the intent of the BWL plan, the document Board Mtg.Minutes March 27,2007 Pale 16 of 38 restatement clarifies the language, time periods, dates, and eligibility. She went onto advise that a retirement benefit does not necessarily entitle one to a healthcare benefit package; it is simply a different plan that operates separately from the pension plan. Ms. Ekren also stated that one of the biggest changes is the plan documents flexibility. The previous document specifically restricted premium sharing for retirees whereas, the new document neither permits nor restricts premium sharing. Therefore, it is important to note that the language does not necessarily institute premium sharing for retirees. However, it adds more flexibility for that determination to be made by the Board at a future date. Dick Peffley, Interim General Manager noted that it is not their intent to implement premium sharing for existing retirees unless given direction by the Board. The intent is to give the BWL the flexibility to address future retirees. Commissioner Cochran asked if there is anything in the union agreement regarding the above? Staff replied no and reported that there is language in both plan documents that offers exceptions to anything otherwise specified in the union agreement. After further discussion, the following motion was introduced: On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Restatement of Post Retirement Benefit Plan resolution to the full Board for consideration. Ms. Erken added that in reviewing their plans they came up with a number of opportunities to help the plan improve its operation. As such, they are going to present the ideas to the healthcare taskforce for investigation. Commissioner Graves asked when does the healthcare taskforce begin? Darold Oxender, Benefits Administrator advised that they have not had their first meeting as of yet. However, an expert from Michigan State University was brought in to present information to the employees on the history of healthcare and its increases. He also noted Rick Daly, Labor Relations Manager and Mr. Peffley need to determine who will participate on the taskforce. Mr. Oxender further reported that per the Board's request, a retiree would be invited to participate on the taskforce. After further discussion, it was noted that the healthcare taskforce should formulate immediately so that they may begin research in preparation for presenting recommendations to the Board prior to the next union contract negotiation period. There being no further business, the Human Resource Committee adjourned at 4:45 p.m. Respectfully submitted, Board Mtg.Minutes March 27,2007 Page 17 of 38 Robert Cochran, Chair Human Resource Committee Motion by Commissioner Cochran, seconded by Commissioner Rodocker, to receive the Human Resource Committee report as presented. Action: Carried unanimously. esolution 2007-3-3 FINANCE COMMITTEE March 13, 2007 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 3:30 p.m. on Tuesday, March 13, 2007. 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 Gary Calkins, Semone James and Robin Smith. Absent: Commissioner Sandra Zerkle Public Comment There were no public comments. Update on Delta Township Contract Moved by Commissioner Calkins, seconded by Commissioner Smith, to go into executive session to discuss a privileged document received from C.L. Moore & Associates, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (3:33 p.m.) The roll was called. Yeas: Commissioners Calkins, James and Smith. Nays: None. Absent: Commissioner Sandra Zerkle Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole reconvened in open session at 4:18 p.m. Board Mtg.Minutes March 27,2007 Page 18 of 38 Policy Changes Due to the Passing of Proposal 2 Defined Benefit and VEBA Trust Investment Policies Amy Cavanaugh, General Counsel noted that the Board has three policies that need to be updated in light of the passing of Proposal 2. As such, she was charged with the responsibility of developing language that would encourage diversity in terms of the pool without violating the proposal. The policies in question are Defined Benefit Investment, VEBA Trust Investment, and the Corporate Diversity and Corporate Supplied Diversity Policy. It was noted that the proposed language changes are the same for the Defined Benefit and VEBA Trust Investment Policies. On motion by Commissioner Calkins, seconded by Commissioner Smith, to accept the suggested changes to the Defined Benefit Investment Policy and the VEBA Trust Investment Policy and move it forward to the full Board for approval. Discussion: Commissioner Smith stated that she understood the final selection criteria and the fact that one cannot have a preference for minorities. She also believes that diversity is covered in the pool candidates' statement. However, Commissioner Smith expressed concern pertaining to previous conversations regarding the avoidance of advertising efforts directed towards a specific market. Ms. Cavanaugh clarified that if one spent all their advertising dollars trying to reach women and minority candidates then one could be in violation of Proposal 2 because it would be considered a preference for those candidates. Commissioner Smith noted that she did not think the pool candidates' statement creates a preference. She went onto advise that they want to cast a wide net so that the mix of advertising incorporates items to ensure they reach minority candidates. Commissioner Smith also asked staff if they have had opportunity to review the changes? Dick Peffley, Interim General Manager commented that he has reviewed the documents with Ms. Cavanaugh and is in concurrence with said language changes. Action: Carried unanimously. Corporate Diversity and Corporate Supplied Diversity Policy Ms. Cavanaugh explained that she combined the Corporate Diversity and Corporate Supplied Diversity Policies together because they were extremely similar. The primary difference between the two is that one spoke of customers and the latter spoke of ratepayers. The Corporate Diversity policy also charges the General Manager to establish procedures and be responsible for its implementation. As such, Ms. Cavanaugh combined the two and created one Corporate Diversity Policy. In doing so, she removed specific language that could be considered a preference and added language that 1) recognizes the importance of diversity to the BWL, and 2) language that also supports the growth and development of the candidate pool. Ms. Cavanaugh explained that they are Board Mtg.Minutes March 27,2007 Page 19 of 38 trying to be as broad as possible in terms of promoting and making opportunities available to everyone. Discussion surrounded the issue as to why the new statement could not continue to use the previous language, which stated that the, "...BWL will continue to establish a workforce that is highly representative of the customers who use BWL's resources". It was noted that the language was removed because it could be construed as a preference if the community makeup was based on ethnicity or gender. Commissioner Smith expressed concern with the proposed changes in that the language does not indicate BWL's desire to somewhat reflect the community it serves. She also noted that it is not embedded in the process and she is not requesting preference. After further discussion, the following motion was introduced: On motion by Commissioner Calkins, seconded by Commissioner Smith, to refer the Corporate Diversity Policy to the Committee of the Whole. Discussion: Commissioner James advised that they must rely on General Counsel to write a policy that is consistent with the law ill regardless of individual issues. Commissioner Smith added and to rely on General Counsel to a point that the Board challenges them when they do not feel that it has gone as far as it could go. Ms. Cavanaugh noted that she understood Commissioner Smith's point of view and to the extent that she may have ideas on how to accomplish this task within the law, then she would certainly review the suggestions. Action: Carried unanimously. Additional Discussion: Charles Moore, Interim Internal Auditor advised the Board to error on the side of caution in relation to the policy and said language changes. It was further noted that several other entities are in the process of developing language to bring their organization into compliance. Therefore, as one hears what other industries are implementing it will help to develop a better statement. It was also explained that the policy is not written in stone and could be subject to further review and change. In addition, Commissioner Smith agreed to work with Ms. Cavanaugh to share ideas in cultivating a new Corporate Diversity Policy statement. Budget Assumptions Sue Flores, Manager of Finance and Planning reviewed the fiscal year 2008 budget assumptions for the Board of Water and Light. It was noted that the BWL would file the budget with City Council ten days after its approval by the Board of Commissioners. The City's final budget deadline is June loth. Ms. Flores advised that during the beginning of April, they would also look at possible rate increases, budget reviews, and allocations. Board Mtg.Minutes March 27,2007 Page 20 of 38 She further reported that allocation methods have been a large discussion point and they would probably bring it forward in April for a more thorough discussion. The Commissioners asked if the budget schedule could be moved up so that they may have budget discussions sooner than projected? Ms. Flores replied that the budget calendar is in part based on scheduled Board committee meetings. As such, a Committee of the Whole is scheduled for April and they could bring forward whatever information they have at that point. Ms. Flores clarified that rate hearings are only necessary if there is a rate increase request. The Commissioners had a brief discussion regarding cost of service relative to retail customers. They also discussed cost allocation methods, bond issues and a schedule pertaining to rate increases. Ms. Flores went onto continue the presentation and reviewed the sales forecast, revenue assumptions, operating expenses, capital expenditures, and other considerations such as, the payment in lieu of taxes to remain at 4%, General Motors exit fees, continued draw down of Belle River project, and bond issues. Capital Area United Way (CAUW)— Corporate Sponsorship On motion by Commissioner Calkins, seconded by Commissioner Smith, to approve the request to renew the Capital Area United Way Sponsorship and to move it forward to the full Board for approval. Discussion: Commissioner Smith noted that the BWL has had a long history with CAUW and thought it would be a great way to help them underwrite a project. She noted that she was not sure how much was previously raised. However, each year the BWL has received an award for its employee participation and corporate contribution. Commissioner James asked if the BWL has any other contributions and if so, what are the amounts and what publicity was given for said sponsorships? She further noted that they should also review the other sponsorships as well and consider using it in a marketing campaign and/or community relations. It was reported that any sponsorship above $5,000 must be brought before the Board for approval. Mr. Peffley also advised that a BWL committee meets every week to review sponsorship requests. He noted that they have approved what was budgeted and they could compile a list of sponsorships per the Board's request. Mark Nixon, Director of Communications noted that he will introduce the new marketing firm, The Rossman Group at next week's Committee of the Whole meeting. During which time they will briefly speak about the BWL's community sponsorships and various projects that are currently underway. Board Mtg.Minutes March 27,2007 Page 21 of 38 Action: Carried unanimously. Informational Only: Coal Letter and Investment Letter from Charles Moore It was advised that each respective letter was brought forward at this time for informational purposes only and would be discussed in detail at the next Finance Committee meeting, as staff has been given additional instruction. The Commissioners agreed to move the item to the next the Finance Committee meeting. Other Commissioner Calkins asked staff to speak to an article written in the Lansing State Journal relative to a BWL contribution for the building of a downtown fountain? Mr. Peffley noted that the BWL has not received nor approved any requests for (in kind donations nor monetary) contributions to the building of said fountain. There being no further business, the meeting adjourned at 5:05 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. �esolutioya COMMITTEE OF OF THE WHOLE March 20, 2007 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, March 20, 2007. Commissioner Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins (teleconference), Robert Cochran, Semone James (teleconference), Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioners Joseph Graves and Robin Smith Public Comment There were no public comments. Board Mtg.Minutes March 27,2007 Page 22 of 38 Rossman Group— Communications & Marketing Efforts Mark Nixon, Director of Communications gave a brief overview of the marketing and community sponsorships that are taking place at the Board of Water and Light. Mr. Nixon noted that the sponsorships are a good thing and it also provides emotional equity. He advised that the marketing strategy is an evolution of what they are currently doing, which is strengthening community ties through large and small partnerships and reminding people of the BWL's commitment to the community. Mr. Nixon listed some projects that are forthcoming, which include: customer video testimonials to be aired at Lugnut games beginning April 2007, a redesigned web page that should be complete by mid-May 2007, emphasize non-profit causes at the upcoming Chili Cook-off and create an annual report to customers that will appear in local print media. Kelly Rossman, Chief Executive Officer with The Rossman Group thanked the Board for the opportunity to work with them, and noted the importance of the community partnerships that the BWL have nurtured and cultivated over the years. She then advised that this has helped to re-enforce its primary message of"Hometown People Hometown Power". Ms. Rossman reported that the BWL has four premiere events that include Adopt-A-River, Common Grounds, Silver Bells, and the Chili Cook-off. She then indicated that their primary goal is to make the BWL look good in every way possible and advised that their focus would be slightly different than past practice. The new focus will concentrate on community partnerships, earned media coverage and balancing earned media coverage with paid advertising. Ms. Rossman explained that they are building a strategic communications plan and they have also conducted a communications audit, which is a review of all existing communication tools, identification of what works and what could be improved. Ms. Rossman closed by showing a 2-minute BWL customer video testimonial taken December 2006. Dick Peffley, Interim General Manager noted that they track media stories and in the fall they were 1-2 positive stories and 10-11 negative. Since working with the Communications Department and The Rossman Group the BWL has received more positive than negative stories; February's report was 29 positive and 1 negative. Mr. Peffley noted that they are doing everything they can to rebuild the BWL's image. Ms. Rossman noted that Mr. Nixon understands the value of proactive media relations in creating balance between positive and negative media stories. Commissioner Rios noted that he appreciated hearing a balance between paid and earned media due to budget expenses relative to production costs and the return that the BWL receives for its investment. He also inquired as to where they are in terms of establishing a more structured program for donations, community activities, and the creation of a foundation? Mr. Nixon responded by indicating that the foundation idea has been briefly discussed but is not ready for full presentation. He also reported that they would soon bring forth a Board Mtg.Minutes March 27,2007 Page 23 of 38 policy on community sponsorships at a later date. Mr. Nixon notified the Board that the sponsorship committee is taking a closer look at sponsorships, how the BWL sponsors, who it sponsors and what is received in return. Commissioner James thanked Mr. Nixon for developing the spreadsheet that detailed the BWL's contributions as requested. She also asked Mr. Nixon to provide information relative to the following: current fiscal and primarily budget for community sponsorships and donations, standing donations and contributions, who makes the decisions, how are they determined, how many requests are received, and are all of the requests honored? Mr. Nixon reported that they have sponsorship meetings approximately every 3 weeks. They typically approve more requests than they deny and a large percentage of them are bottled water requests. He went onto advise that the community sponsorship committee is responsible for determining the details and rationale for approving or denying requests. After further discussion, it was noted that the community sponsorships would be a separate line item on the budget. It was also suggested that the BWL review changing the format of the billing statement to separate City sewer charges from BWL items. It was reiterated that the Board should be aware of the community sponsorship process, approvals, denials, and the monetary budget. Mr. Nixon suggested providing the Board a regular report as to what projects have been approved or denied. In closing, the Board made clear the importance of establishing objective criteria and communicating sponsorship requests. Single Point of Service Presentation Bill Cook, Senior Vice President of Operations advised it has been a part of the BWL's strategic plan to combine operations in becoming more streamlined and making it easier for customers to work with the BWL. He went onto note that it was an issue identified two years ago relative to customer interface and as a result, Single Point of Service was developed and is a major success story. Diana Paul, Supervisor of Single Point of Service advised that there was a disconnect in how the BWL handled customer requests for new, upgraded, and modification of an existing services. There were multiple departments involved in the process and customers were not receiving the attention they needed. The presentation discussed in detail the creation of Utility Services, which helps to address issues with call transfers, erroneous customer and billing records, delays in reaching construction and incorrect billing statements. The objectives outlined in March 2006 included the following: • One department responsible for all service related issues with respect to new, upgrade, relocate or removal of service requests • Improved communication with customers —more timely and consistent • Improved application process—all services through one department • Reduction of errors involving customer and billing records Board Mtg.Minutes March 27,2007 Page 24 of 38 • Communication improvements with Delivery Services on scheduling and releasing of work • One department responsible for all construction fee collections prior to installation • Uniform application of the Rules &Regulations for service • Reduction in service request processing time • Improve documentation of the process for applying for service • Improvements to BWL website • Reduction in call transfers • Improvement in the education of our customers and internal staff on the service process Commissioner Calkins asked how do you get to Utility Services as he calls Customer Service for service changes and things of that nature? Is there a different group for these services? Ms. Paul confirmed that they are a different group and reported, that Customer Service addresses inquires regarding billing, turn on/off requests and standard inquires. She went onto advised that the phone tree directs customers to dial a different number for Utility Service that handles construction requests such as new service, demolition, relocation or modification of an existing service. Commissioner Zerkle asked if this also applies to major projects as she received an extensive inquiry from the Ingham County Road Commission regarding a situation with the BWL. She went onto state that the presentation indicates that the BWL coordinates its efforts. However, it appeared as if that was not the case with this particular project. Mr. Cook reported that Utility Service is for customers who want new services or service changes. He added that in working with the road commission wherein, the BWL may have to move utilities typically involves an engineer who coordinates the activity. This is a different issue and staff will look into the Ingham County Road Commission situation and respond. Copies of the "Single Point of Service"presentation are on file in the Office of the Corporate Secretary. Outside Counsel Recommendations Amy Cavanaugh, General Counsel advised that the Lansing City Charter requires that City Council must approve Special Counsel before a Board of the City can hire said counsel. She advised that over time it was interpreted that before the BWL hires outside counsel that City Council has to approve it and receive written approval from the City Attorney. Ms. Cavanaugh noted that historically, the BWL Legal Department has accomplished this goal by sending a Request For Proposal (RFP) every two years to determine a list of firms that would provide legal services. The RFP was advertised in Lawyer's weekly and a number of firms have contacted the BWL over time and as such, they were also sent RFP's. Ms. Cavanaugh noted that twenty-two (22) RFP's were sent Board Mtn.Minutes March 27,2007 Page 25 of 38 and they received fifteen (15) responses. She went onto advise that a synopsis of each firm, its primary expected use, the attorneys they thought they might use, perceived strengths and weaknesses of the firm, and previous usage by the BWL were presented to the Board. Ms. Cavanaugh further reported that they spoke to BWL managers who had used the legal services in the past and they also gave some preferences to local firms. She noted that they recommended ten (10) law firms based on the individual attorneys that they might want to hire and the list was presented to the Brigham Smith, City Attorney for a `temperature check'. Commissioner James asked Ms. Cavanaugh to give a comparison for reasonable rates versus expensive? Ms. Cavanaugh noted that she thought reasonable for full service firms is $220.00 - $320.00 per hour for partners, which is typically for persons with a tax background who do pension and benefit work. She advised that to the contrary, a Detroit firm normally starts at$330.00. Commissioner Rios asked if the firms who did not make the list were ones in which the BWL had actual experience with, or were there other reasons why they did not make the list? Ms. Cavanaugh advised that the biggest reason why they did not make the list was because they had Lansing firms that provided the same skills. She confirmed that no firm was rejected based on their work product. Commissioner Rios explained that the fact that a firm makes it on the list does not necessarily mean that they would receive an assignment. He went onto advise that if there are other persons who meet the general qualifications then they should be added to the list in light of the two-year term and regardless of redundancy. It was suggested and concurred that that Attorney, Michael Brown be added Special Counsel list. As such, Commissioner Rios also asked what happens if the Board wants to add another firm? Ms. Cavanaugh explained that she would ask the Board for authorization to go to City Council to have the firm represented on the list if for some reason the existing list of Special Counsel were not sufficient. On motion by Commissioner Cochran, seconded by Commissioner Rodocker, the Committee of the Whole unanimously agreed to move the Special Counsel resolution as amended to the full Board for consideration. The Special Counsel list for a two-year period from March 27, 2007 to March 27, 2009, includes the following law firms. 1. Canady Law Offices 2. Carlin, Edwards, Brown & Howe, PC 3. Clark Hill, PLC 4. Dickinson Wright, PLLC 5. Dykema Gossett, PLLC Board Mtg.Minutes March 27,2007 Page 26 of 38 6. Foster, Swift, Collins & Smith, PC 7. Miller, Balls & O'Neil, PC 8. Oade, Stroud & Kleiman, PC 9. Speigel & McDiarmid 10. Varnum, Riddering, Schmidt & Howlett 11. Willingham& Cote Policy Change Due to Passing of Proposal 2 Corporate Diversity and Corporate Supplier Diversity Policy Ms. Cavanaugh noted that a few of the BWL's policies needed to change due to the passing of Proposal 2. As such, there were a total of three policies, which includes the Defined Benefit Policy, VEBA Trust Investment Policy, and the Corporate Diversity and Corporate Supplier Diversity Policies. The Defined Benefit and VEBA policies were addressed at the Finance Committee and the Corporate Diversity Policy was forwarded to the Committee of the Whole. Ms. Cavanaugh advised that the policies were previously divided into two (Corporate Diversity and Corporate Supplier Diversity Policy) but she identified that they were practically identical and in an effort to focus on diversity with the applicant pool while still complying with Proposal 2, they removed the language that could be construed as preference, modified the document and combined the policies into one. She reported that she attempted to obtain information from other public entities to no avail and would be happy to entertain other ideas relative to the policy changes. On motion by Commissioner Calkins, seconded by Commissioner James, to approve the suggest language changes to the Corporate Diversity Policy as presented. Discussion: Commissioner Rios suggested that the BWL is close to hiring a new Human Resource Direct and as such, recommended that they receive input from that individual. He also advised that they receive input from the Marketing Director in terms of how to communicate the new policy. Commissioner Rios noted that the policy changes places everyone in a precarious position and they will need to develop a statement in response to possible questions and criticism. He went onto note that he strongly suggests they receive as much counsel as possible. Commissioner Rios also recommended that they receive feedback from the City of Lansing in terms of what they are doing relative to consistency. Commissioner James asked Ms. Cavanaugh if she had received counsel from the City Attorney? Ms. Cavanaugh noted that Brigham Smith, City Attorney advised her shortly after the passing of Proposal 2 that he wanted to work with her in terms of the BWL's position. She has since had some difficulty in receiving further follow-up and has made several attempts to bring this issue to the forefront. She is also unaware of the City's stance relative to its own policies in relation to Proposal 2. Ms. Cavanaugh went onto note that any policy can be changed and with that in mind if the Board puts something in place Board Mtg.Minutes March 27,2007 Page 27 of 38 then it could be revisited at a later date. She also advised that if the Board decides not to forward the policy change then she recommended they pull and void the two existing policies. Commissioner Rios advised that he was unaware how long it took the Board to develop a diversity policy. However, he was concerned with the need to move so quickly in modifying the existing policy. Commissioner James noted that she did not think the Board was moving quickly but more responsively. She also reiterated that the Board could revisit the issue at a later date if they so choose. However, the existing policy is the Board's responsibility to approve and they have received comment from General Counsel. The motion carried by the following roll call vote: Ayes: Commissioners Calkins, Cochran, James and Zerkle. Nays: Commissioners Rios and Rodocker. Absent: Commissioners Graves and Smith. Six-month Performance Review of Corporate Secretary Commissioner Calkins noted that the evaluation process had not been as organized as he would have liked. Typically they have a review by the various Commissioners, then they are apprised of one another's appraisal, and frequently they will have the appointee give an impression of their performance within the past six-months. It was noted that the Secretary Jones has written a self-assessment per suggestion by Commissioner James. After further discussion, the Board agreed to move the six-month performance review of the Corporate Secretary to the Human Resource Committee. At which time, Commissioner Cochran would take responsibility for setting a committee meeting before the next Board meeting, receiving the Commissioners completed evaluation forms, Secretary Jones' self-evaluation memo, a salary range matrix from the Human Resource Department, and any other necessary materials. Discuss Legal Review Process The Board discussed the possibility of establishing a legal process or procedure to help determine how the legal process is going to function. An example was given in which another organization allows certain legal actions to be reviewed by a committee with objective criteria and recommendations received by General Counsel. It was noted that the committee acted as another checkpoint before the Board is committed to litigation. A Commissioner also noted that they previously spoke about having a Board committee review the litigation and talk with the attorneys who are handling the claims. Therefore, there would be someone who would review the billing and communicate with the attorneys. It was advised that there were other Commissioners who did this in the past and the Board currently has a void in this area. The Board suggested that is being viewed as a fluid process in which they may not have an answer soon but they can discuss what Board Mtg.Minutes March 27,2007 Page 28 of 38 they have and move on from there. It was further advised that there may be a role for the Internal Auditor in this process as well as they should question what results they are receiving and if it is efficient in terms of how it is being done. It was suggested that the Board have a central person(s) that General Counsel speaks to for litigation matters filed against the Board and in relation to what action(s) they want to take. It was further clarified that the Board has its own counsel and there are other issues in which Ms. Cavanaugh addresses on the Board's behalf. However, presently there is no specific Commissioner(s) that outside counsel speaks with in addressing legal issues such as the Pandy matter. Ms. Cavanaugh clarified that the Pandy matter is not a typical circumstance. Normally, whenever a claim is brought against the Board of Commissioners then Ms. Cavanaugh would manage the case, review the bills, and communicate with the Board. However, in the Pandy case there are conflicts of interest that prevent Ms. Cavanaugh from acting on the Board's behalf in this matter. It was further noted that the Pandy case is an anomaly and normally Ms. Cavanaugh would be able to manage such issues at the Board's bequest. She also advised that it would be wise for the Board to establish a group as suggested to direct legal work. The Board agreed to refer the matter to the Executive Committee to meet with Ms. Cavanaugh within the next month to establish some recommendations that could be presented to the next Committee of the Whole after the initial meeting occurs. Other Director of Safety Mr. Peffley advised the Board that they went through an exhausting process to determine the new Director of Safety as the current Director; Jack Hill is scheduled to retire. He went onto advise that the Human Resource Audit indicated that the BWL does a fair job of succession planning but a poor job with knowledge transfer. It was noted that this is the BWL's first attempt to correct this problem and they will not be able to do it everywhere as it is budget driven. Mr. Peffley went onto introduce the new Director of Safety, Pete Thelen and the new Assistant Director of Safety, Oscar Rodriquez. Mr. Thelen noted that his background is in production and safety and he plans to pass that knowledge onto Mr. Rodriquez. He noted that Mr. Rodriquez will be seeing the Board more frequently and will also meet with different parts of the organization. Mr. Thelen noted that Mr. Rodriquez is one of the premiere people in the environmental lab, he teaches American Water Works Association classes on water purity and water licensing. His background also consists of industrial health, a Masters degree and published papers. Mr. Thelen closed by stating that they are going to work together to introduce Mr. Rodriquez to the rest of the organization. Mr. Rodriquez advised that he was very blessed to be considered and he will work hard in the position. Board Mtg.Minutes March 27,2007 Page 29 of 38 Mr. Peffley also noted that Mr. Thelen was one of the persons who helped the BWL transition from eastern coal to western coal without any severe incidents. He also noted that they will be working over the next year to transfer knowledge. Mr. Peffley advised that this was another step forward in recommending what was recommended in the Human Resource Audit. Mr. Hill clarified that they have had a vacancy in Safety that Mr. Rodriguez is filling. Therefore, Mr. Rodriquez's position was not an addition to staff. Discuss Legal Review Process—Additional Comments Charles Moore, Interim Internal Auditor added to the prior legal review discussion and suggested that when the Board engages with an outside firm they may want to obtain a budget. It could be used as a measuring stick to determine where they are relative to expenses and gage whether or not it is cost beneficial. The Board discussed the feasibility of obtaining a legal budget when one does not know the outcome of the case. Concerned was also expressed about the level of service that the Board would receive relative to the constraints of a monetary budget. It was further suggested that the Board should make clear its expectations to legal counsel when handling a case on their behalf. After further discussion, the Board recommended that Mr. Moore's suggestion be forwarded to the Executive Committee for consideration and he be included in future meetings for further discussion relative to said topic. There being no further business, the Committee of the Whole adjourned at 7:19 p.m. Respectfully submitted Santiago Rios, Chair Pro Tern Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner James, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolutioyz 2007-3- HUMAN RESOURCE COMMITTEE March 27, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 3:30 p.m. on Tuesday, March 27, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Board Mtg.Minutes March 27,2007 Pale 30 of 38 Commissioners Robert Cochran, Joseph Graves, and Julee Rodocker. Commissioners Gary Calkins and Robin Smith (arrived 4:14 p.m.)were also present. Absent: Commissioner Santiago Rios. Public Comment There were no public comments. Six-month Performance Review of Corporate Secretary The Human Resource Committee met to discuss and review the six-month performance evaluation of the Corporate Secretary, Rhonda Jones. It was noted that with the assistance of the Human Resource Department, the committee received a packet of materials that included an excerpt from the employment agreement,job description, salary range matrix, self-evaluation, and a compilation of evaluations from the Commissioners. The evaluation materials were presented to Secretary Jones and she was allowed to review and discuss its contents with the committee. The committee also discussed the current process relative to previous annual and bi-annual reviews as well as the creation of mutually agreed upon goals and objectives. The committee addressed the timeliness of the evaluation and recommended that future performance reviews be conducted in a timely manner. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Human Resource Committee unanimously agreed that Corporate Secretary, Rhonda Jones is doing a good job and the Board will review said performance again in July 2007. As such, they recommended a salary increase of 3.5% to be made retroactive to January 24, 2007. A resolution will be presented to the Board under "Resolutions" order of business at the next Board meeting scheduled for March 27, 2007. There being no further-business, the Human Resource Committee adjourned at 4:26 p.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner-Cochran, seconded by Commissioner Graves, to receive the Human Resource Committee report as presented. Discussion: Commissioner Rios noted that the Human Resource Committee was delegated with the responsibility of assembling information to make a recommendation to the full Board regarding specific action relative to the increase and performance evaluation of the Corporate Secretary. Action: Carried unanimously. Board Mtg.Minutes March 27,2007 Page 31 of 38 MANAGER'S RECOMMENDATIONS esolution A. Section Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election RESOLVED, that the Board of Commissioners hereby adopts the restated Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election, as attached, effective March 28, 2007. FURTHER RESOLVED, that the Chair is hereby authorized to execute the above referenced document on behalf of the Board of Commissioners. -------------------- Staff Comments: This benefit plan document, Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election, is being restated to reflect changes in applicable laws (such as HIPAA and COBRA), to comply with the Internal Revenue Service Code and to provide for greater administrative flexibility. -------------------- Motion by Commissioner Cochran, seconded by Commissioner Graves, to adopt Resolution 2007-3-6 for Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election. Discussion: The Commissioners asked how widely used was the program and what amount are the recipients receiving? Amy Cavanaugh, General Counsel noted that there are sixteen (16) individuals who will be affected by the change, all of whom have alternate coverage. She advised that the recipients would lose the monthly amount of$186.00 that they are receiving and the BWL's healthcare coverage will supplement their existing healthcare. Action: Carried unanimously. esolution 2007-3- B. Post Retirement Benefit Plan Document RESOLVED, that the Board of Commissioners hereby adopts the restated Post Retirement Benefit Plan, as attached, effective March 28, 2007. FURTHER RESOLVED, that the Chair is hereby authorized to execute the above referenced document on behalf of the Board of Commissioners. -------------------- Board Mtg.Minutes March 27,2007 Page 32 of 38 Statt conunents: This benefit plan document, Post Retirement Benefit Plan, is being restated to reflect changes in applicable laws (such as HIPAA), to comply with the Internal Revenue Service Code and to provide for greater administrative flexibility. -------------------- Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-3-7 regarding the Post Retirement Benefit Plan Document. Discussion: The Board advised that they understood changes necessary to comply with the law and the Internal Revenue Service code but expressed concern with changes in respect to administrative flexibility relative to healthcare premiums. It was further noted that current retirees have indicated that they were promised healthcare without premiums whereas, the previous administration reported that there is no legal obligation to maintain the no co-pay provision. The Board also advised that they were concerned that such changes would be made in light of the issues BWL retirees have expressed regarding healthcare premiums. It was further noted that the revised Post Retirement Benefit Plan Document does not specifically address future retirees. As such, the Board requested that the document language reflect its intent. Staff responded by noting that the previous document spoke to very specific coverage and they were attempting to make the document very generic to allow flexibility in making future changes. It was also advised that the intent was to address future and not present retirees due to healthcare costs. Staff further explained that the new document does not change the policy, it only adds flexibility and the Board would have to take additional action to implement premium sharing or anything else of that nature. The Board went onto ask if they included language specific to future retirees, is there anything relative to inclusion of such language that the Board should be aware of? Ms. Cavanaugh replied no and indicated that they could craft that language, and it would bind the hands of a future Board but only to the extent that they would have to amend the current document if they choose to do so. The Board noted that that argument could be made for any policy currently in existence. However, each Board has the opportunity to make whatever amendments or changes necessary as time progresses. It was also advised that the Board does not want to give the impression that it binds other Boards, as this process is similar to other polices that have been implemented. After further discussion, the Board requested that all language that includes retiree premium sharing be removed from the proposed document and the original language pertaining to the policy should remain. It was also noted that staff will take the Board's concerns into consideration and will present a redrafted document at a later date. The Board also requested a copy of the previous plan document for purpose of comparison to the new document. Action: Carried unanimously as amended. Board Mtg.Minutes March 27,2007 Page 33 of 38 esolution 2007-3- C. Policy Changes to Defined Benefit Investment Policy RESOLVED, that the Board of Commissioners hereby approves the amended Defined Benefit Investment Policy dated March 27, 2007, as attached. -------------------- Staff comments: Proposal 2, passed by the electorate in November 2006, modified the Michigan Constitution to prohibit public entities from discriminating against, or giving a preference to, individuals or groups on the basis of race, sex, color, ethnicity, or national origin. To comply with the amendment, the BWL needed to modify certain policies, including the Defined Benefit Investment Policy. Although diversity remains an important goal of the BWL, this policy stresses providing opportunities for all individuals and groups, rather than a preference in their selection. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-3-8 regarding the Policy Changes to the Defined Benefit Investment Policy. Discussion: Commissioner Graves asked if the word, "preference" was used in the former language? Ms. Cavanaugh replied no and read the previous policy language. She also noted that the language of the previous policy implied preference on the basis of ethnicity and gender. The motion carried by the following vote: Ayes: Commissioners Calkins, Cochran, James, Rodocker and Zerkle. Nays: Commissioners Graves, Rios and Smith. esolution 2007-3- D. Policy Changes to VEBA Trust Investment Policy RESOLVED, that the Board of Commissioners hereby approves the amended VEBA Trust Investment Policy dated March 27, 2007, as attached. -------------------- Staff Comments: Proposal 2, passed by the electorate in November 2006, modified the Michigan Constitution to prohibit public entities from discriminating against, or giving a preference to, individuals or groups on the basis of race, sex, color, ethnicity, or national origin. To comply with the amendment, the BWL needed to modify certain policies, including the VEBA Trust Investment Policy. Although diversity remains an important goal of the BWL, this policy stresses providing opportunities for all individuals and groups, rather than a preference in their selection. Board Mtg.Minutes March 27,2007 Page 34 of 38 -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-3-9 regarding Policy Changes to VEBA Trust Investment Policy. The motion carried by the following vote: Ayes: Commissioners Calkins, Cochran, James, Rodocker and Zerkle. Nays: Commissioners Graves, Rios, and Smith. esolution 2007-3-I E. Capital Area United Way Sponsorship Renewal WHEREAS, for the last several years the BWL has provided corporate support for the Capital Area United Way (CAUW) by underwriting the advertising campaign for their annual fundraising drive; and WHEREAS, the BWL's new Purchasing Policy requires Board approval for sponsorships with a value of$5,000 or more; THEREFORE, BE IT RESOLVED, the Board of Commissioners approves an annual sponsorship of the Capital Area United Way (CAUW) in the amount of$7,500 a year for a period of three years. Funds from this sponsorship are to be used to finance CAUW's advertising campaign in support of its annual fundraising drive. Sponsorship will be taken from the Communications Budget for community sponsorships. -------------------- Staff'Cotnnwnts: Since 2004, the BWL has approved$7,500 a year for the Capital Area United Way's print advertising. The advertising specifically is targeted to key dates in the CAUW's campaign, including the campaign kick-off in August and its concluding report to the community. The BWL has long been a supporter of CAUW, and on March 15, 2007, the BWL was recognized by CAUW for this public utility's record of community support. The BWL is one of the CAUW's chief corporate sponsors. Agencies funded by CAUW positively touch the lives of tens of thousands of people in the mid-Michigan community. With Michigan's economy still fragile, support for the CAUW becomes more vital than ever. I wholeheartedly support this expenditure, which is designated to come from the Communications Department budget. -------------------- Motion by Commissioner Rios, seconded by Commissioner Graves, to adopt Resolution 2007-3-10 regarding the Renewal of Corporate Sponsorship for Capital Area United Way. Board Mt-.Minutes March 27,2007 Pale 35 of 38 Discussion: Commissioner Cochran introduced a friendly amendment in which the $7,500 contribution would be indexable with the cost of living over the next 3-years. He noted that if the Board did not agree to the cost of living increase then the contribution would slightly erode each of the two following years. The friendly amendment failed. Commissioner Rios asked how does the BWL receive recognition for its contribution? Mark Nixon, Director of Communications advised that United Way has suggested placement of the BWL's logo on United Way thermostat signs seen throughout the area. It was also noted that the BWL is recognized via banquets, print advertising and television. Action: Carried unanimously. esolution 2007-3-11 F. Outside Counsel List for March 2007 through March 2009 RESOLVED, that the following law firms be placed on the Board of Water and Light Special Counsel approved list for a two year period from March 27, 2007 to March 27, 2009. 1. Canady Law Offices 2. Dickinson Wright PLLC 3. Dykema Gossett PLLC 4. Foster, Swift, Collins & Smith, P.C. 5. Oade, Stroud & Kleiman, PC 6 Varnum, Riddering, Schmidt & Howlett 7. Willingham & Cote 8. Clark Hill PLC 9. Carlin, Edwards, Brown &Howe, PC 10. Miller, Balls & O'Neil, PC 11 Speigel & McDiarmid RESOLVED FURTHER, that this list be submitted to the Lansing City Attorney, and upon his recommendation and opinion, then to the Lansing City Council for final approval in accordance with the Lansing City Charter. -------------------- Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-3-11 regarding the Outside Counsel Recommendations for March 2007 through March 2009. Discussion: Commissioner Smith asked if the two additional firms were added because they have expertise in areas that the other firms do not possess? Board Mtg.Minutes March 27,2007 Page 36 of 38 Ms. Cavanaugh noted that the additional firms are Lansing based and have a strong Lansing presence. It was reported that the Board of Commissioners requested the addition to the extent that they felt the firms would add value to the list. Commissioner Rios clarified that they thought it best to have more firms on the list, as this is a two-year time period and it is not a commitment to hire the firms for a specific service. Commissioner Smith also asked what criteria does General Counsel review in making a determination when deciding to use outside counsel? Ms. Cavanaugh explained that she makes the determination based on the particular case and skill set needed for that particular situation. She also noted that one is able to make a choice based on the firm's skill, personality and what they bring to the case, which could be different from case to case. After further discussion, it was clarified that counsel reviewed the firm's area of specialty and spoke to other managers at the BWL who had legal dealings with said firms. It was also advised that if the need arises for a specific expertise then they could seek approval to add a firm/attorney to the list if needed. Action: Carried unanimously. G. Amend the Corporate Diversity Policy Dick Peffley, Interim General Manager tabled the Corporate Diversity Policy and sent it back to the Committee of the Whole for further review and discussion. UNFINISHED BUSINESS None. NEW BUSINESS Commissioner Smith advised that an amended agenda for the Joint City CouncilBWL Commissioner meeting scheduled for March 29, 2007 was received on March 27, 2007. The items were sent to Secretary Jones, and management is actively working to address the agenda items for the upcoming meeting. Secretary Jones read the list of agenda items and it was noted that the meeting is scheduled for Tuesday, March 291h at Clara's, located at 637 E. Michigan Ave, Lansing at 11:30 a.m. Commissioner James noted that due to a conference she would not be in attendance and asked that her best regards be extended to City Council. Board Mtg.Minutes March 27,2007 Page 37 of 38 RESOLUTIONS esolution 2007-3-12 Corporate Secretary Six-month Performance Increase RESOLVED, that the consensus of the Human Resource Committee was that Corporate Secretary Rhonda Jones is doing a good job. As such, the performance increase recommendation is the numerical average of all eight (8) Commissioners rounded to the nearest half percent. The performance raise recommendation is 3.5%. Motion by Commissioner Cochran, seconded by Commissioner Graves, to approve Resolution 2007-3-12 regarding the Corporate Secretary's Six-month Performance Increase. Discussion: The Board discussed the Human Resource Committee's recommendation as well as the information received from the Human Resource Department. The human resource packet contained information regarding the salary range, which also included the control points. It was also reported that the Human Resource Committee did not reach consensus as to whether or not the Board would conduct an annual review July 2007 as previously assumed. After further discussion, the Board noted the following: • The Human Resource Committee is now charged with the responsibility of addressing process questions, Commissioner expectations, compilation of information for future performance evaluations, and making recommendations to the full Board for consideration. • Secretary Jones will respond to the Board's evaluation and provide a set of goals of objectives within 3-weeks to be carried out starting now through the end of the employment contract, July 2007. • A special meeting maybe called to provide additional time to discuss and review mutually agreed upon goals and objectives. MANAGER'S REMARKS Mr. Peffley notified the Board that he would not apply for the permanent General Manager position. He advised that the BWL needs to move forward in its generation portfolio. As such, he explained that the BWL needs to add generation and they have always planned for the future. Mr. Peffley went onto report that if they are going to move forward with building, which he intends to recommend, then he thinks that that would be a better fit for him. He also commented that he is willing to lend his assistance to the Board with the General Manager search if needed. COMMISSIONERS' REMARKS None. Board Mtg.Minutes March 27,2007 Pagge 38 of 38 EXCUSED ABSENCES None. PUBLIC COMMENTS Max Zemer, BWL retiree advised that he has received inquires regarding the Healthcare Taskforce. He also noted that they want to participant but have not received any information from the BWL thus far. Mr. Peffley noted that the BWL held a healthcare seminar and a letter was sent to the union requesting representation and another letter is forthcoming for the retirees next week. Mr. Zemer advised that the letter should be sent to the attention of Ellen Gale, President of the Retirees Group. Joseph Davis, Business Manager of Local IBEW 352, asked to have information regarding the Section 125 Cafeteria Plan B and the Post Retirement Benefit Plan Document sent to him as he is receiving questions from retirees. He also asked if the cash out option in lieu of prescription healthcare affects active employees and retirees? Mr. Davis went onto advise that he would like to speak to issues effecting bargaining employees prior to their presentation at the Board to represent the bargaining units point of view. Ms. Cavanaugh noted that the cash out option in lieu of would affect beneficiaries only. She also commented that Darold Oxender, Benefits Administrator personally contacted all sixteen (16) persons effected by the change to explain what had occurred and to answer any questions. Ms. Cavanaugh further advised that she would speak to Mr. Davis regarding the plans to bring him up to date. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Graves, the meeting adjourned at 7:05 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk April 4, 2007 r y'�. D Preliminary—Subject to Board Approval on May 22, 2007 ` rL_ 014 MINUTES OF THE BOARD OF COMMISSIONERS REGUIL UT' ING - -.,• C i �idr'l LANSING BOARD OF WATER AND LIGHT Tuesday, March 27, 2007 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, Semone James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. 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 5:35 p.m. APPROVAL OF MINUTES By motion of Commissioner Graves, seconded by Commissioner Cochran the minutes of the January 23, 2007 regular meeting were unanimously approved. By motion of Commissioner Graves, seconded by Commissioner Cochran the minutes of the February 7 and 13, 2007 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. Joseph Davis, Business Manager of IBEW Local 352 noted that the Corporate Secretary is scheduled for a six-month review and advised that he is supportive of the work she has is doing and her dedication. He also advised the Board that many are interested in their actions regarding the Corporate Secretary. Board Mtg.Minutes March 27,2007 Page 2 of 38 COMMUNICATIONS None. COMMMITTEE REPORTS esolutions 2007-3-I COMMITTEE OF THE WHOLE February 20, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 4:30 p.m. on Tuesday, February 20, 2007. 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 Sandra Zerkle. Absent: Commissioner Robin Smith Public Comment Joseph Davis, Business Manager for IBEW 352, thanked the Board for allowing him to submit information he thought important for the leadership regarding the General Manager search. He stated that it was the first time an opportunity of this nature had ever been extended to the bargaining unit. Mr. Davis also advised, the bargaining group welcomes and supports whatever role they can play in the search process. He thanked Sheryl Hudson, Acting Human Resource Director for speaking to the bargaining group and utilizing a team approach for the Human Resource Director search as one of their members is currently participating in the process. Mr. Davis further explained that he would work closely with the new Director. He also noted that having a good relationship with the Director would require someone that has a value system, which supports the organization in moving from where they were to where they want to go. Mr. Davis reiterated that the bargaining group wants to be involved in the process and they welcome it being done in a timely and expeditious manner. He further explained that as they go forward he hopes the BWL does not loose its focus on safety. It was also advised that the BWL is making money right now but they want to continue focusing on the job as well as taking care of one another. Lastly, Mr. Davis reported that he attended meetings regarding the Integrated Resource Plan in which professionals recommended building a power plant. He suggested the BWL build a plant and not delay with this matter. Commissioner Cochran asked Mr. Davis, how does the union view the progress that the Interim General Manager has made thus far in implementing the results of the Human Resource audit? Board Mtg.Minutes March 27,2007 Page 3 of 38 Mr. Davis responded by stating that in the Call Center there are different people but he thinks they have a good manager in Robert Perialas. He also stated that it is a tough group with a lot of issues and he would assess there is still work to be done. Mr. Davis further noted that in his opinion and at this point, the General Manager has given good direction. Commissioner Cochran asked Mr. Davis if he was satisfied that there is progress being made and if he is pleased about the progress? Mr. Davis replied by acknowledging that progress is being made. Update on Implementation of the HR Report Commissioner Graves noted that the agenda item should be properly reworded as an update on the implementation of the Human Resource report, related to the performance of the General Manager. He further clarified that Michael Goree of Growth Strategies Consulting, Inc.; author of the Human Resource audit is present to speak to the issues related to the report and his view of the findings. Commissioner Graves advised that he felt it would be beneficial to have Mr. Goree's input in order to facilitate a meaningful discussion. He also acknowledged that it is the General Manager's right to request a closed session and asked Dick Peffley, Interim General Manager to consider the request. Mr. Peffley noted that he did not have issue with going into closed session to discuss the topic. Amy Cavanaugh, General Counsel clarified that to the extent that the Board is going into closed session to conduct a performance evaluation is fine with respect to the Open Meetings Act. However, she expressed concern with the roll that Mr. Goree would play in the evaluation process. Ms. Cavanaugh also noted that it is completely within Mr. Peffley's right to reopen the meeting at anytime especially, if an unwanted person is present in closed session. Commissioner Graves further advised that he was seeking a discussion related to the General Manager's performance relative to the Human Resource report. He also explained that as they further delve into this item, he thought it important to have an opportunity to discuss it in closed session to provide some degree of candor. After further discussion, it was explicitly made clear that Mr. Goree was not present to evaluate the General Manager's performance, as that is the sole responsibility of the Board of Commissioners. It was also clarified that the General Manager has the authority to request a closed session relative to his performance review and to decidedly open the meeting if he did not agree with the persons selected to sit in on said evaluation. Motion by Commissioner Graves, seconded by Commissioner James to conduct a performance evaluation relating to the General Manager's performance with respect to the Human Resource Audit. Board Mtg.Minutes March 27,2007 Page 4 of 38 Carried unanimously. Executive Session Request made by Dick Peffley, Interim General Manager to go into executive session to receive his performance evaluation by the Board of Commissioners protected by the Open Meetings Act exemption MCL 15.268(a). (4:47 p.m.) The Committee of the Whole reconvened in open session at 5:43 p.m. Commissioner Rios advised there was a closed session to discuss the General Manager's performance relative to the Human Resource audit. The Board continued discussion in open session relative to the audit. Commissioner Calkins departed the meeting at 5:43 p.m. due to a prior obligation. Continued Discussion on the Update on Implementation of the HR Report Commissioner Graves suggested the Board hear from Michael Goree so that he could give a more in depth review and limit the discussion to exclude specific names and speak to the issues outside of the Human Resource Department. In summary Mr. Goree noted the following information: • He was retained to review the recruitment and selection process and they have conducted some initial new testing with regards to assessment to find a more expeditious way to bring people into the system. • There are still problems with certain individuals in the Human Resource Department and whether or not they have the knowledge base and/or capacity to do what is being asked of them. This is a challenge that needs to be addressed by the new Human Resource Director. (Mr. Goree clarified that he has discussed this issue with Mr. Peffley and that he is aware of the names of those persons.) • It was noted that the Interim Human Resource Director has the thought process, knowledge base, leadership skills, and strategic thinking to be the Human Resource Director. Mr. Goree advised the Board that he wholeheartedly and without reservation believes the current Interim person should be the Human Resource Director. Commissioner Rios asked if the application period was still open and where are they in the process? He also asked if the Interim Human Resource Director is one of the candidates? Mr. Peffley responded by stating that the application period is closed and they are currently in the process of narrowing the applicant pool to those that they are going to interview. Mr. Peffley also advised that the Interim Human Resource Director did not apply for the position. Board Mtg.Minutes March 27,2007 Page 5 of 38 Commissioner Graves went onto ask that although they are into the process of recruitment, if the Interim Director were to make themselves available then is it possible that the General Manager could make a decision to go into that direction and simply close the process? Mr. Peffley replied yes and indicated that it was an option for the General Manager and he could hire whomever he wants for the position. Mr. Goree continued the report and noted the following additional information: • Some of the human resource group spent time regarding their branding and image with participation by individuals in the Human Resource Department. In this they developed the phase, "Together We Achieve Success". Those that bought into process have applied that language to begin the process of mending the Human Resource Department. • Met with the compensation and benefit committee to determine that the pay system needed assistance. • Worked with Wendy Bradley, BWL Employment/Compensation Administrator to streamline the system and resolve some of the issues relatively quickly. The proposed streamlined compensation system was presented and well received to a group of managers on February 14, 2007. There are additional details to address and additional recommendations regarding recruitment selection can be made. However, it was noted that he is currently assisting with the compensation and performance appraisal system. • Ms. Bradley asked if he could train the supervisors on performance management of which he responded yes. However, he advised that he was not retained to do that work but he would be happy to help in anyway he could. • Outside of Human Resources there are major concerns with some individuals in certain departments, which was previously stated. There are issues with how individuals get placed, when they get placed, and errors that are made in certain departments, which are unfortunate and begin to jeopardize the integrity of the BWL. • It was reiterated that he has never seen a more dedicated workforce. For example, he believes Robert Perialas has done a superb job in Customer Service. However, there is some restructuring that would make it even better. It is his recommendation that they not only look at Customer Service but also at CARS, Meter Reading, Remittance, etc. and begin to do things that would relieve some of the concerns and issues, and address some of the shortfalls of the individuals who are in an authoritative role. • There are individuals in the Environmental Department in leadership roles that are neither well versed in,the environmental language nor arena, which leads to unnecessary errors that are beginning to jeopardize the BWL. • Some of the decision-making processes for placing individuals reinforces the good ole boy network. • The engineering report indicated that there were some restructuring issues. However, there are still people in leadership positions that are causing some of the same problems. He did not recommend firing those individuals but intervention is not there. Board Mtg.Minutes March 27,2007 Page 6 of 38 • Training modules instruct persons on what to do but not on how to do it. In the absence of a mentorino, system, the quality decision-making process is absence. • Mr. Goree sited a former BWL employee's frustrations with co-workers, peers and other supervisors in attempting to do what is appropriate and obtain the proper support from management. The issue of responsibility and accountability was raised relative to the supervisory and managerial level. • If you want to do something then he is your best ally but if you just say you want to do something then he could become your worse nightmare. He also has a huge passion for the success of his clients. • The BWL has an absolutely wonderful organization with some individuals that need stronger intervention in Human Resources, Engineering, Water Department, Environmental, and Communications. • He noted that he has shared the above information with Mr. Peffley in detail. • In the original report one of the important items they talked about was being open to the free exchange of information, proactive decision making at all levels, enabling employees to be owners of their work, promoting and participating in innovation, and encouraging a positive relationship among all employees. He noted this language was in the contract, three contracts ago and further advised that had this taken place at all levels of the organization then there would be no need for this conversation. • Originally, the Human Resource Department was chastised for not doing x, y, or z. However, no one helped the department understand how, which is not fair. • There will always be one or two at the organization that do not belong at the BWL and there are some of those at the managerial, director and bargaining unit level. • The BWL must have the right supervisors who can do the right things and the right directors and managers who understand what pulling in the right direction actually means. • If the BWL hires a new General Manager without taking action then that person will come here and say what are we doing? Subsequently, they will wait to determine all of the politics and the BWL will end up in the same position that it was in 1 1/2 years ago. • The immensely good news article on Sue Warren in the Lansing State Journal was noted as a good example of the positive public relations that the BWL should seek. • Mr. Goree noted that he does two things: 1) problem identification and 2) solution implementation. Charles Moore, Interim Internal Auditor asked if there were some conclusions to the report and if there are going to be additional recommendations? Mr. Goree replied yes, and indicated there are some additional recommendations he believe necessary to move the organization forward. He also advised that he and Mr. Peffley could review some additional concerns, which were discovered within the last 3-4 weeks. Commissioner Cochran asked Mr. Goree a series of questions that included the following: Board Mtg.Minutes March 27,2007 Page 7 of 38 1) Many years ago he heard that when a formal organization fails, an informal one starts to form from the inside out. Is that taking place at the BWL? 2) Is it adding another layer, more layers or changing recording roles by mutual agreement? 3) How big is it and has this been communicated to Mr. Peffley? Mr. Goree responded by stating that yes, it is happening. He also noted that it does not change recording roles, it is a defensive mechanism to maintain the status quo. Mr. Goree responded to the last question by stating that if nothing is done then it would solidify before the new General Manager is in place. He also advised that he has not communicated this to Mr. Peffley in strong enough words. Commissioner Rodocker stated that she appreciated the report and is interested in results driven progress. She explained that she would like to hear information on topics such as is the BWL top heavy, succession planning, are there too many people in the same outfit, do we need to rotate to different jobs, etc. Commissioner Rodocker went onto say that she needs plans on how the BWL becomes more efficient and effective. Mr. Goree noted that to a degree those items have been discussed. He also reported that he believes there are a number of additional supervisors and managers that may not be necessary to the organization. Mr. Goree continued to advise that the succession planning process is not necessarily knowledge capture driven so much as it is body filled driven. Whereby, when an employee leaves, another body is put in its place. He further stated that he has not seen the capture of knowledge versus the replacing of bodies, which represents a big difference and an issue that people need to discuss. Commissioner Graves stated that for the record, when the human resource audit was being proposed and lobbied for by groupings within the BWL as well as individuals outside of the BWL, he was not supportive of it. He noted that he lobbied against it, didn't want and didn't think it necessary, which was a huge mistake on his part. After engaging the consultant, who went about the business of looking at the human side of the BWL, shared with the Board his report, and further shared in more detail some of the things presented today; it is not a report that he thinks they should simply put on the shelves and allow it to collect dusk. Commissioner Graves noted that he thinks that the Board needs to act on those items. He further stated that Commissioner Cochran suggested that he attended the governance workshop, which he did not have the opportunity to attend,but apparently the rest of the Board did and they talked about his historical position. Commissioner Graves further advised that his historical position is the same position that Commissioner Cochran spoke to and that is, what is the role of management and what is the role of the Board? He went onto note that he thinks that traditionally the Board has had very little role to play as it relates to the functioning on the management's side. However, given the scope of the issues that they just heard he struggles with trying to figure it out. Commissioner Graves went onto state that they have an Interim General Manager who may or may not apply for the General Manager position. They have a search firm who is busy with the search process and he does not want to see another General Manager come in without there being movement in all the Board Mtg.Minutes March 27,2007 Page 8 of 38 areas they just heard about. He also advised that this situation brings an exception to where he would normally be, which is that there is a role for the Board as a subset until a permanent General Manager is in place. He noted that it would essentially work with the General Manager in an oversight role as it relates to addressing the issues they just heard about and the issues articulated in the written report. Commissioner Graves noted that he understood everyone would not have the time or flexibility to serve in that capacity. However, he would certainly make time to serve and he would also ask Commissioners Calkins and James to serve, as he believes they also have the flexibility. Therefore, they would have a three-person oversight committee. Motion by Commissioner Graves, seconded by Commissioner James to create a three- person oversight committee that would act as a subset of the Board of Commissioners in which the committee would essentially work with the Interim General Manager as it relates to addressing the issues relative to the Human Resource audit report. Furthermore, the oversight committee members would consist of Commissioners Calkins, Graves and James. Discussion: Some Commissioners expressed concern with the motion and noted the following reasons as to why they would not support it. • Did not think it appropriate and suggested additional meetings to accomplish the above recommended tasks • Do not want to micromanage the process and felt an oversight committee was unprecedented • Suggested providing the General Manager with additional direction if needed • The Board is currently asking more questions and increasing their expectations, which are gradually being met • The Board is an eight-member committee and oversight of the General Manager is not their responsibility; a subset committee for super oversight is not needed • If the Interim General Manager is going to apply for the permanent position then it throws a cloud over the General Manager if the Board is stating that they have not approved of his performance in the last six-months There were other Commissioners who felt the oversight committee was needed and gave several reasons in support of the motion, which are listed below. • Not fair to ratepayers to incur costs related to processes that are not functioning properly • Desire to leave the Board in a better position than when they arrived • Individuals are vested in maintaining the status quo without adjusting and/or making changes • There is a capacity issue in which individuals may not have the capacity to do what needs to be done • Do not recommend micromanaging the process or directing the General Manager in their day-to-day activities. Instead propose an oversight committee that would have more time and energy to talk to the General Manager regarding some of the issues that were outlined and a strategy to address those concerns. As a result, the General Board Mtg.Minutes March 27,2007 Page 9 of 38 Manager would still have the freedom to go about tackling problems in whatever manner he chooses. • There are deeply embedded problems at the Board that need to be addressed • It was noted that while the Interim General Manager may not have had a tremendous amount of time to effectuate change, there are things that have been identified that need to be addressed • The Interim General Manager may feel that some tasks cannot be carried out due to certain relationships that are currently in place and the precarious position it would place him in once he returns to the general body • It was noted that one of the reasons why Ms. Hudson may not want the Human Resource Director position is because she does not know if she would have the support of the Interim General Manager nor the new General Manager. However, Ms. Hudson was encouraged to apply for the permanent position • The General Manager was encouraged to call upon the Board for assistance if needed After further brief discussion, the motion failed by the following roll call vote: Yeas: Commissioners Graves, James, and Rodocker. Nays: Commissioners Cochran, Rios, and Zerkle. Absent: Commissioners Calkins (left meeting at 5:43 p.m.) and Smith. Commissioners Graves, James and Zerkle left the meeting at 6:34 p.m. due to a prior obligation. Due to time constraints the following agenda items were moved to the next Committee of the Whole meeting: Rossman Group—Communication and Marketing Efforts, Outside Counsel Recommendation and Discuss Legal Review Process. Risk Assessment Presentation Bill Cook, Senior Vice President of Operations advised that over the past several years the Board has heard about wholesale market risk and the fact that the BWL's wholesale business is approaching 33% of its total business, which is a risky position. He went onto note that with new initiation wholesale market pricing becoming even more volatile, the problem that the BWL will encounter in the near future is that the utility market is changing and standard products on the wholesale market involve a higher level of risk. Mr. Cook further explained that the BWL currently sales recallable power, which means that if the BWL sells everything it has and needs the power back then it can be recalled for the BWL's own usage. However, today's market is moving forward with sales of power on a financially firm basis, which means that you are obligated to provide power if you sign a contract. He went onto report that a number of customers who are currently willing to buy the BWL's recallable product are dwindling. Mr. Cook reported that the BWL is doing well this year but as the market matures it will become more of a problem. Therefore, if the BWL is going to continue to take risks of that nature for the 1/3 revenue then they are going to have to look at financial instruments to ensure that if they take those risks then they are not jeopardizing the BWL's financial future. Mr. Cook further noted that they are not making recommendations, as the BWL neither has a permanent Chief Financial Officer nor an Internal Auditor in place. However, this is the first step and they wanted to acknowledge that they have looked at a Risk Management Policy on Board Mtg.Minutes March 27,2007 Page 10 of 38 how to protect the BWL in moving forward. The Risk Assessment presentation was scheduled to give the Board a brief overview of what has been accomplished thus far. Dan Conway, Principle with RMI Consulting, Inc. indicated that the presentation would be educational in terms of its structure and content. He also noted that some of the items he would like to address include: an overview of what is risk management, what is happening in the industry, where does BWL fit in terms of the municipality clients they serve, steps they initially reviewed in terms of their risk assessment and, markets and price volatility. Mr. Conway further reported that the BWL is trying to protect a revenue stream but in the future the BWL will have a moving energy target of prices that is becoming more volatile. He also advised that there are counterparts who are potentially going to transact business with the BWL to buy its excess power that will continue the revenue stream. However, the industry is moving towards a financial transaction environment. The purpose of the presentation is to layout some of the policy directions and term where they might be heading in the next 6 - 12 months. Charles Moore, Interim Internal Auditor asked if they are moving towards a futures market? He also stated that it sounds as if they are in between a futures market and the stock exchange in which they are in essence going to require that the BWL make payments the next day? Mr. Conway confirmed Mr. Moore's sentiment and further stated that currently, there is a futures market in electricity that has developed within the last 2 - 5 years, similar to the natural gas market that developed in the early 1990's after deregulation. He advised that to have a successful futures market, you have to have an overlay of a strong physical market, which is what the BWL currently transacts within now. Mr. Conway indicated that the futures market is another venue for BWL to participate and protect its revenue stream. However, the BWL may see a potential attractive price to lock in some revenue in year 2007 or 2008 and because of the type of physical contract that the BWL currently uses, less and less people are willing to participate in that type of structure. Mr. Conway reiterated that the futures market allows the BWL to have that type of opportunity and protect revenue. Mr. Moore asked if the basis is to move from a restrictive market to a futures market in nature? Mr. Conway confirmed that it was and advised that a futures market involved financial contracts and derivatives. He also noted that one does not go from being a solely physical transaction environment to a financial market without having a policy structure in place to ensure the Board that all control processes, authorizations and all levels of risk are being managed. Mr. Conway further advised that the BWL has a unique situation in that it is long on power and has generation to potentially sell out. He also reported that municipalities unlike regulated utilities are normally less risky on a risk spectrum perspective, whereas, the cost of energy is passed onto the customer in a regulated utility. It was also noted that within risk management they attempt to identify, control and minimize exposure to price movement by developing a hedge plan. Mr. Conway Board Mtg.Minutes March 27,2007 Page 11 of 38 continued his review of the presentation and noted the assessment findings and several recommendations contained within the body of the report. 2006 Assessment Findings Summary: RMI's main conclusion is that BWL, given its status as a municipal utility with excess power and its current agreement with the MPPA, has a unique current risk profile versus its post-MPPA position in the marketplace. RMI Recommendations: Operational Risk Mitigation Policies and Procedures • Work to establish policy adapted to current MPPA environment Oversight and Governance • Establish cross functional risk oversight and operations committees • Conduct periodic risk management education updates Authority Limits • Continue current schedule of authorizations with GM designee in absence • Continue efforts on sub-net long MPPA committee authorization Segregation of Duties • Designate non-transacting personnel to assist with compliance for BWL and MPPA activity Risk Monitoring and Reporting • Require key management reports • Ensure adequate systems are in place Credit Risk Mitigation Establish credit procedure • Work to establish policy for non-MPPA activity and beyond MPPA • Give ROC credit risk management accountability Perform credit evaluations and specify/monitor credit limits • Perform periodic check of MPPA and MISO credit information • Establish BWL evaluation and limit setting practices for non-MPPA activity Obtain Appropriate Securities to Support Limit Compliance • Consider exchange-cleared account to minimize credit risk • In post MPPA-environment work to establish more equitable thresholds • Update master agreements to include `netting' credit mitigation tool Market Risk Mitigation RMI Recommendations Given BWL Status: Develop Overall Hedge Plans Coal Board Mtg.Minutes March 27,2007 Page 12 of 38 • Consider products to protect against price spikes • Create a budget-driven coal procurement plan to take advantage of lower markets Wholesale Sales • Determine whether or not revenue margin risk on the low side is too great for the municipality to endure and hedge accordingly if needed • Develop a longer-term hedging approach of 2-3 years versus the current 12-18 months • Create a wholesale sale methodology to establish execution triggers and limits, which encompass a combination of historical price-driven, time-driven and budget protection components tied to a know cost for fuel Mr. Conway clarified that revenue protection pertains to any type of forward sales on known input cost, be it coal, or any another type of cost structure. He also noted this refers to protecting the margin and knowing the input cost as well as having the ability to sell at the top of the margin or a more profitable margin than the budget forecast. Mr. Conway further advised that whether the BWL decides to sell or not, in looking at the forward market and power prices, at some period of time the price is moving up and down. He continued by noting the current three step structure as one transitions into the future: 1) enhance the current risk management practices that the BWL currently has thru MPPA, 2) the BWL could develop its own infrastructure in the interim while it is still associated with the pool, and 3) look at longer term revenue protection. Commissioner Cochran asked when you sell that future price do you receive payment today and deliver at a later date? Staff noted that the gain in position goes to the seller at the time of the transaction. Thereby, one is contracting a certain price at that time and the buyer has to purchase it at a set price. Mr. Moore noted that in his opinion, the BWL should limit its futures market participation due to the fact that it is a governmental body and the risk factors involved in trading. Mr. Cook explained that they agree with Mr. Moore but also noted that doing nothing is a risk in and of itself. Therefore, based on what has been learned they are looking at assembling a pilot project with a quantitative amount of risk that will allow them to learn the market, determine the positives and negatives, and assess whether or not it will meet the needs of the BWL. Mr. Conway closed by advising that their current client base all began with a pilot program structure, which allows the customer, City Council, and management to understand what they are doing. He also noted that if the BWL looks at the amount of generation and revenue that its brings in on a yearly basis, which is a small percentage of what one would look at in the forward market, 2-3 years from now the BWL may have fewer potential counterparts. Board Mtg.Minutes March 27,2007 Page 13 of 38 Copies of the "Risk Management Introduction and Risk Assessment Summary" presentation are on file in the Office of the Corporate Secretary. Update on Delta Township Mr. Peffley advised that they are still working with the customer and the township supervisor was out of the office and thereby unable to meet. It was also noted that the materials requested for Mr. Moore are forthcoming. Varnum Consulting—GM Selection Process Sandra Soltysiak, Varnum Consulting advised that the job description and summary for the General Manager position were included in the packet of materials previously sent. She also reported that they are ready to begin the advertising phase of the project and gave the Board a list of potential advertising options. Ms. Soltysiak reminded the Commissioners that they are going to cast a wide net to help ensure that they receive as many candidates as possible. She also asked that all interested candidates apply via the website, by fax or email. Ms. Soltysiak noted that the next step in the process would be a meeting with the Interim General Manager and anyone else he deems important and she would also like to take a facility tour. Ms. Soltysiak reported that the posting would close on March 30, 2007 upon which time she will present the top 5-6 candidates to the Board. The additional prescreening process will also take place prior to the next meeting, which she hopes will be in five weeks and the position filled in 10 weeks. Ms. Soltysiak noted that her firm would call all of the utilities in Michigan and start asking for referrals and indicated that that is where they would receive good candidates. She further advised the Board that if they have any other place that they would like her to call then feel free to forward the information via email and she will follow up in order to try and obtain a large pool of candidates. Ms. Soltysiak also reported that public comments are welcome and would be noted on the posting in the Lansing State Journal along with an email address for which the public can send comments. The Board agreed with the language for the General Manager position announcement. They also indicated that they would decide at a later date as to whether or not they would host a candidate meet and greet or any other public forum of said nature. Ms. Soltysiak confirmed that it is common practice to send a board-wide communication to the organization indicating that the General Manager position is being posted and they are accepting applications. If a BWL employee knows of anyone interested in the position then they should be directed to the website, www.hiringsohrtionsinc.com. Ms. Soltysiak also commented that if BWL employees have any comments then they are welcome to forward them to her via email. Mr. Peffley advised that he would make sure that the communication is sent to all BWL employees. There being no further business, the meeting ended at 7:20 p.m. Board Mtg.Minutes March 27,2007 Page 14 of 38 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. esolution 2007-3-2 HUMAN RESOURCE COMMITTEE March 8,2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 4:00 p.m. on Thursday, March 8, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Robert Cochran, Joseph Graves, and Julee Rodocker. Absent: Commissioner Santiago Rios. Public Comment There were no public comments. Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election Brandie Ekren, Associate Attorney advised that during the past few year's staff has reviewed the benefit plan documents to bring them up to date, ensure compliancy and restatement. As such, they have proposed a document restatement and plan changes to reflect current practices, changes in applicable laws, compliance with the Internal Revenue Service Code and greater administrative flexibility. The changes would affect both Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election and the Post Retirement Benefit Plan Document. The first of said documents is in essence the plan, which gives employees and retirees the decision to either receive a taxable cash benefit or health and prescription drugs. It was noted that if an employee or retiree wants to receive cash in lieu of health and prescription then they must possess alternative healthcare coverage. The restatement includes items that are necessary since the Health Insurance Portability and Accountability Act (HIPAA) and Consolidated Omnibus Budget Reconciliation Act (COBRA) references came into effect. Commissioner Graves inquired as to whether or not there would be a cost savings to the BWL if retirees were required to sign up for Medicare Part D. He also noted that State of Board Mtg.Minutes March 27,2007 Page 15 of 38 Michigan employees are required to sign up at the age of 65 for prescription drugs, which makes the federal government the first billable option and the State of Michigan, the second billable option. Mr. Oxender advised that it would be a change to the BWL's existing plan and there are some wraparound plans, which are administratively cumbersome at this point. He then indicated that it is something that the Healthcare Taskforce could review and make recommendations. Executive Session Moved by Commissioner Graves, seconded by Commissioner Rodocker, to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel and Brandie Erken, Associate Attorney protected by the Open Meetings Act exemption MCL 15.268(h). (4:21 p.m.) The roll was called. Yeas: Commissioners Cochran, Graves, and Rodocker. Nays: None. Absent: Commissioner Rios. Carried unanimously. Moved by Commissioner Graves, seconded by Commissioner Rodocker that the Human Resource Committee meeting return to open session. Carried unanimously. The Human Resource Committee reconvened in open session at 4:30 p.m. Continued Discussion On: Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Restatement of Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election resolution forward to the full Board for consideration. Post Retirement Benefit Plan Document Ms. Ekren reported that the Post Retirement Benefit Plan Document specifically outlines the benefit options available to retirees by meeting certain eligibility requirements. In an effort to review and update the document, it was restated to reflect changes in applicable laws, compliance with the Internal Revenue Service Code and greater administrative flexibility. Ms. Ekren noted that the previous plan document implied `piggy-back' vesting whereas; if one were vested in the pension plan then one was automatically vested in healthcare. Since that was not the intent of the BWL plan, the document Board Mtg.Minutes March 27,2007 Page 16 of 38 restatement clarifies the language, time periods, dates, and eligibility. She went onto advise that a retirement benefit does not necessarily entitle one to a healthcare benefit package; it is simply a different plan that operates separately from the pension plan. Ms. Ekren also stated that one of the biggest changes is the plan documents flexibility. The previous document specifically restricted premium sharing for retirees whereas, the new document neither permits nor restricts premium sharing. Therefore, it is important to note that the language does not necessarily institute premium sharing for retirees. However, it adds more flexibility for that determination to be made by the Board at a future date. Dick Peffley, Interim General Manager noted that it is not their intent to implement premium sharing for existing retirees unless given direction by the Board. The intent is to give the BWL the flexibility to address future retirees. Commissioner Cochran asked if there is anything in the union agreement regarding the above? Staff replied no and reported that there is language in both plan documents that offers exceptions to anything otherwise specified in the union agreement. After further discussion, the following motion was introduced: On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Restatement of Post Retirement Benefit Plan resolution to the full Board for consideration. Ms. Erken added that in reviewing their plans they came up with a number of opportunities to help the plan improve its operation. As such, they are going to present the ideas to the healthcare taskforce for investigation. Commissioner Graves asked when does the healthcare taskforce begin? Darold Oxender, Benefits Administrator advised that they have not had their first meeting as of yet. However, an expert from Michigan State University was brought in to present information to the employees on the history of healthcare and its increases. He also noted Rick Daly, Labor Relations Manager and Mr. Peffley need to determine who will participate on the taskforce. Mr. Oxender further reported that per the Board's request, a retiree would be invited to participate on the taskforce. After further discussion, it was noted that the healthcare taskforce should formulate immediately so that they may begin research in preparation for presenting recommendations to the Board prior to the next union contract negotiation period. There being no further business, the Human Resource Committee adjourned at 4:45 p.m. Respectfully submitted, Board Mtg.Minutes March 27,2007 Page 17 of 38 Robert Cochran, Chair Human Resource Committee Motion by Commissioner Cochran, seconded by Commissioner Rodocker, to receive the Human Resource Committee report as presented. Action: Carried unanimously. esolution 2007-3 33 FINANCE COMMITTEE March 13, 2007 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 3:30 p.m. on Tuesday, March 13, 2007. 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 Gary Calkins, Semone James and Robin Smith. Absent: Commissioner Sandra Zerkle Public Comment There were no public comments. Update on Delta Township Contract Moved by Commissioner Calkins, seconded by Commissioner Smith, to go into executive session to discuss a privileged document received from C.L. Moore & Associates, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (3:33 p.m.) The roll was called. Yeas: Commissioners Calkins, James and Smith. Nays: None. Absent: Commissioner Sandra Zerkle Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole reconvened in open session at 4:18 p.m. Board Mtg.Minutes March 27,2007 Page 18 of 38 Policy Changes Due to the Passing of Proposal 2 Defined Benefit and VEBA Trust Investment Policies Amy Cavanaugh, General Counsel noted that the Board has three policies that need to be updated in light of the passing of Proposal 2. As such, she was charged with the responsibility of developing language that would encourage diversity in terms of the pool without violating the proposal. The policies in question are Defined Benefit Investment, VEBA Trust Investment, and the Corporate Diversity and Corporate Supplied Diversity Policy. It was noted that the proposed language changes are the same for the Defined Benefit and VEBA Trust Investment Policies. On motion by Commissioner Calkins, seconded by Commissioner Smith, to accept the suggested changes to the Defined Benefit Investment Policy and the VEBA Trust Investment Policy and move it forward to the full Board for approval. Discussion: Commissioner Smith stated that she understood the final selection criteria and the fact that one cannot have a preference for minorities. She also believes that diversity is covered in the pool candidates' statement. However, Commissioner Smith expressed concern pertaining to previous conversations regarding the avoidance of advertising efforts directed towards a specific market. Ms. Cavanaugh clarified that if one spent all their advertising dollars trying to reach women and minority candidates then one could be in violation of Proposal 2 because it would be considered a preference for those candidates. Commissioner Smith noted that she did not think the pool candidates' statement creates a preference. She went onto advise that they want to cast a wide net so that the mix of advertising incorporates items to ensure they reach minority candidates. Commissioner Smith also asked staff if they have had opportunity to review the changes? Dick Peffley, Interim General Manager commented that he has reviewed the documents with Ms. Cavanaugh and is in concurrence with said language changes. Action: Carried unanimously. Corporate Diversity and Corporate Supplied Diversity Policy Ms. Cavanaugh explained that she combined the Corporate Diversity and Corporate Supplied Diversity Policies together because they were extremely similar. The primary difference between the two is that one spoke of customers and the latter spoke of ratepayers. The Corporate Diversity policy also charges the General Manager to establish procedures and be responsible for its implementation. As such, Ms. Cavanaugh combined the two and created one Corporate Diversity Policy. In doing so, she removed specific language that could be considered a preference and added language that 1) recognizes the importance of diversity to the BWL, and 2) language that also supports the growth and development of the candidate pool. Ms. Cavanaugh explained that they are Board Mtg.Minutes March 27,2007 Page 19 of 38 trying to be as broad as possible in terms of promoting and making opportunities available to everyone. Discussion surrounded the issue as to why the new statement could not continue to use the previous language, which stated that the, "...BWL will continue to establish a workforce that is highly representative of the customers who use BWL's resources". It was noted that the language was removed because it could be construed as a preference if the community makeup was based on ethnicity or gender. Commissioner Smith expressed concern with the proposed changes in that the language does not indicate BWL's desire to somewhat reflect the community it serves. She also noted that it is not embedded in the process and she is not requesting preference. After further discussion, the following motion was introduced: On motion by Commissioner Calkins, seconded by Commissioner Smith, to refer the Corporate Diversity Policy to the Committee of the Whole. Discussion: Commissioner James advised that they must rely on General Counsel to write a policy that is consistent with the law ill regardless of individual issues. Commissioner Smith added and to rely on General Counsel to a point that the Board challenges them when they do not feel that it has gone as far as it could go. Ms. Cavanaugh noted that she understood Commissioner Smith's point of view and to the extent that she may have ideas on how to accomplish this task within the law, then she would certainly review the suggestions. Action: Carried unanimously. Additional Discussion: Charles Moore, Interim Internal Auditor advised the Board to error on the side of caution in relation to the policy and said language changes. It was further noted that several other entities are in the process of developing language to bring their organization into compliance. Therefore, as one hears what other industries are implementing it will help to develop a better statement. It was also explained that the policy is not written in stone and could be subject to further review and change. In addition, Commissioner Smith agreed to work with Ms. Cavanaugh to share ideas in cultivating a new Corporate Diversity Policy statement. Budget Assumptions Sue Flores, Manager of Finance and Planning reviewed the fiscal year 2008 budget assumptions for the Board of Water and Light. It was noted that the BWL would file the budget with City Council ten days after its approval by the Board of Commissioners. The City's final budget deadline is June 10th. Ms. Flores advised that during the beginning of April, they would also look at possible rate increases, budget reviews, and allocations. Board Mtg.Minutes March 27,2007 Page 20 of 38 She further reported that allocation methods have been a large discussion point and they would probably bring it forward in April for a more thorough discussion. The Commissioners asked if the budget schedule could be moved up so that they may have budget discussions sooner than projected? Ms. Flores replied that the budget calendar is in part based on scheduled Board committee meetings. As such, a Committee of the Whole is scheduled for April and they could bring forward whatever information they have at that point. Ms. Flores clarified that rate hearings are only necessary if there is a rate increase request. The Commissioners had a brief discussion regarding cost of service relative to retail customers. They also discussed cost allocation methods, bond issues and a schedule pertaining to rate increases. Ms. Flores went onto continue the presentation and reviewed the sales forecast, revenue assumptions, operating expenses, capital expenditures, and other considerations such as, the payment in lieu of taxes to remain at 4%, General Motors exit fees, continued draw down of Belle River project, and bond issues. Capital Area United Way (CAUW)— Corporate Sponsorship On motion by Commissioner Calkins, seconded by Commissioner Smith, to approve the request to renew the Capital Area United Way Sponsorship and to move it forward to the full Board for approval. Discussion: Commissioner Smith noted that the BWL has had a long history with CAUW and thought it would be a great way to help them underwrite a project. She noted that she was not sure how much was previously raised. However, each year the BWL has received an award for its employee participation and corporate contribution. Commissioner James asked if the BWL has any other contributions and if so, what are the amounts and what publicity was given for said sponsorships? She further noted that they should also review the other sponsorships as well and consider using it in a marketing campaign and/or community relations. It was reported that any sponsorship above $5,000 must be brought before the Board for approval. Mr. Peffley also advised that a BWL committee meets every week to review sponsorship requests. He noted that they have approved what was budgeted and they could compile a list of sponsorships per the Board's request. Mark Nixon, Director of Communications noted that he will introduce the new marketing firm, The Rossman Group at next week's Committee of the Whole meeting. During which time they will briefly speak about the BWL's community sponsorships and various projects that are currently underway. Board Mtg.Minutes March 27,2007 Page 21 of 38 Action: Carried unanimously. Informational Only: Coal Letter and Investment Letter from Charles Moore It was advised that each respective letter was brought forward at this time for informational purposes only and would be discussed in detail at the next Finance Committee meeting, as staff has been given additional instruction. The Commissioners agreed to move the item to the next the Finance Committee meeting. Other Commissioner Calkins asked staff to speak to an article written in the Lansing State Journal relative to a BWL contribution for the building of a downtown fountain? Mr. Peffley noted that the BWL has not received nor approved any requests for (in kind donations nor monetary) contributions to the building of said fountain. There being no further business, the meeting adjourned at 5:05 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. esolufion 2007-3- COMMITTEE OF THE WHOLE March 20,2007 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, March 20, 2007. Commissioner Rios called the meeting to order and asked the secretary to call the roll. The following members were present: Commissioners Gary Calkins (teleconference), Robert Cochran, Semone James (teleconference), Santiago Rios, Julee Rodocker, and Sandra Zerkle. Absent: Commissioners Joseph Graves and Robin Smith Public Comment There were no public comments. Board Mtg.Minutes March 27,2007 Page 22 of 38 Rossman Group— Communications & Marketing Efforts Mark Nixon, Director of Communications gave a brief overview of the marketing and community sponsorships that are taking place at the Board of Water and Light. Mr. Nixon noted that the sponsorships are a good thing and it also provides emotional equity. He advised that the marketing strategy is an evolution of what they are currently doing, which is strengthening community ties through large and small partnerships and reminding people of the BWL's commitment to the community. Mr. Nixon listed some projects that are forthcoming, which include: customer video testimonials to be aired at Lugnut games beginning April 2007, a redesigned web page that should be complete by mid-May 2007, emphasize non-profit causes at the upcoming Chili Cook-off and create an annual report to customers that will appear in local print media. Kelly Rossman, Chief Executive Officer with The Rossman Group thanked the Board for the opportunity to work with them, and noted the importance of the community partnerships that the BWL have nurtured and cultivated over the years. She then advised that this has helped to re-enforce its primary message of"Hometown People Hometown Power". Ms. Rossman reported that the BWL has four premiere events that include Adopt-A-River, Common Grounds, Silver Bells, and the Chili Cook-off. She then indicated that their primary goal is to make the BWL look good in every way possible and advised that their focus would be slightly different than past practice. The new focus will concentrate on community partnerships, earned media coverage and balancing earned media coverage with paid advertising. Ms. Rossman explained that they are building a strategic communications plan and they have also conducted a communications audit, which is a review of all existing communication tools, identification of what works and what could be improved. Ms. Rossman closed by showing a 2-minute BWL customer video testimonial taken December 2006. Dick Peffley, Interim General Manager noted that they track media stories and in the fall they were 1-2 positive stories and 10-11 negative. Since working with the Communications Department and The Rossman Group the BWL has received more positive than negative stories; February's report was 29 positive and 1 negative. Mr. Peffley noted that they are doing everything they can to rebuild the BWL's image. Ms. Rossman noted that Mr. Nixon understands the value of proactive media relations in creating balance between positive and negative media stories. Commissioner Rios noted that he appreciated hearing a balance between paid and earned media due to budget expenses relative to production costs and the return that the BWL receives for its investment. He also inquired as to where they are in terms of establishing a more structured program for donations, community activities, and the creation of a foundation? Mr. Nixon responded by indicating that the foundation idea has been briefly discussed but is not ready for full presentation. He also reported that they would soon bring forth a Board Mtg.Minutes March 27,2007 Page 23 of 38 policy on community sponsorships at a later date. Mr. Nixon notified the Board that the sponsorship committee is taking a closer look at sponsorships, how the BWL sponsors, who it sponsors and what is received in return. Commissioner James thanked Mr. Nixon for developing the spreadsheet that detailed the BWL's contributions as requested. She also asked Mr. Nixon to provide information relative to the following: current fiscal and primarily budget for community sponsorships and donations, standing donations and contributions, who makes the decisions, how are they determined, how many requests are received, and are all of the requests honored? Mr. Nixon reported that they have sponsorship meetings approximately every 3 weeks. They typically approve more requests than they deny and a large percentage of them are bottled water requests. He went onto advise that the community sponsorship committee is responsible for determining the details and rationale for approving or denying requests. After further discussion, it was noted that the community sponsorships would be a separate line item on the budget. It was also suggested that the BWL review changing the format of the billing statement to separate City sewer charges from BWL items. It was reiterated that the Board should be aware of the community sponsorship process, approvals, denials, and the monetary budget. Mr. Nixon suggested providing the Board a regular report as to what projects have been approved or denied. In closing, the Board made clear the importance of establishing objective criteria and communicating sponsorship requests. Single Point of Service Presentation Bill Cook, Senior Vice President of Operations advised it has been a part of the BWL's strategic plan to combine operations in becoming more streamlined and making it easier for customers to work with the BWL. He went onto note that it was an issue identified two years ago relative to customer interface and as a result, Single Point of Service was developed and is a major success story. Diana Paul, Supervisor of Single Point of Service advised that there was a disconnect in how the BWL handled customer requests for new, upgraded, and modification of an existing services. There were multiple departments involved in the process and customers were not receiving the attention they needed. The presentation discussed in detail the creation of Utility Services, which helps to address issues with call transfers, erroneous customer and billing records, delays in reaching construction and incorrect billing statements. The objectives outlined in March 2006 included the following: • One department responsible for all service related issues with respect to new, upgrade, relocate or removal of service requests • Improved communication with customers —more timely and consistent • Improved application process— all services through one department • Reduction of errors involving customer and billing records Board Mtg.Minutes March 27,2007 Page 24 of 38 • Communication improvements with Delivery Services on scheduling and releasing of work • One department responsible for all construction fee collections prior to installation • Uniform application of the Rules & Regulations for service • Reduction in service request processing time • Improve documentation of the process for applying for service • Improvements to BWL website • Reduction in call transfers • Improvement in the education of our customers and internal staff on the service process Commissioner Calkins asked how do you get to Utility Services as he calls Customer Service for service changes and things of that nature? Is there a different group for these services? Ms. Paul confirmed that they are a different group and reported, that Customer Service addresses inquires regarding billing, turn on/off requests and standard inquires. She went onto advised that the phone tree directs customers to dial a different number for Utility Service that handles construction requests such as new service, demolition, relocation or modification of an existing service. Commissioner Zerkle asked if this also applies to major projects as she received an extensive inquiry from the Ingham County Road Commission regarding a situation with the BWL. She went onto state that the presentation indicates that the BWL coordinates its efforts. However, it appeared as if that was not the case with this particular project. Mr. Cook reported that Utility Service is for customers who want new services or service changes. He added that in working with the road commission wherein, the BWL may have to move utilities typically involves an engineer who coordinates the activity. This is a different issue and staff will look into the Ingham County Road Commission situation and respond. Copies of the "Single Point of Service"presentation are on file in the Office of the Corporate Secretary. Outside Counsel Recommendations Amy Cavanaugh, General Counsel advised that the Lansing City Charter requires that City Council must approve Special Counsel before a Board of the City can hire said counsel. She advised that over time it was interpreted that before the BWL hires outside counsel that City Council has to approve it and receive written approval from the City Attorney. Ms. Cavanaugh noted that historically, the BWL Legal Department has accomplished this goal by sending a Request For Proposal (RFP) every two years to determine a list of firms that would provide legal services. The RFP was advertised in Lawyer's weekly and a number of firms have contacted the BWL over time and as such, they were also sent RFP's. Ms. Cavanaugh noted that twenty-two (22) RFP's were sent Board Mtg.Minutes March 27,2007 Page 25 of 38 and they received fifteen (15) responses. She went onto advise that a synopsis of each firm, its primary expected use, the attorneys they thought they might use, perceived strengths and weaknesses of the firm, and previous usage by the BWL were presented to the Board. Ms. Cavanaugh further reported that they spoke to BWL managers who had used the legal services in the past and they also gave some preferences to local firms. She noted that they recommended ten (10) law firms based on the individual attorneys that they might want to hire and the list was presented to the Brigham Smith, City Attorney for a `temperature check'. Commissioner James asked Ms. Cavanaugh to give a comparison for reasonable rates versus expensive? Ms. Cavanaugh noted that she thought reasonable for full service firms is $220.00 - $320.00 per hour for partners, which is typically for persons with a tax background who do pension and benefit work. She advised that to the contrary, a Detroit firm normally starts at$330.00. Commissioner Rios asked if the firms who did not make the list were ones in which the BWL had actual experience with, or were there other reasons why they did not make the list? Ms. Cavanaugh advised that the biggest reason why they did not make the list was because they had Lansing firms that provided the same skills. She confirmed that no firm was rejected based on their work product. Commissioner Rios explained that the fact that a firm makes it on the list does not necessarily mean that they would receive an assignment. He went onto advise that if there are other persons who meet the general qualifications then they should be added to the list in light of the two-year term and regardless of redundancy. It was suggested and concurred that that Attorney, Michael Brown be added Special Counsel list. As such, Commissioner Rios also asked what happens if the Board wants to add another firm? Ms. Cavanaugh explained that she would ask the Board for authorization to go to City Council to have the firm represented on the list if for some reason the existing list of Special Counsel were not sufficient. On motion by Commissioner Cochran, seconded by Commissioner Rodocker, the Committee of the Whole unanimously agreed to move the Special Counsel resolution as amended to the full Board for consideration. The Special Counsel list for a two-year period from March 27, 2007 to March 27, 2009, includes the following law firms. 1. Canady Law Offices 2. Carlin, Edwards, Brown & Howe, PC 3. Clark Hill, PLC 4. Dickinson Wright, PLLC 5. Dykema Gossett, PLLC Board Mtg.Minutes March 27,2007 Page 26 of 38 6. Foster, Swift, Collins & Smith, PC 7. Miller, Balis & O'Neil, PC 8. Oade, Stroud & Kleiman, PC 9. Speigel & McDiarmid 10. Varnum, Riddering, Schmidt & Howlett 11. Willingham & Cote Policy Change Due to Passing of Proposal 2 Corporate Diversity and Corporate Supplier Diversity Policy Ms. Cavanaugh noted that a few of the BWL's policies needed to change due to the passing of Proposal 2. As such, there were a total of three policies, which includes the Defined Benefit Policy, VEBA Trust Investment Policy, and the Corporate Diversity and Corporate Supplier Diversity Policies. The Defined Benefit and VEBA policies were addressed at the Finance Committee and the Corporate Diversity Policy was forwarded to the Committee of the Whole. Ms. Cavanaugh advised that the policies were previously divided into two (Corporate Diversity and Corporate Supplier Diversity Policy) but she identified that they were practically identical and in an effort to focus on diversity with the applicant pool while still complying with Proposal 2, they removed the language that could be construed as preference, modified the document and combined the policies into one. She reported that she attempted to obtain information from other public entities to no avail and would be happy to entertain other ideas relative to the policy changes. On motion by Commissioner Calkins, seconded by Commissioner James, to approve the suggest language changes to the Corporate Diversity Policy as presented. Discussion: Commissioner Rios suggested that the BWL is close to hiring a new Human Resource Direct and as such, recommended that they receive input from that individual. He also advised that they receive input from the Marketing Director in terms of how to communicate the new policy. Commissioner Rios noted that the policy changes places everyone in a precarious position and they will need to develop a statement in response to possible questions and criticism. He went onto note that he strongly suggests they receive as much counsel as possible. Commissioner Rios also recommended that they receive feedback from the City of Lansing in terms of what they are doing relative to consistency. Commissioner James asked Ms. Cavanaugh if she had received counsel from the City Attorney? Ms. Cavanaugh noted that Brigham Smith, City Attorney advised her shortly after the passing of Proposal 2 that he wanted to work with her in terms of the BWL's position. She has since had some difficulty in receiving further follow-up and has made several attempts to bring this issue to the forefront. She is also unaware of the City's stance relative to its own policies in relation to Proposal 2. Ms. Cavanaugh went onto note that any policy can be changed and with that in mind if the Board puts something in place Board Mtg.Minutes March 27,2007 Paoe 27 of 38 then it could be revisited at a later date. She also advised that if the Board decides not to forward the policy change then she recommended they pull and void the two existing policies. Commissioner Rios advised that he was unaware how long it took the Board to develop a diversity policy. However, he was concerned with the need to move so quickly in modifying the existing policy. Commissioner James noted that she did not think the Board was moving quickly but more responsively. She also reiterated that the Board could revisit the issue at a later date if they so choose. However, the existing policy is the Board's responsibility to approve and they have received comment from General Counsel. The motion carried by the following roll call vote: Ayes: Commissioners Calkins, Cochran, James and Zerkle. Nays: Commissioners Rios and Rodocker. Absent: Commissioners Graves and Smith. Six-month Performance Review of Corporate Secretary Commissioner Calkins noted that the evaluation process had not been as organized as he would have liked. Typically they have a review by the various Commissioners, then they are apprised of one another's appraisal, and frequently they will have the appointee give an impression of their performance within the past six-months. It was noted that the Secretary Jones has written a self-assessment per suggestion by Commissioner James. After further discussion, the Board agreed to move the six-month performance review of the Corporate Secretary to the Human Resource Committee. At which time, Commissioner Cochran would take responsibility for setting a committee meeting before the next Board meeting, receiving the Commissioners completed evaluation forms, Secretary Jones' self-evaluation memo, a salary range matrix from the Human Resource Department, and any other necessary materials. Discuss Legal Review Process The Board discussed the possibility of establishing a legal process or procedure to help determine how the legal process is going to function. An example was given in which another organization allows certain legal actions to be reviewed by a committee with objective criteria and recommendations received by General Counsel. It was noted that the committee acted as another checkpoint before the Board is committed to litigation. A Commissioner also noted that they previously spoke about having a Board committee review the litigation and talk with the attorneys who are handling the claims. Therefore, there would be someone who would review the billing and communicate with the attorneys. It was advised that there were other Commissioners who did this in the past and the Board currently has a void in this area. The Board suggested that is being viewed as a fluid process in which they may not have an answer soon but they can discuss what Board Mtg.Minutes March 27,2007 Page 28 of 38 they have and move on from there. It was further advised that there may be a role for the Internal Auditor in this process as well as they should question what results they are receiving and if it is efficient in terms of how it is being done. It was suggested that the Board have a central person(s) that General Counsel speaks to for litigation matters filed against the Board and in relation to what action(s) they want to take. It was further clarified that the Board has its own counsel and there are other issues in which Ms. Cavanaugh addresses on the Board's behalf. However, presently there is no specific Commissioner(s) that outside counsel speaks with in addressing legal issues such as the Pandy matter. Ms. Cavanaugh clarified that the Pandy matter is not a typical circumstance. Normally, whenever a claim is brought against the Board of Commissioners then Ms. Cavanaugh would manage the case, review the bills, and communicate with the Board. However, in the Pandy case there are conflicts of interest that prevent Ms. Cavanaugh from acting on the Board's behalf in this matter. It was further noted that the Pandy case is an anomaly and normally Ms. Cavanaugh would be able to manage such issues at the Board's bequest. She also advised that it would be wise for the Board to establish a group as suggested to direct legal work. The Board agreed to refer the matter to the Executive Committee to meet with Ms. Cavanaugh within the next month to establish some recommendations that could be presented to the next Committee of the Whole after the initial meeting occurs. Other Director of Safety Mr. Peffley advised the Board that they went through an exhausting process to determine the new Director of Safety as the current Director; Jack Hill is scheduled to retire. He went onto advise that the Human Resource Audit indicated that the BWL does a fair job of succession planning but a poor job with knowledge transfer. It was noted that this is the BWL's first attempt to correct this problem and they will not be able to do it everywhere as it is budget driven. Mr. Peffley went onto introduce the new Director of Safety, Pete Thelen and the new Assistant Director of Safety, Oscar Rodriquez. Mr. Thelen noted that his background is in production and safety and he plans to pass that knowledge onto Mr. Rodriquez. He noted that Mr. Rodriquez will be seeing the Board more frequently and will also meet with different parts of the organization. Mr. Thelen noted that Mr. Rodriquez is one of the premiere people in the environmental lab, he teaches American Water Works Association classes on water purity and water licensing. His background also consists of industrial health, a Masters degree and published papers. Mr. Thelen closed by stating that they are going to work together to introduce Mr. Rodriquez to the rest of the organization. Mr. Rodriquez advised that he was very blessed to be considered and he will work hard in the position. Board Mtg.Minutes March 27,2007 Page 29 of 38 Mr. Peffley also noted that Mr. Thelen was one of the persons who helped the BWL transition from eastern coal to western coal without any severe incidents. He also noted that they will be working over the next year to transfer knowledge. Mr. Peffley advised that this was another step forward in recommending what was recommended in the Human Resource Audit. Mr. Hill clarified that they have had a vacancy in Safety that Mr. Rodriguez is filling. Therefore, Mr. Rodriquez's position was not an addition to staff. Discuss Legal Review Process—Additional Comments Charles Moore, Interim Internal Auditor added to the prior legal review discussion and suggested that when the Board engages with an outside firm they may want to obtain a budget. It could be used as a measuring stick to determine where they are relative to expenses and gage whether or not it is cost beneficial. The Board discussed the feasibility of obtaining a legal budget when one does not know the outcome of the case. Concerned was also expressed about the level of service that the Board would receive relative to the constraints of a monetary budget. It was further suggested that the Board should make clear its expectations to legal counsel when handling a case on their behalf. After further discussion, the Board recommended that Mr. Moore's suggestion be forwarded to the Executive Committee for consideration and he be included in future meetings for further discussion relative to said topic. There being no further business, the Committee of the Whole adjourned at 7:19 p.m. Respectfully submitted Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner James, to receive the Committee of the Whole report as presented. Action: Carried unanimously. esolutionz 2007-3- HUMAN RESOURCE COMMITTEE March 27, 2007 The Human Resource Committee of the Board of Water and Light met at the Executive Offices, Lansing beginning at 3:30 p.m. on Tuesday, March 27, 2007. Human Resource Committee Chair, Robert Cochran called the meeting to order and asked the secretary to call the roll. The following committee members were present: Board Mtg.Minutes March 27,2007 Page 30 of 38 Commissioners Robert Cochran, Joseph Graves, and Julee Rodocker. Commissioners Gary Calkins and Robin Smith (arrived 4:14 p.m.)were also present. Absent: Commissioner Santiago Rios. Public Comment There were no public comments. Six-month Performance Review of Corporate Secretary The Human Resource Committee met to discuss and review the six-month performance evaluation of the Corporate Secretary, Rhonda Jones. It was noted that with the assistance of the Human Resource Department, the committee received a packet of materials that included an excerpt from the employment agreement,job description, salary range matrix, self-evaluation, and a compilation of evaluations from the Commissioners. The evaluation materials were presented to Secretary Jones and she was allowed to review and discuss its contents with the committee. The committee also discussed the current process relative to previous annual and bi-annual reviews as well as the creation of mutually agreed upon goals and objectives. The committee addressed the timeliness of the evaluation and recommended that future performance reviews be conducted in a timely manner. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Human Resource Committee unanimously agreed that Corporate Secretary, Rhonda Jones is doing a good job and the Board will review said performance again in July 2007. As such, they recommended a salary increase of 3.5% to be made retroactive to January 24, 2007. A resolution will be presented to the Board under"Resolutions" order of business at the next Board meeting scheduled for March 27, 2007. There being no further business, the Human Resource Committee adjourned at 4:26 p.m. Respectfully submitted, Robert Cochran, Chair Human Resource Committee Motion by Commissioner Cochran, seconded by Commissioner Graves, to receive the Human Resource Committee report as presented. Discussion: Commissioner Rios noted that the Human Resource Committee was delegated with the responsibility of assembling information to make a recommendation to the full Board regarding specific action relative to the increase and performance evaluation of the Corporate Secretary. Action: Carried unanimously. Board Mtg.Minutes March 27,2007 Page 31 of 38 MANAGER'S RECOMMENDATIONS esolution 2007-3- A. Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election RESOLVED, that the Board of Commissioners hereby adopts the restated Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election, as attached, effective March 28, 2007. FURTHER RESOLVED, that the Chair is hereby authorized to execute the above referenced document on behalf of the Board of Commissioners. -------------------- Staff Comments: This benefit plan document, Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election, is being restated to reflect changes in applicable laws (such as HIPAA and COBRA), to comply with the Internal Revenue Service Code and to provide for greater administrative flexibility. -------------------- Motion by Commissioner Cochran, seconded by Commissioner Graves, to adopt Resolution 2007-3-6 for Section 125 Cafeteria Plan B: Cash or Health/Prescription Drug Election. Discussion: The Commissioners asked how widely used was the program and what amount are the recipients receiving? Amy Cavanaugh, General Counsel noted that there are sixteen (16) individuals who will be affected by the change, all of whom have alternate coverage. She advised that the recipients would lose the monthly amount of$186.00 that they are receiving and the BWL's healthcare coverage will supplement their existing healthcare. Action: Carried unanimously. esolution 2007-3- B. Post Retirement Benefit Plan Document RESOLVED, that the Board of Commissioners hereby adopts the restated Post Retirement Benefit Plan, as attached, effective March 28, 2007. FURTHER RESOLVED, that the Chair is hereby authorized to execute the above referenced document on behalf of the Board of Commissioners. -------------------- Board Mtg.Minutes March 27,2007 Page 32 of 38 Staff comments: This benefit plan document, Post Retirement Benefit Plan, is being restated to reflect changes in applicable laws (such as HIPAA), to comply with the Internal Revenue Service Code and to provide for greater administrative flexibility. -------------------- Motion by Commissioner Graves, seconded by Commissioner Cochran, to adopt Resolution 2007-3-7 regarding the Post Retirement Benefit Plan Document. Discussion: The Board advised that they understood changes necessary to comply with the law and the Internal Revenue Service code but expressed concern with changes in respect to administrative flexibility relative to healthcare premiums. It was further noted that current retirees have indicated that they were promised healthcare without premiums whereas, the previous administration reported that there is no legal obligation to maintain the no co-pay provision. The Board also advised that they were concerned that such changes would be made in light of the issues BWL retirees have expressed regarding healthcare premiums. It was further noted that the revised Post Retirement Benefit Plan Document does not specifically address future retirees. As such, the Board requested that the document language reflect its intent. Staff responded by noting that the previous document spoke to very specific coverage and they were attempting to make the document very generic to allow flexibility in making future changes. It was also advised that the intent was to address future and not present retirees due to healthcare costs. Staff further explained that the new document does not change the policy, it only adds flexibility and the Board would have to take additional action to implement premium sharing or anything else of that nature. The Board went onto ask if they included language specific to future retirees, is there anything relative to inclusion of such language that the Board should be aware of? Ms. Cavanaugh replied no and indicated that they could craft that language, and it would bind the hands of a future Board but only to the extent that they would have to amend the current document if they choose to do so. The Board noted that that argument could be made for any policy currently in existence. However, each Board has the opportunity to make whatever amendments or changes necessary as time progresses. It was also advised that the Board does not want to give the impression that it binds other Boards, as this process is similar to other polices that have been implemented. After further discussion, the Board requested that all language that includes retiree premium sharing be removed from the proposed document and the original language pertaining to the policy should remain. It was also noted that staff will take the Board's concerns into consideration and will present a redrafted document at a later date. The Board also requested a copy of the previous plan document for purpose of comparison to the new document. Action: Carried unanimously as amended. Board Mtg.Minutes March 27,2007 Page 33 of 38 esolution 2007-3- C. Policy Changes to Defined Benefit Investment Policy RESOLVED, that the Board of Commissioners hereby approves the amended Defined Benefit Investment Policy dated March 27, 2007, as attached. -------------------- Staff comments: Proposal 2, passed by the electorate in November 2006, modified the Michigan Constitution to prohibit public entities from discriminating against, or giving a preference to, individuals or groups on the basis of race, sex, color, ethnicity, or national origin. To comply with the amendment, the BWL needed to modify certain policies, including the Defined Benefit Investment Policy. Although diversity remains an important goal of the BWL, this policy stresses providing opportunities for all individuals and groups, rather than a preference in their selection. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-3-8 regarding the Policy Changes to the Defined Benefit Investment Policy. Discussion: Commissioner Graves asked if the word, "preference" was used in the former language? Ms. Cavanaugh replied no and read the previous policy language. She also noted that the language of the previous policy implied preference on the basis of ethnicity and gender. The motion carried by the following vote: Ayes: Commissioners Calkins, Cochran, James, Rodocker and Zerkle. Nays: Commissioners Graves, Rios and Smith. esolution 2007-3- D. Policy Changes to VEBA Trust Investment Policy RESOLVED, that the Board of Commissioners hereby approves the amended VEBA Trust Investment Policy dated March 27, 2007, as attached. -------------------- Staff Comments: Proposal 2, passed by the electorate in November 2006, modified the Michigan Constitution to prohibit public entities from discriminating against, or giving a preference to, individuals or groups on the basis of race, sex, color, ethnicity, or national origin. To comply with the amendment, the BWL needed to modify certain policies, including the VEBA Trust Investment Policy. Although diversity remains an important goal of the BWL, this policy stresses providing opportunities for all individuals and groups, rather than a preference in their selection. Board Mtg.Minutes March 27,2007 Page 34 of 38 -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-3-9 regarding Policy Changes to VEBA Trust Investment Policy. The motion carried by the following vote: Ayes: Commissioners Calkins, Cochran, James, Rodocker and Zerkle. Nays: Commissioners Graves, Rios, and Smith. Resolution 2007-3-I E. Capital Area United Way Sponsorship Renewal WHEREAS, for the last several years the BWL has provided corporate support for the Capital Area United Way (CAUW) by underwriting the advertising campaign for their annual fundraising drive; and WHEREAS, the BWL's new Purchasing Policy requires Board approval for sponsorships with a value of$5,000 or more; THEREFORE, BE IT RESOLVED, the Board of Commissioners approves an annual sponsorship of the Capital Area United Way (CAUW) in the amount of$7,500 a year for a period of three years. Funds from this sponsorship are to be used to finance CAUW's advertising campaign in support of its annual fundraising drive. Sponsorship will be taken from the Communications Budget for community sponsorships. -------------------- Staff Comments: Since 2004, the BWL has approved$7,500 a year for the Capital Area United Way's print advertising. The advertising specifically is targeted to key dates in the CAUW's campaign, including the campaign kick-off in August and its concluding report to the community. The BWL has long been a supporter of CAUW, and on March 15, 2007, the BWL was recognized by CAUW for this public utility's record of community support. The BWL is one of the CAUW's chief corporate sponsors. Agencies funded by CAUW positively touch the lives of tens of thousands of people in the mid-Michigan community. With Michigan's economy still fragile, support for the CAUW becomes more vital than ever. I wholeheartedly support this expenditure, which is designated to come from the Communications Department budget. -------------------- Motion by Commissioner Rios, seconded by Commissioner Graves, to adopt Resolution 2007-3-10 regarding the Renewal of Corporate Sponsorship for Capital Area United Way. Board Mtg.Minutes March 27,2007 Page 35 of 38 Discussion: Commissioner Cochran introduced a friendly amendment in which the $7,500 contribution would be indexable with the cost of living over the next 3-years. He noted that if the Board did not agree to the cost of living increase then the contribution would slightly erode each of the two following years. The friendly amendment failed. Commissioner Rios asked how does the BWL receive recognition for its contribution? Mark Nixon, Director of Communications advised that United Way has suggested placement of the BWL's logo on United Way thermostat signs seen throughout the area. It was also noted that the BWL is recognized via banquets, print advertising and television. Action: Carried unanimously. esolution 2007-3-11 F. Outside Counsel List for March 2007 through March 2009 RESOLVED, that the following law firms be placed on the Board of Water and Light Special Counsel approved list for a two year period from March 27, 2007 to March 27, 2009. 1. Canady Law Offices 2. Dickinson Wright PLLC 3. Dykema Gossett PLLC 4. Foster, Swift, Collins & Smith, P.C. 5. Oade, Stroud & Kleiman, PC 6 Varnum, Riddering, Schmidt &Howlett 7. Willingham & Cote 8. Clark Hill PLC 9. Carlin, Edwards, Brown & Howe, PC 10. Miller, Balis & O'Neil, PC 11 Speigel & McDiarmid RESOLVED FURTHER, that this list be submitted to the Lansing City Attorney, and upon his recommendation and opinion, then to the Lansing City Council for final approval in accordance with the Lansing City Charter. -------------------- Motion by Commissioner Rios, seconded by Commissioner Rodocker, to adopt Resolution 2007-3-11 regarding the Outside Counsel Recommendations for March 2007 through March 2009. Discussion: Commissioner Smith asked if the two additional firms were added because they have expertise in areas that the other firms do not possess? Board Mtg.Minutes March 27,2007 Page 36 of 38 Ms. Cavanaugh noted that the additional firms are Lansing based and have a strong Lansing presence. It was reported that the Board of Commissioners requested the addition to the extent that they felt the firms would add value to the list. Commissioner Rios clarified that they thought it best to have more firms on the list, as this is a two-year time period and it is not a commitment to hire the firms for a specific service. Commissioner Smith also asked what criteria does General Counsel review in making a determination when deciding to use outside counsel? Ms. Cavanaugh explained that she makes the determination based on the particular case and skill set needed for that particular situation. She also noted that one is able to make a choice based on the firm's skill, personality and what they bring to the case, which could be different from case to case. After further discussion, it was clarified that counsel reviewed the firm's area of specialty and spoke to other managers at the BWL who had legal dealings with said firms. It was also advised that if the need arises for a specific expertise then they could seek approval to add a firm/attorney to the list if needed. Action: Carried unanimously. G. Amend the Corporate Diversity Policy Dick Peffley, Interim General Manager tabled the Corporate Diversity Policy and sent it back to the Committee of the Whole for further review and discussion. UNFINISHED BUSINESS None. NEW BUSINESS Commissioner Smith advised that an amended agenda for the Joint City Council/BWL Commissioner meeting scheduled for March 29, 2007 was received on March 27, 2007. The items were sent to Secretary Jones, and management is actively working to address the agenda items for the upcoming meeting. Secretary Jones read the list of agenda items and it was noted that the meeting is scheduled for Tuesday, March 291h at Clara's, located at 637 E. Michigan Ave, Lansing at 11:30 a.m. Commissioner James noted that due to a conference she would not be in attendance and asked that her best regards be extended to City Council. Board Mtg.Minutes March 27,2007 Page 37 of 38 RESOLUTIONS esolution 2007-3-12 Corporate Secretary Six-month Performance Increase RESOLVED, that the consensus of the Human Resource Committee was that Corporate Secretary Rhonda Jones is doing a good job. As such, the performance increase recommendation is the numerical average of all eight (8) Commissioners rounded to the nearest half percent. The performance raise recommendation is 3.5%. Motion by Commissioner Cochran, seconded by Commissioner Graves, to approve Resolution 2007-3-12 regarding the Corporate Secretary's Six-month Performance Increase. Discussion: The Board discussed the Human Resource Committee's recommendation as well as the information received from the Human Resource Department. The human resource packet contained information regarding the salary range, which also included the control points. It was also reported that the Human Resource Committee did not reach consensus as to whether or not the Board would conduct an annual review July 2007 as previously assumed. After further discussion, the Board noted the following: • The Human Resource Committee is now charged with the responsibility of addressing process questions, Commissioner expectations, compilation of information for future performance evaluations, and making recommendations to the full Board for consideration. • Secretary Jones will respond to the Board's evaluation and provide a set of goals of objectives within 3-weeks to be carried out starting now through the end of the employment contract, July 2007. • A special meeting maybe called to provide additional time to discuss and review mutually agreed upon goals and objectives. MANAGER'S REMARKS Mr. Peffley notified the Board that he would not apply for the permanent General Manager position. He advised that the BWL needs to move forward in its generation portfolio. As such, he explained that the BWL needs to add generation and they have always planned for the future. Mr. Peffley went onto report that if they are going to move forward with building, which he intends to recommend, then he thinks that that would be a better fit for him. He also commented that he is willing to lend his assistance to the Board with the General Manager search if needed. COMMISSIONERS' REMARKS None. Board Mtg.Minutes March 27,2007 Page 38 of 38 EXCUSED ABSENCES None. PUBLIC COMMENTS Max Zemer, BWL retiree advised that he has received inquires regarding the Healthcare Taskforce. He also noted that they want to participant but have not received any information from the BWL thus far. Mr. Peffley noted that the BWL held a healthcare seminar and a letter was sent to the union requesting representation and another letter is forthcoming for the retirees next week. Mr. Zemer advised that the letter should be sent to the attention of Ellen Gale, President of the Retirees Group. Joseph Davis, Business Manager of Local IBEW 352, asked to have information regarding the Section 125 Cafeteria Plan B and the Post Retirement Benefit Plan Document sent to him as he is receiving questions from retirees. He also asked if the cash out option in lieu of prescription healthcare affects active employees and retirees? Mr. Davis went onto advise that he would like to speak to issues effecting bargaining employees prior to their presentation at the Board to represent the bargaining units point of view. Ms. Cavanaugh noted that the cash out option in lieu of would affect beneficiaries only. She also commented that Darold Oxender, Benefits Administrator personally contacted all sixteen (16) persons effected by the change to explain what had occurred and to answer any questions. Ms. Cavanaugh further advised that she would speak to Mr. Davis regarding the plans to bring him up to date. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Graves, the meeting adjourned at 7:05 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk April 4, 2007 Approved by the Board: March 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT i Tuesday, February 13, 2007 r. C ) C"� ! The Board of Commissioners met in the Boardroom of the Administrative Offices, 12 %20 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, Julee Rodocker(arrived 4:39 p.m.), and Sandra Zerkle (arrived 4:18 p.m.). Absent: Commissioner Robin Smith. The Secretary declared a quorum present. Vice Chair Rios called the meeting to order at 4:13 p.m. PUBLIC COMMENT THE VICE 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. There were no public comments. COMMUNICATIONS None. MANAGER'S RECOMMENDATION Dick Peffley, Interim General Manager informed the Board of Commissioners that he was unable to recommend the Renewable Energy Power Purchase Agreement at this time. He noted that the BWL had a short time span in which to review the proposal and address any issues but unfortunately they needed additional time for a contract of that magnitude. Mr. Peffley went onto report that it would have been an$80,000,000 deal Special Board Mtg February 13,2007 Page 2 of 4 over a course of 21 years. He further advised that he had received legal opinions, which indicated that it was best not to bring the agreement forward at this time. The Board thanked Mr. Peffley and staff for their hard work and encouraged them to continue being aggressive in working on projects of this nature. They also commended Mr. Peffley for bringing the project forward and taking the time to inform the Board. The Board also agreed that it was best not to enter into a non-solid contractual agreement, as they would end up addressing contractual issues at a later date. CLOSED SESSION Delta Township Wholesale Water Contract Update Moved by Commissioner Calkins, seconded by Commissioner Cochran, to go into executive session to further discuss a legal opinion regarding the Delta Township Wholesale Water contract protected by the Open Meetings Act exemption MCL 15.268(h). (4:18 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Graves that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 5:09 p.m. The Special Bom-d meeting took a meeting break at 5:10 p.m. and resumed at 5:24 p.m. Delta Township Wholesale Water Contract Update Moved by Commissioner Rios, seconded by Commissioner Graves, to go back into executive session to further discuss a legal opinion regarding the Delta Township Wholesale Water contract protected by the Open Meetings Act exemption MCL 15.268(h). (5:25 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James (teleconference), Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Cochran that the Special Board meeting return to open session. Special Board Mtg February 13,2007 Page 3 of 4 Carried unanimously. The Special Board meeting reconvened in open session at 5:54 p.m. Discuss Internal Auditor Employment Contract Moved by Commissioner Calkins, seconded by Commissioner Cochran to go into executive session to discuss a legal opinion presented by Amy Cavanaugh, General Counsel, protected by the Open Meetings Act exemption MCL 15.268(h). (5:56 p.m.). The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James (teleconference), Rios, Rodocker and Zerkle. Nays: None Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Cochran, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 6:10 p.m. COMMISSIONERS' REMARKS Commissioner James advised that she was pleased with the work conducted by Charles Moore, Interim Internal Auditor and as such, it would serve the Board to have him transition with the new Auditor. Commissioner Calkins suggested that Mr. Moore continue working with the Board for an additional 2—3 months. Commissioner James responded by stating that the new Auditor will have a learning curve and she does not want an open-ended contract. Therefore, Commissioner James went onto note that the work conducted by Mr. Moore should be directed with specific goals in mind. After further discussion, the following motion was introduced. Motion by Commissioner Calkins, seconded by Commissioner Graves, to support the transitional period between Mr. Moore and the new Auditor would be up to 3-months and anything further would be subject to review. Discussion: Commissioner Rios noted that a 90-day timeframe would give them an option to continue. Special Board Mtg February 13,2007 Page 4 of 4 Commissioner Graves suggested that they could go internal and/or external. He went onto note that as a Board they think it is important that there be an interim period of transitional time. Commissioner Cochran introduced a friendly amendment to limit the transitional timeframe to 90 calendar days. Commissioner Calkins amended the motion to include 30-billable days over a 90-day calendar period. Action: Carried unanimously. EXCUSED ABSENCES On motion by Commissioner Calkins, seconded by Commissioner Rios that the absence of Commissioner Smith be excused. Carried unanimously. PUBLIC COMMENT There were no public comments. ADJOURNMENT On motion by Commissioner Graves, seconded by Commissioner Cochran, the meeting adjourned at 6:19 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk February 19, 2007 Preliminary—Subject to Board approval on March 27, 2007 .c� j MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT �. r �► Tuesday, February 13, 2007 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, Semone James, Santiago Rios, Julee Rodocker(arrived 4:39 p.m.), and Sandra Zerkle (arrived 4:]8 p.m.). Absent: Commissioner Robin Smith. The Secretary declared a quorum present. Vice Chair Rios called the meeting to order at 4:13 p.m. PUBLIC COMMENT THE VICE 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. There were no public comments. COMMUNICATIONS None. MANAGER'S RECOMMENDATION Dick Peffley, Interim General Manager informed the Board of Commissioners that he was unable to recommend the Renewable Energy Power Purchase Agreement at this time. He noted that the BWL had a short time span in which to review the proposal and address any issues but unfortunately they needed additional time for a contract of that magnitude. Mr. Peffley went onto report that it would have been an $80,000,000 deal Special Board Mtg February 13,2007 Page 2 of 4 over a course of 21 years. He further advised that he had received legal opinions, which indicated that it was best not to bring the agreement forward at this time. The Board thanked Mr. Peffley and staff for their hard work and encouraged them to continue being aggressive in working on projects of this nature. They also commended Mr. Peffley for bringing the project forward and taking the time to inform the Board. The Board also agreed that it was best not to enter into a non-solid contractual agreement, as they would end up addressing contractual issues at a later date. CLOSED SESSION Delta Township Wholesale Water Contract Update Moved by Commissioner Calkins, seconded by Commissioner Cochran, to go into executive session to further discuss a legal opinion regarding the Delta Township Wholesale Water contract protected by the Open Meetings Act exemption MCL 15.268(h). (4:18 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Graves that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 5.09 p.m. The Special Board meeting took a ineeting break at 5:10 p.m.and resumed at 5:24 p.m. Delta Township Wholesale Water Contract Update Moved by Commissioner Rios, seconded by Commissioner Graves, to go back into executive session to further discuss a legal opinion regarding the Delta Township Wholesale Water contract protected by the Open Meetings Act exemption MCL 15.268(h). (5:25 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James (teleconference), Rios, Rodocker, and Zerkle. Nays: None. Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Cochran that the Special Board meeting return to open session. Special Board Mtg February 13,2007 Page 3 of 4 Carried unanimously. The Special Board meeting reconvened in open session at 5:54 p.m. Discuss Internal Auditor Employment Contract Moved by Commissioner Calkins, seconded by Commissioner Cochran to go into executive session to discuss a legal opinion presented by Amy Cavanaugh, General Counsel, protected by the Open Meetings Act exemption MCL 15.268(h). (5:56 p.m.). The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James (teleconference), Rios, Rodocker and Zerkle. Nays: None Absent: Commissioner Robin Smith. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Cochran, that the Special Board meeting return to open session. Carried unanimously. The Special Board meeting reconvened in open session at 6:10 p.m. COMMISSIONERS' REMARKS Commissioner James advised that she was pleased with the work conducted by Charles Moore, Interim Internal Auditor and as such, it would serve the Board to have him transition with the new Auditor. Commissioner Calkins suggested that Mr. Moore continue working with the Board for an additional 2— 3 months. Commissioner James responded by stating that the new Auditor will have a learning curve and she does not want an open-ended contract. Therefore, Commissioner James went onto note that the work conducted by Mr. Moore should be directed with specific goals in mind. After further discussion, the following motion was introduced. Motion by Commissioner Calkins, seconded by Commissioner Graves, to support the transitional period between Mr. Moore and the new Auditor would be up to 3-months and anything further would be subject to review. Discussion: Commissioner Rios noted that a 90-day timeframe would give them an option to continue. Special Board Mtg February 13,2007 Page 4 of 4 Commissioner Graves suggested that they could go internal and/or external. He went onto note that as a Board they think it is important that there be an interim period of transitional time. Commissioner Cochran introduced a friendly amendment to limit the transitional timeframe to 90 calendar days. Commissioner Calkins amended the motion to include 30-billable days over a 90-day calendar period. Action: Carried unanimously. EXCUSED ABSENCES On motion by Commissioner Calkins, seconded by Commissioner Rios that the absence of Commissioner Smith be excused. Carried unanimously. PUBLIC COMMENT There were no public comments. ADJOURNMENT On motion by Commissioner Graves, seconded by Commissioner Cochran, the meeting adjourned at 6:19 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk February 19, 2007 Approved by the Board: March 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT Tuesday, February 7, 2007 The Board of Commissioners met in the Executive Offices, 2°a Floor Conference Room, 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, S 'Wn , James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra e.-:�"-, Absent: None. ��'' G �! The Secretary declared a quorum present. �y C� Chairperson Smith called the meeting to order at 10:17 a.m. PUBLIC COMMENT None. COMMUNICATIONS None. NEW BUSINESS Chairperson Smith called the Special Meeting to order on Tuesday, February 7t' at 10:17 a.m. to consider the top candidates for the position of Director of Internal Auditor of the Board of Water and Light. The Board conducted two interviews in the morning, met with Sandra Soltysiak of Varnum Consulting regarding the General Manager selection process during the lunch hour, and interviewed the last two Internal Auditor candidates in the afternoon. Upon conclusion of the interviews, the Commissioners discussed the interview results, candidate's credentials and ratings. Executive Search Consultant Charles Blockett also reviewed the background checks and the salary range for the position. After further discussion, the following motions were introduced: Motion by Commissioner Calkins, seconded by Commissioner Cochran, to nominate Susan M. Pifer as the Director of Internal Auditor for the Board of Water and Light. Action: Carried unanimously. Special Board Mtg February 6,2007 Page 2 of 5 Motion by Commissioner Calkins, seconded by Commissioner Cochran to give the BWL Human Resource Department direction in negotiating an offer. Action: Carried unanimously. General Manager Selection Process The Commissioners met with Sandra Soltysiak, Director of Executive Search for Varnum Consulting to discuss the General Manager (GM) selection process. Ms. Soltysiak handed out a packet of materials that included information relative to the search process, position profile and other issues. During the meeting Ms. Soltysiak advised that several topics need to be addressed that included the job posting, expected communication measures to the Board, a leadership statement, GM current salary range and benefits, communications with third party individuals, and community involvement. Job Description—Ms. Soltysiak advised that the previous GM job description did not match the posting. Therefore, she requested some clarification and also suggested that the Board include a leadership statement, information regarding the strategic plan and a statement that reflects the GM's need to work with the bargaining unit. Ms. Soltysiak provided the Board with some suggestions regarding the job description and after further discussion a motion was introduced. Motion by Commissioner Calkins, seconded by Commissioner Smith, to include the statement, "10 years or more with progressive utility or related leadership experience" in the job description for the upcoming General Manager job announcement. The motion carried by the following vote: Yeas: Commissioners Calkins, Cochran, Rios, Rodocker, Smith, and Zerkle. Nays: Commissioners James and Graves. Absent: None. As a follow-up to the motion, the Board also directed Ms. Soltysiak to rewrite the GM job description and announcement so that it maybe presented to the Board at a later date for further discussion. They further directed Ms. Soltysiak to advise which, candidates are screened out of the evaluation process. Motion by Commissioner Calkins, seconded by Commissioner Smith to remove the wording, "...arrest record..." from the equal opportunity employer statement printed on the job an iouncement. Action: Carried unanimously. Ms. Soltysiak went onto to ask the Board a series of questions involving how should she respond in regards to inquires about previous General Manager's. She also recommended to the Board that they should include a leadership statement in the job announcement. Ms. Soltysiak further suggested that in an effort to involve the community in the process she could make her email address available so that individuals Special Board Mtg February 6,2007 Page 3 of 5 could contact her with their opinions. Ms. Soltysiak also asked the Board for direction in determining who to meet with regarding the process. Joseph Davis, Business Manager of IBEW 352 reminded the Board of the level of employee and public participation utilized during the previous General Manager search. He also suggested continuing that process in which a focus group was developed to meet with the candidates and provide input to the Board regarding their observations. Mr. Davis acknowledged that the Board of Commissioners will have the final decision but he advocated for an inclusionary process that creates ownership. After discussion, the Board advised Ms. Soltysiak that there are public statements on record regarding the previous General Managers. They went onto state that Sanford Novick resigned and they are restricted on what could be said regarding Joseph Pandy due to pending litigation. As a result, the Board directed Secretary Jones to provide Ms. Soltysiak with a copy of the public statements so that she may address candidate questions regarding those topics should they arise. The Board also indicated that they would write a leadership statement to be submitted by Thursday, February 8tb Additionally, the Board agreed that they did not want to impede the selection process by dictating whom Ms. Soltysiak should or should not meet with. However, they clarified that direction should be received from the Board of Commissioners. The Board went onto express concerns regarding micromanaging the process, input that should appear before the Board, and third party meetings. After further discussion, the following motion was introduced. Motion by Commissioner Rios, seconded by Commissioner Calkins, to not impose any restrictions on the consultant as to who she contacts in carrying out her duties. Discussion: Commissioner Cochran noted that they should be open to requests for committee meetings and Special Board meetings but the Board of Commissioners should own the process and manage it. Commissioner Smith asked Ms. Soltysiak what does she normally do in these instances? Ms. Soltysiak responded by stating that she agreed with Commissioner Rios in advocating that the Board not dictate who she should or should not speak with. She went onto note that if people feel that they have something to tell her then she should be open enough to meet with them. Action: Carried unanimously. Motion by Commissioner Calkins, seconded by Commissioner Cochran, to pay the billing invoice received from Vamum Consulting, LLC. Action: Carried unanimously. Special Board Mtg February 6,2007 Page 4 of 5 RESOLUTIONS IRESOLUTIONNO. 2007-2-Z INTERIM INTERNAL AUDITOR RECOMMENDATION SIX-YEAR FORECAST WHEREAS, on January 16, 2007 C.L. Moore &Associates, P.C. presented the Finance Committee of the Board of Commissioners with an internal auditor report relative to the Six-Year Forecast and made certain recommendations for managerial implementation; and WHEREAS, the audit report included three recommendations that advised that the Board of Commissioners of the Board of Water and Light should annually review and approve the allocation percentages used in financial decision making; and WHEREAS, the audit report also recommended that the Board of Water and Light should study the capacity for wholesale sales of electricity and water due to its potential revenue generation; and WHEREAS, the audit report further recommended an additional evaluation of healthcare projects due to projected industry increases; and RESOLVED, That management is hereby directed to implement all of the interim internal auditor's recommendations within the Six-Year Forecast audit report dated January 4, 2007. ---------------------------- SOLUTIONNO. 2007-2 INTERIM INTERNAL AUDITOR RECOMMENDATION COAL INVENTORY CONTROLS WHEREAS, on January 16, 2007 C.L. Moore & Associates, P.C. presented the Finance Committee of the Board of Commissioners with an internal auditor report relative to Coal Inventory Controls and made certain recommendations for managerial implementation; and WHEREAS, the first recommendation advocated for the separation of duties whereby, the purchasing and contracting for coal, whether emergency or not, be handled through the Purchasing Department; and Special Board Mtg February 6,2007 Page 5 of 5 WHEREAS, the second recommendation also advocated for the separation of duties whereby, an additional person would be involved in the coal approval process. RESOLVED, That management is hereby directed to implement all of the interim internal auditor's recommendations within the Coal Inventory Controls audit report dated January 4, 2007. ---------------------------- Motion by Commissioner Smith, seconded by Commissioner Cochran to accept the Interim Internal Auditor Recommendations relative to both the Six-Year Forecast (Resolution 2007-2-1) and Coal Inventory Controls (Resolution 2007-2-2). Action: Carried unanimously. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Cochran, the meeting adjounled at 4:09 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk February 13, 2007 Preliminary—Subject to Board approval on March 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS SPECIAL MEETING LANSING BOARD OF WATER AND LIGHT _0 Tuesday,February 7,2007 ~ G ti-rl P, The Board of Commissioners met in the Executive Offices, 2"d Floor Conference Room; 1232 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. Absent: None. The Secretary declared a quorum present. Chairperson Smith called the meeting to order at 10:17 a.m. PUBLIC COMMENT None. COMMUNICATIONS None. NEW BUSINESS Chairperson Smith called the Special Meeting to order on Tuesday, February 71h at 10:17 a.m. to consider the top candidates for the position of Director of Internal Auditor of the Board of Water and Light. The Board conducted two interviews in the morning, met with Sandra Soltysiak of Varnum Consulting regarding the General Manager selection process during the lunch hour, and interviewed the last two Internal Auditor candidates in the afternoon. Upon conclusion of the interviews, the Commissioners discussed the interview results, candidate's credentials and ratings. Executive Search Consultant Charles Blockett also reviewed the background checks and the salary range for the position. After further discussion, the following motions were introduced: Motion by Commissioner Calkins, seconded by Commissioner Cochran, to nominate Susan M. Pifer as the Director of Internal Auditor for the Board of Water and Light. Action: Carried unanimously. Special Board Mtg February 6,2007 Page 2 of 5 Motion by Commissioner Calkins, seconded by Commissioner Cochran to give the BWL Human Resource Department direction in negotiating an offer. Action: Carried unanimously. General Manager Selection Process The Commissioners met with Sandra Soltysiak, Director of Executive Search for Varnum Consulting to discuss the General Manager (GM) selection process. Ms. Soltysiak handed out a packet of materials that included information relative to the search process, position profile and other issues. During the meeting Ms. Soltysiak advised that several topics need to be addressed that included the job posting, expected communication measures to the Board, a leadership statement, GM current salary range and benefits, communications with third party individuals, and community involvement. Job Description—Ms. Soltysiak advised that the previous GM job description did not match the posting. Therefore, she requested some clarification and also suggested that the Board include a leadership statement, information regarding the strategic plan and a statement that reflects the GM's need to work with the bargaining unit. Ms. Soltysiak provided the Board with some suggestions regarding the job description and after further discussion a motion was introduced. Motion by Commissioner Calkins, seconded by Commissioner Smith, to include the statement, "10 years or more with progressive utility or related leadership experience" in the job description for the upcoming General Manager job announcement. The motion carried by the following vote: Yeas: Commissioners Calkins, Cochran, Rios, Rodocker, Smith, and Zerkle. Nays: Commissioners James and Graves. Absent: None. As a follow-up to the motion, the Board also directed Ms. Soltysiak to rewrite the GM job description and announcement so that it maybe presented to the Board at a later date for further discussion. They further directed Ms. Soltysiak to advise which, candidates are screened out of the evaluation process. Motion by Commissioner Calkins, seconded by Commissioner Smith to remove the wording, "...arrest record..." from the equal opportunity employer statement printed on the job announcement. Action: Carried unanimously. Ms. Soltysiak went onto to ask the Board a series of questions involving how should she respond in regards to inquires about previous General Manager's. She also recommended to the Board that they should include a leadership statement in the job announcement. Ms. Soltysiak further suggested that in an effort to involve the community in the process she could make her email address available so that individuals Special Board Mtg February 6,2007 Page 3 of 5 could contact her with their opinions. Ms. Soltysiak also asked the Board for direction in determining who to meet with regarding the process. Joseph Davis, Business Manager of IBEW 352 reminded the Board of the level of employee and public participation utilized during the previous General Manager search. He also suggested continuing that process in which a focus group was developed to meet with the candidates and provide input to the Board regarding their observations. Mr. Davis acknowledged that the Board of Commissioners will have the final decision but he advocated for an inclusionary process that creates ownership. After discussion, the Board advised Ms. Soltysiak that there are public statements on record regarding the previous General Managers. They went onto state that Sanford Novick resigned and they are restricted on what could be said regarding Joseph Pandy due to pending litigation. As a result, the Board directed Secretary Jones to provide Ms. Soltysiak with a copy of the public statements so that she may address candidate questions regarding those topics should they arise. The Board also indicated that they would write a leadership statement to be submitted by Thursday, February 81b Additionally, the Board agreed that they did not want to impede the selection process by dictating whom Ms. Soltysiak should or should not meet with. However, they clarified that direction should be received from the Board of Commissioners. The Board went onto express concerns regarding micromanaging the process, input that should appear before the Board, and third party meetings. After further discussion, the following motion was introduced. Motion by Commissioner Rios, seconded by Commissioner Calkins, to not impose any restrictions on the consultant as to who she contacts in carrying out her duties. Discussion: Commissioner Cochran noted that they should be open to requests for committee meetings and Special Board meetings but the Board of Commissioners should own the process and manage it. Commissioner Smith asked Ms. Soltysiak what does she normally do in these instances? Ms. Soltysiak responded by stating that she agreed with Commissioner Rios in advocating that the Board not dictate who she should or should not speak with. She went onto note that if people feel that they have something to tell her then she should be open enough to meet with them. Action: Carried unanimously. Motion by Commissioner Calkins, seconded by Commissioner Cochran, to pay the billing invoice received from Varnum Consulting, LLC. Action: Carried unanimously. Special Board Mtg February 6,2007 Page 4 of 5 RESOLUTIONS ESOLUTION NO. 2007-2-1 INTERIM INTERNAL AUDITOR RECOMMENDATION SIX-YEAR FORECAST WHEREAS, on January 16, 2007 C.L. Moore & Associates, P.C. presented the Finance Committee of the Board of Commissioners with an internal auditor report relative to the Six-Year Forecast and made certain recommendations for managerial implementation; and WHEREAS, the audit report included three recommendations that advised that the Board of Commissioners of the Board of Water and Light should annually review and approve the allocation percentages used in financial decision making; and WHEREAS, the audit report also recommended that the Board of Water and Light should study the capacity for wholesale sales of electricity and water due to its potential revenue generation; and WHEREAS, the audit report further recommended an additional evaluation of healthcare projects due to projected industry increases; and RESOLVED, That management is hereby directed to implement all of the interim internal auditor's recommendations within the Six-Year Forecast audit report dated January 4, 2007. ---------------------------- ESOLUTION NO. 2007-2-2 INTERIM INTERNAL AUDITOR RECOMMENDATION COAL INVENTORY CONTROLS WHEREAS, on January 16, 2007 C.L. Moore & Associates, P.C. presented the Finance Committee of the Board of Commissioners with an internal auditor report relative to Coal Inventory Controls and made certain recommendations for managerial implementation; and Special Board Mtg February 6,2007 Page 5 of 5 WHEREAS, the first recommendation advocated for the separation of duties whereby, the purchasing and contracting for coal, whether emergency or not, be handled through the Purchasing Department; and WHEREAS, the second recommendation also advocated for the separation of duties whereby, an additional person would be involved in the coal approval process. RESOLVED, That management is hereby directed to implement all of the interim internal auditor's recommendations within the Coal Inventory Controls audit report dated January 4, 2007. ---------------------------- Motion by Commissioner Smith, seconded by Commissioner Cochran to accept the Interim Internal Auditor Recommendations relative to both the Six-Year Forecast (Resolution 2007-2-1) and Coal Inventory Controls (Resolution 2007-2-2). Action: Carried unanimously. ADJOURNMENT On motion by Commissioner Calkins, seconded by Commissioner Cochran, the meeting adjourned at 4:09 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk February 13, 2007 Approved by the Board: March 27; 2W,7 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT c '� Tuesday, January 23, 2007 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, Semone James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. 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 5:36 p.m. APPROVAL OF MINUTES By motion of Commissioner Calkins, seconded by Commissioner Rodocker the minutes of the November 28, 2006 regular 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. Joseph Davis, Business Manager of IBEW Local 352 encouraged the Board to move forward with the process in addressing the issues found within the human resource audit. He advised that many persons were energized with the audit and would like to move forward as it has been a month since the results were shared with the BWL. Mr. Davis also advocated for utilizing an open and shared interview process in the hiring of a new General Manager as was practiced in the past. He further noted that the previous shared process allowed for employee, bargaining unit and public input. Mr. Davis went onto report that they have met to discuss the pension survey, which will be broader than Board Mtg.Minutes January 23,2007 Page 2 of 63 initially anticipated in trying to help employees with their future plans. He also advised that they hope to have the survey to employees within a month. COMMUNICATIONS A letter was received from Jim Dravenstatt-Moceri to Commissioner James regarding pension fund issues. Received and placed on file. COMMITTEE REPORTS esolution 2007-I-I SUMMARY REPORT FOR THE BOARD OF COMMISSIONERS PENSION FUND TRUSTEES REPORT The Pension Fund Trustees held their annual meeting on November 28, 2006, to receive the financial statements for the Defined Benefit Pension Plan, Defined Contribution Pension Plan and Retiree Benefit Plan (VEBA). Performance reports for the three plans were reviewed in detail for the period ended September 30, 2006. Representatives from LCG Associates reviewed the Defined Benefit Pension Plan Performance Report and staff presented the Defined Contribution Pension and Retiree Benefit Plan Performance Reports. Staff did not propose any chanIn ges to the existing policies that include the Defined Benefit Pension Plan Investment Policy, Defined Contribution Pension Plan Investment Policy and the VEBA Trust Investment Policy. There being no further business, the meeting adjourned at 4:57 p.m. Respectfully submitted, Robin M. Smith, Chair Pension Fund Trustees Board Mtg.Minutes January 23,2007 Page 3 of 63 MINUTES BOARD OF BOARD OF WATER AND LIGHT PENSION FUND TRUSTEES' ANNUAL MEETING Tuesday, November 28, 2006 Present: Trustees Gary L. Calkins, Robert W. Cochran (arrived at 4:16 p.m.), Joseph E. Graves (arrived at 4:18 p.m.), Semone M. James (teleconferenced), Julee M. Rodocker, and Robin M. Smith. Absent: Trustee Santiago Rios Staff Present: Interim General Manager Richard Peffley, Senior Vice President of Operations William Cook, General Counsel Amy Cavanaugh, Acting Human Resource Director Sheryl Hudson, Communications Director Mark Nixon, Manager of Finance and Planning Sue Flores, Senior Financial Analyst Charmaine Shellman, Human Resource Systems Consultant Darold Oxender, Associate Attorney Brandie Ekren, Communications and Public Relations Representative Cheval Breggins, Executive Administrative Assistant Beverly Bishop, Secretary Rosemary Sullivan, and Corporate Secretary Rhonda Jones. Consultant Present: Richard Babcock, Senior Vice President of LCG Associates and David Emerson, Consultant of LCG Associates. A quorum was present at 4:16 p.m. Chairperson Smith called the meeting to order at 4:08 p.m. Public Comments There were no public comments. Audited Financial Statements Manager of Finance and Planning Sue Flores reported that the financial statements for the Defined Benefit, Defined Contribution and Retiree Benefit Reports (VEBA) each received a clean opinion by the auditors, Plante & Moran and there were no audit comments. Ms. Flores explained that a clean audit indicates that the auditors did not have any areas of concern or issues relative to the plans that the BWL needed to address. She further advised that the BWL typically does not receive auditor comments on any of the three audit reports. Moved by Trustee Smith, seconded by Trustee Rodocker and carried, to approve the following resolution: Board Mtg.Minutes January 23,2007 Page 4 of 63 RESOLUTION ACCEPTANCE OF 2006 AUDITED FINANCIAL STATEMENTS FOR DEFINED BENEFIT PENSION PLAN, DEFINED CONTRIBUTION PENSION PLAN, AND RETIREE BENEFIT PLAN AND TRUST (VEBA). Resolved, that the Corporate Secretary receive and place on file the Defined Benefit, Defined Contribution, and Retiree Benefit Pension reports presented during the Pension Trustee Meeting. -------------------------- Defined Benefit Pension Plan Performance Report David Emerson, Consultant of LCG Associates presented the third quarter market returns for the Defined Benefit (DB) Pension plan for the period ending September 30, 2006. He indicated that the majority of the major indexes show positive market returns in the third quarter and all of them are in the black for the longer term. There are a couple of major themes that investors and portfolio managers have reviewed that include: 1) housing market, 2) energy crisis—fluctuating oil prices and 3) consumers. Mr. Emerson advised that although mortgage is refinancing is slowing down and energy prices are starting to stabilize, consumers are finding available funds to spend in the marketplace. All of these factors including that of interest rates and inflation are major areas that portfolio managers review when investing in stocks and bonds. Richard Babock, Senior Vice President of LCG Associates reviewed the total fund allocation and discussed the following associated charts and reports for the quarter ending September 30, 2006: • Distribution of Assets Mr. Babcock reported that we are slightly above the target goal in domestic equity and 3.8% above in international equity. The reason being that the international market has increased significantly which means that the asset allocation has shifted to the BWL's benefit. In order to rebalance the funds LCG Associates recommends the sell of approximately$6,300,000 from the Wachovia Equity Account (Large Cap Core), which will lighten domestic equity. Mr. Babcock further stated that he would like to leave in place the overweight in the international sector because on a relative basis it appears to have more long- term value than the domestic market. Trustee Smith advised that last year they spoke about the risks involved in the international market versus the domestic market. It now appears that LCG is stating that the international market is stronger than the domestic market. What are the risks of being involved in what is normally deemed a riskier marketplace? Mr. Babcock responded by stating that more than half of the productivity exists outside of the United States. There are two different managers in all of the G7 Board Mtg.Minutes January 23,2007 Page 5 of 63 countries as well as the other countries. Therefore, between the two of them there is enormous diversification, as we become a global economy and society. He went onto state that he thinks the risks are no more so than the domestic market, the only difference being the near term currency as the dollar strengthens and weakens against currencies around the world. There is that risk but over time it tends to balance out. Mr. Babcock went onto clarify that they will transfer the fiends from domestic equity to fixed income to reduce overall equity exposure. • Comparative Performance Mr. Babcock noted that in the past two quarters passive index managers have had an advantage over active index managers and there are two reasons why. One is that in the large cap arena one may have mega stocks and because these are caperated indexes then it is a self-fulfilling prophesy because as they get bigger, they count more and drive the index up. Conversely, in the small cap market that has a cap limit to it, it forces small cap managers to buy the less attractive stocks in the index because they have to place the monies somewhere. Mr. Babcock also reported that the figures in the comparative performance data are net after all fee numbers. He further noted that the diversification of managers' dramatically reduces risk. They now have five managers whereas, before when they started there was only one. Overall, performance has been quite good, as they have benefited by going into small cap international funds. • Total Fund Performance • Total Fund Five-Year Return vs. Risk. Mr. Babcock noted that the BWL's fund has outperformed the market benchmarks from the T-Bill to the S&P 500. Therefore, the cadre of managers over the last five years has added value versus the risk index in the capital market. • Equity Sector Allocation. (The pie charts indicate the level of diversification achieved since the September, 2005 report.) • Equity Allocation • Equity Performance for individual managers for the current quarter and historical performance. Mr. Babcock reported that American Beacon Small Cap Value/Instl is behind in its performance and he would like to see it improve to his expectations. It is a mini-fund of funds and there are five underlying managers that manage the portfolio on a cost effective basis. He also noted that if they were to replace them right now then they could not locate a candidate. Small cap value is the single best performing asset class since 1970, which makes it difficult to locate additional candidates. Therefore, we do not have anywhere to go right now but if it continues then they could move to the index. However, Mr. Babcock reported that he still thinks that American Beacon Small Cap Value/Instl is a good choice but if things do not perk up then they will make a change. Trustee Graves asked that you typically make these types of changes when you do not see the type of performance that you are looking for? Board Mtg.Minutes January 23,2007 Page 6 of 63 Mr. Babcock noted that they look at performance, underlying process and philosophy, and people. Do they have the same team in place; did they bring in some other individuals that have a different view? He went onto state that they want them to hire what we hire to make sure they continue to do what they do best. The worse thing that could be done is to eliminate the fund while at the bottom when it is about to come back strong. Recognizing that there will be years in which they under perform, as they all do. Trustee Graves asked what happens when you are dealing with a particular fund management group and the principle that has been directing that activity departs and forms their own fund? His understanding is that that history follows that principle. Mr. Babcock concurred. The Trustees advised that they passed a policy in which they wanted to place value on the diversity of fund managers and make sure that there is diversity within their management group. As a result, they inquired as to whether or not there had been opportunity to diversify and if there is an established timetable to periodically facilitate the search for diversification. Mr. Babcock responded by noting that they monitor the fund managers on a continual basis and they have since expanded from 2 to 8 managers. At the time the policy was passed, he believes they had already initiated and nearly completed the process of adding additional managers. Staff noted that none of the managers have been changed since the inception of the resolution and they did not take the policy to mean that that would prompt them to change managers at that time. Their interpretation was that if the opportunity presented itself then they would take into consideration everything passed in the resolution. They went onto advise that performance with the existing fund managers has been good and so in essence the opportunity to change managers has not presented itself. Trustee James asked when you say the opportunity has not presented itself what specifically will you be looking for? She took it to mean that it would just be performance from the fund manager? Mr. Babcock reiterated that they would look at performance, people, and process. He noted that there are three other asset classes that they are presently reviewing that they are allowed to invest in by policy. The current market conditions suggest that this might be the best time to invest in international emerging markets, real estate and high yield bonds. These are three additional areas that they are going to continue to research for potential investment. Trustee James suggested that they narrow down the search, as the premise could always be that they are searching and continuing to do so. She went onto Board Mtg.Minutes January 23,2007 Pa.le 7 of 63 recommend that the Trustees establish a timetable in which to effect this change relative to diversification. Mr. Babcock explained that they would be delighted to accommodate the Trustees request. He noted that they have several clients who ask them to be proactive in finding a fund manager, which can certainly be accomplished being that they conduct these types of searches on a regular basis. Trustee Smith asked if they would need additional guidance or a resolution that says that we would like to initiate this task on a quarterly or yearly basis? Trustee Calkins stated that based on previous statements he thought that LCG Associates were already doing this on a continual basis. Thus far, he thinks they have done a lot from where they initially started. He went onto state that they were originally in one big basket and have diversified significantly since that time and so except for one fund it appears to have done well. Trustee Calkins further noted that he is not knocking LCG Associates as they have done what was requested and so he is unsure what more can be done other than to continue to do that search. Trustee Smith noted that they are not criticizing what they has been done at this point and she thinks the statement made by Trustee Calkins is a fair assessment. She went onto state that it is not so much that they are not pleased with what LCG Associates are doing but that they want them to be more proactive in searching for fund managers. Amy Cavanaugh, General Counsel advised that Proposition 2 was just passed in the state of Michigan and it will go into effect mid-December 2006. The proposition essentially states that no one can give preference on the basis of race, age, sex, gender, or national origin. She went onto state that they need to evaluate what that means in terms of the resolution that was passed by the Board in going forward to look for diversity in terms of the funds and its managers. Ms. Cavanaugh further explained that they do not have an answer yet and many public entities are trying to define what they can and cannot do to diversify themselves. In the meantime, she just wanted everyone to know that it is an issue in this context as well as many others for the BWL. Trustee Smith clarified that the proposition does not prohibit the BWL from looking for diversity. It is only when you are seeking preferential treatment and that is not what they are asking them to do. The Trustees are suggesting that they see what is available and if it makes sense to change it then they will do so. Trustee Graves advised that he understood that General Counsel has not had the opportunity to give a legal opinion. However, his understanding of what just passed does not in anyway precludes in his mind the Board looking to have a diverse portfolio. He went onto state that there are minority owned firms that Board Mtg.Minutes January 23,2007 Page 8 of 63 meet the criteria that the Board set out in terms of performance, dollar amounts, and years of operation which is relevant to the question regarding a principle. Trustee Graves noted that he wants to be sure that what they are tracking is in principle and that they consider the fund managers track record. He further noted that he thinks they can still be proactive and if our Legal Department develops an opinion that we need to discuss then that can be done at the appointed time. Nevertheless, he thinks one needs to be proactive when there is opportunity because they are not talking about preference when you say that all parties have to meet this standard. Trustee Graves went onto explain that you are simply saying diversify this pool but they need to meet this standard and there are firms out there that can accomplish that goal. The Trustees agreed that they need further guidance from the Legal Department in terms of the effects of Proposition 2 on current BWL policies and resolutions. They also support referring the issue of developing a timetable for diversification to the Finance Committee. Trustees Graves further clarified that there is nothing at this point that precludes LCG Associates from being proactive. He further advised that they do not need to wait for the Trustees to act. Mr. Babcock concurred. • Fixed Income Sector Allocation • Fixed Income and C&E Performance for the current quarter and historical • Other Performance Assets Trustee Smith stated that during the previous discussions they mentioned international emerging markets. She knows it was stated that they are currently performing but they keep getting into the now. How long do we know that they are going to perform and how much of a greater risk is it for us to be involved in emerging markets? Mr. Emerson noted that emerging markets are totally different than what they were ten years ago. Certainly there is a fair amount of volatility but the risk factor has gone down. There is exposure to emerging markets through our two international managers. It is a very small portion at approximately 10% of each. Mr. Emerson continued to note that emerging markets have become what the United States markets were in the late 1970's and we have seen what they have done since that time. He further explained that as the overall economy continues to globalize then those are the growth areas and it should continue. There it maybe overvalued right now but over long periods of time emerging markets will be a potential asset when the economy is right. Mr. Babcock also noted that there is one thing that makes it slightly less volatile which is the fact that you do not have as much currency risk in the emerging markets because they pay good currency to the U.S. dollar. Board Mtg.Minutes January 23,2007 Page 9 of 63 The complete report on Investment Management Analysis of Comparative Risk and Return for the quarter ending September 30, 2006 is on file with the permanent minutes. Retiree Benefit Plan (VEBA) Finance and Planning Manager Sue Flores reviewed the status of the VEBA (Retiree Benefit Plan and Trust) for the third quarter ending September 30, 2006. The total fund allocation for the VEBA Retiree Benefit Plan and Trust as of September 30, 2006 is $46,933,982. However, the actuarial accrued liability for the VEBA fund as of February 2006 was estimated to be $216,161,111. Compared to the current balance $178,496,807 is unfunded. Ms. Flores noted that the BWL is in better shape than most municipalities. Other governmental entities will need to start making progress towards their unfunded liability, whereas the BWL has started early and is ahead of many other governmental bodies. One-year performance on the VEBA fund as of September 30, 2006 was 8.5% overall. The current asset allocation is 34.4% fixed income, 58.4% equity, and 7.1% cash equivalents, which is close to the allocation targets. The comparative performance graph shows that each of the asset allocation classes were either close or have surpassed their benchmarks. The charting also indicated that although they added more to the VEBA fund and it earned money, the actual liability also grew from one year to the next. Ms. Flores noted that staff would like the Trustees to consider giving consist to move forward in evaluating and engaging financial investment firms similar to LCG Associates relative to VEBA. There is $50,000,000 invested with additional contributions of $11,000,000 each year. This fund will continue to grow and staff thinks that it would be wise to go out for bids for investments firms similar to the function that LCG currently performs. They will evaluate the cost of that service and bring forth a recommendation to the Board. The VEBA fund is currently managed internally and most of the equities are in an index fund, mirroring the asset allocation with approximately 15 individual bonds. Defined Contribution Pension Fund Performance Report Ms. Flores provided a high level summary report of the Defined Contribution (401A) Plan as of September 30, 2006. • Plan assets by class total $120,590,000 • Historical performance of funds • Historical performance benchmarks The allocation of this fund is based on the individual employee preferences in how they choose to direct their investments. They have the option to select their funds online, by telephone or in writing. They can also choose the Goalmaker option that places money in a combination of investments that automatically rebalances. The selection is based on a combination of age, expected retirement date, and risk tolerance. Approximately 15% of employees are enrolled in Goalmaker. Board Mtg.Minutes January 23,2007 Page 10 of 63 Trustee Smith asked that based on the Goalmaker category how did employees do in the market? Ms. Flores reported that this is based on employee's individual preferences and she looks at age comparisons in how people invest. There are individuals in there 50's and 60's heavily into equity investments, which she would question. However, they may have other investments outside of the BWL and this maybe their choice. Therefore, it is difficult for the BWL to pick the perfect fund because they are not financial advisors. Ms. Flores continued to note that the funds perform really well and they conduct an annual review and evaluation with Prudential on all of the funds. Trustee Graves asked if there is a service available to employees if they want it? Ms. Flores advised that there are monthly meetings available for employees to meet with either a Prudential and/or ICMA representative. Appointment notifications are sent via email and posted on bulletin boards. The representatives' role is to speak in general terms about investments relative to age, length of service, financial goals, etc. They typically fall short of making specific fund recommendations. Ms. Flores also explained that the BWL has a self-directing brokerage option available with approximately $700,000 in employee funding. The option allows employees to self-direct from the Prudential Family Fund. Informational Items Ms. Flores briefly addressed Proposal 06-02, Pension Protection Act of 2006 and Resolution 2005-3-13. Proposal 06-02. There is language that was added to the investment policy last year to give consideration to diversity candidates. They have been asked by the BWL's internal legal staff to bring to their attention all the policies that have this type of language contained within the document. At this time, they are not saying that it is right, wrong or indifferent. They are however raising the issue and they will review it with all of the other policies that may have been affected by the passing of Proposition 06-02. Pension Protection Act of 2006. There was sweeping pension legislation changes that affected both public and private funds. Several of the changes were on private funds and will be phased in over a period of years. They are reviewing those changes and will be working with internal legal staff, external counsel, and the actuaries to determine how everything will affect the BWL. It is also possible that they may need an actuarial update to determine the financial impact. Resolution 2005-3-13. Interim General Manager Dick Peffley stated that Resolution 2005-3-13 prompts management to review consideration of a cost of living adjustment to the Defined Benefit Plan within 30 days of Board of Commissioners' approval of the BWL-IBEW contract. He met with retirees Ron Byrnes and Roger A. Jeffers who submitted a proposal for the Board's consideration. Mr. Peffley noted that he had staff Board Mtg.Minutes January 23,2007 Page I I of 63 cost the initial proposal and included it in the packet for informational purposes only. He further noted that any increase to the cost of living would come from the DB plan, which is currently over funded. However, the over funding is also used to fund VEBA. Mr. Peffley went onto suggest that this topic be referred to the Finance Committee for further discussion and a plan to move forward. The Trustees supported moving the Cost of Living Adjustment proposal to the Finance Committee. There being no further business, the Pension Fund Trustees meeting adjourned at 4:57 p.m. Submitted by: Rhonda Jones Corporate Secretary Motion by Commissioner Calkins, seconded by Commissioner Graves, to receive the Pension Fund Trustees' Committee Report as presented. Action: Carried unanimously esolution 2007-I-2 MINUTES BOARD RETREAT December 2, 2006— 8:30 a.m. to 3:30 p.m. The James B. Henry Center for Executive Development 3535 Forest Road - Lansing Present: Commissioners Gary Calkins, Robert Cochran, Semone James, Santiago Rios, Julee Rodocker, and Robin Smith. (Note: 4th Ward Vacancy Exists) Absent: Commissioner Joseph Graves Facilitator: Bryan Singletary, President of Practical Energies Staff Present: Corporate Secretary Rhonda Jones The Commissioners met to discuss various issues that included public power governance, strategic planning for public power systems, key issues, strategies in the selection of a new General Manager (GM) and Board relations. The goal of the Board retreat was to have open and effective discussion regarding the above topics in relation to the Board of Water and Light (BWL). Board Mtg.Minutes January 23,2007 Page 12 of 63 Public Power Governance Bryan Singletary, President of Practical Energies facilitated the Board retreat. As such, Mr. Singletary advised that outside influences and employee concerns that outweigh those of the ratepayers has too much influence over the Board. Individual groups or persons are only subsets. If it does not benefit the ratepayer then it is not good for the organization. Effective Board governance can be achieved through individual Board members who are interested, engaged, effective, and meet their fiduciary responsibilities. Board interests must stay at the policy level. The Commissioners expressed concern regarding inclusiveness, whereas individual Commissioners speak for the entire Board without Board input. Mr. Singletary suggested that Commissioners keep in mind that an individual's opinion is seen as the Board's viewpoint. Therefore, everyone has a right to their opinion but they must exercise caution in this respect. Mr. Singletary also advised that the strategic plan should be the focus of all boardroom discussions. The Commissioners also noted that the Board's role is to establish policy and not manage the BWL. The strategic plan should be a working document and hence the focus of the Board. It was noted that in the past, lack of policy has lead to several issues. One of the Commissioners asked if they should avoid criticizing staff during a Board meeting? Mr. Singletary explained that it would be more appropriate to advise the GM that something maybe amiss and needs to be revisited thereby, allowing the GM to address the issue. He also clarified that it is ok to make a public declaration of positivity to staff but one must keep things targeted. Mr. Singletary observed that once the Board starts making operational decisions then they have moved away from governance, which increases the likelihood of a lawsuit. Interference in day-to-day activities is an indication that the Board has stepped outside of their fiduciary responsibilities. The more operational decisions are made, the more personal exposure. Statutory Duties: General Responsibilities, Ethics, Public Access and Federal Laws Fiduciary Duties: Fiduciary, Liabilities, and Protections Under the guise of Public Power Governance Mr. Singletary also noted the following: • Legal issues should be referred to the GM and he/she can refer it to General Counsel or perhaps have Counsel contact the Board directly. • The Board should not have informational lunches with employees; assumptions and rumors do far more harm than good because you are speaking as many voices and not as one. He also advised that if an employee calls a Commissioner for lunch then they should decline. • Email is public record. Do not conduct debates via email, as this is an inappropriate form of communication. • Commissioners should keep their special and personal interests out of Board business. Board Mtg.Minutes January 23,2007 Page 13 of 63 Key Issue Review Mr. Singletary met with executive staff on Friday, December Is'to discuss the questionnaire responses and review several key issues. Listed below are some of those observations as well as those of the Commissioners and that of Mr. Singletary. • Executive staff indicated their comfort level with the Board but noted that those directly below them do not know the Board and hence things become that of perception and rumor. • Staff also expressed concern regarding stepping outside of existing bounds due to the Board's history of terminations. It was also indicated that the Board is working well together right now. However, when hotly contested issues arise that cause dissention amongst Board members and/or staff, will they continue to work well together? • The Commissioners noted that they do not think staff provides enough guidance to the Board regarding what needs to be enacted at the BWL in terms of policy decisions. • Sidebar meetings with individual Commissioner's and staff should not be allowed, as the GM is the key. A Commissioner explained that they noticed a lot of these meetings occurring and felt it to be very disconcerting. The Commissioners explained that they believe this practice stemmed from issues with a previous GM in which concerns were not being addressed. Therefore, individuals were approaching the Commissioners' as there was a severe lack of trust with management. • The question was asked, should individual Board members give the GM direction? Mr. Singletary responded by stating that direction should come from the Board as a whole or the Chair but not as individual Commissioners. As a result of the discussion, the Commissioners recommended that they develop a Memorandum of Understanding to govern the Board. The documentation will help avoid some of the past governance issues that were discussed. Mr. Singletary added that it is ok to argue in the Boardroom but not in the court of public opinion. As a Board, the Commissioners should communicate with one another why they did what they did. Facilitator Suggestions: 1. Add a training session on parliamentary procedure (recommend Colleen Trohand with American Public Power Association). Board may want to also consider having a parliamentarian sit in on regular Board meetings for direction and clarification when needed. 2. Review the strategic plan and revisit it after the new General Manager is hired. He advised that this would require a 2-day retreat. 3. The Board should read everything sent to BWL customers prior to their receipt. Mr. Singletary suggested that they should not get involved with proofing, Board Mtg,Minutes January 23,2007 Page 14 of 63 approving or having input;just be aware of what the BWL is communicating to its customers. 4. The Commissioners suggested a follow-up session with Mr. Singletary at which he recommended another Board retreat in approximately 6-months but definitely after the new GM is hired so that he/she may participate. 5. Develop a Communication Policy that would govern the Board's internal and external communications. 6. The Board should consider having a strategic planning session in January 2008 as it is going to affect the budget process. Strategic Planning for Public Power Systems Questions for the Board: 1. Are you standing true to your fiduciary responsibilities? 2. Are you asking questions for information that you need to make policy decisions? Strategic Direction • The utility business is stagnate and there are relatively small changes or surprises. However, the Board should approve a long-term business plan and periodically review and update it. • Review the strategic plan once a year. Consider utilizing an outside consultant or facilitator once every other year to provide an outside objective viewpoint. • Independent System Operator (ISO) training is in order for Board members and as such, staff should provide the training. This will give the Commissioners background and understanding on information relative to generation, transmission, power plant building, etc. • Mr. Singletary suggested that the Board look at branding the BWL to advise customers of the benefits of the services that the BWL provides. Strategies in the Selection of a New General Manager The Board should have an open declaration that the new GM will be held to the Strategic Plan. Mr. Singletary encouraged the Board to conduct a national search for the GM to ensure that they have done their due diligence, which is not to say that they do not already have talented persons in house. It was noted that the standard Request For Proposal (RFP) search firm charges 25% of the GM's yearly salary. Mr. Singletary also explained that he believes the Board should utilize a search firm with utility experience, American Public Power Association, or Board Mtg.Minutes January 23,2007 Page 15 of 63 public power experience. He cautioned against hiring a non-public utility person. However, if the Board chooses to do so then they need to make sure adequate training is provided. Lack of training and experience in the public arena can be the downfall of a GM. Mr. Singletary also explained that the GM should be given his/her evaluation at least 2- weeks prior to having discussion. He also suggested that the Board should not see the GM's self-evaluation until they have completed their own evaluations to ensure that there is no duplication. What are you looking for in a General Manager? Musts &Wants —Board must decide what they want in a GM prior to the interview process. Be honest about the compensation package, the Lansing community and its attributes as possible; and allow for a flexible benefit package. It is also recommended that the Human Resource department should thoroughly explain the benefit package to prospective candidates. Plan of Deliverables: 1. Develop a Communication Policy that Speaks to Internal and External Board Communications 2. Establish a Yearly Board Calendar 3. Address the General Manager Selection Process 4. Follow and Make a Commitment to the Strategic Plan a. Add a component of education to the Board meetings in which staff educates the Board on relevant industry-wide issues 5. Speak as One Voice There being no further business, the Retreat adjourned at 3:25 p.m. Submitted by Rhonda Jones Corporate Secretary Motion by Commissioner Cochran, seconded by Commissioner Calkins, to receive the Board Retreat Report as presented. Action: Carried unanimously. evolution 2007-1-3 COMMITTEE OF THE WHOLE December 18, 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 Monday, December 18, 2006. Board Mtg.Minutes January 23,2007 Page 16 of 63 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(arrived at 4:16 p.m.) and Robin Smith. Absent: Commissioner Sandra Zerkle Public Comment Joseph Davis, Business Manager of IBEW Local 352 thanked the Board for bringing in an outside consultant to conduct the Human Resource Audit without any parameters. He also applauded them for presenting the findings in an open foium so that everyone could receive the information. Mr. Davis noted that the New Year would bring forth many new tasks including that of the General Manager (GM) search. He went onto state that the previous search method used by Charles Blockett was an admirable attempt as it included employee and retiree groups and also allowed for public input. Discuss and Reach Consensus on Top 5 Candidates for Internal Auditor Position— Charles Blockett Charles Blockett of Charles Blockett, Jr. and Associates, Inc. explained that they have two objectives: 1) narrow the candidate pool to five and 2) determine the balance of the remaining process. He went onto suggest that since four of the ten candidates received a minimum number of votes, then he asked if the Commissioners would like to reduce the candidate pool to four or add an additional person? Mr. Blockett advised that based on his experience he recommended that they interview at least five people. He also noted that the background checks and subsequent information would be provided to the Commissioners prior to their vote for the final candidate. Motion by Commissioner Calkins, seconded by Commissioner Smith to accept the top four candidates: James A. Felch, Kenneth L. Johnson, Susan M. Pifer, and Shirley T. Smith. Discussion: Commissioner Graves advised that he wants to be supportive of Mr. Blockett's suggestion that they select a minimum of five individuals. Given that premise Commissioner Graves made a friendly amendment to add Glenn Holloway to the list of candidates due to his experience with the BWL. Commissioners Calkins and Smith supported the friendly amendment. Discussion: Commissioner James suggested that Martin S. Wood also be included in the interviewing process in addition to Glenn Holloway being that they both received the same number of votes. Commissioners Rios and Calkins supported the friendly amendment. Board Mtg.Minutes January 23,2007 Page 17 of 63 Discussion: Commissioner Smith advised that she would rather stay with five candidates as opposed to six because it would extend the interview process from one to two days. She suggested having discussion on the other candidates that received an equal number of votes. Commissioner James noted an interest in interviewing Martin Wood an as additional candidate and expressed concern regarding Mr. Holloway's previous departure. Commissioner Rios suggested that in the interest of giving themselves the benefit of another candidate and the fact that they each received the same number of votes, he recommended that they interview six, which would include both Mr. Holloway and Mr. Wood. Commissioner Cochran seconded the friendly amendment. Mr. Blockett noted that in his experience when there are more than five candidates it makes for an extremely long day. He did not recommend interviewing six candidates, as the interviewees on the first day would be at a disadvantage. Mr. Blockett cautioned against six interviews due to the time factor and the validity of the process. Commissioner Cochran supported Commissioner James' comments in regards to Glenn Holloway as a finalist for the Internal Auditor position. Commissioner Graves noted that he supported the perspective of both Commissioners Cochran and James. However, he thought the interview process would allow them to explore and examine the concerns that they may have with regards to Mr. Holloway's potential employment with the BWL and his previous departure. He went onto state that he does have some concerns as to why he left. However, he understood that circumstances change and that Mr. Holloway has a lot of familiarity with the BWL. Therefore, he would support the five by keeping Mr. Holloway in the pool and he would not support six for the reasons just presented by Mr. Blockett. After further discussion, Commissioner Rios withdrew his friendly amendment to interview six candidates by adding Martin Wood to the finalist pool. The original motion to accept the top four candidates that included James A. Felch, Kenneth L. Johnson, Susan M. Pifer, and Shirley T. Smith carried by the following vote: Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None Absent: Commissioner Sandra Zerkle The motion to add Glenn Holloway as the fifth candidate failed by the following vote: Yeas: Commissioners Calkins, Graves, and Smith. Nays: Commissioners Cochran, James, Rios, and Rodocker. Board Mtg.Minutes January 23,2007 Pa.-e 18 of 63 Absent: Commissioner Sandra Zerkle Motion by Commissioner Smith, seconded by Commissioner James to add a fifth candidate, Martin S. Wood to the finalist pool. The motion carried unanimously by the following vote: Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None Absent: Commissioner Sandra Zerkle. As a summary to the motions, the following five candidates will be extended an opportunity to interview as a finalist for the Internal Auditor position with the Board of Water and Light: James A. Felch, Kenneth L. Johnson, Susan M. Pifer, Shirley T. Smith, and Martin S. Wood. Mr. Blockett noted that he would notify all five candidates and advise them of where they stand in the process. He would also ask that they sign an authorization form to allow background checks. The background search will include a civil and criminal record check, education verification, verification of previous employment, bankruptcy check, and newspaper article search. Mr. Blockett went onto state that he will request each candidate to prepare a written plan of action as to how they would develop an internal audit plan for the BWL, no more than 10 pages in length. This document would display their individual writing style, ability to communicate, and their organizational thoughts. This instrument would also act as an additional source in evaluating the candidates and obtaining the best ideas from all five persons. In addition to the above, Mr. Blockett stated that he would send them a copy of the survey responses, annual report, and strategic plan. Mr. Blockett will work with Secretary Jones to obtain copies of the materials needed to provide to the candidates. Charles Moore, Interim Internal Auditor suggested that Mr. Blockett provide a copy of the external audit report as it will be a better source of information to draw questions and help with the internal auditor process. The Commissioners agreed with the suggestion. Mr. Blockett further noted that the background check firm would have all of their materials returned to him by January 4, 2007. He also stated that he would give the candidates until January 5, 2007 to complete and submit their internal audit plans. Commissioner Smith asked Mr. Blockett if he would want a time lag from the date of the interviews to the date of the final selection? Mr. Blockett responded by stating yes. He also strongly recommended that they take 3-4 workdays to think about the candidates and review the reports. While also keeping in mind that the Open Meetings Act covers the position, which means that they must interview and deliberate in public. He went onto state that between now and January he will ask each Commissioner to develop three job related interview questions that he will use to determine a standard set of interview questions. Board Mtg.Minutes January 23,2007 Page 19 of 63 The Commissioners charged Secretary Jones to work with Mr. Blockett in establishing the interview dates, the remaining schedule and to also provide whatever materials necessary for the candidates in relation to the Internal Auditor action plan. Commissioner Calkins asked for a copy of the interview questions used during the last process to use as a basis for the new questions. Commissioner Rios asked Secretary Jones to distribute those materials to the entire Board. Human Resource Audit Report—Michael Goree Commissioner Cochran, Human Resource Chair introduced Michael Goree of Growth Strategies Consulting, Inc. who conducted a Human Resource Audit of the BWL at the request of the Board of Commissioners. Mr. Goree explained that part of the process involved in the Human Resource audit was trust in which there were three facets, 1) trusting individuals to do their job, 2) trusting the General Manager and leadership to learn to do their job, and 3) trusting the Board of Commissioners to do their job. He went onto note that he considered various options in delivering the report such as, sharing it with the Board of Commissioners only, sharing it with senior management only, or opening the door and sharing the document with the entire organization. Of all three options he chose the later. Mr. Goree advised that no one including the Commissioners had seen the final report prior to today's meeting. He also explained that everyone must believe that he did his job. The organization was open to him, individuals were open and honest in their conversations, and he was not prohibited from receiving anything that he requested of the organization. Mr. Goree noted the Commissioners and staff's cooperation in this endeavor and advised that it was a huge step forward for the BWL. He went onto explain the challenge he faced was in how to convey the employee's passion, dedication, and commitment in a report. Mr. Goree advised that he spoke to hundreds of people at the BWL and not once did people blame others for the problems at the BWL. What he did hear was the passion for doing a better job with the tools and resources that are available and whether or not they are available to the persons at the BWL. He noted that throughout the report one would hear the employee's passion for the organization. However, Mr. Goree also noted that there are challenges at the BWL. He explained that he was hired because he is very direct and to the point, which his final report reflects. Mr. Goree proceeded to present the preliminary analysis and findings of the Human Resource Audit. Listed below is a brief synopsis of the information presented: • Four Key Hurdles —Cognitive, Political, Motivational and Resource • Truths and Rumors—With any project of this nature you will hear both truths and rumors. Some of the truths included: o No interference by the Commissioners, Leadership, Union, or outside influences o Full and trusting cooperation by all employees o Straightforward and direct approach o Access to all aspects of the organization Board Mtg.Minutes January 23,2007 Pa.-e 20 of 63 • Process Followed—Met with Human Resource Committee to review plan, reviewed key documents, interviewed employees, developed preliminary findings and recommendations, and presented those findings to the Board of Commissioners on December 18, 2006. • Non-Human Resource Realities— Some of the Non-HR realities include: o Not all departments are "pulling in the same direction". o Some directors and managers have an "I'm a Director, therefore I get what I want" mentality. Completely unnecessary and demoralizing for staff. o Insensitivity to employee's work by some "management". o Somewhat insular in understanding what other organizations offer, are faced with, competition, etc. o Good Old Boy network is still strong in some areas. o Decision Quality not taught—Decision making skills weak in some areas o Main focus on power generation and less on water—partial product of the rate structure. o Supervisory skills of some very weak to non-existent. o Weak brand identity. o Weak diversity strategy with little impact. o Ombudsman process not used and most see little value in the process. o The Call Center—Needs greater intervention to re-establish a strong team environment; also not receiving the support from HR that it needs to move forward. o 4 General Manager's in 10 years —Little time to heal and yet another change. Recommend cooling off period of 6-9 months before hiring another General Manager. o Work systems and processes could improve with "lean principles". o Appear-to have too many supervisors/managers in some departments. o Where is the Trust? —Strategic, Personal, Organizational o Destroyers of Trust within BWL—Inconsistent messages and standards, false feedback, failure to trust others, rumors in a vacuum and consistent underperformance. • 100 Year Plus Companies—The most difficult to duplicate, therefore the most sustainable, advantages are those that rest in people and their processes. • Human Resources Needs to be Driven By. . . 1) What do you want employees to know? 2) How do you want employees to feel? 3) What do you want employees to do? • Human Resource Realities —Mr. Goree noted that the comments listed below are not single line items from one individual but sentiments heard several times from various persons throughout the organization including that of Managers, Directors, and employees. Some of the Human Resource realities include the following: Board Mtn.Minutes January 23,2007 Page 21 of 63 o Not user friendly o Looked upon as a detriment to organization o Very poor response time o Very poor communication with employees o Not accessible—locked doors o Never seen them on other shifts o Reactive not anticipative o Who is in charge? o Compensation system poorly communicated o Performance system—old systems with a new face—too complicated o Weak"people skills" o Controlling and at times out of control o Overly structured and little to no flexibility o Poor employment process o When one is out sick, hard, if not impossible to get an answer o Structured in silos with little cross development o Currently, 12 employees. Normal staffing ratio is approximately 1:100 employees. Appears excessive given the poor response time, lack of visibility in certain areas, limited access, etc. o Not seen as the "go to" Department • Mr. Goree also reported on major areas of review that included recommendations for each respective subject relative to his findings. The areas of review included the following and are found in detail within the body of the report. * Employment Law/Documentation * Training/Development Employee Recruitment, Selection and Retention * Succession Planning .r Labor Relations ''= HR Information Systems (HRIS) * Benefits Administration =k HR and Line Management * Compensation * The HR Staff * Performance Management The Call Center All Focus on the Three A's—Attitude, Aptitude and Action 1) Attitude • Change and movement come from the "right" attitude. A weak/no foundation invites trouble down the road. • This comes in the form of the right vision and strategy and guiding it through your organization. 2) Aptitude • We can communicate all we want about where we want to go but, if employees don't have the Aptitude to get us there. • Without the right skills and knowledge, employees feel anxiety and frustration. • We want action! But, without aptitude through development you face even greater hurdles. 3) Action 0 "The failure to execute strategy results in 70% of CEO failures..." Board Mtg.Minutes January 23,2007 Page 22 of 63 • Execution requires attitude and aptitude first! The Next 100 Days: • 72 work days—Based on 5/week • 571.5 work hours —Based on 8/day • 34,286 work minutes • And the average worker works less than 6 hours a day • Plan the work and work the plan. The Identification and Removal of Waste Office Waste—Focus: People Office Waste—Focus: Information Goal Alignment Translation Assignment Missing Information Waiting Hand-Off Motion Irrelevancy Processing Inaccuracy Office Waste—Focus: Process Control Sub-optimization Variability Scheduling Tampering Work-around Strategic Uneven Flow Reliability Checking Standardization Error Mr. Goree closed by reiterating that the BWL has a highly dedicated workforce with an underutilized Human Resource department that is not as responsive as it could be. He also noted that the BWL has a workforce with some managers and supervisors that have an investor owned attitude. Mr. Goree further stated that the BWL has to break that cycle. He also advised that the problems at the BWL are not necessarily a personality or knowledge issue as much as it is an execution issue. Commissioner Graves observed that Mr.Goree had done an excellent job in conducting the Human Resource audit. In the beginning, he was given the flexibility to look throughout the organization and while the report in large part focuses on the Human Resource Department and function, it also looks at the organization as a whole. He went onto note the physiological, emotional, and personality changes discussed in the report would perhaps take longer than a 100-day plan to accomplish. Mr. Goree noted that a 100-day plan gives employees the opportunity to step up to the challenge and secondly, do they have the ability in which to do the job? He explained that as a dedicated and committed organization to the staff at hand and the success of the employees that currently work at the BWL, he believes it is imperative that people are given the opportunity to step up to the plate. Everyone will not have the ability to meet the challenge. However, without giving people the opportunity to try then it sends a bad message to the organization. Mr. Goree further noted that he is a conceptual person and Board Mtg.Minutes January 23,2007 Page 23 of 63 not a detailed person. He went onto advise that he is much better suited as a conceptual individual as opposed to a detail oriented individual. Commissioner Smith noted that it was well stated when Mr. Goree implied conceptualism since some of the physiological and emotional issues cannot be dealt with in a bullet point presentation. She went onto state that she believes Mr. Goree outlined and gave them a good overlay as to the organization and not just Human Resources but how HR strategically fits into the organization. Commissioner Smith also noted that Mr. Goree dealt with the system issues, the flexibility of the organization, its rigidness, and fragmentation. She went onto state that the wheels of change are slow but that there needs to be a comprehensive plan as to how they address the issues as an institution. Mr. Goree responded by stating in his opinion, the BWL has approximately 6 —9 months to have a large impact if they start the first of 2007. Therefore, the BWL can state that by September 2007 all of"these" things will be done and you must start immediately. The 100-day plans create a sense of urgency but not a sense of panic. Mr. Goree explained that once you become accustomed to it then it becomes a part of the system of always improving every 100-days. Commissioner Rios noted that they should keep in mind the key purpose of the audit. The Board has heard a lot of the information that suggested the problems that were presented in the report. Commissioner Rios went onto note that they wanted to have an independent objective person to evaluate the BWL and he was pleased that Mr. Goree accomplished what they asked him to do. Part of that process was to receive recommendations from an outside objective viewpoint from someone who is professionally trained and experienced in dealing with organizational opportunities so that they could move the BWL forward. Commissioner Rios stated that to him it is very important as they discuss the report that they also keep in mind its purpose. The second item is that the Board of Commissioners is not where the changes are going to take place. It is their role to look at the report and either accept it, to the extent that it is accepted and they agree with the direction that the Mr. Goree is recommending, then to discuss it with management and give policy direction in terms of addressing some of the needs and opportunities. The third point is that the Board must keep it simple; part of the simplicity is having a doable plan. Commissioner Rios noted that because of the enthusiasm, they might think that they can accomplish these goals overnight but they are not going to be able to do so. He went onto explain that the Commissioners job is to take the report in its entirety and keep in mind its purpose and understand their respective roles as a Board versus that of management and employees. And to also address with management, the extent to which they agree and acknowledge some of items within the report. Commissioner Rios advised that there would be different views on the priorities of some of the actions that can be taken. He went onto state that there are perhaps some operational difficulties that will not allow them to do everything that they want to do in the first 100-days as it might carryover to the second 100-days. Commissioner Rios stated that from his perspective, up to this point they have fully accomplished their objective as a Board. Their challenge as he sees it is for the Board to come to terms with management and to set a plan in motion that makes sense and delivers the types of results Board Mtg.Minutes January 23,2007 Page 24 of 63 that they can all be proud of and continue to be better. Commissioner Rios advised that Mr. Goree has done a lot of research and knows the organization as well as anyone could and probably better. He went onto suggest that he would like to see Mr. Goree continue with the execution stage. Commissioner Rios advised that as of right now he is the Board's employee but once they receive the report and give him additional assignments then he thinks the ball is passed to management. He also stated that one of the things he would encourage management to consider is taking advantage of this very important resource and developing an action plan for the future. Commissioner Smith stated that she thinks time after time it has to be a doable plan and that whatever is implemented, simplicity must be paramount. She also noted that it must be something that is doable, as they can clearly see there are some areas that need to be addressed and the execution of the plan is not something that the Board of Commissioners will do. Commissioner Smith explained that their job is to implement policy, make sure that policy supports the document so that new things can be implemented in the organization. She further advised that trust was the paramount issue and the report was presented to everyone at the same time. How people interpret it maybe somewhat different but they are all on the same page in that there must be change and change must begin now. Commissioner Smith noted that there is a wonderful opportunity to implement some very important ideas. She also commented that she did not always believe that the answers are not there but that sometimes they are not asking those that have the answers. Commissioner Cochran indicated that he has the utmost respect for Mr. Goree and he has fulfilled his every wish. He further acknowledged that Mr. Goree is worthy of his trust and thanked him for his wonderful performance. Commissioner Cochran then asked Mr. Goree if he had anything that he would like to comment on to the Board of Commissioners with prior counsel approval that would require a closed session? Mr. Goree responded by stating that his understanding is that a closed session requires conversation about specific individuals. He then asked if that was a fair statement? Amy Cavanaugh, General Counsel responded by stating that if he wanted to talk about specific individuals then that that would be classified as a remark or a complaint. Therefore, that individual person has the right to request a closed session. Mr. Goree stated that at this point, the challenge is that the role of the Commissioners versus the role of the management and he believes that the Board is in governance and management is in operations. Therefore, if there are individuals that he believes need some intervention then that is a conversation that he would prefer to have with the General Manager and not with the Board of Commissioners. The Board of Commissioners sets policy and the daily operational executable issues reside with senior management. Commissioner Cochran asked Mr. Goree if he is available to do what Commissioner Rios has suggested in continuing with this work? Mr. Goree noted that he has two passions: 1) the success of his clients and 2) achieving his goal of doing whatever he can to not be Board Mtg.Minutes January 23,2007 Page 25 of 63 here. As a result, he will do whatever he can to help the BWL and his calendar is always adjustable depending upon the circumstances. Commissioner Rios asked Dick Peffley, Interim General Manager if he wanted to make any comments? Mr. Peffley responded by indicating that he had just received the report and did not have any comments at this point. However, he did note that he looks forward to working with Mr. Goree. Mr. Peffley went onto state that as with any audit he is looking at how to improve. The BWL had an engineering audit and will conduct a production audit. Mr. Peffley noted that he saw the Human Resource Audit as another tool to help improve the BWL. Motion by Commissioner Cochran, seconded by Commissioner Smith to accept the Human Resource Audit report as presented and forward it to full Board for consideration. Carried unanimously. A complete copy of the `Lansing Board of Water and Light, Human Resource Audit, Preliminary Analysis and Findings" report is on file with the permanent minutes. The Committee of the Whole took a meeting break at 6:03 p.m. and resumed at 6:20 p.m. Discuss Executive Search Firm RFP's Received for the GM Position The Commissioners discussed the number of firms that they would like to interview in awarding the Request for Proposal (RFP) to an executive search firm for assistance in hiring a new General Manager. They also discussed the possibility of changing Dick Peffley's title from "Interim General Manager" to "General Manager" for a term of one- year, based on Michael Goree's recommendation to delay the process for up to 9-months. Commissioner Calkins introduced a motion to stop the process and remove the word "Interim" from Dick Peffley's title and allow him to operate as the permanent General Manager for one-year. Commissioner Cochran advised that he did not think they should stop the process of hiring a new General Manager but they should consider delaying it. As such, Commissioner Cochran seconded the motion. Discussion: The Commissioners expressed their respect and support of Mr. Peffley and the work he has done thus far. They also welcomed him to become a part of the process and apply for the permanent position. The Commissioners agreed that they want to continue with an open process and would like to ensure that they have the best candidate available. The Commissioners agreed to move forward in conducting a national search as had been previously outlined. After further discussion, Commissioner Calkins redrew his motion from the floor. Motion by Commissioner Smith, seconded by Commissioner James to award the Request for Proposal bid for the Executive Search Firm to Charles Blockett, Jr. & Associates. Board Mtg.Minutes January 23,2007 Pa.-e 26 of 63 Discussion: The Commissioners expressed concern in awarding the bid without conducting interviews with the top 3 candidates. It was recommended that the Board proceed with an open process and interview the executive search firms prior to making a final decision. Commissioner Graves particularly noted that he believes the Board should continue with the process that they have outlined and therefore, it should not stop. He recognizes the suggestion made by Mr. Goree to delay the process but believes they should move forward. Commissioner Graves also noted Mr. Peffley's good works and invited him to become a part of the process if he so desires. As such, Commissioner Graves went onto suggest that they proceed with the initial process of interviewing the top 3 RFP respondents. He explained that Charles Blockett, Jr. & Associates, Inc. was the only firm in which all of the Commissioners voted to interview. Based on Mr. Blockett's national success and success with the Board of Water and Light he supports the motion currently on the floor. The motion to award the RFP bid to Charles Blockett & Associates, Inc. failed by the following vote: Yeas: Commissioners Graves, James and Smith. Nays: Commissioners Calkins, Cochran, Rios and Rodocker Absent: Commissioner Zerkle Motion by Commissioner Cochran, seconded by Commissioner Graves to interview the top 3 firms listed on the voting tally sheet: Charles Blockett, Jr. and Associates, Inc., Varnum Consulting, and ASG Renaissance, LLC. Discussion: The Commissioners advised that there are actually four top firms on the list based on the number of votes that each firm received. It was indicated that interviewing the top 3 would not be fair to the fourth candidate as they received the same number of votes as the third candidate. It was suggested that perhaps they should either interview the top 2 or 4 candidates based on the voting results. Commissioner Smith suggested that they see what the voting is like at this point and have each Commissioner state their top 3 candidates that they would like to move forward. At that point, if there is a majority that has a top three firms then those would be the firms that they would interview. Commissioner Rios made a friendly amendment to interview the top 4 candidates, which included Charles Blockett, Jr. and Associates, Inc., Varnum Consulting, ASG Renaissance, LLC, and The Rehmann Group. Commissioner Graves accepted the friendly amendment. Board Mtg.Minutes January 23,2007 Page 27 of 63 Discussion: Commissioner Smith stated that she thought three firms was a good round number for the RFP's. She went onto say that if it seemed somewhat challenging then it maybe due to the lengthy meeting. However, this is what the Board meeting is, a discussion of the process. The motion to interview the top 4 firms of Charles Blockett, Jr. and Associates, Inc., Varnum Consulting, ASG Renaissance, LLC, and The Rehmann Group carried by the following vote: Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None Absent: Commissioner Zerkle. The Board charged Commissioner Cochran, Human Resource Chair with the responsibility of establishing an interview schedule with the BWL Purchasing Department. Discuss Separate Forecast by Utility Request Commissioner Rios advised that Commissioner Graves had requested some information from staff that he felt necessary to evaluate the issue of cross subsidization of utilities. Commissioner Rios asked Mr. Peffley for a status update and whatever other information deemed appropriate. Mr. Peffley explained that staff has prepared some information, which they are scheduled to send to the Board that addresses most of Commissioner Graves concerns. He went on note that they have met separately with Mr. Beauchamp, Consultant and Charles Moore, Interim Internal Auditor. A policy recommendation will be forthcoming on the six-year forecast strategy. Commissioner Graves stated that he understood that Mr. Peffley will send a summary of his initial request and they will have opportunity at the next Committee of the Whole or Board meeting to discuss the information and ask questions. Commissioner Rios asked Mr. Peffley to present a timeframe for the next step in terms of discussing the recommendations. Discuss Privileged Document Moved by Commissioner Cochran, seconded by Commissioner James to go into executive session to discuss a privileged document received from Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (6:51 p.m.). The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None. Board Mtg.Minutes January 23,2007 Page 28 of 63 Absent: Commissioner Zerkle Carried unanimously. The motion carried unanimously for the Committee of the Whole to return to open session. The Committee of the Whole reconvened in open session at 7:15 p.m. Motion by Commissioner Calkins, seconded by Commissioner Smith to pay the Foster, Swift, Collins & Smith, P.C. invoice number 483218 for services rendered in July 2006. Carried unanimously. Motion by Commissioner Calkins, seconded by Commissioner Cochran to meet with counsel from Foster, Swift, Collins & Smith, P.C. in the regards to invoice number 483024 for services rendered in November 2006. Carried unanimously. Motion by Commissioner Calkins, seconded by Commissioner Graves, to review the current legal billing process. Carried unanimously. Other Commissioner Calkins inquired as to the BWL's street lighting process for decorative lighting, repairs and replacements. Doug Wood, Director of Engineering explained that the City of Lansing, namely Chad Gamble has to approve any decorate light installations. In cases of accidents, where damaged has occurred, the BWL will replace the light fixture with whatever was already in place. It was further noted that streetlights that are out or in need of repair should be reported to the BWL Customer Service Center. It was also stated that the BWL typically repairs streetlights that are out within 5 days and structural repairs within 12 days. There being no further business, the meeting adjourned at 7:22 p.m. Respectfully submitted Santiago Rios, Chair Pro Tern Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Rodocker, to receive the Committee of the Whole report as presented. Board Mtg.Minutes January 23,2007 Page 29 of 63 Action: Carried unanimously. esolution COMMITTEE OF OF THE WHOLE January 9, 2007 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, January 9, 2007. Committee of the Whole Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Joseph Graves (teleconference), Semone James, Santiago Rios, Julee Rodocker, Robin Smith and Sandra Zerkle. Absent: Commissioner Robert Cochran. Public Comment Joseph Davis, Business Manager of IBEW Local 352 noted that Michael Goree of Growth Strategies, Inc. was asked to present the Human Resource Audit results to the bargaining unit. After discussions with Sheryl Hudson, Acting Human Resource Director and Dick Peffley, Interim General Manager, meetings were coordinated for the entire Board of Water and Light. The sessions will take place on January 10"'. He went onto advise that Bill Cook, Senior Vice President of Operations, Dick Peffley and himself were asked to appear at the meetings. Mr. Davis also reported that the bargaining unit met with Mr. Peffley in which Commissioner James was present. The meeting allowed them to address some issues that were touched upon in the audit report and move forward. Mr. Davis noted that the BWL had a tough year in 2006 but they are interested in addressing issues and moving forward with the assistance of Ms. Hudson and Mr. Peffley. Customer Satisfaction Survey Andy Morrison of Market Strategies presented the summary of June and January 2006 results of the Lansing Board of Water and Light, Customer Satisfaction Research Briefing. The results were originally presented to senior management August 11, 2006. However, due to the Board's calendar and scheduling conflicts the results were delayed in being presented to the Board of Commissioners. Mr. Morrison gave a high level overview of the results, which are detailed within the body of the report. He advised the Board that natural gas prices in 2005 and 2006 were extraordinarily high across the country and had a specific impact on gas utilities. Mr. Morrison also noted that there were some catastrophic events in the industry, principally the hurricanes in the southeast and a variety of problems related to reliability that have created new demands and tensions. On the electric side, there have been some states that have impacted customers with 50% plus electric rate increases. There have also been customer service issues and demands on the service systems of energy utility clients, which are continuing to Board Mtg.Minutes January 23,2007 Page 30 of 63 increase. He also advised that traditionally, customers are used to 24-hour access to their respective utility company and energy companies are behind the curb in terms of addressing customer service demands. Mr. Morrison reported that all of these items lead to value issues with the customer. He also noted that if you put that in the context of their national model then the issues that they address for all of their utility clients could be summarized into four key performance drivers: reliability and restoration, service reputation, management reputation, and electric rates. Mr. Morrison further explained that the data suggests that customers lag behind politicians with regards to environmental issues, as they appear to be more concerned with monetary cost than environmental impact. Some of the other issues Mr. Morrison addressed included: long-term customer anger and concern over energy prices, commitment to the value proposition(s), and a realistic goal to stay strong as the BWL has done over the last 2-3 years as the industry is going to be very challenged. In summary, Mr. Morison concluded the following points: • The Board is regaining a stronger position with customers as the "lead in drinking water" issue fades in terms of close public attention, and customers are feeling somewhat more positive about the rate situation for electricity and water. In 2006, it is rare to find any utility whose customers actually feel a bit more positive about rates. • Electricity satisfaction and overall favorability are both up five points. Water satisfaction has not recovered yet. The results for all outcomes are still not yet back to the strongest levels of past years. • The Board's communication and community involvement activities through January continue to provide important support for and help to improve customer relations and satisfaction. The "Connections" newsletter has been an important channel in the past and may need a review to see how to make it more relevant. Utility websites are becoming an increasingly used and useful channel for customers. • The question the Board should address pertains to what the "value proposition" will be for customers in the next few years. What can customers expect from the Board, and what will they be asked to consider and do in terms of how they relate to the Board? - Reliability - Customer Service -Management - Rates and Energy Management Codes of the "Customer Satisfaction Research Briefing" results are on file in the Office of the Corporate Secretary. Steam Abandonment Board Mt,-.Minutes January 23,2007 Page 31 of 63 Doug Wood, Director of Engineering presented the Restricted Steam Abandonment Policy to the Board of Commissioners. It was explained that the purpose of the policy is to establish the following: • Abandon selective uneconomic areas of the steam distribution system that meet certain criteria • Customers in these selected areas must convert to another energy source • The BWL will convert the customer to an alternate energy source at no cost to them Mr. Wood also noted that some of the criteria used to determine potential abandonment areas include: • Safety to BWL employees and customers • Age of system (main & services) • Steam main pressure and/or leak problems • Deteriorating manholes • System losses • High Operating &Maintenance costs • High infrastructure replacement costs • Low revenue Mr. Noted advised that the steam service map indicates potential abandonment areas that meet the criteria previously addressed. Areas 1 and 2 were used as a pilot program and customers were asked if they would voluntarily convert from steam to natural gas. He also noted that they were very successful in converting those customers. However, Oldsmobile Park opted out, which did not deter the project from proceeding due to the location of their facility relative to the remaining customers. The cost of conversion for Area 1 was approximately $300,000 and it saved approximately$500,000 in O&M costs with very little revenue associated with the area. Bill Cook, Senior-Vice President of Operations commented that the CSO project may require the BWL to move or affect a main that they might not otherwise have done. This in essence would change the timing as to when it is economical to convert customers from steam to natural gas. Mr. Cook noted that the BWL is incurring cost that it might not otherwise have but there is no means to recover the cost as the steam mains are in the street right a way. The Commissioners asked that since they are aware of the CSO project, is there a way for the BWL to overlay their work so that they can approximate the cost of conversion? It was also asked if any of the areas would show that the cost is greater than the recovery? Mr. Wood noted that based on their estimates of historically replacing steam they know what the project is going to cost. He also advised that based on the CSO planning for the next 20 years, the BWL can determine costs for those respective areas. In regards to the second question, Mr. Wood noted that one might start seeing some other areas (relative to cost being less than recovery) and start paring back. He went onto state that there are definitely some revenue areas in the downtown vicinity such as, Lansing Community College in which there are no structural or manhole problems. Board Mtg.Minutes January 23,2007 Page 32 of 63 Mr. Cook noted that the BWL has invested a significant amount of money over the last several years in keeping up with the CSO project and there is now some new infrastructure in the downtown area. Mr. Cook went onto report that there might be a pruned back steam system that works for the BWL but they are not yet prepared to make that determination. The question still remains, what is the core downtown business in which they can sustain the steam utility? Mr. Wood advised that Areas 3 and 4 with a total of 25 customers are two additional areas that the BWL would like to convert from steam to natural gas. The fiscal year 2006 revenues for the two areas were $39,774. The O&M expenses for fiscal year 2007 are $146,135 and the 20-year capital cost requirements are $4,894,000. Staff clarified that the capital cost requirement would not be paid out over the course of 20 years. Typically, the BWL would continue to incur O&M expenses at approximately $100,000 a year for Area 4 and then an additional lump sum cost of$2,500,000 at present value would be incurred at some point in time. It was also noted that it economically feasible for the BWL to convert Areas 3 and 4 without having to wait for the CSO project. Once the CSO project goes through those areas, then the mains would have been capped, and would only require nominal cost to remove and strap the mains. It was further advised that the difference between this policy proposal and the previous pilot program is that this one would be mandatory as opposed to voluntarily. Staff also noted that based on their experience with Areas 1 and 2, the BWL has estimated a conversion cost for Areas 3 and 4 at a total of$800,000, which is subject to change. A detailed engineering estimate is still needed by outside contractors ID to determine the final cost. Commissioner Zerkle asked what would be a customer's argument to resist conversion? Mr. Cook noted that to the extent that the price of steam is less expensive than the cost of natural gas. He also reiterated that the conversion project would have no upfront cost to the customer. However, the negative impact would be if natural gas were more expensive than steam. Commissioner Rios commented that the cost of steam to customers is an unknown factor at this point. As the Board, passed a reduced rate increase that was not sufficient to cover the base, which further created a significant gap in the BWL's ability to maintain services. Commissioner Rios also noted that they have elected to look at the entire steam system to determine what can they do to reduce their cost and exposure to help avoid significant rate increases. Mr. Cook explained that one issue that may arise is a customer's desire to convert but they are not located in a designated conversion area, which is why the BWL needs a steam abandonment policy to address those issues. Board Mtg.Minutes January 23,2007 Page 33 of 63 Commissioner Rios also noted that he understood why it is called "abandonment" but expressed apprehension with the terminology used as it delivers a negative connotation. Dick Peffley, Interim General Manager advised that they could work with the Communications Department in developing a marketing package for this project. The Commissioners were in agreement with the suggestion. Commissioner Graves asked Amy Cavanaugh, General Counsel if the BWL is setting precedence by absorbing the conversion cost for some but perhaps making a different decision in the future? For example, the steam utility is not profitable therefore all customers have to convert. Is there a precedence issue that the BWL should be aware of? Ms. Cavanaugh noted that there maybe but the larger concern is that as a public utility you have a responsibility to service your customers. There is an issue as to whether or not the BWL can abandon steam because they have steam customers. Ms. Cavanaugh stated that the conclusion she has reached thus far is that service for the BWL is a contractual matter for some customers. Whereas, there is no obligation to serve them at the end of their contractual period and hence the BWL would have more lead way as to the terms of the conversion costs. However, for customers who are under the Rules & Regulations, then the rules maybe different. She went onto note that for those customers, since the BWL is a public utility and has a duty to serve then the easier course of action would be for the BWL to pay for the cost of conversion. Ms. Cavanaugh noted that she has not been able to locate anything that supports the BWL's ability to walk away from the steam utility business especially, since this is a vital service—heat. She further stated that she believes the BWL would possibly set itself up for a claim if it did not pay for the cost of conversion. Charles Moore, Interim Internal Auditor asked if the BWL has any exposure with the difference between the BWL rates and involuntarily conversion? For example, whereas a customer now experiences a significantly higher heating bill compared to what they would have received if they had been allowed to maintain steam service with the BWL? He further noted the difference between voluntary and mandatory conversions and asked if the BWL is imposing any liability associated with a mandatory conversion? Ms. Cavanaugh reported that the Rules & Regulations has some language that assists the Board in this matter. Primarily to the extent that safety is an issue then there would be no liability to the BWL. In instances of economics, its more of a concern especially, since the current Rules & Regulations speaks about getting customer permissions for doing a project of this nature. Ms. Cavanaugh noted that the Board could change the Rules & Regulations, which would help insulate the BWL from potential liability. Mr. Cook stated that from a practical stance they are saving $2,500,000 by cutting over 20 customers to natural gas. The argument could be made that if those customers did not convert then the cost of maintaining the service specific to that area could be allocated to respective individuals, which would be a price signal that perhaps it is time to convert to gas. During discussion, it was indicated that the BWL could differentiate the cost for serving different customers if you have a separate rate class in which it could appear as a Board Mtg.Minutes January 23,2007 Page 34 of 63 surcharge. However, staff noted that the BWL does not separate rate classes based on geographical areas. It was further suggested that the cleanest method is voluntary conversion. Commissioner Rios noted that the reasonableness and viability of the plan is based on the BWL's financial assessment of the steam business. They have always treated the steam business as one entity in terms of rate increases and there is no rate classification of steam customers. He went onto note that part of the justification has to come from projections in terms of steam rate increases necessary to support the business. Commissioner Rios also reported that he believes that this has to be built into whatever rate policy they develop. Keeping in mind that the last steam rate increase did not cover the BWL's total cost. He also advised that there is economic justification for steam rate increases that would cover the cost differential for propane. Mr. Wood continued with the presentation and noted that the recommendations are as follows: Adopt a Restricted Steam Abandonment Policy based on the following: 1) Areas that have O&M, low revenues, high capital investments to replace infrastructure and safety to BWL customers. 2) Where O&M costs exceed the annual revenues and/or when the capital improvements show the 20-year present worth is less than capital cost to continue service. 3) For Areas 3 and 4 the BWL will contract, oversee and pay for converting customer's equipment to another energy source. 4) Future potential conversion options will be at the discretion of the BWL. 5) This policy would only apply to the customers in areas currently identified by the BWL or areas selected by the BWL in the future. Commissioner Calkins asked how do they decide and establish what type of heating system the BWL is going to install? Mr. Wood noted that it is based on the minimalist cost possible to convert the customer from to steam to natural. He also explained that if the customer wanted something greater than what the BWL offers then the customer would incur the cost differential. Mr. Wood also advised that in previous projects, customers either had an existing forced air system that the BWL replaced or piping hot water piping in which a boiler installed. Commissioner Zerkle stated that based on Commissioner Graves' previous statements what is going to happen after Areas 3 and 4 are converted and the program ends but others want or need to convert? How would the BWL handle that situation? Mr. Cook responded by stating that if they met the same criteria for Areas 3 and 4 in respect to the 20-year payback and other criteria items then they would be treated the same way. Board Mtg.Minutes January 23,2007 Page 35 of 63 Commissioner Rios noted that unless it is a mutual benefit for the BWL and the customer based on the criteria then a conversion from steam to natural gas does not make sense. He also stated that crafting the rationalization, the description, articulating the reasons, and giving them plenty of flexibility to determine how far the BWL wants to take the program is a challenge. Commissioner Rios went onto explain that they want to make sure that they do not create a situation where people are going to want to convert at a time in which it does not make sense. He further advised that the standards that they implement in terms of policy will determine how are they make those types of decisions. Mr. Cook clarified that the Board had previously approved the budget and a voluntarily steam abandonment policy. If the project cost is going to be 15% or more than what was originally budgeted at$812,000 then they would bring the item back to the Board for approval according to policy. However, if the final cost figure were below that amount then they would proceed with the project. The Commissioners agreed to continue the steam abandonment project on a voluntary basis or at least until they have solidified the overall steam plan. At present, there are still questions relative to cost, public reaction and legalities. Commissioner James noted that the BWL could legitimately say it is mandatory when you take into account safety issues. She also indicated that one could look at the cost benefit analysis and also review rate categories for the respective areas. Commissioner James further advised that she would like to make sure that the BWL is covered legally as volunteerism may not insulate the BWL. Mr. Wood noted that safety issues typically occur in the manholes because the crews have to get in them. He also reported that leaks within the main heat up the manhole cover somewhere else and that is how stepping on the hole especially in the summer while barefoot could endanger the public. Staff advised that one could always pay the $2,000,000 in structural repair cost to alleviate the safety issues. Mr. Cook concluded by stating they will move forward with the project on a voluntarily basis and if issues arise then they would bring them before the Board; no specific action is needed at this time. Watson Drain Easement Mr. Peffley advised that the item was removed from the agenda, as it has been resolved. Renewable Portfolio Pete Schimpke, Manager of Resource and System Planning presented an overview of the Renewable Energy Portfolio Standard Resolution. It is noted within the presentation that, "A renewable portfolio standard (RPS) is a policy that requires electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date." Board Mtg.Minutes January 23,2007 Page 36 of 63 A brief summary of the key reasons for BWL to adopt a RPS are listed below: • The Energy Policy Act of 2005 amended Title 1 of the Public Utility Regulatory Policies Act of 1978 (PURPA) requires utilities to consider a plan to minimize dependence on one fuel source and to ensure that electric energy is generated from a diverse range of fuels and technologies which includes renewable technologies. Governor Jennifer Granholm has required the MPSC to develop an Energy Plan no later than December 31, 2006. (The plan should be released next week, which will require renewable portfolio standards.) This 21St Century Energy Plan is required to include an RPS that establishes targets of Michigan's energy consumption to be derived from renewable energy sources. sion: "Adding new generation could better provide for reliability IRP Study Conclu and low-cost utility service over the long term." IRP Study Conclusion: "Wind energy turbine technologies coupled with the available wind resource within Michigan offer the prospect of production costs competitive with coal-fired generation. • IRP Recommended Action Step: "Consider ownership or long term power purchase from large wind power projects or other renewable portfolio power projects." • Appropriate and prudent for the LBWL to explore additional renewable energy supply opportunities, as a part of ongoing efforts of meeting the electricity supply requirements of its customers and in complying with the anticipated statewide RPS. Mr. Schimpke noted that to his knowledge none of the other Michigan based utility companies have formally approved a RPS policy. Although, Consumers Energy (CE) and DTE are currently working to develop one. Mr. Cook also reported that although the BWL is not under Michigan Public Service Commission (MPSC) authority, legislation maybe developed that would place the BWL under some form of requirement. He further commented, that by acting now, the BWL could define what they want as opposed to someone defining it on their behalf. Mr. Peffley advised that other utilities are going to buy up the existing resources and the BWL does not want to be in a position where they cannot located the needed renewable resources for the RPS policy. Staff explained that the resolution is flexible. The flexibility of the resolution allows the BWL to make changes if deemed necessary and appropriate. It also requires the BWL to report back to the Board of Commissioners on the progress of achieving its goals. Board Mtg.Minutes January 23,2007 Page 37 of 63 Mr. Schimpke noted that the proposed percentage levels are based on the research they conducted and nationwide information. The proposed RPS Resolution states that: The BWL shall strive to generate or purchase electricity generated from eligible renewable energy sources at the following target levels: 1. Two percent (2%) of electric retail sales (kWhs) by December 31, 2008; 2. Five percent (5%) of electric retail sales (kWhs) by December 31, 2012; 3. Seven percent (7%) of electric retail sales (kWhs) by December 31, 2016. Commissioner Smith asked what types of things would the BWL has to do in order to meet the standards? Mr. Cook responded by stating that the BWL would probably have to purchase renewable energy to meet the 2008 short-term goals. However, he also advised that some of the recent RPS initiatives at the BWL include the following: • Repower 1-wheel BWL Hydro at Eckert (4000Mwhrs) • Evaluate Repowering 2°d Wheel at Eckert. • Renew Greenwise supply from Tower Kleber Hydro (6500Mwhr) • Working with Granger regarding purchase of Biomass generation. • Working with Traverse City Light and Power regarding a wind site in mid-Michigan. Commissioner Graves asked if CE has contracts with Granger for biomass and have they set the market rate? Mr. Schimpke responded by stating that CE has a contract with Granger and others but he is not aware of all of them. He went onto note that based on the responses they received for the Request For Proposals (RFP) then it does not appear that CE has set the market price. However, Mr. Cook did note that as soon as the RPS standard is set then the price of renewable energy would increase. Commissioner Calkins asked if the BWL has any idea as to what the State of Michigan is going to propose? Mr. Schimpke stated that they do not know what the State will propose. However, they believe that the State's numbers will be similar to what the BWL is proposing. Mr. Cook clarified that the MPSC is conducting a study initiated by Governor Granholm. Once the study results are presented, then it would probably be a blueprint for some type of legislative action. The MPSC does not regulate the BWL and as such, it would require legislative action for it to affect the BWL. Mr. Cook went onto note that the BWL is attending the 21" Century Energy Plan meetings and the BWL's mantra has been that this is a great idea but the plan should allow municipalities to regulate themselves as the charter dictates. Mr. Schimpke presented the RPS Resolution Parameters that include the following: Board Mtg.Minutes January 23,2007 Page 38 of 63 • Levels may be adjusted to meet future legislative requirements. • All costs reasonably and prudently incurred in procuring renewable energy sources will be considered cost of service and recoverable through electric sales. • Each January staff will prepare a report on status of achieving target levels. Commissioner James asked if the BWL is looking to capture methane gas? She went onto note that the Michigan Land Bank Fast Track Authority (a division of Michigan Department of Labor and Economic Growth) has five landfills in their portfolio in which they are currently looking at methane gas. Mr. Schimpke noted that methane gas is an option that the BWL has discussed with Granger. He also reported that the reliability of such an asset is very high. On motion by Commissioner Smith, seconded by Commissioner Calkins, the Committee of the Whole unanimously agreed to move the Renewable Energy Portfolio Standard (RPS) resolution forward to the full Board for consideration. Delta Township Wholesale Water Contract Update Moved by Commissioner Calkins, seconded by Commissioner Smith to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel protected by the Open Meetings Act exemption MCL 15.268(h). (7:22 p.m.) The roll was called. Yeas: Commissioners Calkins, Graves (teleconference), James, Rios, Rodocker, Smith, and Zerkle. Nays: None. Absent: Commissioner Cochran Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole meeting reconvened in open session at 8:08 p.m. Commissioner Rios advised that the Board had discussion and received an update from staff on the Delta Township wholesale water contract. The Commissioners directed Ms. Cavanaugh to continue to work to resolve the matter. Discuss Legal Review Process In the interest of time, the discussion regarding the Legal Review Process will be moved to a later Committee of the Whole meeting. Board Mtg.Minutes January 23,2007 Page 39 of 63 Other Internal Auditor Interview Questions Commissioner Calkins stated that he thought the previous interview questions used in the selection of the Internal Auditor were adequate. However, he suggested that Charles Moore, Interim Internal Auditor review the questions to see if he has any additional questions. Commissioner Calkins also clarified that the use of the previous questions would be in lieu of developing new questions and conducting a 2-hour structured interview training session with Mr. Blockett. The Commissioners were in agreement with Commissioner Calkins suggestion. As such, Mr. Moore will review the questions and submit any possible changes to Secretary Jones. Proxy Rights Commissioner Calkins stated that he read the email regarding the designation of proxy rights and indicated that he did not believe that a Commissioner could designate proxy to another party. The Commissioners agreed that a Commissioner could submit information that the Board may consider but that it would not involve voting rights. It was suggested that the Board might need further clarification in the Rules of Procedure, as the existing guidelines are silent on this subject. Committee Meetings Secretary Jones advised the Board that staff needs to present two policy recommendations to the Human Resource Committee before the next Board meeting scheduled for January 23rd Commissioner Rios advised that to the extent possible they should always try to accommodate schedules so that they receive maximum participation. However, they cannot slow down the process due to scheduling conflicts, vacations, etc. Commissioner Smith advised that they have committee alternates and any committee member or alternate can chair the meeting for the chair if necessary. She went onto explain that if the chair would prefer to decide who should chair in their absence then that is acceptable. Therefore, if one can obtain a quorum with the use of alternates then the meeting should continue. Commissioner Rios also noted that during the Board retreat they also agreed that they would establish an annual calendar to be more efficient and respectful of their other responsibilities. He went onto note that they would be adjustments in the future and they need to plan for those accordingly. Commissioner Calkins asked what is the policy if the chair is not present? Commissioner Smith responded by stating that she did not know if there is an actual policy in place, as she believes their Rules of Procedure are silent to the issue. However, Board Mtg.Minutes January 23,2007 Page 40 of 63 in the past if there is a quorum then they proceed with the meeting and typically the chair will ask someone else to chair in their absence. Joint Committee Formation Commissioner James stated that during the previous Committee of the Whole meeting they gave Michael Goree a directive to work with Dick Peffley. During the meeting, the Commissioners did not establish goals, deliverables, or a monetary amount, which she thinks necessary, as she did not want an open-ended contract. Commissioner James went onto note that the union may want to provide input. As such, she encouraged the formation of a committee that consists of management and employees to facilitate the evaluation and possible implementation of the Human Resource audit recommendations. Commissioner James went onto note that the communication that she put forth before the Board today was an instance in which the union made her aware of an issue. The Commissioner's discussed the protocol and appropriateness of the receipt and response of correspondence. After lengthy discussion, they generally agreed to strive for the uniform sharing and response of all communications that maybe sent to individual Board members. Commissioner Rios stated that everyone that includes, Commissioners, management and employees alike, have to be cognizant of the correspondence process. He went onto note that if an official request is received then it should be forwarded to the entire to the Board. Commissioner James asked that she receive a copy of the BWL's response to the FOIA request submitted by Brookover. Secretary Jones advised that she would forward copies of the information to the entire Board. Human Resource—Scope of Work Mr. Peffley advised that during the previous meeting, the Board instructed him to work with Michael Goree of Growth Strategies, Inc. in regards to the Human Resource audit findings. Mr. Goree prepared a scope of work in which he identified 14 deliverables with an estimated timetable of 4-5 months at 60-70 consulting days at a $1,000/day with a cap amount of$70,000. Mr. Peffley noted that Mr. Goree still has his full support to work with Sheryl Hudson, Acting Human Resource Director to implement the deliverables. He went onto ask the Commissioners for their input and noted that there are five meetings scheduled for Wednesday, January loth in which Mr. Goree to scheduled to present the report to all BWL employees. Mr. Peffley further stated that he is following up with this request, as was the direction from the Board. He also noted that Ms. Hudson spoke to the Purchasing Department to ensure that the contract extension is not in violation with the existing purchasing policy. Mr. Peffley reported that the scope of work is very aggressive and it was submitted earlier that day and hence he wanted to advise the Board as to its progress. Commissioner Rios stated that he wanted to clarify their previous request in which they did not direct Mr. Peffley to contract with Mr. Goree. He noted that his recollection was Board Mtg.Minutes January 23,2007 Page 41 of 63 that the Board suggested continuing to involve Mr. Goree in the process. Commissioner Rios went onto advise that what they did ask was that Mr. Peffley would work to implement the recommendations made within the report. Commissioner Rios then noted that it was his suggestion that Mr. Goree would continue on that basis. He went onto to explain that it is Mr. Peffley's responsibility to decide the best course of action to take to implement the recommendations or to reject them and to keep the Board abreast of the project. Mr. Peffley stated that with that understanding these are Mr. Goree's recommendations and he will provide a list of his own recommendations with a cost analysis associated with it. He went onto note that the scope of work represents everything that Mr. Goree would like to address with the worse case scenario for timing and cost. Commissioner Rios commented that the BWL has a lot of capable people who are responsible for accomplishing the tasks that are on the list. From his perspective, what they would receive from Mr. Goree is guidance and assistance in developing the tools and processes that might help staff in implementing the changes and adjustments. Commissioners Rios noted that a$70,000 contract seemed excessive. Commissioner Smith advised that once Mr. Peffley decides which items needs to be handled then it would be up to him to decide Mr. Goree's level of interaction. Commissioner Graves noted that he agreed with Commissioner Rios summarization of the previous Committee of the Whole meeting. However, they did say said go forward and work with Mr. Goree and he thought to implement a plan for addressing the issues that are in the report. Commissioner Graves went onto explain that at this point, he thinks they have transitioned from the report to what is clearly operational. He stated that he does not think that Mr. Peffley should bring anything back to the Board other than information that he wants to share in regards to how the BWL is moving forward. Commissioner Graves further reported that in his opinion that they do need the assistance of Mr. Goree as those were his findings and he thinks staff would benefit greatly from his expertise. He went onto speak to the cost issue, which he thinks is something that management needs to review and determine as to whether or not they think it is an appropriate cost. Commissioner Graves further advised that he thinks that staff should be allowed to go forward and engage Mr. Goree in whatever ways are appropriate and keep the Board informed of their progress. Mr. Moore noted that there should be information in the Rules of Procedure that speaks to the issue of proxy rights. The Commissioners advised Mr. Moore that the existing Rules of Procedure are silent on this issue. Mr. Moore also stated that the BWL needs to develop a plan of action to determine how they are going to address some of the issues within the Human Resource audit report. He went onto ask how does the BWL will get from Mr. Goree's report to a clean report? Board Mtg.Minutes January 23,2007 Page 42 of 63 Commissioner Graves responded by stating that they have now transitioned to management's discretion. He went onto advise that the Board is not there to manage this process to its conclusion as that is not their role. Commissioner Rodocker advised Mr. Peffley that she would like a report that determines how the Human Resource audit report should or could be used at the BWL and then work on a plan to implement it. She went onto note that it is management's responsibility to implement the suggestions and that she does not want to see Mr. Goree in essence become a BWL employee. Commissioner James stated that the discussion ties back to the possibility of forming a joint committee comprised of management, bargaining unit representatives and two Commissioners. After further discussion, the Commissioners advised that the joint committee suggestion would blend the lines of policy and operations, as it is difficult to keep the two separated. There being no further business, the meeting adjourned at 8:46 p.m. Respectfully submitted Santiago Rios, Chair Pro Tern 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 esolution HUMAN RESOURCE RESOURCE COMMITTEE January 11, 2007 The Human Resource Committee of the Board of Water and Light met in the Boardroom of the Administrative Offices, Lansing beginning at 11:00 a.m. on Thursday, January 11, 2007. Acting Human Resource Committee Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Joseph Graves, Santiago Rios, and Julee Rodocker. Absent: Commissioner Robert Cochran. Public Comment There were no public comments. Board Mtg.Minutes January 23,2007 Page 43 of 63 Use of LBWL Communication Technologies Policy The Commissioners met to review and discuss the Use of LBWL Communication Technologies Policy, which if approved will govern the Board of Water and Light's communications that include, but are not limited to: telephones (including cellular and Voice Over Internet Protocol —VOIP), email, internet use, Virtual Private Network (VPN), radios, pagers, global positioning devices, and personal digital assistant (PDA). Amy Cavanaugh, General Counsel outlined the policy and its major components. The policy includes governance relative to communication equipment, permitted uses, prohibited uses, monitoring, safety and security, loss or theft, return, and misuse of equipment. She also explained that VOIP would link BWL's computers to its phone and email system and would also allow for enhanced monitoring capabilities. Ms. Cavanaugh reported that employees should not have an expectation of privacy when using any BWL communication technology. They should also be aware that any documents created using the aforementioned technology is subject to the Freedom of Information Act and thereby, subject to public disclosure. Ms. Cavanaugh also advised the Commissioners that the Internal Revenue Service has recently determined that cell phones given to employees for business use are 100% taxable. The only exemption to this measure is if one can prove that there is no incidental personal use as the IRS deems the cell phone as a benefit to employees. Ms. Cavanaugh also noted that the new IRS mandate would also govern the Board of Commissioners. As it stands, the BWL does allow for incidental personal use provided there is no additional cost to the BWL and work productivity does not suffer. She further explained that if the Board adopts the Use of LBWL Communications Technologies Policy as presented then staff will develop a means to address the IRS's cell phone mandate. The Commissioners expressed concern in approving the policy without supplemental procedures in place to address each respective technology and its application. More specifically, the Commissioners requested that procedures be developed to govern monitoring, its application, the business reasons for monitoring, determining parties with the authority to monitor, tracking requests for monitoring and any other such items relevant to the subject. The Commissioners also advised that it would be prudent to provide training and/or a communication tool for employees to learn of the policy and its implications. Ms. Cavanaugh agreed that she and staff would develop and send the respective policy and supplemental monitoring procedures to the full Board for review by January 171h. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Use of LBWL Communication Technologies Policy to the full Board subject to procedures being received and reviewed prior to the Board meeting. The Human Resource Committee's recommendation will be submitted to the Board on January 23rd pending receipt of supplemental monitoring procedures. Board Mtg.Minutes January 23,2007 Page 44 of 63 Anti-Harassment Policy Ms. Cavanaugh reviewed the Anti-Harassment Policy and noted that the primary modification to the existing policy is mandatory reporting. In the past, reporting of discriminatory behavior was the sole responsibility of managers and supervisors only. The proposed policy change would deem it mandatory for all employees to report discriminatory behavior. The policy specifically states that the term harassment is defined as discrimination based on any characteristic protected by applicable law. It also indicates that the characteristics include race, color, sex, religion, national origin, citizenship, age, disability, height, weight, marital status and sexual harassment. Ms. Cavanaugh also briefly discussed the City of Lansing, Human Rights Ordinance. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Anti-Harassment Policy to the full Board for approval. The Human Resource Committee's recommendation will be submitted to the Board on January 23`d There being no further business, the Human Resource Committee adjourned at 11:54 a.m. Respectfully submitted, Santiago Rios, Acting Chair Human Resource Committee Motion by Commissioner Rios, seconded by Commissioner Calkins, to receive the Human Resource Report as presented. Action: Carried unanimously. Commissioner James arrived at the Board meeting in person at 5:55 p.m.and the teleconference connection ended. esolution 2007- - FINANCE COMMITTEE January 16, 2007 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 3:30 p.m. on Tuesday, January 16, 2007. 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 Gary Calkins, Semone James, Robin Smith and Sandra Zerkle. Commissioner Joseph Graves was also present. Public Comment There were no public comments. Board Mtg.Minutes January 23,2007 Page 45 of 63 Internal Audit Reports— Charles Moore, Including: Six-Year Forecast, Internal Audit Plan and Coal Inventory Control Six-Year Forecast Charles Moore, Interim Internal Auditor presented an executive summary of the six-year forecast, internal audit plan and coal inventory control. During the six-year forecast review, Mr. Moore specifically advised the Commissioners that they should play a larger role in determining the allocation of cost due to the effects that it has on utility rates. He recommended that staff bring allocation methods before the Board for review and approval, for in the past, those decisions were made without Board input. Mr. Moore further noted that the goal of the allocation decisions are to make each utility stand independently by allocating cost more appropriately as it relates to the bottom line. He also provided four examples of cost allocation methods that the Board could use as examples during this process. In addition to the above, Mr. Moore also recommended that the BWL study the capacity for wholesale sales of electricity and water due to its potential revenue generation. He further recommended a thorough review of healthcare cost as the BWL is projecting a 5% increase in years 2 through 6 of the six-year forecast while the rest of the nation is projecting increases of 15% to 20%. Therefore, based on the industry, the BWL's projections appear to be low. He suggested that the BWL conduct a full study of healthcare to determine baseline costs. Mr. Moore briefly addressed the payment in lieu of taxes and noted that the figures met the 4%, which is good based on the current 10-year contract. He further clarified that he did not compare the BWL's existing agreement to other municipalities. Staff reported that the BWL is currently in the sixth year of the payment in lieu of taxes agreement with the City of Lansing. Internal Audit Plan Mr. Moore presented an executive summary of the Internal Audit Plan that can used as a guideline in determining when and what items should be audited and at what frequency. There are a total of 58 items listed within the scope of the review. One of the items specifically mentioned were random periodic P-card audits. The Commissioners commented as to the feasibility of whether or not one individual has the capability to accomplish so many tasks on a yearly basis. It was suggested that the Board might need one person to determine the audits and another one to conduct them. As such, the Commissioners asked Dick Peffley, Interim General Manager to review the budget for the upcoming fiscal period and make a recommendation as to potential additional staffing. Mr. Peffley agreed to review the budget in consideration of adding up to two persons to the Internal Auditor Department and/or outsourcing during peak audit periods. Commissioner Calkins asked Mr. Moore if he has considered utilizing interns in addition to another full-time person? Board Mtg.Minutes January 23,2007 Page 46 of 63 Mr. Moore responded by stating that he has used interns at his own firm in which the persons then became full-time employees. The use of internships allows an employee and employer to determine whether or not they make a good fit for the organization and if the employee likes the work that they are asked to do. Mr. Moore suggested that the BWL could consider an intern(s) as an additional employment option. Mr. Moore noted that it is important for the Board to recognize that the BWL is a large construction company with approximately$60,000,000 a year in maintenance, construction, and capital projects. The question was asked if the BWL has controls in place to monitor construction? Mr. Moore noted that the software is not in place to assist in this process and the existing controls are not tracked on a consistent basis. He also reported that the information gathering should be simplified and that he has not tested the controls as the construction audit would be a project that the permanent Internal Auditor should undertake. Staff advised that the SAP project should help with tracking and thereby, provide additional construction controls. They also noted that satellite inventory is an example of one of the controls that will be useful in monitoring construction costs with the inception of SAP project. Coal Inventory Control Mr. Moore presented an executive overview of the coal inventory control process. During the review, he advised that the process of coal inventory and fuel services, which includes transportation and rail cars are too concentrated within the hands of too few people, primarily that of one BWL employee and one contractor. Mr. Moore did not suggest cause for concern. However, he recommended that the Purchasing Department be involved in the purchase of coal to create separation of duties. He also suggested that someone else be involved in the coal approval process in which that individual would compare the manifest to the national database for accuracy. This would ensure better separation of duties and improved internal controls. Lastly, Mr. Moore also recommended that the new Internal Auditor review past sales and transactions for good measure and due diligence. The Commissioners were receptive to the recommendations and advised that coal inventory has appeared on previous external auditor reports. They also noted that the previous Internal Auditor, Glenn Holloway had also suggested an audit of this nature. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee unanimously agreed to advance Mr. Moore's recommendations made within the Coal Inventory Controls report to create separation of duties within the purchasing and contracting for coal process and the coal approval process. The Finance Committee's d recommendation will be submitted to the Board on January 23' . Board Mtg.Minutes January 23,2007 Page 47 of 63 On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee unanimously agreed to advance Mr. Moore's Six-Year Forecast report and recommendations to the full Board. The Finance Committee's recommendation will be submitted to the Board on January 23`d. Commissioner Calkins made a friendly amendment to state that cost allocations are to be reviewed by the Board on an annual basis. Commissioner Smith seconded the motion. Carried unanimously. Copies of Charles Moore's Internal Audit Reports are on file in the Office of the Corporate Secretary. Legal Opinion re. Impact of Proposal 2 on Resolution 2006-1-3 Moved by Commissioner Graves, seconded by Commissioner Smith to go into executive session to receive a legal opinion from Amy Cavanaugh, General Counsel, protected by Open Meetings Act exemption MCL 15.268(h). (4:24 p.m.) The roll was called. Yeas: Commissioners Calkins, Graves, James, Smith and Zerkle. Nays: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Zerkle that the Finance Committee meeting return to open session. Carried unanimously. The Finance Committee reconvened in open session at 5:01 p.m. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously agreed that the legal department would prepare new proposed language to replace the existing language within Resolution 2006-1-3. The proposed changes will be reviewed at a subsequent meeting once they are made available to the Board. Commissioner Smith left executive session at 4:44 p.m.due to a prior obligation and rejoined the meeting by teleconference at 4:50 p.m. Upon completion of the executive session,Commissioner Smith ended her teleconference participation at 5:01 p.m. Discussion on Retirees' Cost of Living Proposal Sue Flores, Manager of Finance and Planning explained that the BWL is obligated under Resolution 2005-3-13 to review consideration of a Cost of Living Adjustment (COLA) to the Defined Benefit Plan within 30 days of an approved BWL-IBEW contract. Upon completion of the contract extension, adopted by the Board on October 30, 2006, the Board Mtg.Minutes January 23,2007 Page 48 of 63 BWL began to consider a request received from the Defined Benefit (DB) Pensioners for the BWL to consider a COLA increase. Ms. Flores advised that the last COLA increase was received in 2001. She also explained that granting an increase in the DB fund would reduce its current over funding and thereby, affect transfers to the VEBA fund. The BWL adopted GASBY 45, which is a commitment to fully fund VEBA. As a result, transfers from the over funded DB fund to the under funded VEBA fund have allowed the BWL to reduce its operating cost because it is able to take advantage of the over funding. Ms. Flores noted that granting a COLA increase would affect the DB fund but to what extent would have to be determined by the amount of the increase and an actuarial assessment. She also reported that fully funded medical health benefits are paid to both the Defined Benefit and Defined Contribution retirees. Ms. Flores further advised that increases in health care medical benefits have been substantial and they continue to be fully funded with no premium sharing for the pensioners. She went onto note that although the pensioners have not received a COLA increase since 2001, they have received a net overall increase benefit from the company in that the BWL has continued to fully fund healthcare. The net increase has resulted in a benefit of 15% during the past five years at an average of 3% each year. Ms. Flores continued by presenting options that the Board may want to consider, which include the following: Lump sum per year retired, no minhnax: Total Low High $15 each year retired prior to 7/l/2006, no min max $123,560 $ 0 $ 658 $30 each year retired prior to 7/1/2006, no min/max $247,120 $ 0 $ 1,316 Percentage per year retired with minhnax: .5% each year retired prior to 7/l/2006 of annual amount $143,758 $ 150 $ 300 .5% each year retired prior to 7/l/2006 of annual amount $229,861 $ 200 $ 500 Graduated amount based on annual pension: 10% of 1st $1,000, 1.5% next $20,000, $0% over $21,000 $144,113 58 400 20% of lst $1,000, 3% next $20,000, $0% over $21,000 $238,726 108 700 Ms. Flores reported that staff recommends a one-time lump sum payment of$15.00 each year retired prior to 7/1/2006, as the most appropriate option until actuarial numbers can be thoroughly reviewed. This option may provide some relief to retirees, especially those who retired several years ago. They would also like to invite a retiree representative to serve on the healthcare taskforce. Mr. Peffley advised that they are not advocating a decrease in the healthcare benefits that retirees currently possess. However, they want their involvement in the future, as the BWL will need to address healthcare issues. Mr. Peffley also noted that the BWL would revisit this issue again in approximately 1'/2 year, which will be the end of the current bargaining unit contract extension. The Commissioners advised that some of the retirees have already expressed an interest in participating on the healthcare taskforce and have not had opportunity to do anything Board Mtg.Minutes January 23,2007 Page 49 of 63 of this nature in the past. It was also asked if the BWL had conducted a survey of the retirees to indicate their preference relative to the COLA options? Mr. Peffley responded by stating that the BWL has not conducted a survey to determine the retiree's preference. He also noted that they are required to visit this issue within a timeframe after the bargaining unit contract is settled. Mr. Peffley explained that if the $15 each year retired option is chosen then it would be at a cost of$123,560 to the over funded Defined Benefit plan, which will effect the transfer to the VEBA fund. Upon further discussion, the Commissioners asked staff what are the negative effects of providing a lump sum payment? Ms. Flores advised the negative implications would involve the following: 1. Cost - $123,560 2. Defined Contribution Plan pensioners may be unhappy as they are not scheduled to receive a likewise amount. 3. The Defined Benefit Plan pensioners may not feel that the amount is sufficient and/or they may feel that the increase should be permanent. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Finance Committee, agreed to move forward a recommendation to the full Board to adopt a one- time lump sum Cost of Living Adjustment to the Defined Benefit Plan pensioners in the amount of$20.00 each year retired prior to 7/l/2006, no min/max at a total cost to the BWL of approximately $164,000. The Finance Committee's recommendation will be submitted to the Board on January 23rd Discussion: Commissioner James asked staff if they have determined the ramifications of the aforementioned COLA increase in terms of the bottom line? Staff clarified that there are essentially two ramifications: 1. The $164,000 lump sum payment would have to be funded from the Operations & Maintenance (O&M) budget. 2. They would have to look for savings internally in some other area or they will be over budget in a line item for$164,000. Commissioner Zerkle introduced a friendly amendment to include that retirees will be invited to serve on the healthcare taskforce. Mr. Moore advised that the BWL is over budget in wholesale sales at approximately $2,000,000. Thereby, the BWL has sufficient cash to accommodate the request. Bill Cook, Senior Vice of Operations noted that the average pensioner receives $15,690 a year and this will result in a bonus payment of approximately$330, which is equivalent 2.1%. Vote: Carried unanimously. Board Mtg.Minutes January 23,2007 Page 50 of 63 Plan of Deliverables—Charles Moore Mr. Moore explained that the Plan of Deliverables advises the Board of his progress for various projects that are scheduled to occur throughout his contractual period with the Board of Commissioners. A copy of the plan is updated and sent on a monthly basis with the billing invoice that includes a forecast of upcoming projects. Copies of Charles Moore's Plan of Deliverables are on file in the Office of the Corporate Secretary. SAP Update Mr. Peffley advised that the Commissioners were originally told that the budget for the Financial System Software Project (SAP) was $2,664,000. A component of the budgeted amount, $504,000 was an O&M cost. During the budgeting process the $504,000 was not transferred into Capital Projects. The documentation that should have been used to accomplish this task is a Capital Projects Justification (CPJ) form. Under the current administration, a capital project is not approved unless a CPJ is filled out. Mr. Peffley further explained that the $2,664,000 has to be approved as the $504,000 from O&M was not included and hence only$2,160,000 is in the capital budget for the SAP project. He also noted that this is not an increase to capital projects at a cost to the ratepayers, the BWL is essentially moving funds from O&M to capital. Mr. Peffley went onto state that the $504,000 discrepancy is an accounting issue that needs to be rectified with the Board's approval. He also advised the Board that an additional $67,000 is also being requested at Mr. Moore's recommendation for capitalized interest. Therefore, the total amount requested is $567,000. Mr. Peffley also reported that there was a problem in which the software project was bid on time and materials with no cap and the project was not going as quickly as the BWL thought it should. They have since negotiated with the vendors to accept a fixed price. The project is scheduled to go live on April 2, 2007 and the project will cost approximately$2.8 million as opposed to $2.6 million. For clarification purposes, the $2,600,000 would be allotted from capital projects and $200,000 would be allotted from O&M. Mr. Moore noted that they must keep in mind that it is not a modification but an increase to capital budget by$567,000, as O&M will not experience a decrease. Commissioner Calkins asked if the form had been filled out at the appropriate time then what would have occurred as opposed to what is happening now? Mr. Peffley replied that the transfer would have taken place accordingly. However, since it was not filled out then the funds were moved out of O&M but were not placed in capital and thereby, he agrees with Mr. Moore's statement. He went onto note that not filling out the form created the problem. Staff further clarified that if proper procedure Board Mtg.Minutes January 23,2007 Page 51 of 63 had taken place when the project was originally approved then staff would have requested a budgeted amount of$2,664,000 as opposed to $2,160,000. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously agreed to move staff's recommendation to the full Board. The Finance Committee's recommendation will be submitted to the Board on January 23`d Commissioner James asked management to ensure that the Board receives status updates on the progress of the SAP project in a timely manner. They have requested monthly updates in the past and have not received them as of yet. She also requested that staff present an update on the SAP project at a future Board meeting. Discussion to Establish Timeframe to Diversify Advisors In the interest of time, the last agenda item—Discussion to Establish Timeframe to Diversify Advisors will be moved to next Committee of the Whole or Finance Committee meeting. There being no further business, the Finance Committee adjourned at 5:32 p.m. Respectfully submitted, Semone M. James, Chair Finance Committee Motion by Commissioner James, seconded by Commissioner Rios, to receive the Finance Report as presented. Action: Carried unanimously esolution 2007-I- COMMITTEE OF THE WHOLE January 17, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 11:00 a.m. on Tuesday, January 17, 2007. Acting Committee of the Whole 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, Semone James, Santiago Rios, Robin Smith and Sandra Zerkle. Absent: Commissioners Robert Cochran and Julee Rodocker. Public Comment There were no public comments. Board Mtg.Minutes January 23,2007 Page 52 of 63 Interview Search Firms for General Manager Position The Commissioners met to conduct face-to-face interviews with vendors for the Request For Proposal for executive search services for the General Manager position. The first interview was conducted with Scott Edmunds, Director of Business Development and Josh Roberts, Recruiting Manager of ASG Renaissance, LLC. The representatives provided information regarding their organization and a question/answer session followed. The second interview took place with Sandra Soltysiak, Executive Search Director of Varnum Consulting. Ms. Soltysiak provided information regarding her organization and a question/answer session followed. The third interview took place with Charles Blockett, Human Resource Consultant of Charles Blockett, Jr. and Associates, Inc. Mr. Blockett provided information regarding his organization and a question/answer session followed. The fourth interview took place with Lynn Margulies, Director of Executive Recruitment and Mary McCune, Principle of The Rehmann Group. The representatives provided information regarding their organization and a question/answer session followed. Following conclusion of the interviews, the Commissioners discussed each vendor's presentation, credentials and subsequent information. On motion by Commissioner James, seconded by Commissioner Calkins, the Committee of the Whole unanimously agreed to bring forth a recommendation to the full Board to award the Request for Proposal for Executive Search Services for the General Manager position to Varnum Consulting. The Committee of the Whole's recommendation will be submitted to the Board on January 23rd There being no further business, the Committee of the Whole adjourned at 1:23 p.m. Respectfully submitted, Robin M. Smith, Acting Chair Committee of the Whole Motion by Commissioner Smith, seconded by Commissioner Calkins, to receive the Committee of the Whole report as presented. Action: Carried unanimously esolution COMMITTEE OF OF THE WHOLE January 23, 2007 Board Mtg.Minutes January 23,2007 Page 53 of 63 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, January 23, 2007. 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, Robin Smith (teleconference), and Sandra Zerkle. Absent: None. Public Comment There were no public comments. Legal Opinion re: Delta Township Wholesale Water Contract Moved by Commissioner Graves, seconded by Commissioner James, to go into executive session to discuss privileged documents received from Amy Cavanaugh, General Counsel and Peter H. Ellsworth of Dickinson Wright PLLC protected by the Open Meetings Act exemption MCL 15.268(h). (4:08 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, Smith, and Zerkle. Nays: None. Absent: None. Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Zerkle that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole reconvened in open session at 4:47 p.m. Commissioner Rios advised that the Board discussed a legal opinion in regards to the Delta Township wholesale water contract and asked staff to move quickly in resolving the matter. Continued Discussion on Executive Search Services for the General Manager Position The Commissioners briefly discussed the RFP for the executive search services and advised that all of the vendors were very well qualified. It was also noted that they selected the firm that they thought would work best with this matter. The Committee of Board Mtg.Minutes January 23,2007 Page 54 of 63 the Whole will make a recommendation to the full Board to award the RFP to Varnum Consulting. Discussion on Board of Commissioners Travel Policy The Commissioners discussed the Board's travel policy in relation to conferences that they could attend. They also addressed the issue of what is reasonable relative to a per diem amount and the location of the respective conference. After further discussion regarding the use of study findings and overall business practices, the Commissioners introduced a motion regarding their travel policy. On motion by Commissioner Cochran, seconded by Commissioner Rios, the Committee of the Whole passed a motion to increase the per diem amount to $100.00 for the Board of Commissioners only and to charge staff with the responsibility of making a recommendation based on study findings. The motion carried by the following vote: Yeas: Commissioners Cochran, Graves, James, Rios, Smith, and Zerkle. Nays: Commissioners Calkins and Rodocker. Absent: None. Other Financial Report Dick Peffley, Interim General Manager presented an updated Financial Report for the six- months ended December 31, 2006. Mr. Peffley noted that the BWL's net income is $15,500,000, which is $10,000,000 over projected figures. He went onto advise that the net income increase is due to the BWL's wholesale marketing strategy, which they plan to continue. Commissioner Rios complimented Mr. Peffley on his progress at the BWL and further advised that all of the feedback he has received has been very positive. Mr. Peffley thanked Commissioner Rios and acknowledged staff and their contributions in accomplishing various goals. Board Compensation Commissioner Cochran advised that with the advent of the communications policy, IRS taxable issues, and the FOIA information, he asked representatives at American Public Power Association (APPA) how do other municipalities address issues of this nature. He went onto report that some Boards compensate their respective Board members as a means to address those topics. Commissioner Cochran further reported that he did not want to make a motion at this time but will instead circulate a copy of the study that speaks to the issue. There being no further business, the meeting adjourned at 5:12 p.m. Board Mtg.Minutes January 23,2007 Page 55 of 63 Respectfully submitted, Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Graves, to accept the Committee of the Whole report as presented. Action: Carried unanimously RESOLUTIONS LANSING BOARD OF WATER AND LIGHT GENERAL MANAGER'S RECOMMENDATIONS January 23, 2007 esolution 2007-1- A. Renewable Energy Portfolio Standards (RPS) WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has an obligation to make its best efforts to assure a reliable and cost effective supply of electricity to its customers; and WHEREAS, renewable energy creates energy diversity for long-term security of our economy and environment and is consistent with assuring reliable, safe, clean and affordable energy for our citizens; and WHEREAS, consistent with Resolutions #2001-6-7 and#2001-7-14 (Green Power), certain BWL customer-owners want their electricity from cleaner, renewable sources; and WHEREAS, The Energy Policy Act of 2005 amended Title I of the Public Utility Regulatory Policies Act of 1978 (PURPA) requires utilities to consider a plan to minimize dependence on one fuel source and to ensure that electric energy is generated from a diverse range of fuels and technologies which includes renewable technologies; and WHEREAS, Twenty one (21) states have already implemented a mandated or voluntary Renewable Portfolio Standard (RPS); and WHEREAS, an April 2006 Executive Order from Governor Jennifer Granholm to the Michigan Public Service Commission requires an Energy Plan no later than December 31, 2006. This 21" Century Energy Plan is required to include an RPS that establishes targets of Michigan's energy consumption to be derived from renewable energy sources. Preliminary reports of the 2 1" Century Energy Plan indicate a recommendation of 7 percent renewable resources by 2016; and Board Mtg.Minutes January 23,2007 Page 56 of 63 WHEREAS, the major investor-owned electric generation systems in Michigan have indicated that they plan to soon issue Request For Proposals to lock up ownership, ownership interest, and long-term contracts with any available or proposed Michigan- based renewable energy source in anticipation of an RPS; and WHEREAS, it is appropriate and prudent for the Board of Water and Light of the City of Lansing to explore additional renewable energy supply opportunities, as a part of its ongoing efforts of meeting the electricity supply requirements of its customers and in complying with the anticipated state wide RPS. NOW THEREFORE BE IT RESOLVED, that the BWL shall strive to expand its electric generation from renewable resources. This may include ownership, ownership interest and long term contracts in diverse renewable energy sources, including hydro-electric, wind, solar and biomass (including landfill gas). Source location preference priority shall be: within our service area, within Michigan, and within economic dispatch distance. The BWL shall strive to generate or purchase electricity generated from eligible renewable energy sources at the following target levels: 1. Two percent (2%) of electric retail sales (kWhs) by December 31, 2008; 2. Five percent (5%) of electric retail sales (kWhs) by December 31, 2012; 3. Seven percent (7%) of electric retail sales (kWhs)by December 31, 2016 These levels may be adjusted to meet any legislative requirements. Each year in January, staff will prepare a report to the Board of Commissioners on the progress on achieving these target levels. All costs reasonably and prudently incurred in procuring renewable energy sources shall be considered a cost of service and recoverable through the electric rates. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-1-9, which pertains to the Renewable Energy Portfolio Standards (RPS). Discussion: Commissioner Rios complimented staff on bringing the resolution forward as it puts the BWL in a leadership position, as it is consistent with overall policy and direction. Commissioner Cochran also complimented staff for having the foresight to care about the environment as well as making electricity. Dick Peffley, Interim General Manager noted that they have done due diligence and a press release will announce the newsworthy resolution. He also advised that the BWL is the first mid-Michigan utility to adopt such a policy. Mr. Peffley went onto report that they are currently negotiating a deal that will allow the BWL to meets its 2008 target within the next 2-months. Action: Carried unanimously. Board Mtg.Minutes January 23,2007 Page 57 of 63 esolution 2007-I-I B. Increase Capital Pro-iect Budget for Financial System Software RESOLVED, that the FY 2007 Planned Capital Budget be increased $567,000 to correct the budgeted amount for the Financial System Software Project, 07-121. -------------------- Staff comments: When the original capital budget amount was developed for this project, Board of Water and Light staff labor (plus indirect costs) was not included in the budgeted amount of$2,160,000. Internal labor of$504,000 was anticipated when the project was proposed, and was included when the project was presented to and approved by the IT Steering Committee in the amount of$2,664,000; however, due to an internal communication breakdown, the internal labor was not included in the capital budget amount. A Capital Project Justification form was not completed for this project, since Management at that time felt that IT Steering Committee justification was sufficient. Current Management has mandated that Capital Project Justification forms will be filled out for all Capital Projects. An amount of$67,000 is also being requested as an addition to this project for capitalized interest. At the direction of our external auditors, all projects in excess of$1,000,000 should receive a charge for allocated interest expense. This does not represent an additional cash outlay on the project, but rather a transfer from interest expense to this capital project. The amount of$567,000 represents an updated amount for internal labor, the allocation of interest, and the net effect of other updated project expenditures including a revised allocation of the cost of the installation contract, savings on software purchases and the cost of temporary offices for the project team. -------------------- Motion by Commissioner Graves, seconded by Commissioner Rodocker, to adopt Resolution 2007-1-10, regarding the Increase Capital Project Budget for Financial System Software. Discussion: Commissioner Rios advised that he was glad to hear that the BWL has implemented a policy that would prevent errors of this nature from happening again. Mr. Peffley clarified that in this instance the policy was in place but it was not followed. He went onto state that there are only two positions at the BWL who could not follow the policy, which includes the General Manager and the Senior Vice President of Finance. Mr. Peffley further reported that the individual who did not follow the policy is no longer with the BWL. Commissioner Smith asked Mr. Peffley if the policy is sufficient in his opinion? Board Mtg.Minutes January 23,2007 Page 58 of 63 Mr. Peffley replied yes and advised that the policy was in place and should have been followed. There are no capital projects that Bill Cook, Senior Vice President of Operations or himself will approve without proper signatures and documentation. He went onto note that it was a simple clerical error and had the forms been filled out then they would have noticed that the Operations and Maintenance (O&M) piece of the project was missing. As a result, the O&M was taken out but was not placed in the capital budget. Mr. Peffley further explained that that is why they have the forms and it is not acceptable that someone does not follow the process. Action: Carried unanimously. esolution 2007-1-11 C. Approve Anti-Harassment Policy and Supersede the Existing No Harassment, Sexual Harassment, and Freedom from Harassment Policies RESOLVED, that the Board of Commissioners hereby approves the attached Anti- Harassment Policy, dated January 23, 2007. RESOLVED FURTHER, that the attached Anti-Harassment Policy supersedes the following existing BWL policies: No Harassment Policy, Sexual Harassment Policy, and Freedom from Harassment Policy. -------------------- Staff comments: This policy combines the substance of the current No Harassment Policy, Sexual Harassment Policy, and Freedom from Harassment Policy, and removes all duplication and potential conflict between the policies. This policy is in full compliance with state and federal law. The most substantive change in the policy is that it makes reporting of harassment mandatory for all employees and not just supervisory staff. Once approved, Staff will schedule mandatory Anti-Harassment training for all BWL employees consistent with this policy. -------------------- Motion by Commissioner Cochran, seconded by Commissioner Rios, to adopt Resolution 2007-1-12, in regards to the Anti-Harassment Policy and Supersede Existing No Harassment, Sexual Harassment, and Freedom from Harassment Policies. Discussion: Commissioner Smith asked how long had it been since the BWL received harassment training? She also asked if the policy is similar to what other companies utilize? Amy Cavanaugh, General Counsel advised that it is her understanding that it has been at least seven years since the BWL has conducted harassment training. She also noted that it would bring the BWL into compliance with state and federal law and that the policy is very similar to current industry practice. Ms. Cavanaugh went onto clarify that the BWL was already in compliance with state and federal law. Board Mtg.Minutes January 23,2007 Page 59 of 63 Action: Carried unanimously. esolution 2007-1-12 D. Approve the Use of LBWL Communications Technologies Policy RESOLVED, that the Board of Commissioners hereby approves the attached Use of LBWL Communications Technologies Policy, dated January 23, 2007. -------------------- Staff Comments: This policy is an umbrella policy intended to cover all LBWL communications technologies to set parameters for use, misuse, monitoring, safety and security. In accordance with this policy, Staff will develop procedures particular to certain types of communication technologies, such as email and cellular phones. Attached to this policy are procedures for monitoring and recording of LBWL communications technologies, which will be adopted by Staff if this policy is approved. -------------------- Motion by Commissioner Calkins, seconded by Commissioners Graves, to adopt Resolution 2007-1-12, regarding the Use of LBWL Communications Technologies Policy. Discussion: Commissioner James asked if the policy would affect the Commissioners use of cell phones relative to the IRS mandate? Ms. Cavanaugh advised that it would also affect the Board of Commissioners. She went onto explain that if you have a business issued phone and you cannot document that every phone call is for business use then the IRS considers the entire amount to be personally taxable. Therefore, the BWL will also have to address Commissioners in terms of the procedure. Ms. Cavanaugh also noted that the policy makes clear that employees and Commissioners are subject to the Freedom of Information Act (FOIA) to the extent that they are using LBWL issued communication technologies. Commissioner Cochran expressed concern regarding section III, A2 of the Procedures for Monitoring and Recording LBWL Communication Technologies in which the procedure discusses the recording of content. He went onto ask if the BWL were recording all cell phone conversations? Ms. Cavanaugh advised that if someone leaves a voicemail message on your cell phone then the cell phone company records it verbatim. She went onto state that if someone were to then FOIA that record and the message was still on the cell phone then you would have to provide that record. Ms. Cavanaugh further clarified that only voicemail messages can be recorded by the cell phone company. The BWL does not have the capacity to record cell phone conversations. Commissioner Rios advised that whenever one talks about monitoring activities then it is a very sensitive subject from a business, employee morale and emotional standpoint. As Board Mtg.Minutes January 23,2007 Page 60 of 63 no one likes to feel as if someone is looking over his or her shoulder, and hence you do not any have privacy or confidentiality. He went onto note that the committee and the Board has been concerned with making sure that it is a fair process with accountability. Commissioner Rios also stated that staff has done a very good job and suggested that they go a little further. As such, Commissioner Rios made a friendly amendment in which he asked that they 1) change section VI, la of the Procedures for Monitoring and Recording LBWL Communication Technologies to state that, "A manager or director must have a documented good-faith reason..." He went onto note that he would like language added that makes it clear that it has to be documented. Commissioner Rios further advised that 2) the BWL should have a specific form that indicates the mandatory information that is necessary in order for monitoring to be approved. Therefore, there is no room for discussion as to whether or not the BWL followed its own policy. He also suggested that 3) the monitoring has to be approved by the General Manager or their designee in addition to Human Resources. Commissioner Rios noted that this is so invasive that he believes they should go through the steps necessary if they are going to conduct this type of monitoring. Commissioner Calkins asked how this would work with Call Center monitoring? Commissioner Rios clarified that he was only referring to the recording of calls for disciplinary purposes. Ms. Cavanaugh advised that if there was someone who was having problems with their calls and consistently received bad remarks in terms of their monitoring then it could affect their job performance ratings. She went onto note that eventually it is possible that if you had someone who was doing an extremely bad job then one could end up losing his or her job based on monitoring. Commissioner Rios pointed out that the monitoring Ms. Cavanaugh referred to occur all the time, as there is always an ability to listen in on a call. He went onto state that he is referring to a situation in which someone decides to listen in because there is a good faith reason to believe that someone is violating policy. Commissioner Zerkle asked if that would apply to all aspects such as, the Global Positioning Devices that the BWL plans to or have installed on BWL trucks? Commissioner Rios responded by stating that this is a general procedure and so if the intent were to record or monitor for purposes of disciplinary action then these rules would apply. Commissioner Calkins asked how do you determine if you have documentation regarding something of that nature? Commissioner Rios advised that the form would spell out the reasoning behind the monitoring request. Board Mtg.Minutes January 23,2007 Page 61 of 63 Commissioner Graves stated that he was generally in support of the recommendation with one exception. He questioned whether or not they should send the request to the General Manager for all occurrences. Commissioner Graves further clarified that he was not concerned with the volume of the requests but that certain issues could be delegated to senior staff such as, the Human Resource Director. Commissioner James stated that she questioned the support of the documentation that the manager or the General Manager would serve as the basis for performing the monitoring for disciplinary purposes. She went onto note that she wants to make sure that this is not used as a tool for abuse. Commissioner James further stated that they should make sure that they have everything lined up and it is not superficial. The Commissioners agreed with Commissioner James' statement and Commissioner Rios further noted that to take that type of action it has to be extraordinary and it cannot be something that happens quickly. He went onto advise that it has to be documented and several people should review it as individuals should be able to support the recommendation to the General Manager. Commissioner Rodocker further advised that perhaps a set of guidelines and the assistance of Human Resources prior to reaching the monitoring level would be appropriate. She also noted that some type of documentation stating how long the monitoring would take place is also necessary. After further discussion, the Commissioners acknowledged that employees do not have an expectation of privacy when using LBWL devices. However, they clarified that the larger issue is, who is going to be accountable, and who will have to sign off on these situations. The Commissioners agreed to accept the Use of LBWL Communications Technologies Policy contingent upon the procedures being changed as directed by the Board. Mr. Peffley agreed and noted that if the Board approves the policy then staff would implement the suggested changes to the Procedures for Monitoring and Recording LBWL Communication Technologies. Action: Carried unanimously. Commissioner Smith departed the meeting at 6:39 p.m.due to a prior obligation and rejoined the Board meeting via teleconference at 6:42 p.m. (after Resolution 2007-1-13). esolutioyz 2007-I-13 E. Lump Sum Payment for Defined Benefit Pensioners RESOLVED, that a lump sum payment be made to Defined Benefit Pensioners equal to $20 for each year retired prior-to July 1, 2006. -------------------- Board Mtg.Minutes January 23,2007 Page 62 of 63 Staff Con2ments: Pursuant to Resolution 2005-3-13, Management reviewed consideration of a Cost of Living Adjustment to the Defined Benefit Plan. Management's recommendation is that rather than a permanent increase to monthly pensions, that a lump sum payment be made to Defined Benefit pensioners equivalent to $20 per year for each year retired prior to July 1, 2006. In addition, Management recommends including a retiree representative on the Health Care Task Force that will be analyzing health care issues identified in Resolution 2006- 10-04. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Graves, to adopt Resolution 2007-1-13, in regards to the Lump Sum Increase for Defined Benefit Pensioners. Discussion: Commissioner Rios asked how did they determine the proposed amount? Commissioner Calkins responded by stating that management made two proposals to the Board of$15 and$30. He went onto note that due to the short-term contract agreement, and in wanting a one-time payment as was done in the past, they decided on $20. Action: Carried unanimously. UNFINISHED BUSINESS None. NEW BUSINESS None. RESOLUTIONS esolution 2007-1-I EXECUTIVE SEARCH SERVICES FOR THE GENERAL MANAGER POSITION 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 Executive Search Services for the General Manager position on January 17, 2007; and WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and discussed each firms presentation and credentials after the interviews held on January 17, 2007. Board Mtg.Minutes January 23,2007 Page 63 of 63 RESOLVED, That the Committee of the Whole recommends that the Request for Proposal award for the Executive Search Services for the General Manager position be granted to Varnum Consulting. -------------------------- Motion by Commissioner Graves, seconded by Commissioner Calkins, to receive the Committee of the Whole's recommendation to award the Request for Proposal of the Executive Search Services for the General Manager Position to Varnum Consulting. Action: Carried unanimously. Date Resolved by Board Action: January 23, 2007 MANAGER'S REMARKS Mr. Peffley noted that the BWL was one of 13 companies that received the, "National Partnership for Highway Quality Making a Difference Award", in regards to the BWL's participation in the Capitol Loop project. Commissioner Rios advised that there are so many good things happening at the BWL and they have a lot to be proud of. He also noted that when outside persons recognize the work of BWL employees then it is refreshing and rewarding and makes the long hours worthwhile. Commissioner Rios went onto compliment staff and management for all of their hard work that was recognized by the award. COMMISSIONERS' REMARKS Commissioner Graves acknowledged Secretary Jones' birthday. EXCUSED ABSENCES None. PUBLIC COMMENTS None. ADJOURMENT On motion by Commissioner Cochran, seconded by Commissioner Calkins, the meeting adjourned at 6:45 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk January 30, 2007 Preliminary—Subject to Board Approval on March 27, 2007 MINUTES OF THE BOARD OF COMMISSIONERS REGULAR MEETING LANSING BOARD OF WATER AND LIGHT ru Tuesday,January 23, 2007 z •• of The Board of Commissioners met in the Boardroom of the Administrative OfficeS�l233 Haco Drive, Lansing, Michigan. Present: Commissioners Gary Calkins, Robert Cochran, Joseph Graves, Semone James, Santiago Rios, Julee Rodocker, Robin Smith, and Sandra Zerkle. 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 5:36 p.m. APPROVAL OF MINUTES By motion of Commissioner Calkins, seconded by Commissioner Rodocker the minutes of the November 28, 2006 regular 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. Joseph Davis, Business Manager of IBEW Local 352 encouraged the Board to move forward with the process in addressing the issues found within the human resource audit. He advised that many persons were energized with the audit and would like to move forward as it has been a month since the results were shared with the BWL. Mr. Davis also advocated for utilizing an open and shared interview process in the hiring of a new General Manager as was practiced in the past. He further noted that the previous shared process allowed for employee, bargaining unit and public input. Mr. Davis went onto report that they have met to discuss the pension survey, which will be broader than Board Mtg.Minutes January 23,2007 Page 2 of 64 initially anticipated in trying to help employees with their future plans. He also advised that they hope to have the survey to employees within a month. COMMUNICATIONS A letter was received from Jim Dravenstatt-Moceri to Commissioner James regarding pension fund issues. Received and placed on file. COMMITTEE REPORTS esolution 2007-I-I SUMMARY REPORT FOR THE BOARD OF COMMISSIONERS PENSION FUND TRUSTEES REPORT The Pension Fund Trustees held their annual meeting on November 28, 2006, to receive the financial statements for the Defined Benefit Pension Plan, Defined Contribution Pension Plan and Retiree Benefit Plan (VEBA). Performance reports for the three plans were reviewed in detail for the period ended September 30, 2006. Representatives from LCG Associates reviewed the Defined Benefit Pension Plan Performance Report and staff presented the Defined Contribution Pension and Retiree Benefit Plan Performance Reports. Staff did not propose any changes to the existing policies that include the Defined Benefit Pension Plan Investment Policy, Defined Contribution Pension Plan Investment Policy and the VEBA Trust Investment Policy. There being no further business, the meeting adjourned at 4:57 p.m. Respectfully submitted, Robin M. Smith, Chair Pension Fund Trustees Board Mtg.Minutes January 23,2007 Page 3 of 64 MINUTES BOARD OF BOARD OF WATER AND LIGHT PENSION FUND TRUSTEES' ANNUAL MEETING Tuesday, November 28, 2006 Present: Trustees Gary L. Calkins, Robert W. Cochran (arrived at 4:16 p.m.), Joseph E. Graves (arrived at 4:18 p.m.), Semone M. James (teleconferenced), JUlee M. Rodocker, and Robin M. Smith. Absent: Trustee Santiago Rios Staff Present: Interim General Manager Richard Peffley, Senior Vice President of Operations William Cook, General Counsel Amy Cavanaugh, Acting Human Resource Director Sheryl Hudson, Communications Director Mark Nixon, Manager of Finance and Planning Sue Flores, Senior Financial Analyst Charmaine Shellman, Human Resource Systems Consultant Darold Oxender, Associate Attorney Brandie Ekren, Communications and Public Relations Representative Cheval Breggins, Executive Administrative Assistant Beverly Bishop, Secretary Rosemary Sullivan, and Corporate Secretary Rhonda Jones. Consultant Present: Richard Babcock, Senior Vice President of LCG Associates and David Emerson, Consultant of LCG Associates. A quorum was present at 4:16 p.m. Chairperson Smith called the meeting to order at 4:08 p.m. Public Comments There were no public comments. Audited Financial Statements Manager of Finance and Planning Sue Flores reported that the financial statements for the Defined Benefit, Defined Contribution and Retiree Benefit Reports (VEBA) each received a clean opinion by the auditors, Plante &Moran and there were no audit comments. Ms. Flores explained that a clean audit indicates that the auditors did not have any areas of concern or issues relative to the plans that the BWL needed to address. She further advised that the BWL typically does not receive auditor comments on any of the three audit reports. Board Mtg.Minutes January 23,2007 Page 4 of 64 Moved by Trustee Smith, seconded by Trustee Rodocker and carried, to approve the following resolution: RESOLUTION ACCEPTANCE OF 2006 AUDITED FINANCIAL STATEMENTS FOR DEFINED BENEFIT PENSION PLAN, DEFINED CONTRIBUTION PENSION PLAN, AND RETIREE BENEFIT PLAN AND TRUST NEBA). Resolved, that the Corporate Secretary receive and place on file the Defined Benefit, Defined Contribution, and Retiree Benefit Pension reports presented during the Pension Trustee Meeting. -------------------------- Defined Benefit Pension Plan Performance Report David Emerson, Consultant of LCG Associates presented the third quarter market returns for the Defined Benefit (DB) Pension plan for the period ending September 30, 2006. He indicated that the majority of the major indexes show positive market returns in the third quarter and all of them are in the black for the longer term. There are a couple of major themes that investors and portfolio managers have reviewed that include: 1) housing market, 2) energy crisis—fluctuating oil prices and 3) consumers. Mr. Emerson advised that although mortgage is refinancing is slowing down and energy prices are starting to stabilize, consumers are finding available funds to spend in the marketplace. All of these factors including that of interest rates and inflation are major areas that portfolio managers review when investing in stocks and bonds. Richard Babock, Senior Vice President of LCG Associates reviewed the total fund allocation and discussed the following associated charts and reports for the quarter ending September 30, 2006: • Distribution of Assets Mr. Babcock reported that we are slightly above the target goal in domestic equity and 3.8% above in international equity. The reason being that the international market has increased significantly which means that the asset allocation has shifted to the BWL's benefit. In order to rebalance the funds LCG Associates recommends the sell of approximately$6,300,000 from the Wachovia Equity Account (Large Cap Core), which will lighten domestic equity. Mr. Babcock further stated that he would like to leave in place the overweight in the international sector because on a relative basis it appears to have more long- term value than the domestic market. Trustee Smith advised that last year they spoke about the risks involved in the international market versus the domestic market. It now appears that LCG is stating that the international market is stronger than the domestic market. What are the risks of being involved in what is normally deemed a riskier marketplace? Board Mtg.Minutes January 23,2007 Page 5 of 64 Mr. Babcock responded by stating that more than half of the productivity exists outside of the United States. There are two different managers in all of the G7 countries as well as the other countries. Therefore, between the two of them there is enormous diversification, as we become a global economy and society. He went onto state that he thinks the risks are no more so than the domestic market, the only difference being the near term currency as the dollar strengthens and weakens against currencies around the world. There is that risk but over time it tends to balance out. Mr. Babcock went onto clarify that they will transfer the funds from domestic equity to fixed income to reduce overall equity exposure. • Comparative Performance Mr. Babcock noted that in the past two quarters passive index managers have had an advantage over active index managers and there are two reasons why. One is that in the large cap arena one may have mega stocks and because these are caperated indexes then it is a self-fulfilling prophesy because as they get bigger, they count more and drive the index up. Conversely, in the small cap market that has a cap limit to it, it forces small cap managers to buy the less attractive stocks in the index because they have to place the monies somewhere. Mr. Babcock also reported that the figures in the comparative performance data are net after all fee numbers. He further noted that the diversification of managers' dramatically reduces risk. They now have five managers whereas, before when they started there was only one. Overall, performance has been quite good, as they have benefited by going into small cap international funds. • Total Fund Performance • Total Fund Five-Year Return vs. Risk. Mr. Babcock noted that the BWL's fund has outperformed the market benchmarks from the T-Bill to the S&P 500. Therefore, the cadre of managers over the last five years has added value versus the risk index in the capital market. • Equity Sector Allocation. (The pie charts indicate the level of diversification achieved since the September, 2005 report.) • Equity Allocation • Equity Performance for individual managers for the current quarter and historical performance. Mr. Babcock reported that American Beacon Small Cap Value/Instl is behind in its performance and he would like to see it improve to his expectations. It is a mini-fund of funds and there are five underlying managers that manage the portfolio on a cost effective basis. He also noted that if they were to replace them right now then they could not locate a candidate. Small cap value is the single best performing asset class since 1970, which makes it difficult to locate additional candidates. Therefore, we do not have anywhere to go right now but if it continues then they could move to the index. However, Mr. Babcock reported that he still thinks that American Beacon Small Cap Value/Instl is a good choice but if things do not perk up then they will make a change. Board Mtg.Minutes January 23,2007 Page 6 of 64 Trustee Graves asked that you typically make these types of changes when you do not see the type of performance that you are looking for? Mr. Babcock noted that they look at performance, underlying process and philosophy, and people. Do they have the same team in place; did they bring in some other individuals that have a different view? He went onto state that they want them to hire what we hire to make sure they continue to do what they do best. The worse thing that could be done is to eliminate the fund while at the bottom when it is about to come back strong. Recognizing that there will be years in which they under perform, as they all do. Trustee Graves asked what happens when you are dealing with a particular fund management group and the principle that has been directing that activity departs and forms their own fund? His understanding is that that history follows that principle. Mr. Babcock concurred. The Trustees advised that they passed a policy in which they wanted to place value on the diversity of fund managers and make sure that there is diversity within their management group. As a result, they inquired as to whether or not there had been opportunity to diversify and if there is an established timetable to periodically facilitate the search for diversification. Mr. Babcock responded by noting that they monitor the fund managers on a continual basis and they have since expanded from 2 to 8 managers. At the time the policy was passed, he believes they had already initiated and nearly completed the process of adding additional managers. Staff noted that none of the managers have been changed since the inception of the resolution and they did not take the policy to mean that that would prompt them to change managers at that time. Their interpretation was that if the opportunity presented itself then they would take into consideration everything passed in the resolution. They went onto advise that performance with the existing fund managers has been good and so in essence the opportunity to change managers has not presented itself. Trustee James asked when you say the opportunity has not presented itself what specifically will you be looking for? She took it to mean that it would just be performance from the fund manager? Mr. Babcock reiterated that they would look at performance, people, and process. He noted that there are three other asset classes that they are presently reviewing that they are allowed to invest in by policy. The current market conditions suggest that this might be the best time to invest in international emerging markets, real estate and high yield bonds. These are three additional areas that they are going to continue to research for potential investment. Board Mtg.Minutes January 23,2007 Page 7 of 64 Trustee James suggested that they narrow down the search, as the premise could always be that they are searching and continuing to do so. She went onto recommend that the Trustees establish a timetable in which to effect this change relative to diversification. Mr. Babcock explained that they would be delighted to accommodate the Trustees request. He noted that they have several clients who ask them to be proactive in finding a fund manager, which can certainly be accomplished being that they conduct these types of searches on a regular basis. Trustee Smith asked if they would need additional guidance or a resolution that says that we would like to initiate this task on a quarterly or yearly basis? Trustee Calkins stated that based on previous statements he thought that LCG Associates were already doing this on a continual basis. Thus far, he thinks they have done a lot from where they initially started. He went onto state that they were originally in one big basket and have diversified significantly since that time and so except for one fund it appears to have done well. Trustee Calkins further noted that he is not knocking LCG Associates as they have done what was requested and so he is unsure what more can be done other than to continue to do that search. Trustee Smith noted that they are not criticizing what they has been done at this point and she thinks the statement made by Trustee Calkins is a fair assessment. She went onto state that it is not so much that they are not pleased with what LCG Associates are doing but that they want them to be more proactive in searching for fund managers. Amy Cavanaugh, General Counsel advised that Proposition 2 was just passed in the state of Michigan and it will go into effect mid-December 2006. The proposition essentially states that no one can give preference on the basis of race, age, sex, gender, or national origin. She went onto state that they need to evaluate what that means in terms of the resolution that was passed by the Board in going forward to look for diversity in terms of the funds and its managers. Ms. Cavanaugh further explained that they do not have an answer yet and many public entities are trying to define what they can and cannot do to diversify themselves. In the meantime, she just wanted everyone to know that it is an issue in this context as well as many others for the BWL. Trustee Smith clarified that the proposition does not prohibit the BWL from looking for diversity. It is only when you are seeking preferential treatment and that is not what they are asking them to do. The Trustees are suggesting that they see what is available and if it makes sense to change it then they will do so. Trustee Graves advised that he understood that General Counsel has not had the opportunity to give a legal opinion. However, his understanding of what just Board Mtg.Minutes January 23,2007 Page 8 of 64 passed does not in anyway precludes in his mind the Board looking to have a diverse portfolio. He went onto state that there are minority owned firms that meet the criteria that the Board set out in terms of performance, dollar amounts, and years of operation which is relevant to the question regarding a principle. Trustee Graves noted that he wants to be sure that what they are tracking is in principle and that they consider the fund managers track record. He further noted that he thinks they can still be proactive and if our Legal Department develops an opinion that we need to discuss then that can be done at the appointed time. Nevertheless, he thinks one needs to be proactive when there is opportunity because they are not talking about preference when you say that all parties have to meet this standard. Trustee Graves went onto explain that you are simply saying diversify this pool but they need to meet this standard and there are firms out there that can accomplish that goal. The Trustees agreed that they need further guidance from the Legal Department in terms of the effects of Proposition 2 on current BWL policies and resolutions. They also support referring the issue of developing a timetable for diversification to the Finance Committee. Trustees Graves further clarified that there is nothing at this point that precludes LCG Associates from being proactive. He further advised that they do not need to wait for the Trustees to act. Mr. Babcock concurred. • Fixed Income Sector Allocation • Fixed Income and C&E Performance for the current quarter and historical • Other Performance Assets Trustee Smith stated that during the previous discussions they mentioned international emerging markets. She knows it was stated that they are currently performing but they keep getting into the now. How long do we know that they are going to perform and how much of a greater risk is it for us to be involved in emerging markets? Mr. Emerson noted that emerging markets are totally different than what they were ten years ago. Certainly there is a fair amount of volatility but the risk factor has gone down. There is exposure to emerging markets through our two international managers. It is a very small portion at approximately 10% of each. Mr. Emerson continued to note that emerging markets have become what the United States markets were in the late 1970's and we have seen what they have done since that time. He further explained that as the overall economy continues to globalize then those are the growth areas and it should continue. There it maybe overvalued right now but over long periods of time emerging markets will be a potential asset when the economy is right. Board Mtg.Minutes January 23,2007 Page 9 of 64 Mr. Babcock also noted that there is one thing that makes it slightly less volatile which is the fact that you do not have as much currency risk in the emerging markets because they pay good currency to the U.S. dollar. The complete report on Investment Management Analysis of Comparative Risk and Return for the quarter ending September 30, 2006 is on file with the permanent minutes. Retiree Benefit Plan (VEBA) Finance and Planning Manager Sue Flores reviewed the status of the VEBA (Retiree Benefit Plan and Trust) for the third quarter ending September 30, 2006. The total fund allocation for the VEBA Retiree Benefit Plan and Trust as of September 30, 2006 is $46,933,982. However, the actuarial accrued liability for the VEBA fund as of February 2006 was estimated to be $216,161,111. Compared to the current balance $178,496,807 is unfunded. Ms. Flores noted that the BWL is in better shape than most municipalities. Other governmental entities will need to start making progress towards their unfunded liability, whereas the BWL has started early and is ahead of many other governmental bodies. One-year performance on the VEBA fund as of September 30, 2006 was 8.5% overall. The current asset allocation is 34.4% fixed income, 58.4% equity, and 7.1% cash equivalents, which is close to the allocation targets. The comparative performance graph shows that each of the asset allocation classes were either close or have surpassed their benchmarks. The charting also indicated that although they added more to the VEBA fund and it earned money, the actual liability also grew from one year to the next. Ms. Flores noted that staff would like the Trustees to consider giving consist to move forward in evaluating and engaging financial investment firms similar to LCG Associates relative to VEBA. There is $50,000,000 invested with additional contributions of $11,000,000 each year. This fund will continue to grow and staff thinks that it would be wise to go out for bids for investments firms similar to the function that LCG currently performs. They will evaluate the cost of that service and bring forth a recommendation to the Board. The VEBA fund is currently managed internally and most of the equities are in an index fund, mirroring the asset allocation with approximately 15 individual bonds. Defined Contribution Pension Fund Performance Report Ms. Flores provided a high level summary report of the Defined Contribution (401A) Plan as of September 30, 2006. • Plan assets by class total $120,590,000 • Historical performance of funds • Historical performance benchmarks The allocation of this fund is based on the individual employee preferences in how they choose to direct their investments. They have the option to select their funds online, by Board Mtg.Minutes January 23,2007 Page 10 of 64 telephone or in writing. They can also choose the Goalmaker option that places money in a combination of investments that automatically rebalances. The selection is based on a combination of age, expected retirement date, and risk tolerance. Approximately 15% of employees are enrolled in Goalmaker. Trustee Smith asked that based on the Goalmaker category how did employees do in the market? Ms. Flores reported that this is based on employee's individual preferences and she looks at age comparisons in how people invest. There are individuals in there 50's and 60's heavily into equity investments, which she would question. However, they may have other investments outside of the BWL and this maybe their choice. Therefore, it is difficult for the BWL to pick the perfect fund because they are not financial advisors. Ms. Flores continued to note that the funds perform really well and they conduct an annual review and evaluation with Prudential on all of the funds. Trustee Graves asked if there is a service available to employees if they want it? Ms. Flores advised that there are monthly meetings available for employees to meet with either a Prudential and/or ICMA representative. Appointment notifications are sent via email and posted on bulletin boards. The representatives' role is to speak in general terms about investments relative to age, length of service, financial goals, etc. They typically fall short of making specific fund recommendations. Ms. Flores also explained that the BWL has a self-directing brokerage option available with approximately $700,000 in employee funding. The option allows employees to self-direct from the Prudential family fund. Informational Items Ms. Flores briefly addressed Proposal 06-02, Pension Protection Act of 2006 and Resolution 2005-3-13. Proposal 06-02. There is language that was added to the investment policy last year to give consideration to diversity candidates. They have been asked by the BWL's internal legal staff to bring to their attention all the policies that have this type of language contained within the document. At this time, they are not saying that it is right, wrong or indifferent. They are however raising the issue and they will review it with all of the other policies that may have been affected by the passing of Proposition 06-02. Pension Protection Act of 2006. There was sweeping pension legislation changes that affected both public and private funds. Several of the changes were on private funds and will be phased in over a period of years. They are reviewing those changes and will be working with internal legal staff, external counsel, and the actuaries to determine how everything will affect the BWL. It is also possible that they may need an actuarial update to determine the financial impact. Board Mtg.Minutes January 23,2007 Page 11 of 64 Resolution 2005-3-13. Interim General Manager Dick Peffley stated that Resolution 2005-3-13 prompts management to review consideration of a cost of living adjustment to the Defined Benefit Plan within 30 days of Board of Commissioners' approval of the BWL-IBEW contract. He met with retirees Ron Byrnes and Roger A. Jeffers who submitted a proposal for the Board's consideration. Mr. Peffley noted that he had staff cost the initial proposal and included it in the packet for informational purposes only. He further noted that any increase to the cost of living would come from the DB plan, which is currently over funded. However, the over funding is also used to fund VEBA. Mr. Peffley went onto suggest that this topic be referred to the Finance Committee for further discussion and a plan to move forward. The Trustees supported moving the Cost of Living Adjustment proposal to the Finance Committee. There being no further business, the Pension Fund Trustees meeting adjourned at 4:57 P.M. Submitted by: Rhonda Jones Corporate Secretary Motion by Commissioner Calkins, seconded by Commissioner Graves, to receive the Pension Fund Trustees' Committee Report as presented. Action: Carried unanimously esolution 2007-1-2 MINUTES BOARD RETREAT December 2, 2006— 8:30 a.m. to 3:30 p.m. The James B. Henry Center for Executive Development 3535 Forest Road - Lansing Present: Commissioners Gary Calkins, Robert Cochran, Semone James, Santiago Rios, Julee Rodocker, and Robin Smith. (Note: 41h Ward Vacancy Exists) Absent: Commissioner Joseph Graves Facilitator: Bryan Singletary, President of Practical Energies Staff Present: Corporate Secretary Rhonda Jones The Commissioners met to discuss various issues that included public power governance, strategic planning for public power systems, key issues, strategies in the selection of a Board Mtg.Minutes January 23,2007 Page 12 of 64 new General Manager (GM) and Board relations. The goal of the Board retreat was to have open and effective discussion regarding the above topics in relation to the Board of Water and Light (BWL). Public Power Governance Bryan Singletary, President of Practical Energies facilitated the Board retreat. As such, Mr. Singletary advised that outside influences and employee concerns that outweigh those of the ratepayers has too much influence over the Board. Individual groups or persons are only subsets. If it does not benefit the ratepayer then it is not good for the organization. Effective Board governance can be achieved through individual Board members who are interested, engaged, effective, and meet their fiduciary responsibilities. Board interests must stay at the policy level. The Commissioners expressed concern regarding inclusiveness, whereas individual Commissioners speak for the entire Board without Board input. Mr. Singletary suggested that Commissioners keep in mind that an individual's opinion is seen as the Board's viewpoint. Therefore, everyone has a right to their opinion but they must exercise caution in this respect. Mr. Singletary also advised that the strategic plan should be the focus of all boardroom discussions. The Commissioners also noted that the Board's role is to establish policy and not manage the BWL. The strategic plan should be a working document and hence the focus of the Board. It was noted that in the past, lack of policy has lead to several issues. One of the Commissioners asked if they should avoid criticizing staff during a Board meeting? Mr. Singletary explained that it would be more appropriate to advise the GM that something maybe amiss and needs to be revisited thereby, allowing the GM to address the issue. He also clarified that it is ok to make a public declaration of positivity to staff but one must keep things targeted. Mr. Singletary observed that once the Board starts making operational decisions then they have moved away from governance, which increases the likelihood of a lawsuit. Interference in day-to-day activities is an indication that the Board has stepped outside of their fiduciary responsibilities. The more operational decisions are made, the more personal exposure. Statutory Duties: General Responsibilities, Ethics, Public Access and Federal Laws Fiduciary Duties: Fiduciary, Liabilities, and Protections Under the guise of Public Power Governance Mr. Singletary also noted the following: • Legal issues should be referred to the GM and he/she can refer it to General Counsel or perhaps have Counsel contact the Board directly. • The Board should not have informational lunches with employees; assumptions and rumors do far more harm than good because you are speaking as many voices and not as one. He also advised that if an employee calls a Commissioner for lunch then they should decline. Board Mtg.Minutes January 23,2007 Page 13 of 64 • Email is public record. Do not conduct debates via email, as this is an inappropriate form of communication. • Commissioners should keep their special and personal interests out of Board business. Key Issue Review Mr. Singletary met with executive staff on Friday, December Is'to discuss the questionnaire responses and review several key issues. Listed below are some of those observations as well as those of the Commissioners and that of Mr. Singletary. • Executive staff indicated their comfort level with the Board but noted that those directly below them do not know the Board and hence things become that of perception and rumor. • Staff also expressed concern regarding stepping outside of existing bounds due to the Board's history of terminations. It was also indicated that the Board is working well together right now. However, when hotly contested issues arise that cause dissention amongst Board members and/or staff, will they continue to work well together? • The Commissioners noted that they do not think staff provides enough guidance to the Board regarding what needs to be enacted at the BWL in terms of policy decisions. • Sidebar meetings with individual Commissioner's and staff should not be allowed, as the GM is the key. A Commissioner explained that they noticed a lot of these meetings occurring and felt it to be very disconcerting. The Commissioners explained that they believe this practice stemmed from issues with a previous GM in which concerns were not being addressed. Therefore, individuals were approaching the Commissioners' as there was a severe lack of trust with management. • The question was asked, should individual Board members give the GM direction? Mr. Singletary responded by stating that direction should come from the Board as a whole or the Chair but not as individual Commissioners. As a result of the discussion, the Commissioners recommended that they develop a Memorandum of Understanding to govern the Board. The documentation will help avoid some of the past governance issues that were discussed. Mr. Singletary added that it is ok to argue in the Boardroom but not in the court of public opinion. As a Board, the Commissioners should communicate with one another why they did what they did. Facilitator Suggestions: 1. Add a training session on parliamentary procedure (recommend Colleen Trohand with American Public Power Association). Board may want to also consider having a parliamentarian sit in on regular Board meetings for direction and clarification when needed. Board Mtg.Minutes January 23,2007 Page 14 of 64 2. Review the strategic plan and revisit it after the new General Manager is hired. He advised that this would require a 2-day retreat. 3. The Board should read everything sent to BWL customers prior to their receipt. Mr. Singletary suggested that they should not get involved with proofing, approving or having input;just be aware of what the BWL is communicating to its customers. 4. The Commissioners suggested a follow-up session with Mr. Singletary at which he recommended another Board retreat in approximately 6-months but definitely after the new GM is hired so that he/she may participate. 5. Develop a Communication Policy that would govern the Board's internal and external communications. 6. The Board should consider having a strategic planning session in January 2008 as it is going to affect the budget process. Strategic Planning for Public Power Systems Questions for the Board: 1. Are you standing true to your fiduciary responsibilities? 2. Are you asking questions for information that you need to make policy decisions? Strategic Direction • The utility business is stagnate and there are relatively small changes or surprises. However, the Board should approve a long-term business plan and periodically review and update it. • Review the strategic plan once a year. Consider utilizing an outside consultant or facilitator once every other year to provide an outside objective viewpoint. • Independent System Operator (ISO) training is in order for Board members and as such, staff should provide the training. This will give the Commissioners background and understanding on information relative to generation, transmission, power plant building, etc. • Mr. Singletary suggested that the Board look at branding the BWL to advise customers of the benefits of the services that the BWL provides. Strategies in the Selection of a New General Manager The Board should have an open declaration that the new GM will be held to the Strategic Plan. Board Mtg.Minutes January 23,2007 Page 15 of 64 Mr. Singletary encouraged the Board to conduct a national search for the GM to ensure that they have done their due diligence, which is not to say that they do not already have talented persons in house. It was noted that the standard Request For Proposal (RFP) search firm charges 25% of the GM's yearly salary. Mr. Singletary also explained that he believes the Board should utilize a search firm with utility experience, American Public Power Association, or public power experience. He cautioned against hiring a non-public utility person. However, if the Board chooses to do so then they need to make sure adequate training is provided. Lack of training and experience in the public arena can be the downfall of a GM. Mr. Singletary also explained that the GM should be given his/her evaluation at least 2- weeks prior to having discussion. He also suggested that the Board should not see the GM's self-evaluation until they have completed their own evaluations to ensure that there is no duplication. What are you looking for in a General Manager? Musts &Wants—Board must decide what they want in a GM prior to the interview process. Be honest about the compensation package, the Lansing community and its attributes as possible; and allow for a flexible benefit package. It is also recommended that the Human Resource department should thoroughly explain the benefit package to prospective candidates. Plan of Deliverables: 1. Develop a Communication Policy that Speaks to Internal and External Board Communications 2. Establish a Yearly Board Calendar 3. Address the General Manager Selection Process 4. Follow and Make a Commitment to the Strategic Plan a. Add a component of education to the Board meetings in which staff educates the Board on relevant industry-wide issues 5. Speak as One Voice There being no further business, the Retreat adjourned at 3:25 p.m. Submitted by Rhonda Jones Corporate Secretary Motion by Commissioner Cochran, seconded by Commissioner Calkins, to receive the Board Retreat Report as presented. Board Mtg.Minutes January 23,2007 Page 16 of 64 Action: Carried unanimously. esolution 2007-I-3 COMMITTEE OF THE WHOLE December 18, 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 Monday, December 18, 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(arrived at 4:16 p.m.) and Robin Smith. Absent: Commissioner Sandra Zerkle Public Comment Joseph Davis, Business Manager of IBEW Local 352 thanked the Board for bringing in an outside consultant to conduct the Human Resource Audit without any parameters. He also applauded them for presenting the findings in an open forum so that everyone could receive the information. Mr. Davis noted that the New Year would bring forth many new tasks including that of the General Manager (GM) search. He went onto state that the previous search method used by Charles Blockett was an admirable attempt as it included employee and retiree groups and also allowed for public input. Discuss and Reach Consensus on Top 5 Candidates for Internal Auditor Position— Charles Blockett Charles Blockett of Charles Blockett, Jr. and Associates, Inc. explained that they have two objectives: 1) narrow the candidate pool to five and 2) determine the balance of the remaining process. He went onto suggest that since four of the ten candidates received a minimum number of votes, then he asked if the Commissioners would like to reduce the candidate pool to four or add an additional person? Mr. Blockett advised that based on his experience he recommended that they interview at least five people. He also noted that the background checks and subsequent information would be provided to the Commissioners prior to their vote for the final candidate. Motion by Commissioner Calkins, seconded by Commissioner Smith to accept the top four candidates: James A. Felch, Kenneth L. Johnson, Susan M. Pifer, and Shirley T. Smith. Discussion: Commissioner Graves advised that he wants to be supportive of Mr. Blockett's suggestion that they select a minimum of five individuals. Given that premise Commissioner Graves made a friendly amendment to add Glenn Holloway to the list of candidates due to his experience with the BWL. Board Mtg.Minutes January 23,2007 Page 17 of 64 Commissioners Calkins and Smith supported the friendly amendment. Discussion: Commissioner James suggested that Martin S. Wood also be included in the interviewing process in addition to Glenn Holloway being that they both received the same number of votes. Commissioners Rios and Calkins supported the friendly amendment. Discussion: Commissioner Smith advised that she would rather stay with five candidates as opposed to six because it would extend the interview process from one to two days. She suggested having discussion on the other candidates that received an equal number of votes. Commissioner James noted an interest in interviewing Martin Wood an as additional candidate and expressed concern regarding Mr. Holloway's previous departure. Commissioner Rios suggested that in the interest of giving themselves the benefit of another candidate and the fact that they each received the same number of votes, he recommended that they interview six, which would include both Mr. Holloway and Mr. Wood. Commissioner Cochran seconded the friendly amendment. Mr. Blockett noted that in his experience when there are more than five candidates it makes for an extremely long day. He did not recommend interviewing six candidates, as the interviewees on the first day would be at a disadvantage. Mr. Blockett cautioned against six interviews due to the time factor and the validity of the process. Commissioner Cochran supported Commissioner James' comments in regards to Glenn Holloway as a finalist for the Internal Auditor position. Commissioner Graves noted that he supported the perspective of both Commissioners Cochran and James. However, he thought the interview process would allow them to explore and examine the concerns that they may have with regards to Mr. Holloway's potential employment with the BWL and his previous departure. He went onto state that he does have some concerns as to why he left. However, he understood that circumstances change and that Mr. Holloway has a lot of familiarity with the BWL. Therefore, he would support the five by keeping Mr. Holloway in the pool and he would not support six for the reasons just presented by Mr. Blockett. After further discussion, Commissioner Rios withdrew his friendly amendment to interview six candidates by adding Martin Wood to the finalist pool. The original motion to accept the top four candidates that included James A. Felch, Kenneth L. Johnson, Susan M. Pifer, and Shirley T. Smith carried by the following vote: Board Mtg.Minutes January 23,2007 Page 18 of 64 Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None Absent: Commissioner Sandra Zerkle The motion to add Glenn Holloway as the fifth candidate failed by the following vote: Yeas: Commissioners Calkins, Graves, and Smith. Nays: Commissioners Cochran, James, Rios, and Rodocker. Absent: Commissioner Sandra Zerkle Motion by Commissioner Smith, seconded by Commissioner James to add a fifth candidate, Martin S. Wood to the finalist pool. The motion carried unanimously by the following vote: Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None Absent: Commissioner Sandra Zerkle. As a summary to the motions, the following five candidates will be extended an opportunity to interview as a finalist for the Internal Auditor position with the Board of Water and Light: James A. Felch, Kenneth L. Johnson, Susan M. Pifer, Shirley T. Smith, and Martin S. Wood. Mr. Blockett noted that he would notify all five candidates and advise them of where they stand in the process. He would also ask that they sign an authorization form to allow background checks. The background search will include a civil and criminal record check, education verification, verification of previous employment, bankruptcy check, and newspaper article search. Mr. Blockett went onto state that he will request each candidate to prepare a written plan of action as to how they would develop an internal audit plan for the BWL, no more than 10 pages in length. This document would display their individual writing style, ability to communicate, and their organizational thoughts. This instrument would also act as an additional source in evaluating the candidates and obtaining the best ideas from all five persons. In addition to the above, Mr. Blockett stated that he would send them a copy of the survey responses, annual report, and strategic plan. Mr. Blockett will work with Secretary Jones to obtain copies of the materials needed to provide to the candidates. Charles Moore, Interim Internal Auditor suggested that Mr. Blockett provide a copy of the external audit report as it will be a better source of information to draw questions and help with the internal auditor process. The Commissioners agreed with the suggestion. Mr. Blockett further noted that the background check firm would have all of their materials returned to him by January 4, 2007. He also stated that he would give the candidates until January 5, 2007 to complete and submit their internal audit plans. Board Mtg.Minutes January 23,2007 Page 19 of 64 Commissioner Smith asked Mr. Blockett if he would want a time lag from the date of the interviews to the date of the final selection? Mr. Blockett responded by stating yes. He also strongly recommended that they take 3-4 workdays to think about the candidates and review the reports. While also keeping in mind that the Open Meetings Act covers the position, which means that they must interview and deliberate in public. He went onto state that between now and January he will ask each Commissioner to develop three job related interview questions that he will use to determine a standard set of interview questions. The Commissioners charged Secretary Jones to work with Mr. Blockett in establishing the interview dates, the remaining schedule and to also provide whatever materials necessary for the candidates in relation to the Internal Auditor action plan. Commissioner Calkins asked for a copy of the interview questions used during the last process to use as a basis for the new questions. Commissioner Rios asked Secretary Jones to distribute those materials to the entire Board. Human Resource Audit Report—Michael Goree Commissioner Cochran, Human Resource Chair introduced Michael Goree of Growth Strategies Consulting, Inc. who conducted a Human Resource Audit of the BWL at the request of the Board of Commissioners. Mr. Goree explained that part of the process involved in the Human Resource audit was trust in which there were three facets, 1) trusting individuals to do their job, 2) trusting the General Manager and leadership to learn to do their job, and 3) trusting the Board of Commissioners to do their job. He went onto note that he considered various options in delivering the report such as, sharing it with the Board of Commissioners only, sharing it with senior management only, or opening the door and sharing the document with the entire organization. Of all three options he chose the later. Mr. Goree advised that no one including the Commissioners had seen the final report prior to today's meeting. He also explained that everyone must believe that he did his job. The organization was open to him, individuals were open and honest in their conversations, and he was not prohibited from receiving anything that he requested of the organization. Mr. Goree noted the Commissioners and staff's cooperation in this endeavor and advised that it was a huge step forward for the BWL. He went onto explain the challenge he faced was in how to convey the employee's passion, dedication, and commitment in a report. Mr. Goree advised that he spoke to hundreds of people at the BWL and not once did people blame others for the problems at the BWL. What he did hear was the passion for doing a better job with the tools and resources that are available and whether or not they are available to the persons at the BWL. He noted that throughout the report one would hear the employee's passion for the organization. However, Mr. Goree also noted that there are challenges at the BWL. He explained that he was hired because he is very direct and to the point, which his final report reflects. Mr. Goree proceeded to present the preliminary analysis and findings of the Human Resource Audit. Listed below is a brief synopsis of the information presented: Board Mtg.Minutes January 23,2007 Page 20 of 64 • Four Key Hurdles—Cognitive, Political, Motivational and Resource • Truths and Rumors—With any project of this nature you will hear both truths and rumors. Some of the truths included: o No interference by the Commissioners, Leadership, Union, or outside influences o Full and trusting cooperation by all employees o Straightforward and direct approach o Access to all aspects of the organization • Process Followed—Met with Human Resource Committee to review plan, reviewed key documents, interviewed employees, developed preliminary findings and recommendations, and presented those findings to the Board of Commissioners on December 18, 2006. • Non-Human Resource Realities— Some of the Non-HR realities include: o Not all departments are "pulling in the same direction". o Some directors and managers have an "I'm a Director, therefore I get what I want" mentality. Completely unnecessary and demoralizing for staff. o Insensitivity to employee's work by some "management". o Somewhat insular in understanding what other organizations offer, are faced with, competition, etc. o Good Old Boy network is still strong in some areas. o Decision Quality not taught—Decision making skills weak in some areas o Main focus on power generation and less on water—partial product of the rate structure. o Supervisory skills of some very weak to non-existent. o Weak brand identity. o Weak diversity strategy with little impact. o Ombudsman process not used and most see little value in the process. o The Call Center—Needs greater intervention to re-establish a strong team environment; also not receiving the support from HR that it needs to move forward. o 4 General Manager's in 10 years—Little time to heal and yet another change. Recommend cooling off period of 6-9 months before hiring another General Manager. o Work systems and processes could improve with "lean principles". o Appear to have too many supervisors/managers in some departments. o Where is the Trust?—Strategic, Personal, Organizational o Destroyers of Trust within BWL—Inconsistent messages and standards, false feedback, failure to trust others, rumors in a vacuum and consistent underperformance. • 100 Year Plus Companies —The most difficult to duplicate, therefore the most sustainable, advantages are those that rest in people and their processes. Board Mtg.Minutes January 23,2007 Page 21 of 64 • Human Resources Needs to be Driven By. . . 1) What do you want employees to know? 2) How do you want employees to feel? 3) What do you want employees to do? • Human Resource Realities —Mr. Goree noted that the comments listed below are not single line items from one individual but sentiments heard several times from various persons throughout the organization including that of Managers, Directors, and employees. Some of the Human Resource realities include the following: o Not user friendly o Looked upon as a detriment to organization o Very poor response time o Very poor communication with employees o Not accessible—locked doors o Never seen them on other shifts o Reactive not anticipative o Who is in charge? o Compensation system poorly communicated o Performance system—old systems with a new face—too complicated o Weak "people skills" o Controlling and at times out of control o Overly structured and little to no flexibility o Poor employment process o When one is out sick, hard, if not impossible to get an answer o Structured in silos with little cross development o Currently, 12 employees. Normal staffing ratio is approximately 1:100 employees. Appears excessive given the poor response time, lack of visibility in certain areas, limited access, etc. o Not seen as the "go to" Department • Mr. Goree also reported on major areas of review that included recommendations for each respective subject relative to his findings. The areas of review included the following and are found in detail within the body of the report. * Employment Law/Documentation * Training/Development * Employee Recruitment, Selection and Retention * Succession Planning * Labor Relations * HR Information Systems (HRIS) * Benefits Administration * HR and Line Management * Compensation * The HR Staff * Performance Management * The Call Center All Focus on the Three A's—Attitude, Aptitude and Action 1) Attitude • Change and movement come from the "right" attitude. A weak/no foundation invites trouble down the road. Board Mtg.Minutes January 23,2007 Page 22 of 64 • This comes in the form of the right vision and strategy and guiding it through your organization. 2) Aptitude • We can communicate all we want about where we want to go but, if employees don't have the Aptitude to get us there.... • Without the right skills and knowledge, employees feel anxiety and frustration. • We want action! But, without aptitude through development you face even greater hurdles. 3) Action • "The failure to execute strategy results in 70% of CEO failures..." • Execution requires attitude and aptitude first! The Next 100 Days: • 72 work days—Based on 5/week • 571.5 work hours—Based on 8/day • 34,286 work minutes • And the average worker works less than 6 hours a day • Plan the work and work the plan. The Identification and Removal of Waste Office Waste—Focus: People Office Waste—Focus: Information Goal Alignment Translation Assignment Missing Information Waiting Hand-Off Motion Irrelevancy Processing Inaccuracy Office Waste—Focus: Process Control Sub-optimization Variability Scheduling Tampering Work-around Strategic Uneven Flow Reliability Checking Standardization Error Mr. Goree closed by reiterating that the BWL has a highly dedicated workforce with an underutilized Human Resource department that is not as responsive as it could be. He also noted that the BWL has a workforce with some managers and supervisors that have an investor owned attitude. Mr. Goree further stated that the BWL has to break that cycle. He also advised that the problems at the BWL are not necessarily a personality or knowledge issue as much as it is an execution issue. Commissioner Graves observed that Mr.Goree had done an excellent job in conducting the Human Resource audit. In the beginning, he was given the flexibility to look throughout the organization and while the report in large part focuses on the Human Board Mtg,Minutes January 23,2007 Page 23 of 64 Resource Department and function, it also looks at the organization as a whole. He went onto note the physiological, emotional, and personality changes discussed in the report would perhaps take longer than a 100-day plan to accomplish. Mr. Goree noted that a 100-day plan gives employees the opportunity to step up to the challenge and secondly, do they have the ability in which to do the job? He explained that as a dedicated and committed organization to the staff at hand and the success of the employees that currently work at the BWL, he believes it is imperative that people are given the opportunity to step up to the plate. Everyone will not have the ability to meet the challenge. However, without giving people the opportunity to try then it sends a bad message to the organization. Mr. Goree further noted that he is a conceptual person and not a detailed person. He went onto advise that he is much better suited as a conceptual individual as opposed to a detail oriented individual. Commissioner Smith noted that it was well stated when Mr. Goree implied conceptualism since some of the physiological and emotional issues cannot be dealt with in a bullet point presentation. She went onto state that she believes Mr. Goree outlined and gave them a good overlay as to the organization and not just Human Resources but how HR strategically fits into the organization. Commissioner Smith also noted that Mr. Goree dealt with the system issues, the flexibility of the organization, its rigidness, and fragmentation. She went onto state that the wheels of change are slow but that there needs to be a comprehensive plan as to how they address the issues as an institution. Mr. Goree responded by stating in his opinion, the BWL has approximately 6—9 months to have a large impact if they start the first of 2007. Therefore, the BWL can state that by September 2007 all of"these" things will be done and you must start immediately. The 100-day plans create a sense of urgency but not a sense of panic. Mr. Goree explained that once you become accustomed to it then it becomes a part of the system of always improving every 100-days. Commissioner Rios noted that they should keep in mind the key purpose of the audit. The Board has heard a lot of the information that suggested the problems that were presented in the report. Commissioner Rios went onto note that they wanted to have an independent objective person to evaluate the BWL and he was pleased that Mr. Goree accomplished what they asked him to do. Part of that process was to receive recommendations from an outside objective viewpoint from someone who is professionally trained and experienced in dealing with organizational opportunities so that they could move the BWL forward. Commissioner Rios stated that to him it is very important as they discuss the report that they also keep in mind its purpose. The second item is that the Board of Commissioners is not where the changes are going to take place. It is their role to look at the report and either accept it, to the extent that it is accepted and they agree with the direction that the Mr. Goree is recommending, then to discuss it with management and give policy direction in terms of addressing some of the needs and opportunities. The third point is that the Board must keep it simple; part of the simplicity is having a doable plan. Commissioner Rios noted that because of the enthusiasm, they might think that they can accomplish these goals overnight but they are not going to be Board Mtg.Minutes January 23,2007 Page 24 of 64 able to do so. He went onto explain that the Commissioners job is to take the report in its entirety and keep in mind its purpose and understand their respective roles as a Board versus that of management and employees. And to also address with management, the extent to which they agree and acknowledge some of items within the report. Commissioner Rios advised that there would be different views on the priorities of some of the actions that can be taken. He went onto state that there are perhaps some operational difficulties that will not allow them to do everything that they want to do in the first 100-days as it might carryover to the second 100-days. Commissioner Rios stated that from his perspective, up to this point they have fully accomplished their objective as a Board. Their challenge as he sees it is for the Board to come to terms with management and to set a plan in motion that makes sense and delivers the types of results that they can all be proud of and continue to be better. Commissioner Rios advised that Mr. Goree has done a lot of research and knows the organization as well as anyone could and probably better. He went onto suggest that he would like to see Mr. Goree continue with the execution stage. Commissioner Rios advised that as of right now he is the Board's employee but once they receive the report and give him additional assignments then he thinks the ball is passed to management. He also stated that one of the things he would encourage management to consider is taking advantage of this very important resource and developing an action plan for the future. Commissioner Smith stated that she thinks time after time it has to be a doable plan and that whatever is implemented, simplicity must be paramount. She also noted that it must be something that is doable, as they can clearly see there are some areas that need to be addressed and the execution of the plan is not something that the Board of Commissioners will do. Commissioner Smith explained that their job is to implement policy, make sure that policy supports the document so that new things can be implemented in the organization. She further advised that trust was the paramount issue and the report was presented to everyone at the same time. How people interpret it maybe somewhat different but they are all on the same page in that there must be change and change must begin now. Commissioner Smith noted that there is a wonderful opportunity to implement some very important ideas. She also commented that she did not always believe that the answers are not there but that sometimes they are not asking those that have the answers. Commissioner Cochran indicated that he has the utmost respect for Mr. Goree and he has fulfilled his every wish. He further acknowledged that Mr. Goree is worthy of his trust and thanked him for his wonderful performance. Commissioner Cochran then asked Mr. Goree if he had anything that he would like to comment on to the Board of Commissioners with prior counsel approval that would require a closed session? Mr. Goree responded by stating that his understanding is that a closed session requires conversation about specific individuals. He then asked if that was a fair statement? Amy Cavanaugh, General Counsel responded by stating that if he wanted to talk about specific individuals then that that would be classified as a remark or a complaint. Therefore, that individual person has the right to request a closed session. Board Mtg.Minutes January 23,2007 Page 25 of 64 Mr. Goree stated that at this point, the challenge is that the role of the Commissioners versus the role of the management and he believes that the Board is in governance and management is in operations. Therefore, if there are individuals that he believes need some intervention then that is a conversation that he would prefer to have with the General Manager and not with the Board of Commissioners. The Board of Commissioners sets policy and the daily operational executable issues reside with senior management. Commissioner Cochran asked Mr. Goree if he is available to do what Commissioner Rios has suggested in continuing with this work? Mr. Goree noted that he has two passions: 1) the success of his clients and 2) achieving his goal of doing whatever he can to not be here. As a result, he will do whatever he can to help the BWL and his calendar is always adjustable depending upon the circumstances. Commissioner Rios asked Dick Peffley, Interim General Manager if he wanted to make any comments? Mr. Peffley responded by indicating that he had just received the report and did not have any comments at this point. However, he did note that he looks forward to working with Mr. Goree. Mr. Peffley went onto state that as with any audit he is looking at how to improve. The BWL had an engineering audit and will conduct a production audit. Mr. Peffley noted that he saw the Human Resource Audit as another tool to help improve the BWL. Motion by Commissioner Cochran, seconded by Commissioner Smith to accept the Human Resource Audit report as presented and forward it to full Board for consideration. Carried unanimously. A complete copy of the "Lansing Board of Water and Light, Human Resource Audit, Preliminary Analysis and Findings" report is on file with the permanent minutes. The Committee of the Whole took a meeting break at 6:03 p.m.and resumed at 6:20 p.m. Discuss Executive Search Firm RFP's Received for the GM Position The Commissioners discussed the number of firms that they would like to interview in awarding the Request for Proposal (RFP) to an executive search firm for assistance in hiring a new General Manager. They also discussed the possibility of changing Dick Peffley's title from"Interim General Manager" to "General Manager" for a term of one- year, based on Michael Goree's recommendation to delay the process for up to 9-months. Commissioner Calkins introduced a motion to stop the process and remove the word "Interim" from Dick Peffley's title and allow him to operate as the permanent General Manager for one-year. Commissioner Cochran advised that he did not think they should stop the process of hiring a new General Manager but they should consider delaying it. As such, Commissioner Cochran seconded the motion. Board Mtg.Minutes January 23,2007 Page 26 of 64 Discussion: The Commissioners expressed their respect and support of Mr. Peffley and the work he has done thus far. They also welcomed him to become a part of the process and apply for the permanent position. The Commissioners agreed that they want to continue with an open process and would like to ensure that they have the best candidate available. The Commissioners agreed to move forward in conducting a national search as had been previously outlined. After further discussion, Commissioner Calkins redrew his motion from the floor. Motion by Commissioner Smith, seconded by Commissioner James to award the Request for Proposal bid for the Executive Search Firm to Charles Blockett, Jr. & Associates. Discussion: The Commissioners expressed concern in awarding the bid without conducting interviews with the top 3 candidates. It was recommended that the Board proceed with an open process and interview the executive search firms prior to making a final decision. Commissioner Graves particularly noted that he believes the Board should continue with the process that they have outlined and therefore, it should not stop. He recognizes the suggestion made by Mr. Goree to delay the process but believes they should move forward. Commissioner Graves also noted Mr. Peffley's good works and invited him to become a part of the process if he so desires. As such, Commissioner Graves went onto suggest that they proceed with the initial process of interviewing the top 3 RFP respondents. He explained that Charles Blockett, Jr. & Associates, Inc. was the only firm in which all of the Commissioners voted to interview. Based on Mr. Blockett's national success and success with the Board of Water and Light he supports the motion currently on the floor. The motion to award the RFP bid to Charles Blockett & Associates, Inc. failed by the following vote: Yeas: Commissioners Graves, James and Smith. Nays: Commissioners Calkins, Cochran, Rios and Rodocker Absent: Commissioner Zerkle Motion by Commissioner Cochran, seconded by Commissioner Graves to interview the top 3 firms listed on the voting tally sheet: Charles Blockett, Jr. and Associates, Inc., Varnum Consulting, and ASG Renaissance, LLC. Discussion: The Commissioners advised that there are actually four top firms on the list based on the number of votes that each firm received. It was indicated that interviewing the top 3 would not be fair to the fourth candidate as they received the same number of votes as the third candidate. It was suggested that perhaps they should either interview the top 2 or 4 candidates based on the voting results. Board Mtg.Minutes January 23,2007 Page 27 of 64 Commissioner Smith suggested that they see what the voting is like at this point and have each Commissioner state their top 3 candidates that they would like to move forward. At that point, if there is a majority that has a top three firms then those would be the firms that they would interview. Commissioner Rios made a friendly amendment to interview the top 4 candidates, which included Charles Blockett, Jr. and Associates, Inc., Varnum Consulting, ASG Renaissance, LLC, and The Rehmann Group. Commissioner Graves accepted the friendly amendment. Discussion: Commissioner Smith stated that she thought three firms was a good round number for the RFP's. She went onto say that if it seemed somewhat challenging then it maybe due to the lengthy meeting. However, this is what the Board meeting is, a discussion of the process. The motion to interview the top 4 firms of Charles Blockett, Jr. and Associates, Inc., Varnum Consulting, ASG Renaissance, LLC, and The Rehmann Group carried by the following vote: Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None Absent: Commissioner Zerkle. The Board charged Commissioner Cochran, Human Resource Chair with the responsibility of establishing an interview schedule with the BWL Purchasing Department. Discuss Separate Forecast by Utility Request Commissioner Rios advised that Commissioner Graves had requested some information from staff that he felt necessary to evaluate the issue of cross subsidization of utilities. Commissioner Rios asked Mr. Peffley for a status update and whatever other information deemed appropriate. Mr. Peffley explained that staff has prepared some information, which they are scheduled to send to the Board that addresses most of Commissioner Graves concerns. He went on note that they have met separately with Mr. Beauchamp, Consultant and Charles Moore, Interim Internal Auditor. A policy recommendation will be forthcoming on the six-year forecast strategy. Commissioner Graves stated that he understood that Mr. Peffley will send a summary of his initial request and they will have opportunity at the next Committee of the Whole or Board meeting to discuss the information and ask questions. Board Mtg.Minutes January 23,2007 Page 28 of 64 Commissioner Rios asked Mr. Peffley to present a timeframe for the next step in terms of discussing the recommendations. Discuss Privileged Document Moved by Commissioner Cochran, seconded by Commissioner James to go into executive session to discuss a privileged document received from Foster, Swift, Collins & Smith, P.C. protected by the Open Meetings Act exemption MCL 15.268(h). (6:51 p.m.). The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, and Smith. Nays: None. Absent: Commissioner Zerkle Carried unanimously. The motion carried unanimously for the Committee of the Whole to return to open session. The Committee of the Whole reconvened in open session at 7:15 p.m. Motion by Commissioner Calkins, seconded by Commissioner Smith to pay the Foster, Swift, Collins & Smith, P.C. invoice number 483218 for services rendered in July 2006. Carried unanimously. Motion by Commissioner Calkins, seconded by Commissioner Cochran to meet with counsel from Foster, Swift, Collins & Smith, P.C. in the regards to invoice number 483024 for services rendered in November 2006. Carried unanimously. Motion by Commissioner Calkins, seconded by Commissioner Graves, to review the current legal billing process. Carried unanimously. Other Commissioner Calkins inquired as to the BWL's street lighting process for decorative lighting, repairs and replacements. Doug Wood, Director of Engineering explained that the City of Lansing, namely Chad Gamble has to approve any decorate light installations. In cases of accidents, where damaged has occurred, the BWL will replace the light fixture with whatever was already in place. It was further noted that streetlights that are out or in need of repair should be Board Mtg.Minutes January 23,2007 Page 29 of 64 reported to the BWL Customer Service Center. It was also stated that the BWL typically repairs streetlights that are out within 5 days and structural repairs within 12 days. There being no further business, the meeting adjourned at 7:22 p.m. Respectfully submitted Santiago Rios, Chair Pro Tem Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Rodocker, to receive the Committee of the Whole report as presented. Action: Carried unanimously. Resolution 2007-I- COMMITTEE OF THE WHOLE January 9,2007 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, January 9, 2007. Committee of the Whole Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Gary Calkins, Joseph Graves (teleconference), Semone James, Santiago Rios, Julee Rodocker, Robin Smith and Sandra Zerkle. Absent: Commissioner Robert Cochran. Public Comment Joseph Davis, Business Manager of IBEW Local 352 noted that Michael Goree of Growth Strategies, Inc. was asked to present the Human Resource Audit results to the bargaining unit. After discussions with Sheryl Hudson, Acting Human Resource Director and Dick Peffley, Interim General Manager, meetings were coordinated for the entire Board of Water and Light. The sessions will take place on January loth. He went onto advise that Bill Cook, Senior Vice President of Operations, Dick Peffley and himself were asked to appear at the meetings. Mr. Davis also reported that the bargaining unit met with Mr. Peffley in which Commissioner James was present. The meeting allowed them to address some issues that were touched upon in the audit report and move forward. Mr. Davis noted that the BWL had a tough year in 2006 but they are interested in addressing issues and moving forward with the assistance of Ms. Hudson and Mr. Peffley. Customer Satisfaction Survey Board Mtg.Minutes January 23,2007 Page 30 of 64 Andy Morrison of Market Strategies presented the summary of June and January 2006 results of the Lansing Board of Water and Light, Customer Satisfaction Research Briefing. The results were originally presented to senior management August 11, 2006. However, due to the Board's calendar and scheduling conflicts the results were delayed in being presented to the Board of Commissioners. Mr. Morrison gave a high level overview of the results, which are detailed within the body of the report. He advised the Board that natural gas prices in 2005 and 2006 were extraordinarily high across the country and had a specific impact on gas utilities. Mr. Morrison also noted that there were some catastrophic events in the industry, principally the hurricanes in the southeast and a variety of problems related to reliability that have created new demands and tensions. On the electric side, there have been some states that have impacted customers with 50% plus electric rate increases. There have also been customer service issues and demands on the service systems of energy utility clients, which are continuing to increase. He also advised that traditionally, customers are used to 24-hour access to their respective utility company and energy companies are behind the curb in terms of addressing customer service demands. Mr. Morrison reported that all of these items lead to value issues with the customer. He also noted that if you put that in the context of their national model then the issues that they address for all of their utility clients could be summarized into four key performance drivers: reliability and restoration, service reputation, management reputation, and electric rates. Mr. Morrison further explained that the data suggests that customers lag behind politicians with regards to environmental issues, as they appear to be more concerned with monetary cost than environmental impact. Some of the other issues Mr. Morrison addressed included: long-term customer anger and concern over energy prices, commitment to the value proposition(s), and a realistic goal to stay strong as the BWL has done over the last 2-3 years as the industry is going to be very challenged. In summary,Mr. Morrison concluded the following points: • The Board is regaining a stronger position with customers as the "lead in drinking water" issue fades in terms of close public attention, and customers are feeling somewhat more positive about the rate situation for electricity and water. In 2006, it is rare to find any utility whose customers actually feel a bit more positive about rates. • Electricity satisfaction and overall favorability are both up five points. Water satisfaction has not recovered yet. The results for all outcomes are still not yet back to the strongest levels of past years. • The Board's communication and community involvement activities through January continue to provide important support for and help to improve customer relations and satisfaction. The "Connections" newsletter has been an important channel in the past and may need a review to see how to make it more relevant. Utility websites are becoming an increasingly used and useful channel for customers. • The question the Board should address pertains to what the "value proposition" will be for customers in the next few years. What can customers expect from the Board, Board Mtg.Minutes January 23,2007 Page 31 of 64 and what will they be asked to consider and do in terms of how they relate to the Board? - Reliability - Customer Service - Management - Rates and Energy Management Copies of the "Customer Satisfaction Research Briefing" results are on file in the Office of the Corporate Secretary. Steam Abandonment Doug Wood, Director of Engineering presented the Restricted Steam Abandonment Policy to the Board of Commissioners. It was explained that the purpose of the policy is to establish the following: • Abandon selective uneconomic areas of the steam distribution system that meet certain criteria • Customers in these selected areas must convert to another energy source • The BWL will convert the customer to an alternate energy source at no cost to them Mr. Wood also noted that some of the criteria used to determine potential abandonment areas include: • Safety to BWL employees and customers • Age of system (main & services) • Steam main pressure and/or leak problems • Deteriorating manholes • System losses • High Operating &Maintenance costs • High infrastructure replacement costs • Low revenue Mr. Noted advised that the steam service map indicates potential abandonment areas that meet the criteria previously addressed. Areas 1 and 2 were used as a pilot program and customers were asked if they would voluntarily convert from steam to natural gas. He also noted that they were very successful in converting those customers. However, Oldsmobile Park opted out, which did not deter the project from proceeding due to the location of their facility relative to the remaining customers. The cost of conversion for Area 1 was approximately $300,000 and it saved approximately$500,000 in O&M costs with very little revenue associated with the area. Bill Cook, Senior Vice President of Operations commented that the CSO project may require the BWL to move or affect a main that they might not otherwise have done. This in essence would change the timing as to when it is economical to convert customers from steam to natural gas. Mr. Cook noted that the BWL is incurring cost that it might not otherwise have but there is no means to recover the cost as the steam mains are in the street right a way. Board Mtg.Minutes January 23,2007 Page 32 of 64 The Commissioners asked that since they are aware of the CSO project, is there a way for the BWL to overlay their work so that they can approximate the cost of conversion? It was also asked if any of the areas would show that the cost is greater than the recovery? Mr. Wood noted that based on their estimates of historically replacing steam they know what the project is going to cost. He also advised that based on the CSO planning for the next 20 years, the BWL can determine costs for those respective areas. In regards to the second question, Mr. Wood noted that one might start seeing some other areas (relative to cost being less than recovery) and start paring back. He went onto state that there are definitely some revenue areas in the downtown vicinity such as, Lansing Community College in which there are no structural or manhole problems. Mr. Cook noted that the BWL has invested a significant amount of money over the last several years in keeping up with the CSO project and there is now some new infrastructure in the downtown area. Mr. Cook went onto report that there might be a pruned back steam system that works for the BWL but they are not yet prepared to make that determination. The question still remains, what is the core downtown business in which they can sustain the steam utility? Mr. Wood advised that Areas 3 and 4 with a total of 25 customers are two additional areas that the BWL would like to convert from steam to natural gas. The fiscal year 2006 revenues for the two areas were$39,774. The O&M expenses for fiscal year 2007 are $146,135 and the 20-year capital cost requirements are $4,894,000. Staff clarified that the capital cost requirement would not be paid out over the course of 20 years. Typically, the BWL would continue to incur O&M expenses at approximately$100,000 a year for Area 4 and then an additional lump sum cost of$2,500,000 at present value would be incurred at some point in time. It was also noted that it economically feasible for the BWL to convert Areas 3 and 4 without having to wait for the CSO project. Once the CSO project goes through those areas, then the mains would have been capped, and would only require nominal cost to remove and strap the mains. It was further advised that the difference between this policy proposal and the previous pilot program is that this one would be mandatory as opposed to voluntarily. Staff also noted that based on their experience with Areas 1 and 2, the BWL has estimated a conversion cost for Areas 3 and 4 at a total of$800,000, which is subject to change. A detailed engineering estimate is still needed by outside contractors to determine the final cost. Commissioner Zerkle asked what would be a customer's argument to resist conversion? Mr. Cook noted that to the extent that the price of steam is less expensive than the cost of natural gas. He also reiterated that the conversion project would have no upfront cost to the customer. However, the negative impact would be if natural gas were more expensive than steam. Board Mtg.Minutes January 23,2007 Page 33 of 64 Commissioner Rios commented that the cost of steam to customers is an unknown factor at this point. As the Board, passed a reduced rate increase that was not sufficient to cover the base, which further created a significant gap in the BWL's ability to maintain services. Commissioner Rios also noted that they have elected to look at the entire steam system to determine what can they do to reduce their cost and exposure to help avoid significant rate increases. Mr. Cook explained that one issue that may arise is a customer's desire to convert but they are not located in a designated conversion area, which is why the BWL needs a steam abandonment policy to address those issues. Commissioner Rios also noted that he understood why it is called "abandonment"but expressed apprehension with the terminology used as it delivers a negative connotation. Dick Peffley, Interim General Manager advised that they could work with the Communications Department in developing a marketing package for this project. The Commissioners were in agreement with the suggestion. Commissioner Graves asked Amy Cavanaugh, General Counsel if the BWL is setting precedence by absorbing the conversion cost for some but perhaps making a different decision in the future? For example, the steam utility is not profitable therefore all customers have to convert. Is there a precedence issue that the BWL should be aware of? Ms. Cavanaugh noted that there maybe but the larger concern is that as a public utility you have a responsibility to service your customers. There is an issue as to whether or not the BWL can abandon steam because they have steam customers. Ms. Cavanaugh stated that the conclusion she has reached thus far is that service for the BWL is a contractual matter for some customers. Whereas, there is no obligation to serve them at the end of their contractual period and hence the BWL would have more lead way as to the terms of the conversion costs. However, for customers who are under the Rules & Regulations, then the rules maybe different. She went onto note that for those customers, since the BWL is a public utility and has a duty to serve then the easier course of action would be for the BWL to pay for the cost of conversion. Ms. Cavanaugh noted that she has not been able to locate anything that supports the BWL's ability to walk away from the steam utility business especially, since this is a vital service—heat. She further stated that she believes the BWL would possibly set itself up for a claim if it did not pay for the cost of conversion. Charles Moore, Interim Internal Auditor asked if the BWL has any exposure with the difference between the BWL rates and involuntarily conversion? For example, whereas a customer now experiences a significantly higher heating bill compared to what they would have received if they had been allowed to maintain steam service with the BWL? He further noted the difference between voluntary and mandatory conversions and asked if the BWL is imposing any liability associated with a mandatory conversion? Ms. Cavanaugh reported that the Rules & Regulations has some language that assists the Board in this matter. Primarily to the extent that safety is an issue then there would be no Board Mtg.Minutes January 23,2007 Page 34 of 64 liability to the BWL. In instances of economics, its more of a concern especially, since the current Rules & Regulations speaks about getting customer permissions for doing a project of this nature. Ms. Cavanaugh noted that the Board could change the Rules & Regulations, which would help insulate the BWL from potential liability. Mr. Cook stated that from a practical stance they are saving$2,500,000 by cutting over 20 customers to natural gas. The argument could be made that if those customers did not convert then the cost of maintaining the service specific to that area could be allocated to respective individuals, which would be a price signal that perhaps it is time to convert to gas. During discussion, it was indicated that the BWL could differentiate the cost for serving different customers if you have a separate rate class in which it could appear as a surcharge. However, staff noted that the BWL does not separate rate classes based on geographical areas. It was further suggested that the cleanest method is voluntary conversion. Commissioner Rios noted that the reasonableness and viability of the plan is based on the BWL's financial assessment of the steam business. They have always treated the steam business as one entity in terms of rate increases and there is no rate classification of steam customers. He went onto note that part of the justification has to come from projections in terms of steam rate increases necessary to support the business. Commissioner Rios also reported that he believes that this has to be built into whatever rate policy they develop. Keeping in mind that the last steam rate increase did not cover the BWL's total cost. He also advised that there is economic justification for steam rate increases that would cover the cost differential for propane. Mr. Wood continued with the presentation and noted that the recommendations are as follows: • Adopt a Restricted Steam Abandonment Policy based on the following: 1) Areas that have O&M, low revenues, high capital investments to replace infrastructure and safety to BWL customers. 2) Where O&M costs exceed the annual revenues and/or when the capital improvements show the 20-year present worth is less than capital cost to continue service. 3) For Areas 3 and 4 the BWL will contract, oversee and pay for converting customer's equipment to another energy source. 4) Future potential conversion options will be at the discretion of the BWL. 5) This policy would only apply to the customers in areas currently identified by the BWL or areas selected by the BWL in the future. Commissioner Calkins asked how do they decide and establish what type of heating system the BWL is going to install? Mr. Wood noted that it is based on the minimalist cost possible to convert the customer from to steam to natural. He also explained that if the customer wanted something greater than what the BWL offers then the customer would incur the cost differential. Board Mtg.Minutes January 23,2007 Page 35 of 64 Mr. Wood also advised that in previous projects, customers either had an existing forced air system that the BWL replaced or piping hot water piping in which a boiler installed. Commissioner Zerkle stated that based on Commissioner Graves' previous statements what is going to happen after Areas 3 and 4 are converted and the program ends but others want or need to convert? How would the BWL handle that situation? Mr. Cook responded by stating that if they met the same criteria for Areas 3 and 4 in respect to the 20-year payback and other criteria items then they would be treated the same way. Commissioner Rios noted that unless it is a mutual benefit for the BWL and the customer based on the criteria then a conversion from steam to natural gas does not make sense. He also stated that crafting the rationalization, the description, articulating the reasons, and giving them plenty of flexibility to determine how far the BWL wants to take the program is a challenge. Commissioner Rios went onto explain that they want to make sure that they do not create a situation where people are going to want to convert at a time in which it does not make sense. He further advised that the standards that they implement in terms of policy will determine how are they make those types of decisions. Mr. Cook clarified that the Board had previously approved the budget and a voluntarily steam abandonment policy. If the project cost is going to be 15% or more than what was originally budgeted at$812,000 then they would bring the item back to the Board for approval according to policy. However, if the final cost figure were below that amount then they would proceed with the project. The Commissioners agreed to continue the steam abandonment project on a voluntary basis or at least until they have solidified the overall steam plan. At present, there are still questions relative to cost, public reaction and legalities. Commissioner James noted that the BWL could legitimately say it is mandatory when you take into account safety issues. She also indicated that one could look at the cost benefit analysis and also review rate categories for the respective areas. Commissioner James further advised that she would like to make sure that the BWL is covered legally as volunteerism may not insulate the BWL. Mr. Wood noted that safety issues typically occur in the manholes because the crews have to get in them. He also reported that leaks within the main heat up the manhole cover somewhere else and that is how stepping on the hole especially in the summer while barefoot could endanger the public. Staff advised that one could always pay the $2,000,000 in structural repair cost to alleviate the safety issues. Mr. Cook concluded by stating they will move forward with the project on a voluntarily basis and if issues arise then they would bring them before the Board; no specific action is needed at this time. Board Mtg.Minutes January 23,2007 Page 36 of 64 Watson Drain Easement Mr. Peffley advised that the item was removed from the agenda, as it has been resolved. Renewable Portfolio Pete Schimpke, Manager of Resource and System Planning presented an overview of the Renewable Energy Portfolio Standard Resolution. It is noted within the presentation that, "A renewable portfolio standard (RPS) is a policy that requires electricity providers to obtain a minimum percentage of their power from renewable energy resources by a certain date." A brief summary of the key reasons for BWL to adopt a RPS are listed below: • The Energy Policy Act of 2005 amended Title 1 of the Public Utility Regulatory Policies Act of 1978 (PURPA) requires utilities to consider a plan to minimize dependence on one fuel source and to ensure that electric energy is generated from a diverse range of fuels and technologies which includes renewable technologies. • Governor Jennifer Granholm has required the MPSC to develop an Energy Plan no later than December 31, 2006. (The plan should be released next week, which will require renewable portfolio standards.) • This 21St Century Energy Plan is required to include an RPS that establishes targets of Michigan's energy consumption to be derived from renewable energy sources. • IRP Study Conclusion: "Adding new generation could better provide for reliability and low-cost utility service over the long term." • IRP Study Conclusion: "Wind energy turbine technologies coupled with the available wind resource within Michigan offer the prospect of production costs competitive with coal-fired generation. • IRP Recommended Action Step: "Consider ownership or long term power purchase from large wind power projects or other renewable portfolio power projects." • Appropriate and prudent for the LBWL to explore additional renewable energy supply opportunities, as a part of ongoing efforts of meeting the electricity supply requirements of its customers and in complying with the anticipated statewide RPS. Mr. Schimpke noted that to his knowledge none of the other Michigan based utility companies have formally approved a RPS policy. Although, Consumers Energy (CE) and DTE are currently working to develop one. Mr. Cook also reported that although the BWL is not under Michigan Public Service Commission (MPSC) authority, legislation maybe developed that would place the BWL Board Mtg.Minutes January 23,2007 Page 37 of 64 under some form of requirement. He further commented, that by acting now, the BWL could define what they want as opposed to someone defining it on their behalf. Mr. Peffley advised that other utilities are going to buy up the existing resources and the BWL does not want to be in a position where they cannot located the needed renewable resources for the RPS policy. Staff explained that the resolution is flexible. The flexibility of the resolution allows the BWL to make changes if deemed necessary and appropriate. It also requires the BWL to report back to the Board of Commissioners on the progress of achieving its goals. Mr. Schimpke noted that the proposed percentage levels are based on the research they conducted and nationwide information. The proposed RPS Resolution states that: The BWL shall strive to generate or purchase electricity generated from eligible renewable energy sources at the following target levels: 1. Two percent (2%) of electric retail sales (kWhs) by December 31, 2008; 2. Five percent (5%) of electric retail sales (kWhs) by December 31, 2012; 3. Seven percent (7%) of electric retail sales (kWhs) by December 31, 2016. Commissioner Smith asked what types of things would the BWL has to do in order to meet the standards? Mr. Cook responded by stating that the BWL would probably have to purchase renewable energy to meet the 2008 short-term goals. However, he also advised that some of the recent RPS initiatives at the BWL include the following: • Repower 1-wheel BWL Hydro at Eckert (4000Mwhrs) • Evaluate Repowering 2nd Wheel at Eckert. • Renew Greenwise supply from Tower Kleber Hydro (6500Mwhr) • Working with Granger regarding purchase of Biomass generation. • Working with Traverse City Light and Power regarding a wind site in mid-Michigan. Commissioner Graves asked if CE has contracts with Granger for biomass and have they set the market rate? Mr. Schimpke responded by stating that CE has a contract with Granger and others but he is not aware of all of them. He went onto note that based on the responses they received for the Request For Proposals (RFP) then it does not appear that CE has set the market price. However, Mr. Cook did note that as soon as the RPS standard is set then the price of renewable energy would increase. Commissioner Calkins asked if the BWL has any idea as to what the State of Michigan is going to propose? Board Mtg.Minutes January 23,2007 Page 38 of 64 Mr. Schimpke stated that they do not know what the State will propose. However, they believe that the State's numbers will be similar to what the BWL is proposing. Mr. Cook clarified that the MPSC is conducting a study initiated by Governor Granholm. Once the study results are presented, then it would probably be a blueprint for some type of legislative action. The MPSC does not regulate the BWL and as such, it would require legislative action for it to affect the BWL. Mr. Cook went onto note that the BWL is attending the 21St Century Energy Plan meetings and the BWL's mantra has been that this is a great idea but the plan should allow municipalities to regulate themselves as the charter dictates. Mr. Schimpke presented the RPS Resolution Parameters that include the following: • Levels may be adjusted to meet future legislative requirements. • All costs reasonably and prudently incurred in procuring renewable energy sources will be considered cost of service and recoverable through electric sales. • Each January staff will prepare a report on status of achieving target levels. Commissioner James asked if the BWL is looking to capture methane gas? She went onto note that the Michigan Land Bank Fast Track Authority (a division of Michigan Department of Labor and Economic Growth) has five landfills in their portfolio in which they are currently looking at methane gas. Mr. Schimpke noted that methane gas is an option that the BWL has discussed with Granger. He also reported that the reliability of such an asset is very high. On motion by Commissioner Smith, seconded by Commissioner Calkins, the Committee of the Whole unanimously agreed to move the Renewable Energy Portfolio Standard (RPS) resolution forward to the full Board for consideration. Delta Township Wholesale Water Contract Update Moved by Commissioner Calkins, seconded by Commissioner Smith to go into executive session to discuss a privileged document received from Amy Cavanaugh, General Counsel protected by the Open Meetings Act exemption MCL 15.268(h). (7:22 p.m.) The roll was called. Yeas: Commissioners Calkins, Graves (teleconference), James, Rios, Rodocker, Smith, and Zerkle. Nays: None. Absent: Commissioner Cochran Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Smith that the Committee of the Whole meeting return to open session. Board Mtg.Minutes January 23,2007 Page 39 of 64 Carried unanimously. The Committee of the Whole meeting reconvened in open session at 8:08 p.m. Commissioner Rios advised that the Board had discussion and received an update from staff on the Delta Township wholesale water contract. The Commissioners directed Ms. Cavanaugh to continue to work to resolve the matter. Discuss Legal Review Process In the interest of time, the discussion regarding the Legal Review Process will be moved to a later Committee of the Whole meeting. Other Internal Auditor Interview Questions Commissioner Calkins stated that he thought the previous interview questions used in the selection of the Internal Auditor were adequate. However, he suggested that Charles Moore, Interim Internal Auditor review the questions to see if he has any additional questions. Commissioner Calkins also clarified that the use of the previous questions would be in lieu of developing new questions and conducting a 2-hour structured interview training session with Mr. Blockett. The Commissioners were in agreement with Commissioner Calkins suggestion. As such, Mr. Moore will review the questions and submit any possible changes to Secretary Jones. Proxy Rights Commissioner Calkins stated that he read the email regarding the designation of proxy rights and indicated that he did not believe that a Commissioner could designate proxy to another party. The Commissioners agreed that a Commissioner could submit information that the Board may consider but that it would not involve voting rights. It was suggested that the Board might need further clarification in the Rules of Procedure, as the existing guidelines are silent on this subject. Committee Meetings Secretary Jones advised the Board that staff needs to present two policy recommendations to the Human Resource Committee before the next Board meeting scheduled for January 23rd Commissioner Rios advised that to the extent possible they should always try to accommodate schedules so that they receive maximum participation. However, they cannot slow down the process due to scheduling conflicts, vacations, etc. Commissioner Smith advised that they have committee alternates and any committee member or alternate can chair the meeting for the chair if necessary. She went onto explain that if the chair would prefer to decide who should chair in their absence then that Board Mtg.Minutes January 23,2007 Page 40 of 64 is acceptable. Therefore, if one can obtain a quorum with the use of alternates then the meeting should continue. Commissioner Rios also noted that during the Board retreat they also agreed that they would establish an annual calendar to be more efficient and respectful of their other responsibilities. He went onto note that they would be adjustments in the future and they need to plan for those accordingly. Commissioner Calkins asked what is the policy if the chair is not present? Commissioner Smith responded by stating that she did not know if there is an actual policy in place, as she believes their Rules of Procedure are silent to the issue. However, in the past if there is a quorum then they proceed with the meeting and typically the chair will ask someone else to chair in their absence. Joint Committee Formation Commissioner James stated that during the previous Committee of the Whole meeting they gave Michael Goree a directive to work with Dick Peffley. During the meeting, the Commissioners did not establish goals, deliverables, or a monetary amount, which she thinks necessary, as she did not want an open-ended contract. Commissioner James went onto note that the union may want to provide input. As such, she encouraged the formation of a committee that consists of management and employees to facilitate the evaluation and possible implementation of the Human Resource audit recommendations. Commissioner James went onto note that the communication that she put forth before the Board today was an instance in which the union made her aware of an issue. The Commissioner's discussed the protocol and appropriateness of the receipt and response of correspondence. After lengthy discussion, they generally agreed to strive for the uniform sharing and response of all communications that maybe sent to individual Board members. Commissioner Rios stated that everyone that includes, Commissioners, management and employees alike, have to be cognizant of the correspondence process. He went onto note that if an official request is received then it should be forwarded to the entire to the Board. Commissioner James asked that she receive a copy of the BWL's response to the FOIA request submitted by Brookover. Secretary Jones advised that she would forward copies of the information to the entire Board. Human Resource—Scope of Work Mr. Peffley advised that during the previous meeting, the Board instructed him to work with Michael Goree of Growth Strategies, Inc. in regards to the Human Resource audit findings. Mr. Goree prepared a scope of work in which he identified 14 deliverables with an estimated timetable of 4-5 months at 60-70 consulting days at a$1,000/day with a cap amount of$70,000. Mr. Peffley noted that Mr. Goree still has his full support to work Board Mtg.Minutes January 23,2007 Page 41 of 64 with Sheryl Hudson, Acting Human Resource Director to implement the deliverables. He went onto ask the Commissioners for their input and noted that there are five meetings scheduled for Wednesday, January 1Ot" in which Mr. Goree to scheduled to present the report to all BWL employees. Mr. Peffley further stated that he is following up with this request, as was the direction from the Board. He also noted that Ms. Hudson spoke to the Purchasing Department to ensure that the contract extension is not in violation with the existing purchasing policy. Mr. Peffley reported that the scope of work is very aggressive and it was submitted earlier that day and hence he wanted to advise the Board as to its progress. Commissioner Rios stated that he wanted to clarify their previous request in which they did not direct Mr. Peffley to contract with Mr. Goree. He noted that his recollection was that the Board suggested continuing to involve Mr. Goree in the process. Commissioner Rios went onto advise that what they did ask was that Mr. Peffley would work to implement the recommendations made within the report. Commissioner Rios then noted that it was his suggestion that Mr. Goree would continue on that basis. He went onto to explain that it is Mr. Peffley's responsibility to decide the best course of action to take to implement the recommendations or to reject them and to keep the Board abreast of the project. Mr. Peffley stated that with that understanding these are Mr. Goree's recommendations and he will provide a list of his own recommendations with a cost analysis associated with it. He went onto note that the scope of work represents everything that Mr. Goree would like to address with the worse case scenario for timing and cost. Commissioner Rios commented that the BWL has a lot of capable people who are responsible for accomplishing the tasks that are on the list. From his perspective, what they would receive from Mr. Goree is guidance and assistance in developing the tools and processes that might help staff in implementing the changes and adjustments. Commissioners Rios noted that a$70,000 contract seemed excessive. Commissioner Smith advised that once Mr. Peffley decides which items needs to be handled then it would be up to him to decide Mr. Goree's level of interaction. Commissioner Graves noted that he agreed with Commissioner Rios summarization of the previous Committee of the Whole meeting. However, they did say said go forward and work with Mr. Goree and he thought to implement a plan for addressing the issues that are in the report. Commissioner Graves went onto explain that at this point, he thinks they have transitioned from the report to what is clearly operational. He stated that he does not think that Mr. Peffley should bring anything back to the Board other than information that he wants to share in regards to how the BWL is moving forward. Commissioner Graves further reported that in his opinion that they do need the assistance of Mr. Goree as those were his findings and he thinks staff would benefit greatly from his expertise. He went onto speak to the cost issue, which he thinks is something that management needs to review and determine as to whether or not they think it is an appropriate cost. Commissioner Graves further advised that he thinks that staff should be Board Mtg.Minutes January 23,2007 Page 42 of 64 allowed to go forward and engage Mr. Goree in whatever ways are appropriate and keep the Board informed of their progress. Mr. Moore noted that there should be information in the Rules of Procedure that speaks to the issue of proxy rights. The Commissioners advised Mr. Moore that the existing Rules of Procedure are silent on this issue. Mr. Moore also stated that the BWL needs to develop a plan of action to determine how they are going to address some of the issues within the Human Resource audit report. He went onto ask how does the BWL will get from Mr. Goree's report to a clean report? Commissioner Graves responded by stating that they have now transitioned to management's discretion. He went onto advise that the Board is not there to manage this process to its conclusion as that is not their role. Commissioner Rodocker advised Mr. Peffley that she would like a report that determines how the Human Resource audit report should or could be used at the BWL and then work on a plan to implement it. She went onto note that it is management's responsibility to implement the suggestions and that she does not want to see Mr. Goree in essence become a BWL employee. Commissioner James stated that the discussion ties back to the possibility of forming a joint committee comprised of management, bargaining unit representatives and two Commissioners. After further discussion, the Commissioners advised that the joint committee suggestion would blend the lines of policy and operations, as it is difficult to keep the two separated. There being no further business, the meeting adjourned at 8:46 p.m. Respectfully submitted Santiago Rios, 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 esolution HUMAN RESOURCE RESOURCE COMMITTEE January 11, 2007 Board Mtg.Minutes January 23,2007 Page 43 of 64 The Human Resource Committee of the Board of Water and Light met in the Boardroom of the Administrative Offices, Lansing beginning at 11:00 a.m. on Thursday, January 11, 2007. Acting Human Resource Committee Chair, Santiago Rios called the meeting to order and asked the secretary to call the roll. The following committee members were present: Commissioners Joseph Graves, Santiago Rios, and Julee Rodocker. Absent: Commissioner Robert Cochran. Public Comment There were no public comments. Use of LBWL Communication Technologies Policy The Commissioners met to review and discuss the Use of LBWL Communication Technologies Policy, which if approved will govern the Board of Water and Light's communications that include, but are not limited to: telephones (including cellular and Voice Over Internet Protocol—VOIP), email, internet use, Virtual Private Network (VPN), radios, pagers, global positioning devices, and personal digital assistant (PDA). Amy Cavanaugh, General Counsel outlined the policy and its major components. The policy includes governance relative to communication equipment, permitted uses, prohibited uses, monitoring, safety and security, loss or theft, return, and misuse of equipment. She also explained that VOIP would link BWL's computers to its phone and email system and would also allow for enhanced monitoring capabilities. Ms. Cavanaugh reported that employees should not have an expectation of privacy when using any BWL communication technology. They should also be aware that any documents created using the aforementioned technology is subject to the Freedom of Information Act and thereby, subject to public disclosure. Ms. Cavanaugh also advised the Commissioners that the Internal Revenue Service has recently determined that cell phones given to employees for business use are 100% taxable. The only exemption to this measure is if one can prove that there is no incidental personal use as the IRS deems the cell phone as a benefit to employees. Ms. Cavanaugh also noted that the new IRS mandate would also govern the Board of Commissioners. As it stands, the BWL does allow for incidental personal use provided there is no additional cost to the BWL and work productivity does not suffer. She further explained that if the Board adopts the Use of LBWL Communications Technologies Policy as presented then staff will develop a means to address the IRS's cell phone mandate. The Commissioners expressed concern in approving the policy without supplemental procedures in place to address each respective technology and its application. More specifically, the Commissioners requested that procedures be developed to govern monitoring, its application, the business reasons for monitoring, determining parties with Board Mtg.Minutes January 23,2007 Page 44 of 64 the authority to monitor, tracking requests for monitoring and any other such items relevant to the subject. The Commissioners also advised that it would be prudent to provide training and/or a communication tool for employees to learn of the policy and its implications. Ms. Cavanaugh agreed that she and staff would develop and send the respective policy and supplemental monitoring procedures to the full Board for review by January 171h On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Use of LBWL Communication Technologies Policy to the full Board subject to procedures being received and reviewed prior to the Board meeting. The Human Resource Committee's recommendation will be submitted to the Board on January 23rd pending receipt of supplemental monitoring procedures. Anti-Harassment Policy Ms. Cavanaugh reviewed the Anti-Harassment Policy and noted that the primary modification to the existing policy is mandatory reporting. In the past, reporting of discriminatory behavior was the sole responsibility of managers and supervisors only. The proposed policy change would deem it mandatory for all employees to report discriminatory behavior. The policy specifically states that the term harassment is defined as discrimination based on any characteristic protected by applicable law. It also indicates that the characteristics include race, color, sex, religion, national origin, citizenship, age, disability, height, weight, marital status and sexual harassment. Ms. Cavanaugh also briefly discussed the City of Lansing, Human Rights Ordinance. On motion by Commissioner Graves, seconded by Commissioner Rodocker, the Human Resource Committee unanimously agreed to move the Anti-Harassment Policy to the full Board for approval. The Human Resource Committee's recommendation will be submitted to the Board on January 23rd There being no further business, the Human Resource Committee adjourned at 11:54 a.m. Respectfully submitted, Santiago Rios, Acting Chair Human Resource Committee Motion by Commissioner Rios, seconded by Commissioner Calkins, to receive the Human Resource Report as presented. Action: Carried unanimously. Commissioner James arrived at the Board meeting in person at 5:55 p.m.and the teleconference connection ended. Board Mtg.Minutes January 23,2007 Page 45 of 64 esolution FINANCE COMMITTEE COMMITTEE January 16, 2007 The Finance Committee of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 3:30 p.m. on Tuesday, January 16, 2007. 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 Gary Calkins, Semone James, Robin Smith and Sandra Zerkle. Commissioner Joseph Graves was also present. Public Comment There were no public comments. Internal Audit Reports— Charles Moore, Including: Six-Year Forecast, Internal Audit Plan and Coal Inventory Control Six-Year Forecast Charles Moore, Interim Internal Auditor presented an executive summary of the six-year forecast, internal audit plan and coal inventory control. During the six-year forecast review, Mr. Moore specifically advised the Commissioners that they should play a larger role in determining the allocation of cost due to the effects that it has on utility rates. He recommended that staff bring allocation methods before the Board for review and approval, for in the past, those decisions were made without Board input. Mr. Moore further noted that the goal of the allocation decisions are to make each utility stand independently by allocating cost more appropriately as it relates to the bottom line. He also provided four examples of cost allocation methods that the Board could use as examples during this process. In addition to the above, Mr. Moore also recommended that the BWL study the capacity for wholesale sales of electricity and water due to its potential revenue generation. He further recommended a thorough review of healthcare cost as the BWL is projecting a 5% increase in years 2 through 6 of the six-year forecast while the rest of the nation is projecting increases of 15% to 20%. Therefore, based on the industry, the BWL's projections appear to be low. He suggested that the BWL conduct a full study of healthcare to determine baseline costs. Mr. Moore briefly addressed the payment in lieu of taxes and noted that the figures met the 4%, which is good based on the current 10-year contract. He further clarified that he did not compare the BWL's existing agreement to other municipalities. Staff reported that the BWL is currently in the sixth year of the payment in lieu of taxes agreement with the City of Lansing. Internal Audit Plan Board Mtg.Minutes January 23,2007 Page 46 of 64 Mr. Moore presented an executive summary of the Internal Audit Plan that can used as a guideline in determining when and what items should be audited and at what frequency. There are a total of 58 items listed within the scope of the review. One of the items specifically mentioned were random periodic P-card audits. The Commissioners commented as to the feasibility of whether or not one individual has the capability to accomplish so many tasks on a yearly basis. It was suggested that the Board might need one person to determine the audits and another one to conduct them. As such, the Commissioners asked Dick Peffley, Interim General Manager to review the budget for the upcoming fiscal period and make a recommendation as to potential additional staffing. Mr. Peffley agreed to review the budget in consideration of adding up to two persons to the Internal Auditor Department and/or outsourcing during peak audit periods. Commissioner Calkins asked Mr. Moore if he has considered utilizing interns in addition to another full-time person? Mr. Moore responded by stating that he has used interns at his own firm in which the persons then became full-time employees. The use of internships allows an employee and employer to determine whether or not they make a good fit for the organization and if the employee likes the work that they are asked to do. Mr. Moore suggested that the BWL could consider an intern(s) as an additional employment option. Mr. Moore noted that it is important for the Board to recognize that the BWL is a large construction company with approximately$60,000,000 a year in maintenance, construction, and capital projects. The question was asked if the BWL has controls in place to monitor construction? Mr. Moore noted that the software is not in place to assist in this process and the existing controls are not tracked on a consistent basis. He also reported that the information gathering should be simplified and that he has not tested the controls as the construction audit would be a project that the permanent Internal Auditor should undertake. Staff advised that the SAP project should help with tracking and thereby, provide additional construction controls. They also noted that satellite inventory is an example of one of the controls that will be useful in monitoring construction costs with the inception of SAP project. Coal Inventory Control Mr. Moore presented an executive overview of the coal inventory control process. During the review, he advised that the process of coal inventory and fuel services, which includes transportation and rail cars are too concentrated within the hands of too few people, primarily that of one BWL employee and one contractor. Mr. Moore did not suggest cause for concern. However, he recommended that the Purchasing Department be involved in the purchase of coal to create separation of duties. He also suggested that Board Mtg.Minutes January 23,2007 Page 47 of 64 someone else be involved in the coal approval process in which that individual would compare the manifest to the national database for accuracy. This would ensure better separation of duties and improved internal controls. Lastly, Mr. Moore also recommended that the new Internal Auditor review past sales and transactions for good measure and due diligence. The Commissioners were receptive to the recommendations and advised that coal inventory has appeared on previous external auditor reports. They also noted that the previous Internal Auditor, Glenn Holloway had also suggested an audit of this nature. On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee unanimously agreed to advance Mr. Moore's recommendations made within the Coal Inventory Controls report to create separation of duties within the purchasing and contracting for coal process and the coal approval process. The Finance Committee's recommendation will be submitted to the Board on January 23ra On motion by Commissioner Calkins, seconded by Commissioner Smith, the Finance Committee unanimously agreed to advance Mr. Moore's Six-Year Forecast report and recommendations to the full Board. The Finance Committee's recommendation will be submitted to the Board on January 23ra Commissioner Calkins made a friendly amendment to state that cost allocations are to be reviewed by the Board on an annual basis. Commissioner Smith seconded the motion. Carried unanimously. Copies of Charles Moore's Internal Audit Reports are on file in the Office of the Corporate Secretary. Legal Opinion re. Impact of Proposal 2 on Resolution 2006-1-3 Moved by Commissioner Graves, seconded by Commissioner Smith to go into executive session to receive a legal opinion from Amy Cavanaugh, General Counsel, protected by Open Meetings Act exemption MCL 15.268(h). (4:24 p.m.) The roll was called. Yeas: Commissioners Calkins, Graves, James, Smith and Zerkle. Nays: None Absent: None Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Zerkle that the Finance Committee meeting return to open session. Carried unanimously. The Finance Committee reconvened in open session at 5:01 p.m. Board Mtg.Minutes January 23,2007 Page 48 of 64 On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously agreed that the legal department would prepare new proposed language to replace the existing language within Resolution 2006-1-3. The proposed changes will be reviewed at a subsequent meeting once they are made available to the Board. Commissioner Smith left executive session at 4:44 p.m.due to a prior obligation and rejoined the meeting by teleconference at 4:50 p.m. Upon completion of the executive session,Commissioner Smith ended her teleconference participation at 5:01 p.m. Discussion on Retirees' Cost of Living Proposal Sue Flores, Manager of Finance and Planning explained that the BWL is obligated under Resolution 2005-3-13 to review consideration of a Cost of Living Adjustment (COLA) to the Defined Benefit Plan within 30 days of an approved BWL-IBEW contract. Upon completion of the contract extension, adopted by the Board on October 30, 2006, the BWL began to consider a request received from the Defined Benefit (DB) Pensioners for the BWL to consider a COLA increase. Ms. Flores advised that the last COLA increase was received in 2001. She also explained that granting an increase in the DB fund would reduce its current over funding and thereby, affect transfers to the VEBA fund. The BWL adopted GASBY 45, which is a commitment to fully fund VEBA. As a result, transfers from the over funded DB fund to the under funded VEBA fund have allowed the BWL to reduce its operating cost because it is able to take advantage of the over funding. Ms. Flores noted that granting a COLA increase would affect the DB fund but to what extent would have to be determined by the amount of the increase and an actuarial assessment. She also reported that fully funded medical health benefits are paid to both the Defined Benefit and Defined Contribution retirees. Ms. Flores further advised that increases in health care medical benefits have been substantial and they continue to be fully funded with no premium sharing for the pensioners. She went onto note that although the pensioners have not received a COLA increase since 2001, they have received a net overall increase benefit from the company in that the BWL has continued to fully fund healthcare. The net increase has resulted in a benefit of 15% during the past five years at an average of 3% each year. Ms. Flores continued by presenting options that the Board may want to consider, which include the following: Lump sum per year retired, no min/max: Total Low High $15 each year retired prior to 7/1/2006, no min max $123,560 $ 0 $ 658 $30 each year retired prior to 7/l/2006, no min/max $247,120 $ 0 $ 1,316 Percentage per year retired with min/max: .5% each year retired prior to 7/l/2006 of annual amount $143,758 $ 150 $ 300 .5% each year retired prior to 7/l/2006 of annual amount $229,861 $ 200 $ 500 Graduated amount based on annual pension: 10% of 1st $1,000, 1.5% next $20,000, $0% over$21,000 $144,113 58 400 20% of lst$1,000, 3% next$20,000, $0% over$21,000 $238,726 108 700 Board Mtg.Minutes January 23,2007 Page 49 of 64 Ms. Flores reported that staff recommends a one-time lump sum payment of$15.00 each year retired prior to 7/l/2006, as the most appropriate option until actuarial numbers can be thoroughly reviewed. This option may provide some relief to retirees, especially those who retired several years ago. They would also like to invite a retiree representative to serve on the healthcare taskforce. Mr. Peffley advised that they are not advocating a decrease in the healthcare benefits that retirees currently possess. However, they want their involvement in the future, as the BWL will need to address healthcare issues. Mr. Peffley also noted that the BWL would revisit this issue again in approximately 11/2 year, which will be the end of the current bargaining unit contract extension. The Commissioners advised that some of the retirees have already expressed an interest in participating on the healthcare taskforce and have not had opportunity to do anything of this nature in the past. It was also asked if the BWL had conducted a survey of the retirees to indicate their preference relative to the COLA options? Mr. Peffley responded by stating that the BWL has not conducted a survey to determine the retiree's preference. He also noted that they are required to visit this issue within a timeframe after the bargaining unit contract is settled. Mr. Peffley explained that if the $15 each year retired option is chosen then it would be at a cost of$123,560 to the over funded Defined Benefit plan, which will effect the transfer to the VEBA fund. Upon further discussion, the Commissioners asked staff what are the negative effects of providing a lump sum payment? Ms. Flores advised the negative implications would involve the following: 1. Cost - $123,560 2. Defined Contribution Plan pensioners may be unhappy as they are not scheduled to receive a likewise amount. 3. The Defined Benefit Plan pensioners may not feel that the amount is sufficient and/or they may feel that the increase should be permanent. On motion by Commissioner Calkins, seconded by Commissioner Zerkle, the Finance Committee, agreed to move forward a recommendation to the full Board to adopt a one- time lump sum Cost of Living Adjustment to the Defined Benefit Plan pensioners in the amount of$20.00 each year retired prior to 7/l/2006, no min/max at a total cost to the BWL of approximately$164,000. The Finance Committee's recommendation will be submitted to the Board on January 23ra Discussion: Commissioner James asked staff if they have determined the ramifications of the aforementioned COLA increase in terms of the bottom line? Staff clarified that there are essentially two ramifications: Board Mtg.Minutes January 23,2007 Page 50 of 64 1. The $164,000 lump sum payment would have to be funded from the Operations & Maintenance (O&M) budget. 2. They would have to look for savings internally in some other area or they will be over budget in a line item for$164,000. Commissioner Zerkle introduced a friendly amendment to include that retirees will be invited to serve on the healthcare taskforce. Mr. Moore advised that the BWL is over budget in wholesale sales at approximately $2,000,000. Thereby, the BWL has sufficient cash to accommodate the request. Bill Cook, Senior Vice of Operations noted that the average pensioner receives $15,690 a year and this will result in a bonus payment of approximately$330, which is equivalent 2.1%. Vote: Carried unanimously. Plan of Deliverables— Charles Moore Mr. Moore explained that the Plan of Deliverables advises the Board of his progress for various projects that are scheduled to occur throughout his contractual period with the Board of Commissioners. A copy of the plan is updated and sent on a monthly basis with the billing invoice that includes a forecast of upcoming projects. Copies of Charles Moore's Plan of Deliverables are on file in the Office of the Corporate Secretary. SAP Update Mr. Peffley advised that the Commissioners were originally told that the budget for the Financial System Software Project (SAP) was $2,664,000. A component of the budgeted amount, $504,000 was an O&M cost. During the budgeting process the $504,000 was not transferred into Capital Projects. The documentation that should have been used to accomplish this task is a Capital Projects Justification (CPJ) form. Under the current administration, a capital project is not approved unless a CPJ is filled out. Mr. Peffley further explained that the $2,664,000 has to be approved as the $504,000 from O&M was not included and hence only $2,160,000 is in the capital budget for the SAP project. He also noted that this is not an increase to capital projects at a cost to the ratepayers, the BWL is essentially moving funds from O&M to capital. Mr. Peffley went onto state that the $504,000 discrepancy is an accounting issue that needs to be rectified with the Board's approval. He also advised the Board that an additional $67,000 is also being requested at Mr. Moore's recommendation for capitalized interest. Therefore, the total amount requested is $567,000. Mr. Peffley also reported that there was a problem in which the software project was bid on time and materials with no cap and the project was not going as quickly as the BWL Board Mtg.Minutes January 23,2007 Page 51 of 64 thought it should. They have since negotiated with the vendors to accept a fixed price. The project is scheduled to go live on April 2, 2007 and the project will cost approximately$2.8 million as opposed to $2.6 million. For clarification purposes, the $2,600,000 would be allotted from capital projects and $200,000 would be allotted from O&M. Mr. Moore noted that they must keep in mind that it is not a modification but an increase to capital budget by$567,000, as O&M will not experience a decrease. Commissioner Calkins asked if the form had been filled out at the appropriate time then what would have occurred as opposed to what is happening now? Mr. Peffley replied that the transfer would have taken place accordingly. However, since it was not filled out then the funds were moved out of O&M but were not placed in capital and thereby, he agrees with Mr. Moore's statement. He went onto note that not filling out the form created the problem. Staff further clarified that if proper procedure had taken place when the project was originally approved then staff would have requested a budgeted amount of$2,664,000 as opposed to $2,160,000. On motion by Commissioner Calkins, seconded by Commissioner Graves, the Finance Committee unanimously agreed to move staff's recommendation to the full Board. The Finance Committee's recommendation will be submitted to the Board on January 23`d. Commissioner James asked management to ensure that the Board receives status updates on the progress of the SAP project in a timely manner. They have requested monthly updates in the past and have not received them as of yet. She also requested that staff present an update on the SAP project at a future Board meeting. Discussion to Establish Timeframe to Diversify Advisors In the interest of time, the last agenda item—Discussion to Establish Timeframe to Diversify Advisors will be moved to next Committee of the Whole or Finance Committee meeting. There being no further business, the Finance Committee adjourned at 5:32 p.m. Respectfully submitted, Semone M. James, Chair Finance Committee Motion by Commissioner James, seconded by Commissioner Rios, to receive the Finance Report as presented. Action: Carried unanimously Board Mt-.Minutes January 23,2007 Page 52 of 64 esolution 2007-I- COMMITTEE OF THE WHOLE January 17, 2007 The Committee of the Whole of the Board of Water and Light met at the Executive Offices, Lansing, beginning at 11:00 a.m. on Tuesday, January 17, 2007. Acting Committee of the Whole 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, Semone James, Santiago Rios, Robin Smith and Sandra Zerkle. Absent: Commissioners Robert Cochran and Julee Rodocker. Public Comment There were no public comments. Interview Search Firms for General Manager Position The Commissioners met to conduct face-to-face interviews with vendors for the Request For Proposal for executive search services for the General Manager position. The first interview was conducted with Scott Edmunds, Director of Business Development and Josh Roberts, Recruiting Manager of ASG Renaissance, LLC. The representatives provided information regarding their organization and a question/answer session followed. The second interview took place with Sandra Soltysiak, Executive Search Director of Varnum Consulting. Ms. Soltysiak provided information regarding her organization and a question/answer session followed. The third interview took place with Charles Blockett, Human Resource Consultant of Charles Blockett, Jr. and Associates, Inc. Mr. Blockett provided information regarding his organization and a question/answer session followed. The fourth interview took place with Lynn Margulies, Director of Executive Recruitment and Mary McCune, Principle of The Rehmann Group. The representatives provided information regarding their organization and a question/answer session followed. Following conclusion of the interviews, the Commissioners discussed each vendor's presentation, credentials and subsequent information. On motion by Commissioner James, seconded by Commissioner Calkins, the Committee of the Whole unanimously agreed to bring forth a recommendation to the full Board to award the Request for Proposal for Executive Search Services for the General Manager Board Mtg.Minutes January 23,2007 Page 53 of 64 position to Varnum Consulting. The Committee of the Whole's recommendation will be submitted to the Board on January 23ra There being no further business, the Committee of the Whole adjourned at 1:23 p.m. Respectfully submitted, Robin M. Smith, Acting Chair Committee of the Whole Motion by Commissioner Smith, seconded by Commissioner Calkins, to receive the Committee of the Whole report as presented. Action: Carried unanimously Resolution COMMITTEE OF OF THE WHOLE January 23, 2007 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, January 23, 2007. 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, Robin Smith(teleconference), and Sandra Zerkle. Absent: None. Public Comment There were no public comments. Legal Opinion re: Delta Township Wholesale Water Contract Moved by Commissioner Graves, seconded by Commissioner James, to go into executive session to discuss privileged documents received from Amy Cavanaugh, General Counsel and Peter H. Ellsworth of Dickinson Wright PLLC protected by the Open Meetings Act exemption MCL 15.268(h). (4:08 p.m.) The roll was called. Yeas: Commissioners Calkins, Cochran, Graves, James, Rios, Rodocker, Smith, and Zerkle. Nays: None. Absent: None. Board Mtg.Minutes January 23,2007 Page 54 of 64 Carried unanimously. Moved by Commissioner Calkins, seconded by Commissioner Zerkle that the Committee of the Whole meeting return to open session. Carried unanimously. The Committee of the Whole reconvened in open session at 4:47 p.m. Commissioner Rios advised that the Board discussed a legal opinion in regards to the Delta Township wholesale water contract and asked staff to move quickly in resolving the matter. Continued Discussion on Executive Search Services for the General Manager Position The Commissioners briefly discussed the RFP for the executive search services and advised that all of the vendors were very well qualified. It was also noted that they selected the firm that they thought would work best with this matter. The Committee of the Whole will make a recommendation to the full Board to award the RFP to Varnum Consulting. Discussion on Board of Commissioners Travel Policy The Commissioners discussed the Board's travel policy in relation to conferences that they could attend. They also addressed the issue of what is reasonable relative to a per diem amount and the location of the respective conference. After further discussion regarding the use of study findings and overall business practices, the Commissioners introduced a motion regarding their travel policy. On motion by Commissioner Cochran, seconded by Commissioner Rios, the Committee of the Whole passed a motion to increase the per diem amount to $100.00 for the Board of Commissioners only and to charge staff with the responsibility of making a recommendation based on study findings. The motion carried by the following vote: Yeas: Commissioners Cochran, Graves, James, Rios, Smith, and Zerkle. Nays: Commissioners Calkins and Rodocker. Absent: None. Other Financial Report Dick Peffley, Interim General Manager presented an updated Financial Report for the six- months ended December 31, 2006. Mr. Peffley noted that the BWL's net income is $15,500,000, which is $10,000,000 over projected figures. He went onto advise that the Board Mtg.Minutes January 23,2007 Page 55 of 64 net income increase is due to the BWL's wholesale marketing strategy, which they plan to continue. Commissioner Rios complimented Mr. Peffley on his progress at the BWL and further advised that all of the feedback he has received has been very positive. Mr. Peffley thanked Commissioner Rios and acknowledged staff and their contributions in accomplishing various goals. Board Compensation Commissioner Cochran advised that with the advent of the communications policy, IRS taxable issues, and the F01A information, he asked representatives at American Public Power Association (APPA) how do other municipalities address issues of this nature. He went onto report that some Boards compensate their respective Board members as a means to address those topics. Commissioner Cochran further reported that he did not want to make a motion at this time but will instead circulate a copy of the study that speaks to the issue. There being no further business, the meeting adjourned at 5:12 p.m. Respectfully submitted, Santiago Rios, Chair Pro Tern Committee of the Whole Motion by Commissioner Rios, seconded by Commissioner Graves, to accept the Committee of the Whole report as presented. Action: Carried unanimously RESOLUTIONS LANSING BOARD OF WATER AND LIGHT GENERAL MANAGER'S RECOMMENDATIONS January 23,2007 esolution 2007-I- A. Renewable Energy Portfolio Standards (RPS) WHEREAS, the Board of Water and Light of the City of Lansing, Michigan, has an obligation to make its best efforts to assure a reliable and cost effective supply of electricity to its customers; and WHEREAS, renewable energy creates energy diversity for long-term security of our economy and environment and is consistent with assuring reliable, safe, clean and affordable energy for our citizens; and Board Mtg.Minutes January 23,2007 Page 56 of 64 WHEREAS, consistent with Resolutions#2001-6-7 and#2001-7-14 (Green Power), certain BWL customer-owners want their electricity from cleaner, renewable sources; and WHEREAS, The Energy Policy Act of 2005 amended Title I of the Public Utility Regulatory Policies Act of 1978 (PURPA) requires utilities to consider a plan to minimize dependence on one fuel source and to ensure that electric energy is generated from a diverse range of fuels and technologies which includes renewable technologies; and WHEREAS, Twenty one (21) states have already implemented a mandated or voluntary Renewable Portfolio Standard (RPS); and WHEREAS, an April 2006 Executive Order from Governor Jennifer Granholm to the Michigan Public Service Commission requires an Energy Plan no later than December 31, 2006. This 21St Century Energy Plan is required to include an RPS that establishes targets of Michigan's energy consumption to be derived from renewable energy sources. Preliminary reports of the 2 1" Century Energy Plan indicate a recommendation of 7 percent renewable resources by 2016; and WHEREAS, the major investor-owned electric generation systems in Michigan have indicated that they plan to soon issue Request For Proposals to lock up ownership, ownership interest, and long-term contracts with any available or proposed Michigan- based renewable energy source in anticipation of an RPS; and WHEREAS, it is appropriate and prudent for the Board of Water and Light of the City of Lansing to explore additional renewable energy supply opportunities, as a part of its ongoing efforts of meeting the electricity supply requirements of its customers and in complying with the anticipated state wide RPS. NOW THEREFORE BE IT RESOLVED, that the BWL shall strive to expand its electric generation from renewable resources. This may include ownership, ownership interest and long term contracts in diverse renewable energy sources, including hydro-electric, wind, solar and biomass (including landfill gas). Source location preference priority shall be: within our service area, within Michigan, and within economic dispatch distance. The BWL shall strive to generate or purchase electricity generated from eligible renewable energy sources at the following target levels: 1. Two percent (2%) of electric retail sales (kWhs) by December 31, 2008; 2. Five percent (5%) of electric retail sales (kWhs) by December 31, 2012; 3. Seven percent (7%) of electric retail sales (kWhs) by December 31, 2016 These levels may be adjusted to meet any legislative requirements. Each year in January, staff will prepare a report to the Board of Commissioners on the progress on achieving these target levels. All costs reasonably and prudently incurred in procuring renewable energy sources shall be considered a cost of service and recoverable through the electric rates. Board Mtg.Minutes January 23,2007 Page 57 of 64 -------------------- Motion by Commissioner Calkins, seconded by Commissioner Cochran, to adopt Resolution 2007-1-9, which pertains to the Renewable Energy Portfolio Standards (RPS). Discussion: Commissioner Rios complimented staff on bringing the resolution forward as it puts the BWL in a leadership position, as it is consistent with overall policy and direction. Commissioner Cochran also complimented staff for having the foresight to care about the environment as well as making electricity. Dick Peffley, Interim General Manager noted that they have done due diligence and a press release will announce the newsworthy resolution. He also advised that the BWL is the first mid-Michigan utility to adopt such a policy. Mr. Peffley went onto report that they are currently negotiating a deal that will allow the BWL to meets its 2008 target within the next 2-months. Action: Carried unanimously. esolution 2007-1-1 B. Increase Capital Project Budget for Financial System Software RESOLVED, that the FY 2007 Planned Capital Budget be increased $567,000 to correct the budgeted amount for the Financial System Software Project, 07-121. -------------------- Staff comments: When the original capital budget amount was developed for this project, Board of Water and Light staff labor(plus indirect costs) was not included in the budgeted amount of$2,160,000. Internal labor of$504,000 was anticipated when the project was proposed, and was included when the project was presented to and approved by the IT Steering Committee in the amount of$2,664,000; however, due to an internal communication breakdown, the internal labor was not included in the capital budget amount. A Capital Project Justification form was not completed for this project, since Management at that time felt that IT Steering Committee justification was sufficient. Current Management has mandated that Capital Project Justification forms will be filled out for all Capital Projects. An amount of$67,000 is also being requested as an addition to this project for capitalized interest. At the direction of our external auditors, all projects in excess of$1,000,000 should receive a charge for allocated interest expense. This does not represent an additional cash outlay on the project, but rather a transfer from interest expense to this capital project. The amount of$567,000 represents an updated amount for internal labor, the allocation of interest, and the net effect of other updated project expenditures including a revised Board Mtg.Minutes January 23,2007 Page 58 of 64 allocation of the cost of the installation contract, savings on software purchases and the cost of temporary offices for the project team. -------------------- Motion by Commissioner Graves, seconded by Commissioner Rodocker, to adopt Resolution 2007-1-10, regarding the Increase Capital Project Budget for Financial System Software. Discussion: Commissioner Rios advised that he was glad to hear that the BWL has implemented a policy that would prevent errors of this nature from happening again. Mr. Peffley clarified that in this instance the policy was in place but it was not followed. He went onto state that there are only two positions at the BWL who could not follow the policy, which includes the General Manager and the Senior Vice President of Finance. Mr. Peffley further reported that the individual who did not follow the policy is no longer with the BWL. Commissioner Smith asked Mr. Peffley if the policy is sufficient in his opinion? Mr. Peffley replied yes and advised that the policy was in place and should have been followed. There are no capital projects that Bill Cook, Senior Vice President of Operations or himself will approve without proper signatures and documentation. He went onto note that it was a simple clerical error and had the forms been filled out then they would have noticed that the Operations and Maintenance (O&M) piece of the project was missing. As a result, the O&M was taken out but was not placed in the capital budget. Mr. Peffley further explained that that is why they have the forms and it is not acceptable that someone does not follow the process. Action: Carried unanimously. esolution 2007-I-II C. Approve Anti-Harassment Policy and Supersede the Existing No Harassment, Sexual Harassment, and Freedom from Harassment Policies RESOLVED, that the Board of Commissioners hereby approves the attached Anti- Harassment Policy, dated January 23, 2007. RESOLVED FURTHER, that the attached Anti-Harassment Policy supersedes the following existing BWL policies: No Harassment Policy, Sexual Harassment Policy, and Freedom from Harassment Policy. -------------------- Staff comments: This policy combines the substance of the current No Harassment Policy, Sexual Harassment Policy, and Freedom from Harassment Policy, and removes all duplication and potential conflict between the policies. This policy is in full compliance with state and federal law. The most substantive change in the policy is that Board Mtg.Minutes January 23,2007 Page 59 of 64 it makes reporting of harassment mandatory for all employees and not just supervisory staff. Once approved, Staff will schedule mandatory Anti-Harassment training for all BWL employees consistent with this policy. -------------------- Motion by Commissioner Cochran, seconded by Commissioner Rios, to adopt Resolution 2007-1-12, in regards to the Anti-Harassment Policy and Supersede Existing No Harassment, Sexual Harassment, and Freedom from Harassment Policies. Discussion: Commissioner Smith asked how long had it been since the BWL received harassment training? She also asked if the policy is similar to what other companies utilize? Amy Cavanaugh, General Counsel advised that it is her understanding that it has been at least seven years since the BWL has conducted harassment training. She also noted that it would bring the BWL into compliance with state and federal law and that the policy is very similar to current industry practice. Ms. Cavanaugh went onto clarify that the BWL was already in compliance with state and federal law. Action: Carried unanimously. esolution 2007-1-12 D. Approve the Use of LBWL Communications Technologies Policy RESOLVED, that the Board of Commissioners hereby approves the attached Use of LBWL Communications Technologies Policy, dated January 23, 2007. -------------------- Staff Comments: This policy is an umbrella policy intended to cover all LBWL communications technologies to set parameters for use, misuse, monitoring, safety and security. In accordance with this policy, Staff will develop procedures particular to certain types of communication technologies, such as email and cellular phones. Attached to this policy are procedures for monitoring and recording of LBWL communications technologies, which will be adopted by Staff if this policy is approved. -------------------- Motion by Commissioner Calkins, seconded by Commissioners Graves, to adopt Resolution 2007-1-12, regarding the Use of LBWL Communications Technologies Policy. Discussion: Commissioner James asked if the policy would affect the Commissioners use of cell phones relative to the IRS mandate? Ms. Cavanaugh advised that it would also affect the Board of Commissioners. She went onto explain that if you have a business issued phone and you cannot document that Board Mtg.Minutes January 23,2007 Page 60 of 64 every phone call is for business use then the IRS considers the entire amount to be personally taxable. Therefore, the BWL will also have to address Commissioners in terms of the procedure. Ms. Cavanaugh also noted that the policy makes clear that employees and Commissioners are subject to the Freedom of Information Act (FOIA) to the extent that they are using LBWL issued communication technologies. Commissioner Cochran expressed concern regarding section III, A2 of the Procedures for Monitoring and Recording LBWL Communication Technologies in which the procedure discusses the recording of content. He went onto ask if the BWL were recording all cell phone conversations? Ms. Cavanaugh advised that if someone leaves a voicemail message on your cell phone then the cell phone company records it verbatim. She went onto state that if someone were to then FOIA that record and the message was still on the cell phone then you would have to provide that record. Ms. Cavanaugh further clarified that only voicemail messages can be recorded by the cell phone company. The BWL does not have the capacity to record cell phone conversations. Commissioner Rios advised that whenever one talks about monitoring activities then it is a very sensitive subject from a business, employee morale and emotional standpoint. As no one likes to feel as if someone is looking over his or her shoulder, and hence you do not any have privacy or confidentiality. He went onto note that the committee and the Board has been concerned with making sure that it is a fair process with accountability. Commissioner Rios also stated that staff has done a very good job and suggested that they go a little further. As such, Commissioner Rios made a friendly amendment in which he asked that they 1) change section VI, la of the Procedures for Monitoring and Recording LBWL Communication Technologies to state that, "A manager or director must have a documented good-faith reason..." He went onto note that he would like language added that makes it clear that it has to be documented. Commissioner Rios further advised that 2) the BWL should have a specific form that indicates the mandatory information that is necessary in order for monitoring to be approved. Therefore, there is no room for discussion as to whether or not the BWL followed its own policy. He also suggested that 3) the monitoring has to be approved by the General Manager or their designee in addition to Human Resources. Commissioner Rios noted that this is so invasive that he believes they should go through the steps necessary if they are going to conduct this type of monitoring. Commissioner Calkins asked how this would work with Call Center monitoring? Commissioner Rios clarified that he was only referring to the recording of calls for disciplinary purposes. Ms. Cavanaugh advised that if there was someone who was having problems with their calls and consistently received bad remarks in terms of their monitoring then it could affect their job performance ratings. She went onto note that eventually it is possible that Board Mtg.Minutes January 23,2007 Page 61 of 64 if you had someone who was doing an extremely bad job then one could end up losing his or her job based on monitoring. Commissioner Rios pointed out that the monitoring Ms. Cavanaugh referred to occur all the time, as there is always an ability to listen in on a call. He went onto state that he is referring to a situation in which someone decides to listen in because there is a good faith reason to believe that someone is violating policy. Commissioner Zerkle asked if that would apply to all aspects such as, the Global Positioning Devices that the BWL plans to or have installed on BWL trucks? Commissioner Rios responded by stating that this is a general procedure and so if the intent were to record or monitor for purposes of disciplinary action then these rules would apply. Commissioner Calkins asked how do you determine if you have documentation regarding something of that nature? Commissioner Rios advised that the form would spell out the reasoning behind the monitoring request. Commissioner Graves stated that he was generally in support of the recommendation with one exception. He questioned whether or not they should send the request to the General Manager for all occurrences. Commissioner Graves further clarified that he was not concerned with the volume of the requests but that certain issues could be delegated to senior staff such as, the Human Resource Director. Commissioner James stated that she questioned the support of the documentation that the manager or the General Manager would serve as the basis for performing the monitoring for disciplinary purposes. She went onto note that she wants to make sure that this is not used as a tool for abuse. Commissioner James further stated that they should make sure that they have everything lined up and it is not superficial. The Commissioners agreed with Commissioner James' statement and Commissioner Rios further noted that to take that type of action it has to be extraordinary and it cannot be something that happens quickly. He went onto advise that it has to be documented and several people should review it as individuals should be able to support the recommendation to the General Manager. Commissioner Rodocker further advised that perhaps a set of guidelines and the assistance of Human Resources prior to reaching the monitoring level would be appropriate. She also noted that some type of documentation stating how long the monitoring would take place is also necessary. After further discussion, the Commissioners acknowledged that employees do not have an expectation of privacy when using LBWL devices. However, they clarified that the larger issue is, who is going to be accountable, and who will have to sign off on these situations. The Commissioners agreed to accept the Use of LBWL Communications Board Mtg.Minutes January 23,2007 Page 62 of 64 Technologies Policy contingent upon the procedures being changed as directed by the Board. Mr. Peffley agreed and noted that if the Board approves the policy then staff would implement the suggested changes to the Procedures for Monitoring and Recording LBWL Communication Technologies. Action: Carried unanimously. Commissioner Smith departed the meeting at 6:39 p.m. due to a prior obligation and rejoined the Board meeting via teleconference at 6:42 p.m.(after Resolution 2007-1-13). esolution 2007-I-13 E. Lump Sum Payment for Defined Benefit Pensioners RESOLVED, that a lump sum payment be made to Defined Benefit Pensioners equal to $20 for each year retired prior to July 1, 2006. -------------------- Staff Comments: Pursuant to Resolution 2005-3-13, Management reviewed consideration of a Cost of Living Adjustment to the Defined Benefit Plan. Management's recommendation is that rather than a permanent increase to monthly pensions, that a lump sum payment be made to Defined Benefit pensioners equivalent to $20 per year for each year retired prior to July 1, 2006. In addition, Management recommends including a retiree representative on the Health Care Task Force that will be analyzing health care issues identified in Resolution 2006- 10-04. -------------------- Motion by Commissioner Calkins, seconded by Commissioner Graves, to adopt Resolution 2007-1-13, in regards to the Lump Sum Increase for Defined Benefit Pensioners. Discussion: Commissioner Rios asked how did they determine the proposed amount? Commissioner Calkins responded by stating that management made two proposals to the Board of$15 and $30. He went onto note that due to the short-term contract agreement, and in wanting a one-time payment as was done in the past, they decided on $20. Action: Carried unanimously. UNFINISHED BUSINESS None. Board Mtg.Minutes January 23,2007 Page 63 of 64 NEW BUSINESS None. RESOLUTIONS esolution 2007-I-1 EXECUTIVE SEARCH SERVICES FOR THE GENERAL MANAGER POSITION 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 Executive Search Services for the General Manager position on January 17, 2007; and WHEREAS, the Committee of the Whole of the Board of Commissioners of the Board of Water and Light met and discussed each firms presentation and credentials after the interviews held on January 17, 2007. RESOLVED, That the Committee of the Whole recommends that the Request for Proposal award for the Executive Search Services for the General Manager position be granted to Varnum Consulting. -------------------------- Motion by Commissioner Graves, seconded by Commissioner Calkins, to receive the Committee of the Whole's recommendation to award the Request for Proposal of the Executive Search Services for the General Manager Position to Varnum Consulting. Action: Carried unanimously. Date Resolved by Board Action: January 23, 2007 MANAGER'S REMARKS Mr. Peffley noted that the BWL was one of 13 companies that received the, "National Partnership for Highway Quality Making a Difference Award", in regards to the BWL's participation in the Capitol Loop project. Commissioner Rios advised that there are so many good things happening at the BWL and they have a lot to be proud of. He also noted that when outside persons recognize the work of BWL employees then it is refreshing and rewarding and makes the long hours worthwhile. Commissioner Rios went onto compliment staff and management for all of their hard work that was recognized by the award. Board Mtg.Minutes January 23,2007 Page 64 of 64 COMMISSIONERS' REMARKS Commissioner Graves acknowledged Secretary Jones' birthday. EXCUSED ABSENCES None. PUBLIC COMMENTS None. ADJOURMENT On motion by Commissioner Cochran, seconded by Commissioner Calkins, the meeting adjourned at 6:45 p.m. /s/Rhonda Jones, Corporate Secretary Filed with Lansing City Clerk January 30, 2007