February 2008 Board Minutes
YAMPA VALLEY ELECTRIC ASSOCIATION, INC.
REGULAR MEETING OF THE BOARD OF DIRECTORS
The Board of Directors of Yampa Valley Electric Association, Inc. convened at 32 Tenth Street, Steamboat Springs, Colorado at 11:00 a.m. on February 15, 2008 for the regular meeting.
Chairman Pud Stetson reconvened the meeting of January 18, 2008, declared all business was concluded and upon motion being duly made and seconded, the January 18 meeting was adjourned. The Chairman called the February 15, 2008 meeting to order.
Upon calling the roll, it was reported that the following directors were present: Dean Brosious, Peggy Espy, Bill Haight, Sam Haslem, Pat McClelland, Scott McGill, Chuck Perry, Jim Simos and Pud Stetson, being all the directors. Mr. Covillo was also in attendance.
Directors considered approval of the previous month’s minutes. Mr. McGill requested the phrase yea and nay be replaced with yes and no. Mr. Haight asked that the minutes reflect that the Western United CEO Selection Committee is interviewing prospective candidates and not the entire Western United Board. A motion was duly made and seconded to approve the minutes of the previous meeting with changes.
RESOLVED that the minutes of the previous meeting be and are hereby approved as amended.
There was no comment from the Public.
Director comments were presented. Mr. Simos commented how unlucky he has been during his tenure of attending the CREA Annual Meeting. He also commented that CREA is caring a large inventory of the “Rodeo Books”. Mr. Haslem reported that he would be willing to share reading material he won at the CREA Annual Meeting.
The Chairman called for a change to the agenda for the purpose of moving Agenda item #5 Proposed Policy-Takeover to later in the meeting when Attorney Tom Sharp can be present to explain the proposed policy. Upon the motion being duly made and seconded, the agenda was unanimously approved.
Mr. Vaillancourt presented the safety report for the month of December. He stated that there were no vehicle accidents and no personal injury accidents reported in the month. Upon being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the safety report be accepted as presented.
Mr. Covillo distributed handouts referencing the proposed Xcel rate adjustment to YVEA. He reported that Xcel Energy filed a 2.7 million dollar rate increase to the Association with the Federal Energy Regulatory Agency (FERC) on February 1st. The increase was filed after giving YVEA only 12 hours to review; which was to short of a time frame for YVEA consultants to make comments. Mr. Covillo stated he felt the rate increase was excessive because it included future growth issues. Should YVEA intervene in the FERC rate case, he felt that the Association had a 50-50 chance of winning a reduction in costs for the disputed items. He noted that negotiations continue with Xcel to attain a fair settlement before we intervene, but the Association might expect something around a 10% adjustment in wholesale rates.
Mr. Covillo updated the Board on several legislative bills before the State Legislature. He reported that House Bill #1160 was pulled upon third reading to see if a compromise could be reached. YVEA members would see an additional increase in rates if House Bill #1107 passes. The bill mandates that utilities direct 2% of their revenue for energy conservation measures. He felt that YVEA could not absorb the cost and would be forced to include it as a line item charge on consumer’s bills. He also raised concerns about House Bill #1227 and the provision that it will require state agencies to intervene in rate cases, even if the agencies have no concerns.
Mr. Covillo reported that he attended a joint meeting with CoBank and officials from the proposed Two Elks Generating facility. He stated that CoBank presented a list of outstanding items that they will require before they will approve a loan. Since the meeting, Two Elks has responded to the list in writing. He felt that CoBank may not accept some of the Two Elk responses. Mr. Covillo also discussed the lack of response from Two Elks regarding the “finder’s fee”. Mr. Covillo commented that there is a long way to go before the Board gets enough information to sign a MOU agreement. Mr. Simos questioned what the increase cost of construction due to delays means to YVEA. Mr. Covillo stated that the delay cannot increase the cost of bonds. Mr. Covillo reported that he is working on attaining a transmission path from the Two Elk project to Hayden via Flaming Gorge.
The meeting was adjourned for a lunch break.
Upon reconvening, it was noted that Mr. Sharp was in attendance. Mr. Covillo reported that the Association has changed contractors who read Association meters. He noted that there will be no March Board Meeting; instead there will be the annual Board Retreat and asked for items to be discussed from the Board. Mr. Covillo informed the Board that 2007 Capital Credit Allocation letters will be mailed out to members in April.
Mr. Sharp presented his legal viewpoints on having a Board Policy that pertains to identify certain precepts and establish certain standards, rules and procedures applying to proposals by an Investor Owned Utility to purchase YVEA’s properties, consumers and service territory. Mr. Sharp stated that for a variety of reasons, a policy that make certain a prospective buyer of assets be given guidelines to meet before the Board decides to submit an offer to the membership. He noted that any proposed sale would cost YVEA money and that the Association needs to be able to recover the cost in the event the sale does not go through. Mr. McGill felt that prospective buyers should have a “pay to play fee” just to look at buying the utility. Mr. Brosious agreed and felt the fee should not be a defined amount, but instead be tied to a fee based upon a percentage of annual sales. Mr. Covillo agreed that the fee should be tired to annual sales and that there also be a minimum application fee. Mr. Covillo also felt the policy should not be limited to potential hostile takeovers by an investor owned utility, but to all offers. Discussion centered on a golden parachute clause to retain employees who might decide to take another job offer in the event of a potential buyout. Mr. Sharp felt any golden parachute should address employees who resign and those terminated after the sale. Mr. Scott mention and Mr. Haight agreed that any policy should not be so restrictive that it impedes any potential offer, which the Board may feel is beneficial to YVEA members. The consensus of the Board was for Mr. Sharp to rewrite the policy that defines application fees and present the policy for Board action at a future meeting.
Mr. Sharp commented that he appreciates that greater details are given in Board minutes and that the comments are more informative to members.
The Board considered delegates to the NRECA Legislative Conference. Upon a motion being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the Chairman and Vice-Chairman of the Board and the General Manager represent the Association at the NRECA Legislative Conference to be held May 5th to 7th, 2008 in Washington, DC.
Mr. Haslem, serving as Chairman of the Member Service Committee, reported on the meeting held earlier in the day. He asked Mr. Chappell to review the Member Service Committee Report. Mr. Chappell reported that the annual new customer survey outlined two areas of concern that will be addressed: (1) employees will do a better job of notifying members when their previously scheduled job is delayed due to unforeseen reasons and (2) the Association’s Engineering Department will develop a list of required tasks needed before members can attain electric service. Mr. Chappell reported that the compact florescent bulb (CFL) program in 2007 was very successful and that the program will be repeated in 2008. Mr. Chappell outlined the cost of processing credit cards, consumers utilizing the E-Bill program, members penalized for late payments, contact with commercial customers, renewable energy sales and the number of energy audits performed in 2007.
Mr. Covillo presented the 2007 In Retrospect report. The report demonstrated that 2007 was a very heavy construction year for YVEA. The Association built nearly 69 miles of line in 2007, more than the two previous years combined. Association employees completed nearly 26,000 meter orders in the year and the report showed that YVEA served an average of 431 consumers per employee. The Board was given a detailed report showing a broad range of statistics for the Association in 2007.
Mr. McClelland presented the report of Paradigm Services. He reported that Paradigm Services consolidated statement for all subsidiaries’ revenues at the end of the year 2007 were a negative $40,000. He also stated that the company’s new CPA will do some accruals that may bring the end-of-year revenues to a negative $300,000. Mr. Stetson questioned if the Field Services Division is defunct or idle. Mr. Covillo reported that they are basically an idle division. Mr. McClelland reported that the new CEO has made a concentrated effort to increase the pricing structure, which will result in an additional $1.5 million gross revenue for 2008.
Mr. Brosious presented the BTA Associates LLC report. He commented that the licenses are set to expire in approximately 90 days. The BTA Board will request that the licenses be renewed for another 10-year term. Once approved, the BTA Board feels they have a very saleable product.
Mr. Haslem outlined the qualification the new CREA Chairman has achieved. He stated that Mr. Covillo had previously outlined legislative issues impacting CREA and the member cooperatives. He stated that the CREA Board will oppose House Bill #1107 that mandates coops direct 2% of revenue to conservation measures. The bill could impose that all electric cooperative members pay nearly $19 million dollars annually to administer conservation measurers. Coops could either administer the program themselves or send the monies to the State to administer. Mr. Haslem reported that he and Mr. Covillo met with Representative Al White.
Mr. Haight gave the Western United financial report showing sales are 20% below budget, but margins are only at a 7% reduction. He stated the organization is on track to have an $83 to $86 million dollar sales projection for 2008. Mr. Haight noted that the CEO Selection Committee has narrowed the candidate search down to four candidates.
Mr. Covillo and Mr. Miller presented the financial and statistical report for the month of December. The Association’s cost of purchased power from Xcel Energy was nearly $600,000 greater than budget. Operating expenses were slightly below budget and $87,000 below last year’s expenses. Overall, margins for January were $679,843, which were down from the budget and previous year’s margins for the same month. The Association set a new record demand for electric in January of 125,151 kW. Upon a motion being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the financial and statistical reports be and are hereby accepted.
The Chairman asked for any unfinished business. Mr. Sharp noted that the Board had previously asked him to look into the qualifications and procedures for director election disputes. While he stated he needs to do more research into a not-for-profit form of business, he can state that in a for-profit form of business, the power rests in the majority vested in the remaining non-candidate board members. Mr. Sharp stated he will do more research and this matter could be a topic of discussion at the Board Retreat. Mr. Covillo stated the Board Retreat will be held all day Thursday and unless new topics are raised, the retreat should end at noon on Friday.
The Chairman asked for a new business. Mr. Covillo asked for Board guidance in preparing advice letters concerning the proposed rate adjustment. The Board felt this should be topic of discussion at the Board Retreat. Mr. McClelland asked that the 10-year financial forecast given at the Board Retreat include the impact of absorbing the rate increase and passing on half the increase to customers. Considerable discussion followed. The Chairman polled the Board Members to see how much of the rate increase each Board Member felt should be passed on to consumers so that Mr. Covillo can do an analysis of the impact. The majority felt half the Xcel rate increase should be passed on, but directed the retreat’s financial analysis includes three options: (1) no pass through, (2) half the pass through and (3) the full pass through. After reviewing the financial analysis, then a decision will be made on any retail rate adjustment to consumers.
Mr. Haslem reported on the condition of his health and stated he is progressing slowly.
There being no further business, the meeting was recessed until such time as may be necessary to reconvene for the purpose of acting on unfinished business as may properly come before the Board.
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Secretary
APPROVED:
Chairman of the Board
