August 2007 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 10:00 a.m. on August 17, 2007 for the regular meeting.
The Chairman reconvened the meeting of July 30, declared all business was concluded and upon motion being duly made and seconded, the July 30, 2007 meeting was adjourned.
The Chairman called the August 17, 2007 meeting to order.
Upon calling the roll, it was reported that the following directors were present: Peggy Espy, Bill Haight, Pat McClelland, Chuck Perry, and Pud Stetson. Directors Dean Brosious, Scott McGill and Jim Simos joined the meeting at approximately 11:00 a.m.
Directors considered approval of the previous month’s minutes. A motion was duly made and seconded to approve the minutes of the previous meeting.
RESOLVED that the minutes of the previous meeting be and are herby approved.
There was no comment from the public.
Director comments were presented. Mr. Stetson reported Mr. Haslem’s absence due to illness. He stated Mr. Haslem reported there was not a meeting of the CREA board in the previous month.
The Chairman called for a change to the order of the agenda to review the General Manager’s report before discussion of power plant issues. Upon motion being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the agenda be revised to hear the General Manager’s report before discussion of power plant issues.
The safety report was presented by Mr. Vaillancourt. He stated that there was one personal injury of a pulled muscle that did not result in lost time. He said there were no vehicle accidents or damage claims. Upon motion being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the safety report is accepted as presented.
Mr. Covillo reviewed his attendance at the CREA Managers Meeting. He reported the managers’ review of the initial report and recommendations developed by the Colorado Climate Action Panel. He discussed certain items recommended in the lengthy report and explained the potential costs to the Association’s price of electricity. Mr. Covillo stated the report will be given to the Governor as recommendations for the state’s energy policy. He warned directors of the negative consequences of certain of the proposals.
Mr. Covillo reported the CREA Board’s request for manager input to state policy on net metering. He told directors that CREA expects legislation will be proposed in the next session on net metering.
Mr. Covillo discussed a presentation at the managers’ meeting by the Governor’s Senior Advisor on Climate Change and Energy. Mr. Covillo reported the advisor presented managers with her proposals and discussed the concept of externality cost assessments. Mr. Covillo pointed out that the advisor believes the cost of electricity is too low. Mr. Covillo reviewed the impact to customers if certain of the proposals become policy or state requirement.
Mr. Covillo discussed miscellaneous items. He requested Board authorization to send the Manager, Chairman of the Board and Vice Chairman of the Board to the Region VII Meeting of NRECA to be held October 2-4 in Overland Park, Kansas. Upon motion being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the Association be represented at the Region VII Meeting of NRECA by the General Manager, Chairman of the Board and Vice Chairman of the Board.
Mr. Covillo reported the status of the Association’s program to both sell and give away compact fluorescent light bulbs. He said approximately 3,000 bulbs were given to customers and 4,000 were sold, leaving approximately two to three thousand bulbs in stock. Mr. Covillo suggested the program be discontinued for now and run again next year.
The Board then returned to the published order of the agenda and addressed the issues noted for power plant discussion.
Mr. Covillo reported the meeting with Howard Barnes, RUS Field Representative. He stated Mr. Barnes was at the Association during the prior week to assist with preparation and review of a financial forecast. Mr. Covillo presented directors with copies of the forecast and discussed all assumptions used to prepare the document. Mr. Covillo reviewed the history of customers, sales, revenue, classes of service and rates. There was detailed review of the chart and graph analysis of the financial forecast results. Directors discussed the ratios produced by the forecast assumptions and held lengthy review of the analysis.
Mr. Covillo reported his attempts to discuss wheeling and firming of power with a PacifiCorp representative.
Directors then reviewed another financial forecast with different assumptions for increased return of capital credits at the rate of 35% of the previous year margin. Directors examined the change to the significant ratios of debt service coverage, times interest earned ratio, equity ratio and net general funds.
Directors presented questions and discussed the topics of firming power, ramp out provisions of the contract with Xcel Energy, wheeling, and partial power requirements contracts. Mr. Covillo responded to the various questions and reviewed the issues around the ramp out provision of the current contract.
Mr. Stetson asked about the price of Xcel power in a partial requirements contract. Mr. Covillo answered that based on statements made previously by Xcel representatives, he does not envision a significant change over the current wholesale power rate.
Directors considered the agenda item of Letter of Intent. Mr. Covillo reviewed his conversation with principals of North American Power Group regarding negotiation of the asset agreement, letter of intent and approach to the continued negotiation between the parties. He reported the parties agreed at this time to work on the drafts of the asset purchase agreement in lieu of a Letter of Intent.
Mr. Covillo reported that Two Elk Generation Project is marketing power and is in negotiation with an investor-owned utility for a significant percentage ownership of the plant, an amount believed to be up to 34% ownership. Mr. Covillo stated that the identity of the party is not known to the Association. Directors discussed their belief that another participant in the project is advantageous to the Association.
Mr. Covillo stated the Participation Agreement was sent to the Association’s FERC attorneys for their review, with note of all suggested revisions made by Mr. Sharp. He said the revised document is due at the Association in the next few days.
Mr. Covillo reported the meeting with representatives of CoBank. He reviewed CoBank requirements. CoBank presented the Association with a choice of two law firms for use in the financial transaction. Mr. Covillo said the Association’s FERC attorneys indicated their preference of the New York firm that was suggested.
Mr. Covillo stated that when the engineers complete their examination of the proposal, directors may expect to visit the power plant site. He stated he will make arrangements when timely for the Board’s site visit.
Mr. McClelland asked whether there had been any contact with other minority owners of North American Power Group plants. Mr. Covillo said that those names were provided to him the previous day, but that no contact was made. He told directors he will pursue the matter.
Mr. McClelland presented the report of Paradigm Services. He reported receipt of the 2006 audit and discussed the unclassified expense and unsatisfactory opinion of the auditor. He reported the intercompany accounting problems and cumulative mistakes that are believed to be responsible for the unclassified expense. Mr. McClelland stated that the financials for the month of June were not available at the board meeting due to personnel matters. He said the management letter issues from the audit were directed to the Paradigm CEO to be addressed with a timeline and revenue requirements for correction. He discussed the Paradigm manager’s continued interest in purchase of the company. Directors discussed the matter and made their concerns known to the Association’s representatives of Paradigm.
Mr. Covillo presented the report of BTA Associates. He reported a change in review of which licenses to renew based on contact by a party interested in lease of the licenses for aviation purposes. He reported the BTA attorney is handling the matter.
Directors reviewed the Key Ratio Trend Analysis report from CFC. Mr. Covillo discussed the approximate 22 ratios where the Association was identified as being in the top or bottom ten percent. Directors asked questions about the meaning of the measurements and reviewed the report.
Mr. Covillo and Mr. Miller presented the financial and statistical reports. Upon motion being duly made and seconded, the following resolution was unanimously adopted:
RESOLVED that the financial and statistical reports are accepted.
Mr. Stetson again stated that Mr. Haslem informed him that the CREA board did not meet in the previous month.
Mr. Haight presented the report of Western United.
The Chairman called for unfinished business. Mr. Covillo reported the negotiation with Xcel for renewable energy credits continues and the issue remains unresolved. He said his contact with a representative of the power supplier leads us to believe the matter will be solved before the end of the year. He explained the effect of the issue on the Association’s wind power program.
Mr. Sharp thanked the Secretary for the detail in the board minutes. Mr. McGill inquired whether a new candidate has been identified to assume the Secretary duties. Mr. Covillo stated that we are working on it.
Mr. McClelland noted that he had not been appointed to any Board committees. Mr. Stetson replied that the oversight will be corrected at the next meeting with a revision of committee assignments. He stated the Executive Committee members will be the same as those appointed and noted in the July minutes.
Mr. Covillo reminded the directors that there will be a meeting of the Executive Committee in September with the Policy Committee moved to the October meeting.
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.
Secretary
APPROVED:
Chairman of the Board
