Yampa Valley Electric Association

 

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 January 18, 2008 for the regular meeting.

Chairman Pud Stetson reconvened the meeting of December 21, 2007, declared all business was concluded and upon motion being duly made and seconded, the December 21 meeting was adjourned.

The Chairman called the January 18, 2007 meeting to order.  Mr. Stetson introduced Mr. Roger Wagner, Attorney from Washington D.C.

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 and YVEA Attorney Tom Sharp were also in attendance.

Mr. Covillo noted that the minutes as mailed, transposed the energy, accounts receivable and other bad debt write-off amounts. Mr. Covillo distributed new minutes showing the correct amounts.  Directors discussed the use of the word “que” in the minutes.  It was decided the word was spelled improperly and should be “queue”.  A motion was made to approve the minutes of the previous meeting as amended.  Upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED that the minutes of the previous meeting be and are hereby approved as corrected.

There was no comment from the Public.

Director comments were presented.  Mr. McGill noted that the regular scheduled Board Meeting as stated in the 2008 Work Program Budget was incorrect.  Mr. Covillo agreed that the date was incorrect and should read February 15.  Mr. Haslem noted the passing of CREA’s President Burl Brownell and the appointment of Thomas Compton as the new CREA President.  Mr. McClelland informed the Board that he is unable to attend the April meeting and gave reasons why he could not attend.

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.  He reported that for the year, YVEA worked 139,000 man hours and drove 385,000 miles with only one loss-time accident and one vehicular accident.  Upon being duly made and seconded, the following resolution was unanimously adopted:

                     RESOLVED that the safety report be accepted as presented.

Mr. Covillo reported that he attended a joint meeting of interested parties in the Two Elk Generation Project in Washington D.C.  The meeting comprised of attorneys representing Two Elk Generation Project, CoBank, and YVEA to resolve differences in a “memorandum-of-understanding” (MOU).  Three issues need to be resolved on the project; due diligence requirements by CoBank, documents, and transmission constraints.  Mr. Covillo stated that financing is up in the air because CoBank will not finance the YVEA portion the way it stands right now in the developer stage concept.  Mr. Covillo noted that the Board has always realized that there are some risks involved in the project, but some risks were not divulged by Two Elks.  The 2005 coal contracts that Two Elks negotiated as “Letters of Intent” (LOI) are loosely executed.  Mr. Covillo stated that within 10-days, a joint meeting of interested parties needs to be reconvened or the Association needs to inform Two Elks that we are backing away from discussions’. Covillo also stated that the issue of due diligence is a huge stumbling block as the project is not far enough along.  Mr. Covillo asked the Board if they remember Two Elks ever divulging a development fee?  Board members do not ever remember hearing of a development fee.  Mr. Covillo said he learned of the development fee from Two Elks in the draft “MOU”.

Mr. Covillo asked Attorney Roger Wagner to shed insight into joint meeting.  Mr. Wagner stated that his firm has expertise in undivided ownership projects and has been involved in other large generation projects.  Mr. Wagner gave his legal interpretation of each line item in the MOU.  Mr. Wagner felt that YVEA can be assumed as a third-party developer in the project.  He commented good progress was made on the MOU exhibits and financing conditions and with the inclusion of a 10 day notice of any problems, but that the MOU needs to have clear language that gives YVEA an exit, should the Board desire to be removed from the project.  He stated that the disparagement paragraph needs to be stricken, something Two Elks may not agree to.  He commented that most projects of this nature have a development fee included.  The fee ranges normally in the two to five percent range.  This project fee is on the high end. Mr. Sharp questioned wording that administrative costs are being double charged.  Mr. Haight agreed that if the Association is perceived as a co-developer, why we are being charged any development fee along with project costs.   The Board agreed with Mr. Wagner that administrative fees need to be better defined.  Mr. Wagner suggested that wording be written showing that Two Elks be more forthright regarding capital outlay to insure staying power in the project.  He noted that Two Elk’s greatest asset is the tax-exempt bonding concept for financing along with already approved construction permits.  Mr. Wagner stated that the last sentence in the MOU allows the Board to proceed with limited liability.

Mr. Stetson asked Mr. Wagner, “If we sign the MOU today and after the 10-day notice, can the Board bail from the project if they so desire?”  Mr. Wagner said yes to Mr. Stetson’s question.  Mr. Stetson noted that by signing the MOU, the YVEA Board is committed to the project.  Mr. McClelland wanted the MOU to insure that Two Elks understand that YVEA will bail if they cannot meet CoBanks funding requirements.  Mr. Covillo stressed that without CoBank funding the project is dead; YVEA cannot self fund the project. 

Mr. Stetson asked Board Members if they had any comments.  Mr. McClelland said that risks and no control were a concern and questioned the final costs of the project. Mr. Haight stated he felt that there have been too many changes since the first discussions and listed several concerns he had about signing the MOU.  Mr. Perry felt the Board should wait to sign the MOU until Two Elks could insure that the CoBank requirements were met.  Mr. Haslem said the Board is moving too fast and agrees with previously mentioned concerns.  Mr. McGill said he is not prepared to say “yea or nay” at this time, but feels the Board should move forward on the MOU, given that the development fee gets resolved or is defined as an incentive.  Mr. McGill said he would like to see a cost containment cap on the total project costs.  Mr. Covillo stated that the Association could be insured of a cap, but it may dilute the ownership percentage to get a cap.  Mr. Simos said he is uncomfortable with the trust shown by Two Elks to YVEA and wants assurance that there will be no “pitfalls” or “road blocks” to the project.  Ms. Espy stated, she wants to stop dealing with the project and that she feels we are “beating a dead horse”.  Mr. Brosious stated that the upfront cost is vague and not clear and that he is concerned with the transparency of what YVEA needs out of the project. He stated that Two Elk is not giving him a comfort level that he would like and that the Board as a whole may never get that comfort level.

Mr. Stetson commented that he wants to insure that the customers of YVEA have a long-term power contract, but is having some reservations about this project.  He would like to see if Mr. Covillo can resolve some of the issues before proceeding with signing a MOU. Mr. Stetson agreed with every ones concerns and wants assurance that Two Elks can actually produce.

Mr. Covillo said he will get the interested parties back at a meeting to resolve the differences and get better answers.  He stated that the Board has options in dealing with Two Elks. The Board can proceed with the project, sign a power purchase agreement with a buy-in option or wait until completion of the project to see if we are interested in buying into the project.  In summary, Mr. Covillo said he feels like there are three distinct issues that the Board needs resolved before a MOU can be signed.  Those differences include; that Two Elks resolve the CoBank constraints for funding as YVEA will not and cannot self fund the project, then come to an agreement on the development fee and lastly further investigate Purchased Power Agreement options (PPA) rather than Development Partner options.  He will also work with Two Elks to instill a dialogue of confidence between the two parties. 

Mr. McClelland moved and Mr. Simos seconded to inform the Two Elks Group that the YVEA Board is not comfortable with signing the MOU until all conditions of the lenders are met and that the development fee cost be clearly defined.  The Board also feels that Two Elks group must conform to its original presentation to the YVEA Board.  Mr. Stetson asked for discussion.

Tom Sharp noted that Mr. Covillo has always said if the Board waits to negotiate with Xcel at the end of the present agreement, the rate will then be at market value.  He questioned the Board’s desire to have short-term pain for the possibility of long-term gain after 2019.  He said to the Board; if you are not convinced that we need to proceed, don’t send management and attorneys to spend money having more meetings.  Mr. Covillo explained the difference between the Board’s desire to have comfort or trust.

Mr. Stetson asked if Mr. McClelland and Mr. Simos would table their motion until a decision could be made if the Board wants to proceed with the Two Elk project.  Both Mr. McClelland and Mr. Simos agreed.

Mr. Stetson polled the Board Members for their individual desire to continue to negotiate with the Two Elks Group.  The Board vote tallied seven for continuation of negotiations and two (Mr. Haight and Ms. Espy) voted to stop negotiations.

Mr. Stetson then asked the Board to vote upon Mr. McClelland’s original motion.  By a unanimous vote the Board approved the motion.

Mr. Covillo distributed a progress report showing key points-of-interest to the Board and asked that Mr. Wagner explain each item.  In summation Mr. Wagner stated YVEA had a better protection than market or industry standards for the usual “minority interest company”.  Mr. Covillo reported that he had explored all transmission path options and now he would submit plans to the Pacific Corp OASIS for a path study.

Mr. Covillo reported on a meeting held earlier with Xcel Energy regarding a proposed rate adjustment increase to YVEA’s wholesale power cost.  Mr. Covillo explained the options available to the Board.  Mr. Covillo asked the Board for direction on how to proceed.  The consensus of the Board was to negotiate a price reduction settlement with Xcel before intervening into the rate case at FERC.

The matter of the date and place for the 2008 annual meeting of Members was considered.  Upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED that the 2008 Annual Meeting of Members be held June 21, 2008 in a location to be determined later in Craig, Colorado.

Mr. Covillo presented directors with copies of Board Policy 3-1.  Mr. Covillo stated that upon Cathy Uttech’s retirement and other position changes, a change was also required to Policy 3.1 designating authorized signers.  Directors reviewed the proposed changes and upon motion being duly made and seconded, the following resolution was unanimously adopted:

            RESOLVED that Board Policy 3-1 be and is hereby approved.

Mr. Covillo discussed several proposed legislation issues facing state legislators this year and the impact to YVEA members.  One bill would require the Association to rebate $2 per watt for solar installations.  He felt the Association should oppose this mandate where less affluent members are required to subsidize solar installations. 

Mr. Covillo encouraged Board Members to attend an upcoming meeting with the Governor’s Office of Energy Conservation.  Several Board Members expressed a desire to attend and asked that Mr. Covillo send emails prior to the meeting.

Mr. Covillo noted that the director packets contain a request for agenda topics to be considered at the Board Retreat.  Directors concurred with a March 20/21 schedule for the two day meeting.

Mr. Covillo reviewed the status of capital credit retirement to estates of deceased consumers.  He recommended that the Board approve funds for the current year retirement of these capital credits.  Upon motion being duly made and seconded, the following resolution was unanimously adopted:

RESOLVED that $75,000 be allocated for the purpose of processing applications and retiring capital credits to the estates of deceased consumers.

The Board considered attendance to the 2008 NRECA Directors Conference.  Mr. Covillo will register those Directors that have requested the Association to make their arrangements.

Mr. Simos presented the report of Paradigm Services.  He reported that Paradigm Services year-to-date revenues are $36,875.  He also stated that the company has hired a new Certified Public Accountant to monitor financials.

The Board considered the 2007 Inventory of Materials.  Upon a motion by Mr. McGill and seconded by Ms. Espy, the following resolution was unanimously adopted:

           RESOLVED that the 2007 Inventory of Materials is approved and the Board       directs that a decrease be made in the book inventory through adjustments in the net amount of $587.26 to reconcile the material records of the Association.

Mr. Haslem questioned the need for added security of copper given the increased value of the commodity.  Mr. Covillo and Mr. Vaillancourt gave details on a copper theft at the Association’s warehouse and what is being done to reduce the possibility of that occurrence happening again.

Mr. Haslem reported that there has not been a meeting of CREA since his last report.

Mr. Haight gave the Western United financial report showing sales are below budget.  He also reported that a selection committee of the Western United Board will be interviewing 10 prospective candidates to replace the retiring CEO.

Mr. Covillo and Mr. Miller presented the financial and statistical report for the month of December.  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, there was none.

The Chairman asked for a new business, there was none.

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