VERMONT ELECTRIC COOPERATIVE, INC.
REGULAR MEETING OF THE BOARD OF DIRECTORS
AUGUST 31, 2010
APPROVED MINUTES

As required under the VEC By-Laws, notice of this meeting was sent to each Director by deposit in U.S. mail on August 25, 2010. 

CALL TO ORDER – AGENDA ITEM # 1
President Tom Bailey called the meeting to order at 12:04 p.m. in the Robert P. Northrop Boardroom at VEC offices in Johnson, Vermont. Present were Thomas Bailey and Directors Dorothy Allard, Dan Carswell, Michelle DaVia, Craig Kneeland, Bertrand Lague, Priscilla Matten, John Miller, Daniel Parsons, John Ward, Mark Woodward, and Don Worth. Also present from VEC were CEO David Hallquist, COO Jeffery Wright, CFO Michael Bursell, Manager of Corporate Services Liz Gamache, and Internal Communications Specialist Amanda Niklaus.

 MINUTES OF JULY 27, 2010 AND AUGUST 3, 2010 CONTINUATION OF JULY 27,2010 REGULAR MONTHLY MEETING APPROVED – AGENDA ITEM #2 

Miller moved and Lague seconded: 

That the minutes of the July 27, 2010 meeting and the August 3, 2010 Continuation of the July 27, 2010 meeting be approved as presented. 

The motion carried unanimously and the minutes were approved as amended.

FINANCIAL UPDATE – AGENDA ITEM #3
CFO Bursell and those present engaged in a discussion of the Financial Update.  Bursell reported that a large metering error in the VELCO system was discovered at the Williston substation. VELCO had neglected to pick up new metering points and therefore had not charged VEC for meter usage of approximately 900 of its members.  VEC had begun reserving against a potential metering error in July when VEC expressed concerns to VELCO regarding their load data.  VELCO confirmed that the error dates back to September 2009 but was corrected on August 11, 2010. The  cost of the error to VEC is estimated to be $600k.  VEC is currently working with VELCO in order to ensure an error will not happen again.  Bursell concluded that VELCO has formed a committee that will be responsible for checking points throughout the state of Vermont to ensure metering is done correctly. 

Directors recognized Bursell for his discovery of the error and his efforts for planning accordingly. 

The Board engaged in a question and answer session around the specifics of the error and a brief discussion ensued.

A lengthy discussion regarding meters and meter charges ensued. 

Bursell continued his financial update by reporting on the following items:

Portland Pipe
Bursell reported to those Directors present that Portland Pipe, a large commercial customer, recently informed VEC of its plans to reduce their electric load. 

Ethan Allen Cogeneration Unit
Last week, Dave and Mike had met with John Freeman of NCIC to discuss the retirement of the Ethan Allen generator unit.  The generator had frozen and incurred damages that cost an estimated $600k to repair. Based on the costs to repair the generator, VEC has decided to write the asset off the books from August through December.

A brief discussion ensued regarding the generator and the future of Orleans County. 

Banking
The Department of Public Service has signaled approval for VEC’s request in obtaining a $9 million dollar bond and modification to its short term credit facilities. The Public Service Board will need to give their final approval before we bring forward a resolution to the VEC Board. 

Kingdom Community Wind
Bursell informed the Board that two agreements related to the KCW project with Green Mountain Power (GMP) are progressing forward. He indicated that both agreements are consistent with the LOI previously presented to the VEC Board. The two agreements include a Power Purchase Agreement (PPA) and a Joint Ownership Agreement (JOA). Bursell commented that the PPA is underway but the joint ownership agreement has been more complex.  He concluded that both agreements are in the final stages of review. 

Directors asked questions regarding the Sheffield wind project and a brief discussion ensued. 

J.Aron and Co.
In 2007, VEC completed a 5MW deal for around the clock power with J. Aron and Co. for 2012 through 2013. Bursell indicated that the energy prices have changed requiring VEC to cure a credit deficiency. VEC is currently facilitating a $1 million letter of credit to secure the exposure for market price differentials.

A brief discussion ensued regarding credit facilities for various power supply contracts.

Hydro Quebec
On August 12^th an agreement was signed between Vermont utilities and Hydro Quebec securing the purchase of up to 225 megawatts of power for Vermont. VEC was an active participant in the negotiation and we have secured up to 17 megawatts for our members beginning in 2012. Additionally, VEC negotiated a sleeve agreement with Washington Electric Cooperative (WEC) where VEC will purchase additional megawatts from WEC at cost beginning in 2016. Bursell commented that the Hydro Quebec deal has a relatively attractive price within the first year. 

Directors asked questions of CFO Bursell regarding his update and a brief discussion ensued. 

BOARD BUDGET – AGENDA ITEM #4
Bursell referred Directors to page 28 in the Board packet that was previously mailed to all Directors. He recommended that the Board be involved in planning their 2011 VEC Board of Directors budget. He requested input on the following three items:

1. Director Fees & Meeting Expenses
2. Legal Consulting Services
3. Training & Education Expenses

Bursell provided an overview of the actual cost applied to the Directors budget and made recommendations on how to plan accordingly. Bursell began the discussion by requesting each committee chair to provide a committee meeting frequency forecast. The committee Chairs provided information on the number of committee meetings each expected to hold during the next budget period. 

Don Worth left the meeting at 1:02 p.m. and returned at 1:05 p.m. 

The Board engaged in a lengthy discussion regarding Director training options through the NRECA.

Ward motioned and Lague seconded:

To budget what the VEC Board of Directors had last year for training which is $18,000 including travel and expenses.

A lengthy discussion ensued regarding the types of training opportunities available to Directors.  A Director suggested that the Board consider exploring alternative Director training from outside of the NRECA.  

The motion carried unanimously. 

COMMITTEE REPORTS – AGENDA ITEM #5-
Unaddressed from 6-29-2010 Meeting
Communications Committee
Chairman Allard engaged in a discussion with those Directors present concerning Touchstone Energy Services. She referred to the June presentation where the NRECA representative provided an overview of the Touchstone membership and its potential value to VEC.

She reported that the committee had discussed at length whether a resolution should be brought forward to the full Board. As a result, the committee members were split on their decision. Two members voted in favor and two members voted against bringing forward a resolution for VEC to become a Touchstone Energy member. Chairman Allard further explained that the cost of the Touchstone Energy membership is $22k a year.  If the Board approved the membership, the fee would be prorated to $7,200 for the remaining four months of the year. Then, the committee could evaluate membership renewal in January 2011. 

Gamache discussed in greater detail the value Touchstone Energy would bring to VEC’s membership.  She indicated that the recent member survey showed that VEC’s members desire more information regarding efficiency.  She concluded that the products and services offered by Touchstone would provide members with access to this information. 

A lengthy discussion ensued regarding the pros and cons of VEC becoming Touchstone Energy members.  Gamache engaged with the Board in a question and answer session. 

Lague left the meeting at 2:03 p.m. and returned at 2:07 p.m.

Miller moved and Carswell seconded: 

To not use Touchstone Energy Services. 

Ward moved to call the question.

The motioned carried by a majority of those Directors present. 

President Bailey called for break in the proceedings at 2:15 p.m.
The meeting resumed in the Robert P. Northrop Boardroom at 2:30 p.m. 

MANAGEMENT UPDATES – AGENDA ITEM #6
REDONA
Hallquist began his CEO update by discussing the REDONA project. He provided the Board with a detailed and comprehensive overview of a fuel cost scenario. Hallquist engaged with the Board in a question and answer session. Hallquist concluded by stating that REDONA is a viable project that will benefit the VEC membership. The future project details will go through the Power Supply Committee for further evaluation.  

A brief discussion ensued regarding gasifieres. 

Matten joined the meeting at 2:46 p.m. 

Strategic PlanningHallquist continued his update by discussing strategic planning. He indicated that the goals given to him from the Board of Directors had conflicted with goals in the strategic plan. In order to better align the CEO goals with the goals of the organization, Hallquist made a recommendation that the strategic plan become his formal goals. 

Hallquist engaged in a question and answer session regarding lead times for member requests (the time it takes from the actual request to the time that request was fulfilled). 

A brief discussion ensued regarding tariff changes. Hallquist stated that he would like to discuss this topic in greater detail at the next Board meeting.  

Capital Projects Budget Report
Questions were asked regarding the capital project budget variance report specifically where projects are reported to be postponed until next year and where projects are substantially over budget. COO Wright explained that there were instances in which a project was supposed to be completed in 2009 but wasn’t and therefore carried over into 2010. 

An extensive discussion ensued regarding the capital projects budget report. 

It was requested that the Capital Budget Variance Report be revised to clarify the information. It was requested that they include the carry forward balance and additional detail regarding the life of the project. 

A lengthy discussion ensued regarding both the Integrated Resource Plan and 2011 capital projects plan. 

Woodward left the meeting at 3:10 p.m. and returned at 3:16 p.m.

AARP Docket
Hallquist provided those Directors present with an update on the current AARP docket. If the outcome of the docket is unfavorable, Hallquist indicated that the Board could request management to appeal and that this would require a Board resolution. He stated his belief that the majority of the Board does not support the funding of this bill. A brief discussion ensued. 

Hallquist concluded that the AARP bill is currently in the hands of the Public Service Board. When they rule, management will inform the Board. 

Gamache joined the meeting at 3:21 p.m.

Ward left the meeting at 3:25 p.m. and returned at 3:27 p.m. 

GRANTS PRESENTATION – AGENDA ITEM # 7
Hallquist provided those Directors present with a formal presentation on applying for federal grants. He indicated that the Board had previously requested educational information on available grants in order to obtain a better understanding of the grants process. Hallquist included in his presentation an overview of available grants through the U.S. Department of Energy and U.S. Department of Commerce Economic Development Administration. His presentation also included a high level list of requirements and risks needed to be successful in seeking and obtaining federal grants.  He stated that an important element to obtaining grants is to have adequate and consistent reporting systems.

He recommended that the Board consider grant opportunities that could help VEC. He stated that VEC has to perform effectively with each grant we accept and therefore need to be cognizant of each grant’s work-load requirements. 

CFO Bursell stated that each grant requires a high level of compliance and therefore requires VEC to maintain a high level of record keeping. Bursell stated that VEC has hired a new controller whom has over twenty years of experience in the grant administration field.  This new controller will provide oversight on grant administration with the intention for VEC to possess more in-house control over the grant process versus outside grant administrator contractors. 

A lengthy discussion ensued regarding grant administration.

STRATEGIC PLANNING– AGENDA ITEM #8
President Bailey tabled this agenda item for the next regular monthly Board of Directors meeting. 

ANY OTHER BUSINESS – AGENDA ITEM #9
Miller motioned and Lague seconded:

To enter into Executive Session to discuss a Board harassment policy.

Motioned carried unanimously.

The Board entered into Executive Session at 3:57 p.m.

Wright left the meeting at 3:57 p.m. and did not return.

Bursell left the meeting at 3:57 p.m. and did not return.

Niklaus left the meeting at 3:57 p.m. and did not return. 

By majority vote of those Directors present the Executive Session ended at 3:59 p.m. 

ADJOURN – AGENDA ITEM #10
There being no further business before the meeting,

Miller moved and Lague seconded:

 That the meeting be adjourned.

No discussion was forthcoming and the motioned carried unanimously.

The meeting adjourned at 4:02 p.m. 

Respectfully submitted:                               

Michelle DaVia, Secretary and Thomas Bailey, President

Signed minutes (PDF)