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VERMONT ELECTRIC COOPERATIVE, INC. REGULAR MEETING OF THE BOARD OF DIRECTORS DECEMBER 28, 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 December 21, 2010.
CALL TO ORDER – AGENDA ITEM # 1 First Vice President Daniel Carswell called the meeting to order at 12:04 p.m. in the Robert P. Northrop Boardroom at VEC offices in Johnson, Vermont. Present were Daniel Carswell and Directors Dorothy Allard, Michelle DaVia, Craig Kneeland, Bertrand Lague, 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, Manager of Government Relations Randy Pratt, Safety Manager Les Burns, and Internal Communications Specialist Amanda Niklaus. MINUTES OF NOVEMBER 30, 2010 REGULAR MONTHLY MEETING APPROVED – AGENDA ITEM #2 Board Secretary DaVia informed those Directors present that the November 30, 2010 meeting minutes are currently under legal review. She stated that these minutes were complex and additional clarification was needed regarding a specific motion that was recommended by Attorney Stackpole. Secretary DaVia also indicated that Attorney Stackpole will conduct a thorough review of VEC’s current Bylaws to ensure potential conflicts do not exist that would prevent member approval of the Director Removal Bylaw Amendment. DaVia concluded that the November 30, 2010 meeting minutes will be presented during the January 25, 2011 meeting.
CEO SUMMARY – AGENDA ITEM #3 Hallquist provided an overview of VEC’s activity during the month of December and highlighted important meeting agenda topics.
December Wind Storm Hallquist stated that the December wind storm caused the largest damage to VEC’s system in history. He discussed a comparison between the December 2010 wind storm and VEC’s October 2005 ice storm and indicated several areas where VEC has made vast improvements to its operations. He stated that VEC had received over one hundred fifty member complaints from the Department of Public Service (DPS) as a result of the October 2005 ice storm. Whereas, the 2010 December wind storm received over one hundred fifty expressions of thanks from members and only two member complaints to the DPS. Several Directors asked Hallquist to express their appreciation of restoration efforts to VEC employees. They also recognized the effectiveness of the extensive communication efforts during the storm.
A brief discussion ensued regarding VEC’s outage communication strategy.
Hallquist stated that this storm put VEC’s new technology to work. For an example, with Automated Metering Information (AMI), VEC was able to quickly pinpoint outage sources which resulted in timely restorations.
A brief discussion ensued regarding areas where VEC performed well and where VEC will seek to improve for the next storm.
Hallquist praised CFO Bursell for his timely work with the Federal Emergency Management Agency (FEMA). As a result, VEC was approved for FEMA reimbursement eligibility within seventeen days of the last outage restoration.
A brief discussion ensued.
MANAGEMENT UPDATES – AGENDA ITEM #4 Financial Update CFO Bursell and those present engaged in a discussion of the Financial Update. He reported that November results for VEC’s operating budget exceeded expectations with a positive operating variance of $238k. VEC is continuing to perform better than budget by $998k year-to-date. As VEC continues to write down the Ethan Allen generator asset for the balance of the year, it impacts earnings by $100k/month and $414k has been written off so far. The capital budget was slightly higher than budget for November by $129k but is $772k under budget year-to-date.
Bursell continued his financial update by reporting on the following items:
December Wind Storm VEC was on target to meet the approved operating and capital budgets for the calendar year. With the storm’s costs expected to reach $2 million, the planned budget outcomes for 2010 degraded.
At the storm’s onset, Bursell began communicating with Emergency Management Department of Transportation, FEMA, and the DPS to inform them of the unprecedented damage that was incurring to the VEC system. The storm resulted in severe system damages with the most extensive damage in Chittenden, Lamoille and Franklin Counties. VEC worked closely with Vermont Emergency Management (VEM), to lay the groundwork leading to a State of Vermont Disaster Declaration and a Presidential Disaster Declaration, both of which are requirements for establishing FEMA funding. Cooperatives and municipalities can be eligible for FEMA reimbursement; investor owned utilities, however, are not. Bursell continued with a detailed overview of the various steps associated with the FEMA reimbursement request and engaged in a question and answer session with those Directors present. A brief discussion ensued.
Bursell stated that VEC received eligibility approval for FEMA reimbursement on December 23, 2010. VEC will receive 75 percent reimbursement for eligible expenses incurred in the counties of Chittenden, Lamoille, and Franklin. This represents 92 percent of the storm’s total costs. He concluded that VEC should be able to recover from the devastating impact of the storm’s cost and meet the 2010 approved budgets.
A brief discussion ensued.
2011 Rate Case VEC has been working with the DPS to review the rate increase request of 2.71 percent. The DPS completed its review, and after several discussions with VEC, a settlement was agreed upon. VEC reduced its rate increase request to 2.13 percent and the DPS agreed to support the revised request.
A brief discussion ensued regarding the First Wind Contract.
A Director enquired about how VEC budgets for storms. Bursell provided a brief overview of VEC’s storm forecasts that utilize a ten-year running average. He concluded that ultimately the information is not considered to be known and measureable.
Bursell informed those Directors present that VEC doesn’t expect to receive FEMA reimbursement until April 2011. He stated that the wind storm’s $2 million expense will be recorded in December. And upon consultation with and approval of VEC’s auditors, the anticipated FEMA reimbursement will be recorded in receivables as a subsequent event.
A Director inquired about the conditions of the poles that broke during the storm and whether VEC shares the poles with Fairpoint Communications. COO Wright responded that an estimated 77 poles had broken and are shared with Fairpoint. It will be an expensive storm for Fairpoint, as well, because they are responsible for sharing in the cost of replacing the poles. However, Fairpoint is not eligible for FEMA reimbursement like VEC.
VEC’s 2010 $9 Million Bond Financing The closing of VEC’s $9 million bond occurred on December 1, 2010. Bursell stated that the loans closed at attractive rates. A brief discussion ensued.
Post Retirement Health Care and Life Insurance: As stated during the November meeting, the recent actuarial assessment performed by Annie Voldman of the liability associated with benefit obligations that VEC acquired in the Citizen acquisition is complete and differed from the previous evaluation performed in 2007 by Deloitte. As a result of the audit, VEC reported $113k in the month of November as an adjustment for the current year. An additional entry of $158k will be required to account for the difference between Voldman and Deloitte liability assessments. An accounting decision will be made at year end after considering all available financial information to determine how to book this entry. Bursell stated that the liability amounts are now accurate.
Northeast Kingdom (NEK) Connector Grant Although the VEC Board of Directors had already resolved to accept the NEK grant, the Economic Development Administration (EDA) is requesting the resolution in their required format. VEC has postponed the next phase of the NEK project until VEC is reimbursed for the significant costs associated with the construction of the Steel Tower Line.
Bursell engaged in a question and answer session regarding the new language and a brief discussion ensued.
DaVia moved and Lague seconded: To approve the Resolution set forth.
RESOLUTION Whereas, an application is being submitted to the Economic Development Administration, U.S. Department of Commerce, for the construction of electrical substations and transmissions lines in Essex County, Vermont and,
Whereas, under the Economic Development Administration’s Public Works Impact Program, the VERMONT ELECTRIC COOPERATIVE, INC. is eligible to receive a maximum grant of 77.84% of the total project cost or $11,286,917 whichever is less; and
Whereas, VERMONT ELECTRIC COOPERATIVE, INC. is prepared to administer the project under force account procedures, and
Whereas, the NORTH EAST KINGDOM ELECTRICAL CONNECTOR PROJECT will create employment opportunities for the unemployed and underemployed resident of the EDA-designated PWIP area;
NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE VERMONT ELECTRIC COOPERATIVE, INC.;
The motion carried unanimously.
Before addressing the next agenda topic, Hallquist informed those Directors present that it has become customary for VEC staff to begin their meetings with a 2 minute safety drill. He stated that he would like to begin doing a 2 minute safety drill for Board meetings. A safety drill commenced with Hallquist discussing stress management and Safety Manager Burns stated that stress management is a focus for the December safety meetings.
Hallquist then stated that he would like VEC to formally express thanks to the congressional leaders that contributed to delivering a timely response from FEMA.
Allard moved and Lague seconded: The VEC Board of Directors hereby resolves to thank Senators Patrick Leahy and Bernie Sanders and Congressman Peter Welch for their work and support in securing Federal Emergency Management Agency relief for the early December 2010 storm that impacted members in the VEC territory. This was the worst storm in VEC’s history and impacted the counties of Chittenden, Franklin and Lamoille. The fast response to this storm is the result of many years of hard work between the Vermont Department of Public Service and Vermont Emergency Management, as well as the collaborative support between Vermont utilities. VEC is proud of how Vermonters work together to respond to extreme weather events.
The motion carried unanimously.
Corporate Services Update Union Negotiations Worth moved and DaVia seconded: To enter into Executive Session to discuss union negotiations. Motioned carried unanimously. The Board entered into Executive Session at 1:04 p.m.
Niklaus left the room at 1:04 p.m. and returned at 1:29 p.m.
By majority vote of those Directors present the Executive Session ended at 1:29 p.m.
Kneeland moved and DaVia seconded:
To authorize President Bailey to sign and execute the Collective Bargaining Agreement between VEC and IBEW Local 300 for the contract period of November 1, 2010 through December 31, 2013.
The motion carried unanimously.
Revised Pension Plan Gamache provided an overview of the components associated with the pension plan that has been revised as a result of the new IBEW Collective Bargaining Agreement. She referred to the appended document that was sent as a separate mailing and informed those Directors present that an additional appended document is being distributed today. Gamache stated that the addendum being distributed to those Directors present pertains specifically to Citizen Employees and she explained the different between the two documents.
Gamache engaged in a question and answer session regarding VEC’s ability to remain competitive with its benefits and compensation packages.
A brief discussion ensued.
Hallquist left the meeting at 1:32 p.m. and returned at 1:33 p.m.
Lague moved and Ward seconded: To approve the Resolution set forth.
WHEREAS, Vermont Electric Cooperative, Inc. is a participating employer in the NRECA sponsored defined benefit plan, the Retirement Security Plan, and;
WHEREAS, The Board of Directors of Vermont Electric Cooperative, Inc. (“the Board”) now desires to amend this plan pursuant to Section 18.02 of the pension plan documents and in accordance with the union contract dated November 1, 2010, and does hereby authorize the amendment effective the first day of April, 2011 by executing the appropriate Adoption Agreement;
BE IT RESOLVED that the amendment to the Plans are as follows:
BE IT FURTHER RESOLVED, that an ERISA 204(h) Notice will be delivered to all affected RS Plan Participants at least 30 days prior to the Effective Date of the plan amendment.
BE IT FURTHER RESOLVED, the Board is aware that the amendment may cause certain employees to experience a reduction in benefits and accepts the responsibility for taking such action.
BE IT FURTHER RESOLVED, that the Board does hereby authorize and direct the General Manager/CEO/Other Executive to execute all necessary documents and to take any and all further actions necessary to carry out the intentions of the Board as indicated in this resolution.
The full resolution and Adoption Agreements approved as presented are appended to these minutes.
The motion carried unanimously.
Operations Update COO Wright and those present engaged in a discussion of the Operations Update and the following items were reported:
Safety VEC experienced no reportable incidents in November 2010. VEC continues to remain on track for meeting its 2010 Service Quality Reliability Performance (SQRP) goals. He indicated that safety trends show that VEC is improving in safety. In 2008, VEC had eighteen reportable incidents whereas, in 2010 VEC had twelve. VEC is striving to cut this number each year.
Reliability The month of November, VEC achieved its best performing month in history. VEC is on track to improve upon last year’s system performance measures.
Jay Tap Project The Jay Tap project is underway. The first concrete will be poured after January 1, 2011. Wright reports that the project is doing well.
December Wind Storm Wright explained that before the storm, VEC spent time with VEC contract meteorologist, Roger Hill, who was able to predict a potential for wind gusts exceeding 90mph in the town of Cambridge.
Wright stated that VEC employees did a great job; not just lineman but all employees. Hallquist added that WESCO, a VEC supplier, did a great job in supplying VEC with the necessary materials during the course of the storm.
Wright discussed the following storm performance indices: • Total member outages: 26,468 • Maximum members out at any time: 12,500 • Total SAIFI: .71 • Average outage duration: 15.7 hours • Injury rate: 1 (no lost time) • Vehicle Incident Rate: 2 Wright discussed the following storm resource statistics: • Total VEC line crews: 16 •Total mutual aid line crews: 54 •Total tree crews: 50 • Standard employee work day: 18 hours
Wright stated that the conditions for the line crew during the storm were very dangerous. A brief discussion ensued regarding managing personnel fatigue.
A lengthy discussed ensued regarding the December wind storm.
Government Relations and Smart Grid Update Fairpoint Pratt informed those Directors present that the Public Service Board (PSB) approved Fairpoint’s bankruptcy settlement plan. He indicated that this is positive news for VEC because VEC had over $450k at risk. VEC should obtain payment in full immediately following the bankruptcy approval.
A brief discussion ensued regarding smart grid technology.
Parliamentary Procedure Pratt stated that he observed during the last meeting a procedure inconsistent with Robert Rules of Order. He explained that the procedure was regarding the request for majority approval for roll call votes. Pratt made a recommendation to use the standard 20% rule which is practiced by US Congress. He suggested that Directors create a special rule of order that requires two votes. Therefore, a Director that makes a motion and a Director who seconds that motion, should be adequate to obtain a roll call vote.
DaVia moved and Ward seconded: Move that the Board adopt a special rule of order requiring a roll call vote upon a making of a request and a second for a roll call vote.
The motion carried unanimously.
Vice President Carswell called for break in the proceedings at 2:14 p.m. The meeting resumed in the Robert P. Northrop Boardroom at 2:32 p.m.
2011 STRATEGIC PLAN – AGENDA ITEM #5 Hallquist provided a brief overview of the 2011 strategic planning process and discussed its importance. He stated that the plan will become the CEO goals for the year.
Hallquist left the meeting at 2:43 p.m. and did not return.
Niklaus presented the proposed 2011 strategic plan to those Directors present. A lengthy discussion ensued regarding the proposed vision statement. A brief discussion ensued regarding renewable pricing. First Vice President Carswell concluded that the current vision statement will remain until it can be discussed further at a future board meeting.
Members of the senior leadership team presented the goals and strategies for their core competency group and each engaged in a question and answer session. A brief discussion ensued.
Woodward left the meeting at 3:58 p.m. and returned at 4:02 p.m.
First Vice President Carswell stated that specific CEO goals will be discussed in detail at the upcoming Executive Committee meeting.
Lague moved and Ward seconded:
To approve VEC’s 2011 Strategic Plan with the Vision Statement subject to Board revision and to be used as the foundation for the CEO’s goals for the upcoming year.
The motion carried unanimously.
TABLED COMMITTEE REPORTS– AGENDA ITEM #6 Vice President Carswell tabled committee reports for the next regular Board of Directors meeting.
GOVERNMENT REGULATION LAY OF THE LAND – AGENDA ITEM #7 Vice President Carswell tabled this topic for the next regular Board of Directors meeting.
OTHER BUSINESS – AGENDA ITEM # 8 Director Worth provided feedback concerning his recent NRECA Director training trip to Nashville, TN. He expressed his concerns regarding the cost of the hotel accommodations. A brief discussion ensued.
DaVia moved and Ward seconded: To direct management to pursue the following resolution through the NRECA resolution process.
RESOLUTION After paying significant expenses at Gaylord Opryland Resort in Nashville Tennessee, the VEC Board of Directors strongly urges the NRECA to find alternate locations for training that are less expensive. With a vast network of cooperatives located in rural areas, we think the NRECA can find sites that are less expensive, thereby helping local economies.
The motion carried unanimously.
PARKING LOT – AGENDA ITEM #9 During this meeting, the following items were identified as parking lot topics: • Refine vision statement
ADJOURN OR RECESS – AGENDA ITEM #10 There being no further business before the meeting, Lague moved and Worth seconded:
That the meeting be adjourned.
No discussion was forthcoming and the motioned carried unanimously. The meeting recessed at 4:21 p.m.
Respectfully submitted:
Michelle DaVia, Secretary and Thomas Bailey, President
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