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| March 29, 2011 |
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VERMONT ELECTRIC COOPERATIVE, INC. APPROVED MINUTES As required under the VEC Bylaws, notice of this meeting was sent to each Director by deposit in U.S. mail on March 23, 2011. CALL TO ORDER – AGENDA ITEM # 1 Dana Kittell and Mark Mayer of Kittell, Branagan & Sargent (KBS) presented to the Board their summary highlights of VEC’s 2010 Financial Audit. Kittell commended VEC employees on their excellent work. Kittell stated that KBS’s “unqualified opinion” is that VEC’s financial statements are fairly presented and no significant findings were discovered. A brief discussion ensued regarding Patronage Capital. Kittell turned the discussion over to Mayer for review of the audit highlights. Mayer reviewed some of the audit highlights regarding the Balance Sheet, Income Statement and Statement of Cash Flow. He stated that KBS conducted a single audit which is a different type of audit compared to prior years. He further explained that conducting a single audit was necessary because VEC had over $500k in grant expenditures for the year which triggers additional audit requirements mandated by the Federal Government. Directors had an opportunity to ask questions of Mayer and Kittell on their findings and a lengthy discussion ensued. Hallquist left the meeting at 12:12 p.m. and returned at 12:15 p.m. Ward moved and Lague seconded: To approve VEC’s 2010 Financial Audit report and management letter as presented. The motioned carried unanimously. President Bailey introduced VEC’s new General Counsel Vickie Brown and current Directors introduced themselves. Hallquist provided a brief overview of Brown’s new role and stated that she will serve as a member of the Senior Leadership Team. MINUTES OF FEBRUARY 22, 2011 REGULAR MONTHLY MEETING APPROVED – AGENDA ITEM #3 Secretary DaVia informed those Directors present that the February 22, 2011 Regular Meeting minutes were under legal review during the time of the Board packet mailing. She stated that the minutes will be presented during the April 26, 2011 meeting. Worth left the meeting at 12:52 p.m. and returned at 12:55 p.m. CEO SUMMARY – AGENDA ITEM #4 Member Information Privacy Policy Hallquist referred to page 46 of the board packet previously mailed to all Directors. He explained that the proposed Member Information Privacy Policy demonstrates VEC’s commitment to protect member information. He stated that it is extremely important as VEC deploys smart meters that member data is secure. The policy indicates that a VEC member owns their information unless permission for disclosure is provided. However, a caveat exists that pertains to subpoena requests. A brief discussion ensued. Miller moved and Carswell seconded: To approve proposed Member Data Privacy Policy as written with non-substantial changes allowed. A brief discussion ensued. The motioned carried unanimously. Two-Minute Safety Drill Safety Manager Burns conducted a two-minute safety drill regarding slips and falls. He stated that slips and falls are considered the number one reason for injuries at home. The following tips were recommended; • Take extra precaution when walking on ice. • Make sure you use ladders correctly; don’t use chairs. MANAGEMENT UPDATES – AGENDA ITEM #5 Financial Update CFO Bursell and those present engaged in a discussion of the Financial Update. He reported that February results for VEC’s operating budget exceeded expectations with a positive variance of $78k. Bursell suggested that VEC will meet its operating budget expectations by year end. The capital budget performed over budget by $292k in February. Bursell stated the primary driver for the variance is due to the delay in receiving committed grant funding from the Economic Development Administration (EDA) for Phase 1 of the Northeast Connector project (NEK). VEC will not begin Phase 2 of the project until these funds are obtained. Northeast Connector (NEK) Bursell provided an overview of VEC’s collaboration with the EDA to obtain confirmation of their reimbursement for Phase 1 of the NEK project. Bursell reported that the EDA has approved a lower reimbursement amount for the project than VEC had previously projected. He attributed the variance to the EDA identifying unqualified expenditures where VEC had expected reimbursement. Bursell is addressing the variance between expected reimbursements and approved reimbursements by scheduling weekly meetings with the EDA. Bursell concluded that once the approved reimbursement amount is identified, VEC will reevaluate the project to identify whether project execution will continue. Gamache left the meeting at 1:04 p.m. and returned at 1:07 p.m. A brief discussion ensued regarding the impact to the capital budget. A brief discussion ensued regarding the timing of the project. Bursell stated that the project was already in progress when the EDA grant was awarded and that in some instances the documentation associated with previously-incurred costs did not meet formal EDA grant requirements. Bursell continued his financial update by reporting on the following items: Kingdom Community Wind (KCW) Bursell stated that he met with Green Mountain Power (GMP) project managers in March for an update on the KCW project. Bursell reported the following project updates; ● The Public Service Board (PSB) concluded its hearings and an order is expected in May. ● GMP will make their selection of the wind turbine manufacturer soon. ● Management is expecting to provide an update on the project model that includes a power purchase agreement, joint ownership agreement and expected project related costs during the May Board meeting. A Director inquired about the responsible party for building the transmission line. Bursell responded that GMP will build the line but VEC will be responsible for maintenance. COO Wright added that VEC and Vermont Electric Power Company (VELCO) are anticipating receiving a Certificate of Public Good (CPG) by the end of July for the Jay substation project. After we receive that CPG, VEC will hold a special meeting in July to obtain a member vote for the transmission upgrades associated with the KCW project and for the Jay substation project. Hallquist suggested that a portion of this year’s annual meeting of the membership be dedicated to discussing the KCW project. A brief discussion ensued regarding the KCW project financial model. A Director inquired about member communication associated with the special meeting vote slated for July. A brief discussion ensued. A Director inquired about the financial implications to VEC members if the transmission project is voted down. Bursell responded that VEC will need to evaluate other renewable energy sources in order to fulfill its Vermont State SPEED requirements and a potential implication could be that members see their rates increase as a result. A brief discussion ensued regarding penalties of not meeting SPEED requirements. A lengthy discussion ensued regarding VEC’s image in the Vermont legislature. Williston Metering Error Bursell reported that the VELCO Operations team concluded discussions regarding the Williston metering error and the issue is now closed. A brief discussion ensued. Banking Resolution Bursell provided an extensive overview regarding the proposed resolution to approve an additional line of credit facility with CoBank. Kneeland moved and Lague seconded: To accept the resolution set forth on pages 61 and 62 included in the March board packet. The full resolution approved as presented is appended to these minutes. The motion carried unanimously. Patronage Capital Bursell provided a recommendation to change VEC’s current Bylaws that would give the VEC Board some flexibility in developing a patronage capital retirement policy. If approved by the Board, the amendment would be included in this year’s annual meeting election and presented to the membership for a vote. A brief discussion ensued. Bursell distributed to all Directors present a revised version of the proposed Bylaw amendment. DaVia moved and Lague seconded: To approve proposal version number 2 of the proposed Bylaw amendments to implement capital credits. The motion carried unanimously. Director praised management for VEC’s improved credit rating by Standard & Poor’s Rating Services. Bursell provided an overview of the benefits to VEC as a result of a higher credit rating. A brief discussion ensued regarding VEC’s guest list for this year’s annual meeting. Ward moved and Kneeland seconded: To invite the complete Washington Electric Cooperative Board to VEC’s annual meeting. The motion carried unanimously. Operations Update COO Wright and those present engaged in a discussion of the Operations Update and reported on the following items: Reliability VEC’s System Average Interruption Frequency Index (SAIFI) continues to remain positive. Wright stated that VEC experienced a large outage caused by a Hydro Quebec problem that affected 12, 000 members. Due to its short duration, the outage did not impact SAIFI. Lead Time A lead time measure has been refined to differentiate between engineering and construction areas. Wright reported that the amount of time the engineer and member work together is 57 days. Then, it takes 22 days to go through construction. He stated that he intends to focus on improving the construction lead time. Operations Highlights VEC complies with nineteen (19) reliability standards in order to remain in NERC Compliance. VEC is currently performing an internal NERC compliance review with anticipation of being audited in 2012. Stewardship The state of Vermont contacted VEC to install an Osprey platform on private property. Crews from the Grand Isle district recently set the member supplied pole with materials paid for by the member. Jay Tap Project Wright reported that the Jay Tap project is progressing favorably. The foundation and building are complete and fence construction has begun. Brown left the meeting at 1:56 p.m. Rock Tenn Operations replaced a breaker at Rock Tenn successfully without interrupting service. Rock Tenn is VEC’s largest industrial customer and it was a critical component of the project to prevent service interruption. A brief discussion ensued. Capital Projects Wright provided a review of capital project highlights. A brief discussion ensued regarding current Fairpoint projects. President Bailey called for break in the proceedings at 2:05 p.m. The meeting resumed in the Robert P. Northrop Boardroom at 2:20 p.m. Brown joined the meeting at 2:20 p.m. Corporate Services Update Gamache reported that VEC’s workers compensation mod rate is expected to drop from 1.19 to 1.05 and will have a positive impact for the upcoming 2011/2012 policy year. If all other rate factors remain the same, this change in mod rate will result in premium savings of approximately $20k. A brief discussion ensued regarding VEC’s apprenticeship program. Gamache indicated that succession planning will be a focus later in the year. Incoming Calls During Business Hours Gamache referred to an incoming calls graph located on page 86 in the board packet previously mailed to all Directors. The graph indicates that VEC is experiencing an increase in call volumes. With the use of contact tracking, VEC is gaining insight to the types of calls member service representatives receive in order to understand how productivity can be improved in the member services area. Communications As a result of VEC’s newly designed four- minute smart grid video. VEC is receiving requests to speak to constituents to share VEC’s smart grid story. Annual Meeting Update Gamache provided an update on the status of annual meeting and VEC’s Candidate for Director 2011 election. She reported the following key items; ● Submit guest invite list to Amanda between now and annual meeting. ● The Petition Review Committee will hold a Board of Directors teleconference on April 6 at 4 p.m. to report their findings to the full Board. ● The notice of annual meeting will be sent to all members on April 27. ● Proposed Bylaw amendments for member approval are available for review in the Corporate Services section of the board packet. Gamache explained that there are three proposed (3) Bylaw amendments that require Board approval;
Gamache briefly described all three proposed Bylaw amendments and engaged in a questions and answer session with those Directors present. Gamache discussed in detail the purpose of changing the language in Article III, Section 6 to include electronic voting. She explained that it would allow management to consider the option of electronic voting in the future. A brief discussion ensued regarding voting options. A Director expressed concerns about the perception to VEC members if the electronic voting option was brought forward to the membership without having the option available immediately or within the year. Since there is no concrete plan, it could appear confusing to the membership. Another Director expressed concerns about bringing the process forward to the membership before allowing the Board to vote. A brief discussion ensued. DaVia moved and Lague seconded: To approve the three Bylaw changes. Ward moved and Caswell seconded: To divide the motion into three parts The motion carried unanimously. Woodward moved and Carswell seconded: To approve the Bylaw amendment Article 4, Section 4 Removal of Directors The motion carried unanimously. Davia moved and Lague seconded: That the Board approves the proposed change to Article 5, Section 1 Meeting of Directors. The motion carried unanimously. Kneeland moved and Ward seconded: To table the proposed electronic balloting Bylaw amendment. There were seven [7] votes in favor and three [3] votes against. The motion carried by majority vote. Programs, Policy and Smart Grid Update Safety Update Bursell left the meeting at 3:06 p.m. and did not return. CEO EVALUATION & GOALS – AGENDA ITEM #6 A Director inquired about a missing field productivity measure. Hallquist responded that identifying an accurate measure that reflects productivity in the field needs to be determined. A Director expressed concerned that the frequency of conducting member advisory group meetings isn’t defined. Hallquist proposed to either remove the goal or change the goal to investigate the use of member advisory groups. A lengthy discussion ensued. President Bailey requested a straw pole and as a result, the member advisory goal was eliminated from 2011 CEO Goals. Hallquist requested an additional month to present his 2011 goals to the Board for approval. He indicated that he wants to ensure that his team can handle the work load. A brief discussion ensued regarding a prices to devices program. Allard moved and Ward seconded: To enter into Executive Session to discuss CEO compensation The motion carried unanimously. Niklaus left the meeting at 3:23 p.m. and returned at 4:01 p.m. By majority of those Directors present, the Executive Session ended. Ward moved and Worth seconded: For a recorded vote (Roll call vote). Miller moved and Lague seconded: To give Dave Hallquist the increase that was discussed to $160k and to be retroactive to January 1, 2011. And Tom Bailey is authorized to sign the CEO contract. Nine [9] Directors voted yes, those being Dorothy Allard, Dan Carswell, Michelle DaVia, Craig Kneeland, Bert Lague, John Miller, Dan Parsons, Mark Woodward, and Don Worth. One [1] Director voted no, that being John Ward and one [1] Director was absent. The motion passed by majority vote. VERMONT YANKEE – AGENDA ITEM #7 Bursell joined the meeting at 4:04 p.m. Hallquist stated that the Vermont Yankee power purchase agreement was discussed at length during a recent Power Supply & Operations Committee. He requested that the Board make a decision regarding the agreement by April. Hallquist explained the pricing model associated with the proposed agreement and a lengthy discussion ensued. Carswell left the meeting at 4:06 p.m. and returned at 4:08 p.m. Kieny joined the meeting at 4:26 p.m. Kieny engaged in a question and answer session regarding the Vermont Yankee pricing model. A lengthy discussion ensued. Ward left the meeting at 4:31 p.m. and returned at 4:33 p.m. Miller moved and Lague seconded: To table the Vermont Yankee contract until next month’s regular meeting. The motion carried by majority vote. Miller moved and Lague seconded; To postpone the Vermont Yankee contract until next month’s regular meeting. The motion carried by majority vote. Kieny left the meeting at 4:38 and did not return. COMMITTEE REPORTS – AGENDA ITEM #8 Chairman Carswell provided a brief overview of the following topics that were discussed at the most recent committee meeting: ● Integrated Resource Plan (IRP) ● Productivity measures consideration ● Progress of transformer salvaging ● Vermont Yankee’s power purchase offer Communications Chairman Allard stated that there will be two (2) sets of minutes included in next month’s board packet. She stated that the committee conducted a meeting via teleconference call to discuss the spring issue of Coop Life. The committee met again to discuss VEC’s smart grid communications strategy in preparation for public events. A Director expressed an interest for the Communications Committee to be more transparent in order to obtain a greater understanding of its functionality. A brief discussion ensued. OTHER BUSINESS – AGENDA ITEM # 9 PARKING LOT – AGENDA ITEM #10 No parking lot topics were identified. ADJOURN OR RECESS – AGENDA ITEM #11 There being no further business before the meeting, Carswell moved and Ward seconded: That the meeting be adjourned. No discussion was forthcoming and the motioned carried unanimously. The meeting adjourned at 4:52 p.m. Respectfully submitted: ____________________ _____________________ Michelle DaVia, Secretary and Thomas Bailey, President 
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