VERMONT ELECTRIC COOPERATIVE, INC.
REGULAR MEETING OF THE BOARD OF DIRECTORS
SEPTEMBER 27, 2011
APPROVED MINUTES

As required under the VEC Bylaws, notice of this meeting was sent to each Director by deposit in U.S. mail on September 21, 2011.

CALL TO ORDER – AGENDA ITEM # 1

President Tom Bailey called the meeting to order at 12:10 p.m. in the Robert P. Northrop Boardroom at VEC offices in Johnson, Vermont.  Present were Thomas Bailey and Directors Dorothy Allard, Daniel Carswell, Michelle DaVia, Craig Kneeland, Carol Maroni, Daniel Parsons, John Ward, Mark Woodward and Don Worth. Also present from VEC were CEO David Hallquist, COO Jeffery Wright, Controller Caroline Mashia, General Counsel Vickie Brown, Safety Manager Les Burns, Board attorney Joe Cahill, and Corporate Assistant Nina Russo-Sanchez.

APPROVAL OF MINUTES - AGENDA ITEM #2

Kneeland moved and DaVia seconded:

            That the minutes of the July 26, 2011 meeting be approved as presented.

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

DaVia moved and Maroni seconded:

            That the minutes of the August 30, 2011 meeting be approved as amended.

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

DUTIES AND RESPONSIBILITIES OF DIRECTORS - AGENDA ITEM #3

Hallquist introduced this agenda item as a refresher of directors’ understanding of the appropriate role of a Board of Directors.  He stated that he has received many individual inquiries from Board members outside of Board meetings and reminded directors that he gets his direction from the full Board.  He stated that except for inquiries that relate to member issues, he would not respond to requests or recommendations from Board members outside of a Board meeting, but would forward them to the full Board. 

VEC member Lerry Chase entered meeting at 12:25 p.m.

Hallquist introduced Board attorney Joe Cahill.  Cahill addressed the Board on the duties and responsibilities of directors.  He encouraged directors to review the vision statement and seven principles of a cooperative on the VEC website.  He noted that the bylaws are specific in providing qualifications and obligations of a director.  Cahill noted that the Board also has adopted policies that govern standards of conduct, fiduciary duty, and the relationship of the Board as a whole with VEC management.

Cahill noted that any organization that operates successfully has to have a chain of command.  He noted that the Board is part of a collective and acts as a whole.  The Board’s job is to set the policy and approve specific acts that management then carries out.

Regarding committee functions, Cahill noted that the job of a committee is to gather facts and report or make recommendations to the full Board.  It is then up to the Board to approve a recommended action.

Cahill also discussed the use of email.  He noted that directors should make sure that what they say in an email is factually accurate, since emails can become public and part of litigation.  An email showing an apparent omission or co-mission by a director may create individual or corporate liability.  He cautioned the directors against creating the appearance that they are taking action via email, since action by the Board is valid only if it is at a duly warned meeting.  

Cahill reiterated that Hallquist cannot conduct business with one Board member, that he is obligated to copy the entire Board when an email is sent to him

Cahill recommended that all directors review the Board policies, in particular B.2 (Duties), B.3 (Fiduciary duties/standards of conduct), and B.4 (conflicts of interest).  He noted that there may be a difference between an actual conflict of interest – e.g. a director receiving a financial benefit as a result of an action – versus an appearance of conflict, but an appearance of a conflict can also cause problems.  To the extent that a director is perceived to have used undue influence, that appearance that will undermine members’ faith and damage ability of the Board to be effective.   It is more a political issue than a technical conflict, but it is still an issue.  An extensive discussion ensued about when actions can cross the line into conflicts of interest

Further discussion ensued as to what needs to be kept confidential given that the Board’s minutes and meetings are open to public.  Cahill noted that directors owe an allegiance to the collegiality of the Board.  A vote in opposition to a motion is not confidential, but characterization of that vote in a negative way may implicate that director’s duties to fellow Board members.  Issues discussed in executive session are confidential.  Some committee discussions may be considered confidential if initiatives have not been acted on by the Board yet.  Information in the Board packet may be confidential, and directors should be careful in how they maintain and destroy Board packets. 

VEC member Lerry Chase left the meeting at 1:20 p.m.

PROCESS OF APPOINTING NEW DIRECTOR – AGENDA ITEM #4

Hallquist noted that after the Board voted in the August meeting as to how to select a new direction for fill the open seat, it was pointed out that we have a policy – B.6 – that gives clear instructions on how the Board is to go about selecting a new director.  Since the vote at the August meeting did not pass by a 2/3rds majority, it did not amend the policy.

A discussion ensued regarding implementing Policy B.6.  Bailey appointed a search committee to solicit and vet candidates for a new director and bring recommendations to the full Board.  The committee will be Mark Woodward, Michelle DaVia, and Don Worth.  Woodward will act as Chair.

The meeting resumed in the Robert P. Northrop Boardroom at 1:51 p.m.

CEO SUMMARY – AGENDA ITEM #5

Safety Manager Burns gave a two- minute safety drill.  Burns noted that an employee, at home during lunch break, was fixing a meal in a rush and sliced her finger.  He pointed out that simple tasks can become dangerous when you are in a rush.

Hallquist noted that management has expressed to Green Mountain Power (GMP) VEC’s interest in acquiring transmission assets and possibly service territory from Central Vermont Public Service (CVPS) as part of the sale of CVPS to GMP.    Hallquist noted that the next step will be to have a formal meeting with GMP to talk about VEC’s proposal.

Hallquist informed the directors of the NEAEC training scheduled for October and encouraged Board members to take the training.

Hallquist has contacted Dave Blittersdorf of All Earth Renewables to ask for a solar panel at VEC headquarters and will follow up. 

Hallquist noted that Wright and Gamache were not in attendance because they are attending a statewide meeting on emergency preparedness.

MANAGEMENT  UPDATES – AGENDA ITEM #6

Finance Update

On behalf of CFO Bursell, Controller Mashia reported that year to date, we are above budget by $594K, and in August we were $433K off budget

$800K has been booked for recovery costs for tropical storm Irene to date and we expect $500-600K in September.  We are hoping for 75 % contribution from FEMA.  A discussion ensued about regarding storm preparation and what would happen if we had prepared for the storm and it missed us.  Hallquist noted that management would be seeking clarification from regulators as to whether such costs would be recoverable in the future, but noted that the bigger risk is being unprepared when a storm hits. 

On the capital budget, we are under budget by $4.3 million, the majority of which is associated with the NEK connector.  We expect that amount will be carried over to 2012.  This week we got final approval from EDA for $2.1 million in grant funds and we should receive payment within next 2-3 weeks.

Regarding other grants, we received reimbursement from FEMA for costs associated with three storms in last nine months.  The reimbursement amount was the equivalent of a 3% rate increase.   On the DOE grant, we have billed $5.3 million and have $5 million left in the grant.

As to facilities, the parking lot bid came in at less than budget, and construction for the new Grand Isle 600 square foot facility will begin on Oct 15 and be complete by the end of the year.

As to the 2012 budget, the Finance Committee is meeting on October 11 to review next year’s operating budget, and approval will be sought at the October Board meeting.  At this time we are not anticipating a rate increase. 

Operations Update

Hallquist took questions on the information included in the Board packet.  A director expressed appreciation of the IRP bus tour and several directors expresses their interest in taking a more detailed tour of Jay Peak.   Hallquist suggested that this would be appropriate for the operations committee.

A question was asked regarding VEC’s relationship with BNE energy who has erected a meteorological tower in Eden. BNE paid $10K for a system impact study in May 2010 and BNE has not been in contact with VEC since.  VEC told BNE that there is only enough transmission capacity for one 2.2 megawatt tower.  This project would not be connected to the existing Kingdom Community Wind project.  It would have to connect to the Eden substation.  We suspect BNE lost interest when they become aware of the transmission limitations.

Corporate Services Update

Hallquist noted that VEC is focused on employee engagement.  Hallquist stated that over the past couple of years, our employee survey has shown a lack of faith in senior management that we want to work to correct.

Safety Update

Safety Manager Burns reported that VEC has passed the 365 days mark of being without an accident.  He reported that the Department of Labor will accept our application for the VPP Challenge.

Programs and Policy Update

Pratt responded to questions regarding the Consumer Behavior Study and noted that even members without broadband were eligible for participation.

He also discussed the future of the North-Link fiber network, noting that there are currently discussions to have the Vermont Telecommunications Authority enter into a management contract with the Northern Enterprises board to make use of the fiber that is in the air. 

Legal Counsel Reports

General Counsel Brown reported that management is putting together the case to be made to the Public Service Board that VEC should own certain transmission assets that GMP proposed to purchase from CVPS.  We will try to negotiate a purchase with GMP first, but will be prepared to make the case to the PSB if necessary.

Brown also reported that VEC received a letter from the Department of Labor regarding the affirmative action audit.  It noted that the audit is now complete and that no apparent violations were found.

Brown reported that we will be seeking PSB approval for the NextEra contract, which will also need to be approved by the membership at the May 2012 annual meeting.

LESSONS LEARNED FROM SPECIAL ELECTION – AGENDA ITEM #7

Brown reported that there was good engagement with members regarding the election process.  She presented management’s recommendations for future action by the Board and by management.  A discussion ensued and the Board agreed that the recommendations would be reviewed initially by the Governance Committee.

RESOLUTIONS – AGENDA ITEM #8

The following resolutions were provided to the Board in the September Board Packet mailed to the Board on 9/21/11:

Resolution #1

Resolved that the two banking resolutions (CoBank and People’s United) as specified and included in this section of the BOD packet are approved.

Worth moved to approve the resolution.  Maroni seconded.

The motion carried.

Resolution #2:

Resolved that the CFO/CEO is authorized to pursue on behalf of VEC a bond of up to $29 million to meet the borrowing needs for the next four years identified in the financial plan discussed with the Finance Committee on 9/16/11. 

Ward moved to approve the resolution.  Allard seconded.

The motion carried.

Resolution #3:

Resolved that the 2012 Director Fees & Training budget as presented to the Finance Committee on 9/16 is approved. 

DaVia moved to approve the resolution.  Woodward seconded.

The motion carried.

REVIEW OF DAVE’S 2011 GOALS – AGENDA ITEM #9

Bailey noted that Hallquist’s 2011 goals were in the September packet.  The goals had been previously reviewed and discussed extensively at an earlier Executive Committee meeting.  A discussion ensued regarding the sufficiency of management’s communication with members leading up to the July special meeting.  The directors expressed nearly unanimous support for the effort by management to engage members.

COMMITTEE REPORTS – AGENDA ITEM #10

Due to time constraints, this agenda item was deferred until the October Board Meeting.

BOARDROOM CONFERENCE TABLE – AGENDA ITEM #11

Mashia presented several options that management had identified for a new conference table for the Boardroom. A brief discussion ensued regarding the optimal shape of the table.

Ward moved;

To purchase a boat-style table. 

Carswell seconded.

The motion carried.  Management was requested to explore options for acquiring a boat-shaped table and present them for further Board action.

ANY OTHER BUSINESS – AGENDA ITEM #12

There was no other business.

ADJOURN OR RECESS – AGENDA ITEM #13

There being no further business before the meeting,

Ward moved and Kneeland seconded:

That the meeting be adjourned.

No discussion was forthcoming and the motion carried unanimously.

The meeting adjourned at 4:26 p.m.

Respectfully submitted:

_____________________          ___________________

Michelle DaVia, Secretary and Thomas Bailey, President

Signed MInutes