Board Meeting Minutes

VERMONT ELECTRIC COOPERATIVE, INC.

REGULAR MEETING OF THE BOARD OF DIRECTORS

September 25, 2018

APPROVED MINUTES

CALL TO ORDER – AGENDA ITEM #1
President Dan Carswell called the meeting to order at 11:53. a.m. in the Robert P. Northrop Boardroom at VEC offices in Johnson, Vermont.  Present were Directors Ken Hoeppner, Carol Maroni (Second Vice President), John Ward (Treasurer), Mark Woodward (Secretary) George Lague (First Vice President), Charlie Van Winkle, Don Worth, Paul Lambert, Rich Goggin, and Tom Bailey.  Also present from VEC was Interim-CEO/General Counsel Vickie Brown, Chief Financial Officer Mike Bursell, Safety & Security Manager John Varney, Manager of Government Affairs and Member Relations Andrea Cohen, Chief Operating Officer Peter Rossi and Corporate Assistant Lisa Vanat

MEMBER INPUT – AGENDA ITEM #2
No members were present.

SAFETY DRILL – AGENDA ITEM #3
Varney shared a cyber security tip pertaining to phishing emails.  He advised everyone to be wary of clicking on links.  He recommended hovering over a link rather than clicking on it to see whether it appears legitimate. 

APPROVAL OF MINUTES – AGENDA ITEM #4
President Carswell asked if there were any additions or corrections to the minutes of the regular monthly Board of Directors meeting held on August 28, 2018. 
Maroni moved and Woodward seconded: That the minutes of the regular monthly Board of Directors meeting held on August 28, 2018 be approved.
The minutes were approved by unanimous vote.

LAND PURCHASE NEWPORT – AGENDA ITEM #5
By unanimous vote, the Board entered into executive session at 11:59 a.m. to discuss the Newport land purchase.  The Board exited executive session at 12:30 p.m.
Ward moved and Worth seconded to approve the resolution to purchase the Newport land which was included in the Board packet at page 10.
The motion passed by unanimous vote.

MISCELLANEOUS ADDED AGENDA ITEMS
Brown informed the Board of three other matters have arisen since the agenda had been set that needed the Board’s attention. 
Vegetative Maintenance:  Bursell noted that the Company is ahead of budget for 2018.  This makes it possible to accelerate our efforts to move the vegetative maintenance cycle from a 12-year cycle to a 10-year cycle (in 2020) and to an 8-year cycle (in 2022).  E&O has identified 38 miles of rights of way that are in need of vegetative maintenance that could be completed in 2018.  Bursell expressed his confidence that we can take on this additional work and still meet the overall 2018 budget that the Board had approved.
Extensive discussion ensued about the details of this proposal, the logistics of completing the work this year, and the impact on overall vegetation maintenance goals. 
Ward moved and Maroni seconded to authorize spending an additional approximately $400,000 for an extra 38 miles of vegetative maintenance in 2018. 
There was additional further discussion about the appropriate level of spending, and the motion passed by unanimous vote.
2019 Budget and Need for Rate Increase: Bursell noted that as the budget is coming together it appears that VEC will need a 1% rate increase for next year and with such a low percentage, it may make sense to stay out.  He explained that there is a condition in an old rate order that is causing a problem with staying out.  Brown noted that the condition was imposed when the PUC approved an increase in TIER in 2009 from 1.8 to 2.18 to fund the 10-year capital spending plan.  The condition requires VEC, at the end of the 10-years, to go back to a TIER of 1.5, which would result in an immediate ratings downgrade.  If VEC can get a deferral of that condition, a rate increase can be deferred for up to a year.  Extensive discussion ensued with numerous questions and answers. 
Brown noted that management plans to ask for a deferral of the condition and if that is granted, then we will not file for a rate increase for January, 2019. There was general support for this approach.
Consolidated Communications: Lague moved and Maroni seconded to enter executive session to discuss a confidential agreement that is being negotiated with Consolidated Communications.  By unanimous vote, the Board entered executive session at 1:00 p.m.  The Board exited executive session at 1:30.

TRANSCO STOCK PURCHASE  – AGENDA ITEM #7 (This item was moved up in the agenda).
Bursell noted that Transco would be making a second offering this year in December.  This was discussed with the Board at length at the May finance committee meeting as part of the long-range financial plan.  Since May, VEC has learned that offerings of Transco stock will be less than VEC had forecasted, and VEC’s equity ratio has improved.  VEC is in a good position to make this 2018 additional purchase of $2.1 million of Transco stock.   The Board asked a series of questions and additional discussion ensued. 
Ward moved and Van Winkle seconded to approve the purchase of TRANSCO shares up to $2.1 million from the Vermont TRANSCO LLC projected with the December, 2018 offering. 
The motion passed by unanimous vote.   There was further discussion as to how the purchase will be financed

HYDROQUEBEC PHASE I/PHASE II AGREEMENT EXTENSION – AGENDA ITEM #9
This item was moved up on the agenda.
Brown noted that this is just an extension of an existing agreement that has been in place for many years.  Lague moved and Worth seconded to approve the resolution included on pages 22-23 of the Board packet.
Staff fielded a number of questions from Board members as to the value of this contract to VEC. 
The motion passed by unanimous vote.

EXECUTIVE SESSION - PROPOSAL FOR BONUSES FOR SLT – AGENDA ITEM #8
By unanimous vote, the Board entered into executive session at 1:45 p.m. to discuss bonuses for the Senior Leadership Team.  Rossi, Cohen, Bursell, Varney and Vanat left the meeting for this executive session.  Brown remained in the meeting for part of the executive session and then left the meeting.
The Board exited executive session at 2:20 p.m.
Based on discussions from executive session, Ward moved and VanWinkle seconded to provide a one-time bonus in 2018 for Bursell, Cohen, Varney and Rossi in the amount of up to 6% of each of their annual base salaries in recognition of their taking on additional duties in support of the Interim CEO.
The motion passed by unanimous vote.
There was a break in the meeting at 2:20 p.m.
The meeting resumed at 2:35 p.m.

2019 STRATEGIC PLAN APPROVAL – AGENDA ITEM #6 – This item had been deferred.
Brown noted that there was one change suggested at the last Board meeting that has been made.  Brown noted work was already underway on KFA 3 to address the need for adding load in the SHEI to relieve congestion. There were a number of questions about the KPIs. Rossi noted one caveat:  When staff developed the KPIs, we were assuming that the maintenance plan would be completed in five years.  We have issued an RFP and depending on the cost that we receive in the bids, we may need to extend that plan out to 6 or 7 years.  There was a general agreement that if circumstance or assumptions change, staff will come back to the Board to approve for any modifications.
Hoeppner moved and Woodward seconded to approve the core competencies and key performance indicators in the 2019 Strategic Plan.
The motion passed by unanimous vote.

NRECA TRAINING OPPORTUNITIES – AGENDA ITEM #10
Brown noted that there is a list of courses in the board packet that NRECA offers on-site.  A board member mentioned that there is a series of videos produced by the NRECA on governance issues.  After discussion, the Board agreed that the Governance Committee should preview a video for quality. 
The Board engaged in a discussion as to which training the Board would like to bring in for the fall training and the relative value of in-house training versus attendance at regional trainings.
A director asked management to provide a list of all trainings that directors have taken.
Maroni moved and Worth seconded to bring 906.1 to VEC for the fall.  Management agreed to check on dates and availability for the NRECA trainer as well as a course syllabus for the training. 
The motion passed by unanimous vote. Hoeppner left the meeting at 3:07.

COMMITTEE REPORTS– AGENDA ITEM #11
There were no committee reports.

MANAGERS’ REPORTS– AGENDA ITEM #12
Bursell asked for Board approval for a bond extension and a four-year extension of the line-of-credit facility.  Both of the bond and the line-of credit were previously approved by the Board and the resolution authorizes the extension of both instruments. 
Bailey moved and Ward seconded to approve the resolution as presented on pages 46-49.
The motion passed by unanimous vote.
There were several questions about details included in the managers’ reports.

ANY OTHER BUSINESS – AGENDA ITEM #13
A director asked whether he could be compensated for his participation on the NEAEC Board.  The consensus was that this should be compensated under the Board’s policy. 
Bursell noted that Tom Bailey has been elected to the CFC Board. 

ADJOURN – AGENDA ITEM #14
There being no further business before the meeting,
Bailey moved and Lague seconded:
That the meeting be adjourned.
The motion carried unanimously.
The meeting adjourned at 3:20 p.m.