Board Meeting Minutes


APRIL 27, 2015

As required under the VEC Bylaws, notice of this meeting was sent to each Director by deposit in U.S. mail on April 21, 2015

Vice-President Dan Carswell called the meeting to order at 12:02 p.m. in the Robert P. Northrop Boardroom at VEC offices in Johnson, Vermont. Present were Directors Michelle DaVia, Ken Hoeppner, Mitzi Johnson, George Lague, Carol Maroni (Second Vice President), John Ward (Treasurer), and Mark Woodward (Secretary). Also present from VEC were CEO David Hallquist, COO Jeffery Wright, CFO Michael Bursell, Safety and Security Manager John Varney, General Counsel Vickie Brown, and Billing Supervisor Lisa Morris.

Varney cautioned that road shoulders tend to be soft as a result of spring rains. He shared a picture of a car that went off the road and got tangled in a guy wire on the VEC pole.

Maroni moved and DaVia seconded:
That the Board enter into executive session to discuss the Board operating norms.
By majority vote of those present the Board entered into executive session.
By majority vote of those present executive session ended.
No members were present.

Carswell asked whether there are any items which should be removed from the consent agenda and placed on the regular agenda. The following items were removed: (1) Meeting Minutes from March 30, 2015 Board meeting; (2) CEO Summary; and (3) Finance and Operations Updates.
Hoeppner moved and Woodward seconded:
To approve the Consent Agenda without the removed items.
There was no further discussion.
The motion passed by unanimous vote, and the following item were approved:
• 3/25/15 Special Board Meeting Minutes;
• Future annual meeting dates and places as follows: Saturday, May 21, 2016 at Smugglers’ Notch Resort and Saturday, May 20, 2017 at Jay Peak Resort
While the remaining items in the Consent Agenda (other managers’ updates) do not require Board approval, approval of the Consent Agenda indicates that the Board had no questions about those items.

1) 3/30/15 Meeting Minutes.
There were two changes suggested to the minutes. The first clarified that the 2014 Audit Report was approved as part of the consent agenda because there were no further questions on it. The second clarified the directive that the Board gave to Hallquist and Bailey with respect to a candidate for director who may have a conflict of interest.
Lague moved and Ward seconded:
That the March 30, 2015 Board meeting minutes be approved as amended.
There was no discussion.
The motion carried by unanimous vote.
2) CEO Summary.
A director asked whether, considering limitations placed on Efficiency Vermont’s budget, EVT would have the ability to support the utilities in implementing H. 40, particularly TIER 3. Hallquist noted that he had discussed the issue with Liz Gamache, EVT’s president. This is still an area of uncertainty, and we will have to address the reduced level of funding.
A director requested that Hallquist invite Gamache to a future Board meeting. Bursell noted that staff met with Christa Shute of VEIC person last week to discuss the availability of grant monies for TIER 3 programs.
A director asked about the changes being proposed in the IBEW health care plan. Brown explained that this was very recent news and staff would be working closely with IBEW for a smooth transition. Discussion ensued about what changes could be made within the existing IBEW contract.
3) Finance update
A director asked about the Kingdom Community Wind project. Since the project’s capacity factor is good, why aren’t unit prices (cost/kwh) better than reported? Bursell responded that the unit cost (11¢/kWh) is actually 6.3% under budget. However, we are seeing a variance of $35,000 or 4.4% above budget for the project costs in total. A large part of the project cost variance is related to revenue that we have realized as a result of GMP’s synchronous condenser and station service retail accounts. GMP has become one of VEC’s top 10 customers, with VEC billings to GMP totaling $570,000 last year. So KCW’s costs are higher, but some of the cost increase is revenue to VEC. GMP and VEC are currently in disagreement on the level of rate currently being billed by VEC to GMP. A reduction in our electric rates to GMP would lower our KCW project costs but VEC would lose a much larger share of revenues as well. The project costs will be addressed by a future Power Supply and Operations committee meeting. A date for that committee meeting will be set at the next Board meeting.
A director asked about the dispute with the VEPP Inc. administrator over transmission services for Standard Offer project. Bursell summarized the posture of the dispute, noting that we are considering a number of different ways to resolve this in the most cost-effective way.
There were additional clarifying questions about the financial update.
Bursell noted that the Form 990 was included with the financial update for Board approval, subject to any further suggestions from the auditors after they perform their review.
Lague moved, and Maroni seconded:
That the BOD approve the included IRS form 990 tax return for 2014 including any immaterial changes brought forward by BOD meeting or KBS review.
Further discussion ensued as to information included in the 990 report.
The motion passed by unanimous consent. A director requested further information as to what is required on Part VI, Section B, line 12c of the Form 990 concerning monitoring of compliance with the conflict of interest policy.
There were additional questions about the Board budget, in particular what costs are included in the line item for “labor.” Bursell noted that when employees record the time they spend working on Board matters, some portion of their labor costs are allocated to the Board budget. The consensus of the Board was that staff attending Board and committee meetings should record their labor expenses to the Board account.
Operations Update
A director requested that Tom Dunn, CEO of VELCO attend a future Board meeting.

Wright reported that we recently discovered a vernal pool and Class 2 wetlands at the center of the South Hero project site. He noted that our environmental consultant met last year with ANR and the Army Corps of Engineers and neither agency raised issues with respect to wetlands on the site. The consultant had completed the full environmental review and submitted detailed analysis, but did not find the wetlands until a follow-up visit. The initial indications are that with a new layout that avoids the wetland, the project size may go from 1.5 MW to 1.2 MW. We will be meeting this week with our permitting team and also consult with Coronal to brainstorm ideas for moving forward. Bursell shared that we might be able to move forward with Phase 2 with Coronal for a 4 MW project in 2017, while construction takes place on the 1MW Alburgh site this year.
A director asked whether VEC has the personnel necessary to implement the new renewable projects on the horizon. Discussion ensued about whether there is other land adjacent to the South Hero project that could be acquired, particularly since the Town of South Hero has voted not to purchase the land.
Further discussion ensued as to Phase 2 of the project, and whether a decision to allow Coronal lead the permitting puts VEC in the back seat. Bursell noted that Coronal is happy to let VEC to take the lead to the public, but VEC wants to shift the project development risks to Coronal.
Bursell noted that he wanted Board support for moving forward with Coronal to tie Phase 1 and Phase 2 together, without doing an RFP for Phase 2. He believes that offering Phase 2 to Coronal without an RFP would provide leverage to get Alburgh constructed in 2015.
Woodward moved and Ward seconded
That management is authorized to move forward with negotiations with Coronal as to both Phase 1 and Phase 2 for a total project capacity of up to 5 MW without the need to go through an RFP process.
Discussion ensued about the benefits of using an RFP process for future projects, and that the BOD is not setting a precedent here. Hallquist noted that management generally finds the RFP process to be valuable.
The motion passed by unanimous consent.
Vice-President Carswell called a break in the proceedings at 2:15 p.m.
The meeting resumed in the Robert P. Northrop Boardroom at 2:25 p.m.
Lisa Morris walked the Board through the solar energy credit plan that VEC is developing to share with members as an alternative to net metering. There is a ten-year plan and a 20-year plan. A third option is available where smaller amounts can be contributed for smaller bill credits. There are off-ramps for the first two plans, but not for the third, due to administrative costs. These numbers are based on the value of solar to VEC as calculated by Craig Kieny. Our cost for the power, based on our PPA with Coronal, is projected at this point to be under 12 cents.
Morris noted that management is looking for Board support for the type of program that we are proposing. Further discussion ensued as to what type of information should be included in the plan. Carswell asked for a straw poll. The consensus of the Board was to support the approach suggested by management.

Hoeppner moved and DaVia seconded:
That the Board enter into executive session to discuss confidential matters related to the CEO review.
By majority vote of those present the Board entered into executive session.
By majority vote of those present executive session ended.

Brown noted that management was looking for Board guidance on two items related to the member petition to limit the ability of certain elected and appointed officials to serve on the VEC Board. The issues had previously been debated but final Board action had been deferred.
The first issue is whether management should request a determination from the Public Service Board as to whether the bylaw amendment is consistent with law.
Hoeppner moved and Maroni seconded:
That management file a petition for a declaratory ruling as to whether the member petition is consistent with law.
The motion was approved by unanimous consent.
The second issue was whether a letter of explanation should be sent to the members who signed the petition notifying them that we would seek Public Service Board review of the proposed bylaw amendment. Hoeppner offered some proposed language for the letter and discussion ensued. The consensus was to simply state that VEC received the petition, that it was reviewed by the VEC Board, that VEC has requested an opinion from the PSB, and that the members will be notified when the PSB opinion is issued.
Ward moved and Maroni seconded:
That management send the letter to members as proposed by Hoeppner and modified by the Board.
The motion passed with DaVia abstaining.
A director suggested that the Board should decide what action to take to implement the PSB’s recommendation that the language “consistent with law” should be removed from Article XII, Section 3 of the bylaws. The consensus was to address that recommendation in connection with next year’s annual meeting. Discussion ensued as to whether other bylaw amendments are needed to clarify how the Board should handle requests for bylaw amendments. The consensus was to defer this issue to a future governance committee meeting.

[Agenda Items 9-11 were deferred.]

Ward moved and Lague seconded
That the meeting be adjourned.
The motion carried unanimously.
The meeting adjourned at 4:30 p.m.
Respectfully submitted:

Mark Woodward, Secretary and Thomas Bailey, President