Page 5 of 5
Minutes of the November 9, 2007 Board of Directors Regular Meeting
Alaska Village Electric Cooperative, Inc.
1. Call to Order, Determination of Quorum, Introduction of Guests
Chairman Beans called the regular meeting of the Alaska Village Electric Cooperative Board of Directors to order at 10:55 a.m. on November 9, 2007 at the AVEC headquarters. A quorum was ascertained with the following board members in attendance:
Robert Beans, Chairman Mike Prince, Director
Phyllis Clough, Secretary Charlie Curtis, Vice Chairman
Fred Sagoonick, Director Helena Jones, Director
Walter Sampson, Treasurer
Others in attendance included:
Meera Kohler, President and CEO Mark Teitzel, Vice Pres. and Mgr. of Engineering
Roger Kemppel, Legal Counsel Brent Petrie, Mgr. Community Development
Amy Murphy, Executive Assistant Mark Bryan, Operations Manager
Debbie Bullock, Administrative Svcs. Mgr.
2. Declaration of Conflicts of Interest
Chairman Beans asked if there were any conflicts of interest to declare and there were none that haven’t been mentioned in the past.
3. Approval of Minutes
Upon a motion duly made and seconded, the minutes of the AVEC board of directors Regular Meeting on August 10, 2007 and the minutes of the Special Teleconference Meeting on August 27, 2007 were approved as presented.
4. Guest Comments
There were no guest comments.
5. Director Trip Reports
Fred Sagoonick went to the APA annual meeting in Valdez and said it was very informative with lots of good speakers. Rep. John Harris made some positive comments about PCE and said he has changed his mind about supporting funding for the PCE Program after learning more about the importance of the program. It was a nice drive to Valdez and he had good company.
Helena Jones said it was cold and foggy in Valdez but the conference was very good. The energy panel did a good job – especially Meera. The issue of out-migration from the villages was mentioned, and high energy bills are one reason people move out of the villages. Rep. John Harris said the utilities need to work together better, especially the railbelt utilities. Harris said he changed his mind and is now very supportive of the PCE program and realizes how important it is to rural Alaska, which is good. Helena went on a tour of the hydro power plant and it was fun and amazing.
Robert Beans said one message he got from the meeting is that the railbelt utilities need to work together better. They seem to want to do their own thing, especially MEA, which wants to build a coal-powered plant in Palmer. The conference was very good and it was a beautiful drive down there. Next year’s annual meeting is in Barrow.
Phyllis Clough said the annual meeting went very well and was educational. The one bad thing is that her luggage got lost. One main message she heard is that developing sustainable, reliable, affordable electric energy for everybody is important. Building new and maintaining our current infrastructure is also very important. Developing renewable energy is also important, by using alternatives like heat recovery, hydro power, wind power, geothermal power, etc. AVEC is different than the other cooperatives and utilities because our communities are so widespread that we can’t develop tielines between all of our communities to help cut costs. We do what we can to stay in business and we face lots of logistical and environmental challenges.
6. Committee Reports
6a. Budget & Audit Committee: Walter Sampson said the Budget & Audit Committee met earlier this morning and they reviewed the budget. He said the budget looks good even considering the increasing cost of fuel and transportation. The only outstanding issue is the newly acquired community of Kotlik. We only have one month of information for them so we projected next year’s figures based on the figures they provided us for the past year. The 2008 budget is based on the actual 2007 budget. The committee recommended presenting the budget to the full board for approval.
Upon a motion duly made and seconded, Resolution 07-38 -- 2008 Operating Budget, was approved as presented.
6b. Village Operating Agreement Committee: Helena Jones said the Village Operating Agreement Committee met this morning and things are still in the reviewing and planning stage. AVEC staff members are working on the financial considerations related to bringing the plant operators on board as contract employees. A financial consulting group is working on different options and will present them to AVEC. The board will approve the final option before the annual meeting. This new operating agreement that will bring PPOs on board as contract employees will be announced at the annual meeting and we can start working on the transition after that. We will prepare a handout with pertinent information to give to the delegates to take back to their communities. Some concerns were discussed, including the total cost to AVEC and the PERS program.
7. President’s Report
7a. Investment Update: Mark Barnum with UBS/Prime said he has some very nice numbers to report to the board. He said that as of January 1 his company will change their name to UBS Institutional Consulting. Mark handed out a copy of the investment report and gave a brief overview. So far this year the investment portfolio has performed quite well and overall we have realized a tremendous rate of return of 9.55% for the year. This return beats the benchmark. Mark reviewed the asset allocation and said one money manager has been changed and one other manager is on the watch list. Some parts of the market have been hurt drastically, especially the financial services industry, and the value of the U.S. dollar has decreased. There is some good news for AVEC though; one is that AVEC doesn’t have much exposure and despite the market downturn, AVEC realized decent returns for this past quarter. There are no real concerns at this point.
A lunch break was taken from 12:00 to 1:00 p.m.
7b. Denali Commission Project Update: Meera Kohler said the Denali Commission appointed nine members to an Environmental Advisory Committee; no partners are allowed to serve on the committee. Brent Petrie distributed a copy of the Executive Summary for the latest Quarterly Report. We have had a slow financial year so far this year as we received our funding late in the year. Unfortunately this basically cost us an entire construction season. We were able to finish some projects already in progress and had some equipment delivered for other, future projects. We received about $15.6 million this year, in the third quarter, and the AVEC cash match is $1.4 million. To date we have received a little over $119 million from the Denali Commission and AVEC’s cash match is about $11 million. Next year will be very busy because we need to wrap up some projects and settle some right-of-way issues. The new tank farm at Savoonga is having some settlement issues, up to 10”, and we are monitoring the situation as this is a big deal and there is a question as to what is causing the settlement. There is a right-of-way issue in Nightmute and the contractor has been told to stop work until the issue is solved. We are doing well with our fuel-efficient engines and overall are getting about 14 kW/gallon of diesel fuel. We have been getting nearly 22% of our electric power from wind in Toksook, which is really great news.
Walter Sampson said it’s good to hear about these projects that are going on and he would like to visit some of the sites in person to see some of the projects. It is great that AVEC has been extremely fortunate in receiving a lot of funding from the Denali Commission to upgrade our facilities. He said somebody needs to clarify the intent of the law (language) that formed the Denali Commission to ensure that these federal funds go to the rural areas where they are needed, instead of going to urban areas. Meera said AVEC has been very outspoken regarding energy issues and getting the funds to the rural areas. Brent Petrie said that it would be beneficial to get board members out to the sites of the Denali Commission projects and maybe we could charter a plane from Bethel to bring in some staff and board members and have a dedication ceremony for some completed projects.
7c. Kotlik Update: Meera said Kotlik came on board beginning September 1 and things happened very quickly, including RCA’s approval of our rates. The residents were billed by AVEC for the first time this month and we haven’t heard any problems, so far. The residential bills increased by about 8 cents/kWhr but the commercial bills decreased. The residential rates were being underbilled and the amount charged didn’t pay for the cost to operate the utility. We have developed incredibly good relations with the city and the utility employees, including the plant operator. We found out after the fact that the fuel from the tanks is directly transferred to the washeteria, so we have to install a meter so we can bill the city for that fuel. We are working on getting an intermediate tank installed. We still need to get approval of the certificate transferring the electric service from Kotlik to AVEC, which should happen soon as no public comments were received.
7d. Kivalina Update: Meera gave a brief recap of the storm and continuing-erosion situation in Kivalina and said AVEC had to move our tank farm. The Coast Guard called Meera and asked how we would handle an oil spill if our tanks ended up in the ocean and Meera said AVEC doesn’t have any resources for a big cleanup and said we could have the fuel removed from the tanks and backhauled, which would leave the city without any fuel to power the generators. This wasn’t well received, but Meera said that AVEC doesn’t want the liability associated with losing tanks to erosion and can’t afford to foot the bill to temporarily remedy the situation, especially since the community has not relocated to a safer area and more land continually gets lost to erosion due to the fall storms. AVEC flew in hose to remove fuel from three tanks closest to the ocean and stored the fuel in some abandoned tanks. Meera said AVEC doesn’t want to pay for this extra expense and will bill the city, the borough or the state to recover our costs. There were numerous problems related to finding a new location to move our fuel tanks to (due to the lack of available land), but we finally found an area in between the new Native store tank farm and the school tank farm. Most of our tanks have been moved to this new area. Meera and/or Mark Teitzel participate in weekly teleconference calls regarding Kivalina and there are lots of players involved in this situation. Discussion about various issues ensued, including relocation plans, which don’t seem to have a consensus of high priority within the community. One big, expensive seawall that was built failed and alternative options are being discussed. AVEC’s options were discussed, including the fact that AVEC has to do whatever is necessary to minimize our costs, risk and liability, including turning over our power plant to the state if necessary. A timeline should be established to say “enough is enough.” AVEC is a small cooperative and our membership can’t be expected to foot the extraordinary costs associated with this one community.
7e. RUS Form 300: Mark Bryan distributed copies of the RUS Form 300, which AVEC needs to fill out since we are a borrower from the RUS. This is the first time Mark has completed it. The form is a rating system and we were able to upgrade several of our ratings and did not go down in any of our ratings. Mark explained the comments in several areas where we increased our ratings, which included inspection progress and records. One area we get dinged on is 7A – Power Outages, but unfortunately logistical challenges hamper our response time.
7f. Fuel Cost/PCE Update: Meera distributed copies of reports and graphs that show the status of fuel deliveries to our communities this season as well as the fuel prices AVEC paid as of 11/6/07. There is a detailed list of information that shows the average cost per gallon paid for each village. Unfortunately the PCE rates stop at 52 cents/gallon for fuel and some of our communities may be affected.
7g. Financial Statements: A copy of the latest financial statement was included in the board packet. During the budget work shop in August we learned what the numbers mean. Line 20 shows a negative number but we have already approved a patronage capital distribution, which will occur in December. The negative number will grow due to a change in how we depreciate things and we can also start collecting money to pay for the increased cost of fuel since the RCA recently approved our fuel cost adjustment. The budget is tracking well and there is nothing anomalous to report.
While waiting for Georgia to get here, Meera asked Fred Sagoonick for an update on the wind turbines they installed at the Native store. Fred said they installed two Skystream wind turbines; one is 40’ high and one is 80’ high. It took five days to get the turbines installed and tied into AVEC’s grid. They tested them for a few hours and then shut them down pending AVEC approval. Fred said they run pretty good but are pretty sensitive to power fluctuations. They tried to get the turbines hooked to the Internet to allow remote monitoring of the system but that isn’t working yet. They may need compensators installed to “tune down” the turbines so they aren’t as sensitive to the power fluctuations. So far they have cranked out about 66 kWhrs.
7h. Delinquent Account Update: Georgia distributed a list of delinquent accounts and gave a brief update of the highest accounts. Overall the cities look pretty good, with the exception of Selawik, which uses a lot of heat tape for the water and sewer system. The individual accounts look pretty good too. Georgia doesn’t do much with the delinquent individual accounts until after the end of the PFD mailings. Between the first and second PFD direct deposits we received about 50 or 60 credit card payments/day; normally we only receive 10 or 15 credit card payments a day. This set a new record. We received our first energy assistance payment from the state, which was a fast turnaround.