Electric City Power, Incorporated

JOURNAL OF BOARD PROCEEDINGS
- DRAFT
September 10, 2007

Electric City Power, Incorporated (ECPI): Regular meeting of the Board of Directors
Great Falls Civic Center, Gibson Room

CALL TO ORDER: 5:30 PM

ROLL CALL: Directors present: Chairman Bob Pancich, Dawn Willey, and Bill Ryan. Also present were the ECPI Executive Director, City Manager, and the City Clerk.

EXECUTIVE DIRECTOR REPORT

Executive Director Coleen Balzarini updated the Board on the following:

The Pilot Program that serves entities, small residential customers and very small business below 50 kW, is moving forward. We finally received confirmation through the Public Service Commission that the Pilot Program customers can still be served by us, even with HB 25. We are now resending notices to all of the customers that were originally approved to see if they still want to continue in it. We are limited to that size of a program.

Chairman Pancich inquired what if, after October 1st, somebody drops out of this program, could you still substitute, or are you set with who you have at that point, and inquired if it could shrink. Ms. Balzarini answered that, if everything stays the same, this pilot program will just be the size that it is, or smaller. After October 1st, we will not be able to take a current NorthWestern Energy customer and bring them in if one of our customers moved. If the legislature changes in the future, then we will have been able to demonstrate that we can serve this size of customer base.

Ms. Balzarini next gave the status of four agreements that all go together, the Wholesale Power Agreement (SME and ECP), Pass Through Agreement (City and ECP), Ownership Agreement (SME and ECP), and the Coordination and Integration Agreement (SME and ECP). The Wholesale Power Agreement identifies what Southern Montana will do on behalf of the City of Great Falls and its customers. Basically, it is an agreement for the wholesale transaction between Southern Montana and the City of Great Falls. That agreement existed between the City and SME. Electric City Power, as a corporation of the City, now needs to be brought into that agreement and the term of the agreement needs to extend to 2042.
The City is the member of Southern Montana, so there needs to be a Pass Through Agreement that provides the written bridge. All of the electricity that it gets from Southern Montana will be passed through to Electric City Power and its customers.

The Coordination and Integration Agreement works hand in hand with the Wholesale Power Agreement. Electric City Power will turn the electricity from its ownership over to Southern Montana to serve Electric City Power needs. Also, if the City and/or Electric City Power have unused electricity, the first entity has a right to use that as part of the coop members and vice-versa. It also identifies draws during the construction period. If the City owns 15% of the facility, the City is responsible for 15% of the cost. So, as the draws come through for construction, 85% of the draws will be the responsibility of the coops and 15% of the draws will be the responsibility of the City.

Then, the Ownership Agreement is suspended as long as the City is a member of Southern Montana. If the City is a member of Southern Montana, then the Wholesale Power Agreement will prevail. The Ownership Agreement identifies what the trustee’s rights, duties and responsibilities would be. City Manager John Lawton added that these are the type of agreements that every large financial transaction between multiple parties must have. They try to cover any eventuality that any financial or legal person can think of.

Chairman Pancich inquired who drafted these agreements. Ms. Balzarini answered the primary author of the Wholesale Power Agreement is Dorsey & Whitney. The primary author of the Ownership Agreement and Coordination and Integration Agreement is Chapman & Cutler. Both firms review the documents during the drafting phase.

Chairman Pancich inquired about the “standard of service” language on page 7 of the Long Term Power Supply Agreement wherein it states Electric City agrees to use commercially reasonable diligence to provide constant and uninterrupted supply of power. He asked can we really live up to an uninterrupted supply of power. Ms. Balzarini answered that is the draft form of the contract that we will enter into with our customers. There is also a force majeure clause added in the event that we have hurricanes, earthquakes, and that sort of thing. But short of that, we have a duty to supply energy to our customers. Mr. Pancich stated that, to him, uninterrupted means you don’t even have that blip for 20 seconds that they cut you off and you have to reset your clocks. Constant may mean something a little different. Mr. Ryan stated that we are delivering a constant power supply. We are not in any way, shape or form responsible for the maintenance of the power lines or interruptions in power.

Ms. Balzarini included the Missoula Mayor comment and SME response to that article in the Board packets to review and explained that both were guest editorials that appeared in the Great Falls Tribune. The Missoula Mayor article appeared on September 5th, and Southern Montana made a response to that today in the Tribune.

I.   OLD BUSINESS

II.  NEW BUSINESS

Accept Board Meeting Minutes of August 6, 2007. Bill Ryan moved to accept the Board minutes from the August 6th meeting. Dawn Willey seconded the motion. All three Board Members voted to accept the Board minutes by role vote, as amended on page 3 at “adjourn” changed Executive Director to Chairman Bob Pancich.

Resolution to Approve Form of ECPI Customer Contracts and Authorize Execution of Customer Contracts. Ms. Balzarini explained that this will be ECPI’s first resolution and, according to the City Attorney’s recommendation, he thought it would be best for each of the board members to sign this resolution. Ms. Balzarini read through the resolution as it gives some authority to her as the executive director. Bill Ryan moved to adopt Resolution 2007.0001. Dawn Willey seconded the motion.

Chairman Pancich asked if there was any discussion among the Board. Ms. Willey asked if this agreement has gone out to most of the current customers, and if there have been issues or questions to date. Ms. Balzarini answered that there have been questions asked. For instance, there was incorporated into the contract language referring to interlocal agreements between government entities. For instance, Benefis mentioned the length of the contract term. There have been questions on the type of security from different entities. Some wanted to do letters of credit and some wanted to do certificates of deposit. One big question is what if Highwood Generating Station doesn’t get built. There is a clause in this contract that says, in the event Highwood Generating Station doesn’t get built or the City of Great Falls is not an owner of Highwood Generating Station, then it allows these long term contracts to revert to five year contracts with rolling renewal, and a one year notice to cancel.

All three Board Members voted to adopt Resolution 2007.0001 in individual voting.

III. BOARD MEMBER REPORTS

IV.  COMMUNICATIONS

Public Comment.

Stuart Lewin, stated he is running for City Commission, and wanted to review with the Board a couple of matters that he thinks are important. Mr. Lewin stated an issue is tabled with the City Commission to consider a zoning request where it would be possible to provide City water and sewer to an area that wouldn’t be immediately annexed. Mr. Lewin stated that this is different than the rules have been in the past, and the City Manager has indicated that one of the purposes of this is to possibly provide for the Highwood Generating Station. Mr. Lewin explained the point he wants to make is that in approving requests for zoning change, the City will have to then consider its current growth policy plan. Since the split up between the City and the County there is no growth policy plan that applies to an urban interface area between the City and the County. He stated that the problem arises when citizens who live in the City have absolutely no say in the County growth policy plan, even though they are members of both the County and the City. He feels, as a result, he doesn’t have a say where this rural growth will take place. He stated that this is important because citizens in the City are the ones that are involved and responsible for taxes. Mr. Lewin stated that he points that out to the Board because he is going to work hard to modify what is currently being proposed to the City. Until something is worked out on the growth policy plan between the City and the County, it is his position that the process has got to be revised, and he warned the Board that this could impact their ability to site the Highwood Generating Station.

Mr. Lewin went on to say that the second thing that concerns him is that he thinks there is a missed opportunity here. He believes that it was wise for the City to work on public power. His own problem was that the Board got lost in the Highwood Generating Station which he considers to be a catastrophe for the City, and an expensive situation for the tax payers. Mr. Lewin stated that he believes the problem is because this Board and our Manager have blinders on that have tied everything to the Highwood Energy Station.

Kathleen Gessaman, asked Coleen Balzarini if the Highwood Generating Station is not built and the contracts revert to five year contracts, then would the water agreement with SME go back to the City of Great Falls completely. Ms. Balzarini answered that, if Highwood Generating Station is not built at all, they won’t need the water. Ms. Gessaman inquired if the contract has a stipulation in it that says should the plant not be built, they don’t have control of that. Ms. Balzarini clarified that, within that agreement, if Highwood Generating Station was not built, they relinquish their rights to water. Ms. Gessaman asked if they could turn around and sub-contract that to someone else. Ms. Balzarini answered if Highwood Generating Station is not built the contract is null and void.

ADJOURN: Chairman Bob Pancich adjourned the meeting at 6:05 PM. The next meeting is set for October 1, 2007, at 5:30 p.m. in the Gibson Room of the Great Falls Civic Center.

Minutes Approved by ECPI Board October 1, 2007.