Electric City Power, Incorporated

JOURNAL OF BOARD PROCEEDINGS

March 2, 2009

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

CALL TO ORDER: 5:30 PM

ROLL CALL: Directors present: Chairman George Golie, Bill Ryan, Bob Pancich, John Gilbert and Lee Ebeling. Also present were the ECP Executive Director, Assistant City Manager, City Attorney and the City Clerk.

I.  EXECUTIVE DIRECTOR REPORTS

Executive Director Coleen Balzarini updated the Board on the following:

Blended Rate Status Update. Ms. Balzarini reported that the blended rate offered by SME (Rate Rider #2) has been approved by the ECP Board and the City Commission. The blended rate took effect January 1, 2009.

Cogeneration Billing Procedure. Rate Rider #1 was also approved by the City Commission. This document sets forth the process used to convey the generation from the cogeneration facility at the Wastewater Treatment Plant to Southern Montana so that it meets the criteria of the all requirements contract.

Year to Date Financials. Ms. Balzarini reviewed the December preliminary balance sheet. The notable changes are under liabilities. The principle sum of $22,639 was paid on the $1.5 million dollar loan to First Interstate Bank in December.

As requested on the income statement, Ms. Balzarini consolidated the first quarter of July, August and September. The change in net assets through December was a deficit amount of $69,000. Of that amount, $50,227 was interest on the First Interstate Bank loan. Director Gilbert requested that the bank loan interest expense be reported on a monthly basis.

Ms. Balzarini reminded the directors that the water credit in lieu of cash agreement expired December 31, 2008.

Director Gilbert also requested projections on a regular basis to take into account what has changed and to look ahead at the next 12 months. Ms. Balzarini responded that she could prepare a projection based on the past 12 months consumption and a projected rate.

Energy Consumption Charts. Ms. Balzarini noted that in November, 2007, the market rate of electricity was $58.97 compared to $39.97 in November, 2008. Factors to consider were the amount of energy being produced in the Mid-C, the weather, less demand and the economy. It is supply and demand driven.

Chairman Golie asked about the October and November imbalances. Ms. Balzarini responded that the costs exceeded revenues. She reminded the Board that ECP’s customer rates increased and the blended rate took effect in January. The same contracts are in place with Southern Montana as before. ECP should begin receiving more revenue and seeing less imbalances.

HGS Status Update. Executive Director Coleen Balzarini reported that she did not have anything more to add since the presentation by Tim Gregori. Southern Montana continues its due diligence and work on the details of the gas plant.

Chairman Golie noted that there are two other gas facilities in the works and there have been no appeals.

Miscellaneous Reports. Executive Director Coleen Balzarini reviewed pleadings in Cause No. DV 08-1797, YVEC vs. SME, et al., and the new First Judicial District Court filing in Cause No. CDV 2009-127, City of Great Falls, et al. vs. PSC.

Chairman Golie asked if anyone had questions for Ms. Balzarini. No one responded.

II.  OLD BUSINESS

Director Gilbert reported that he has received several complaints regarding the pilot program members receiving subsidized power. He clarified that the members have paid a rate less than NorthWestern Energy, but it has not been a subsidized rate. To prevent any illusion that there was a benefit to anybody by virtue of serving on the Board, Director Gilbert suggested making a motion.

John Gilbert moved, seconded by Bill Ryan, that members of the pilot program receive a statement as to what their bill would have been under NorthWestern compared to what it was with ECP with each bill; pilot program customers be encouraged to donate the difference to a charity providing energy assistance; and, ECP officers and directors be required to donate the difference.

Chairman Golie asked if there was any discussion amongst the Board members.

Chairman Golie noted that his rate difference was $10 for a 14 month period. Ms. Balzarini added that it would be cost prohibitive to provide monthly reporting. She suggested it be done on a semi-annual or annual basis.

Director Pancich asked if those rates were set by the Public Service Commission as to what residential customers would pay. Ms. Balzarini responded those rates were set in that program when ECP made its application to the PSC. The process was approved by the PSC, the rates were not.

Ms. Balzarini suggested the tax deductible donations go to the City of Great Falls’ energy program that is managed by the LEAP program.

Director Ebeling suggested the donation record keeping be made public. Ms. Balzarini stated since the program started in October, for record keeping purposes, donations would be reported from October to September of each year.

John Gilbert moved to insert the word “annually” so that if the amendment was adopted the Board would be voting on a motion to state that members of the pilot program receive a statement what their bill would have been under NorthWestern compared to what it was with ECP annually; pilot program customers be encouraged to donate the difference to a charity providing energy assistance; and, ECP officers and directors be required to donate the difference annually.

Chairman Golie asked if there were any comments from members of the public.

Stuart Lewin, 615 3rd Avenue North, commented that the issue was not properly addressed. The concern was that electricity has been provided and billed, and then the City has given water credits that eventually have to be paid by the City. Mr. Lewin stated his concern was the extra amount that the City was paying for the people in the program to get cheap power.

Ed McKnight, 906 3rd Avenue North, commented that the term “cost of power” is a legal term, which was defined in a contract signed by Coleen Balzarini and John Lawton. In that legally defined definition, there is a laundry list of items to be included in the cost of power. Mr. McKnight inquired how many items had been used to calculate the cost of power. Director Ebeling responded that the cost of power would refer to the generator. ECP was not the generator. Director Ebeling stated that Mr. McKnight’s question was not germane to the motion or discussion.

Ron Gessaman, 1006 36th Avenue NE, commented that the motion doesn’t address what happens to the executive director because she is neither a member of the Board nor an officer of the Board. It also does not address what happens to other members of the City.

Richard Liebert, 289 Boston Coulee Road, commended Director Gilbert’s initiative to address this issue, and the Board’s willingness to discuss and share it with the public.

In response to Mr. Gessaman, Director Gilbert stated his motion was intended to include Coleen Balzarini. He considers the executive director to be an officer’s position. Further, this Board has no control over employees of the City of Great Falls. ECP will encourage participants to make a donation.

Motion carried 5-0.

III.  NEW BUSINESS

Accept Board Meeting Minutes of February 2, 2009. Lee Ebeling moved, seconded by John Gilbert, to approve the February 2, 2009, Board meeting minutes.

Chairman Golie asked if there were any public comments or discussion amongst the Board members. No one responded.

Motion carried 5-0.

IV.  BOARD MEMBER REPORTS

Director Gilbert reported that he made contact with ECP’s attorney in the YVEC matter to request clarification on a number of items. He did so directly within the purview of attorney-client privilege. Director Gilbert provided the attorney with email addresses so that responses to his questions could be provided to the Board members.

Director Ryan reported that the issues with the MATL line put the project off for another five months, which also pushes back wind projects tied to it.

Director Ebeling commented that he could contact various people who could do a presentation regarding how people use electricity individually and the future of the electric demand for a topic on a future agenda.

Chairman Golie also suggested that Tim Gregori be invited to present on a specific topic at a future meeting.

V.    COMMUNICATIONS

Public Comment.

Ed McKnight, 906 3rd Avenue North, commented that he brought up the legal definition of the cost of power because the Board was discussing the pilot program. The cost of power is a specific legal definition that is in the contract signed by Ms. Balzarini.

Neil Taylor, 3417 4th Avenue South, discussed a report from FERC.

Richard Liebert, 289 Boston Coulee Road, discussed the stimulus package and an email regarding upgrading fire and police stations to be energy independent in the event of an emergency. Mr. Liebert asked who represented the City at the SME Board meeting on August 21, 2008, when blended rates were discussed. Ms. Balzarini responded she believed it was City Manager Doyon. Mr. Liebert stated his confusion regarding SME and Southern. Ms. Balzarini responded that Southern Montana is the energy supplier and SME is the energy generator.

Mary Jolley, 1910 2nd Avenue North, commented that when she attended an SME Board meeting blended rates were not discussed. Ms. Jolley pointed out that the even numbered pages were missing from the Complaint and Request for Declaratory Ruling in the Board packets. Ms. Jolley asked what the reference meant in the Gerald Murphy letter regarding the exchange of insurance policies. Director Gilbert responded that it was fairly standard that attorneys request and receive copies of the other side’s insurance policy in the discovery process.

Ron Gessaman, 1006 36th Avenue NE, referred to the February 2, 2009 minutes and requested that the Board make public what the amount of profit was for each year SME made a profit, and the total cost per megawatt that ECP paid for electricity it purchased in 2008 from SME. After discussion, Mr. Gessaman clarified that he wanted to know the cost of supply/electricity. Ms. Balzarini responded that the supply costs, plus imbalances, for calendar year 2008 were not yet complete. Mr. Gessaman also discussed his opposition to comments made by Tim Gregori at the last meeting. He challenged the Board members to show him where in the bylaws the statement of responsibilities was with regard to the executive director.

Stuart Lewin, 615 3rd Avenue North, commented that he had asked this Board to consider hiring a separate attorney for the YVEC lawsuit. Ms. Balzarini responded that an attorney was appointed by the Montana Municipal Insurance Authority. MMIA will make a determination as to if and when that would be necessary to have separate legal counsel for the City and ECP. Mr. Lewin requested that the City Attorney provide a memorandum explaining whether or not he thinks an attorney that represents possibly the City and this Board has a privilege of communication that prevents it from being made available to the public. Mr. Lewin opined that this was the most appropriate time for the City of Great Falls to get out from under the contracts it had entered into through ECP with SME and Southern Montana. Mr. Lewin discussed the MATL line project and the rights of private property owners.

Ed McKnight, 906 3rd Avenue North, inquired if there would be a public hand out on the co-generation billing process. He was informed the document was entitled “Rate Rider #1” and was already available on the City’s website.

Director Gilbert read § 2-3-203(4)(a), MCA, “. . . a meeting may be closed to discuss a strategy to be followed with respect to litigation when an open meeting would have a detrimental effect on the litigating position of the public agency.”

Director Ebeling commented that the City did pass Ordinance 2925 that authorized the organization of ECP as an instrumentality of the City in accordance with the provision of the Montana Non-Profit Corporations Act.

In response to Director Gilbert, Stuart Lewin commented that the issue was not decided by that statute; that it was a constitutional issue.

ADJOURN: Chairman Golie adjourned the meeting at 6:47 p.m. The next meeting is set for April 6, 2009, at 5:30 p.m. in the Gibson Room of the Great Falls Civic Center.