Electric City Power, Incorporated

JOURNAL OF BOARD PROCEEDINGS

June 1, 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: George Golie, Bill Ryan, Bob Pancich and Lee Ebeling. Also present were the ECP Executive Director, City Manager, City Attorney and the City Clerk.

I.  EXECUTIVE DIRECTOR REPORTS

Executive Director Coleen Balzarini updated the Board on the following:

Financials - Year to Date and Projected.  Ms. Balzarini reviewed the financial documents with the Board. She noted that the information for the month of March was finalized, and that the month of April was preliminary. Under prepaid items, she explained that the energy imbalances were expenditures paid for in the past, but had not expensed out. In response to Director Pancich, Ms. Balzarini explained that based on consumption from the past and applying a factor, she has it set up so that the energy imbalances will be totally liquidated by June 30, 2011. Since July, the energy imbalances have gone down about $155,000.

Ms. Balzarini also highlighted that approximately $50,000 per month is going on deposit with Southern for the difference between the transition rate now and what it would have been under the pass through rate. The deposit needs to get up to around $730,000.

Under liabilities, she reminded the Board that Director Gilbert had asked her to expense out the interest on the note on a monthly basis rather than on a six month basis.

Total net assets are still at a deficit, but the trend has been positive. There has been a positive month each month since January.

Year to date net operating revenue is positive $69,127. She projects the net operating revenue to be $125,512 on June 30th. That consists of revenues from ECP customers, minus energy, transmission and A&G expenses. She explained the other expenses not directly related to energy supply. Operating income year to date is $38,928, with a projected amount at year end to be $89,363.

She pointed out that the information in the notes is finalized through March 31, 2009. The financial numbers in the notes correspond with the financial reports.

Chairman Golie asked if the Board members had any questions regarding the financials. No one responded.

Energy Consumption Charts.  Ms. Balzarini reported that she did not complete the hourly energy consumption charts for this month, but would next month unless the Board was not interested in seeing the charts. Director Ebeling responded that he would like to see the charts.

YVEC vs. SMEG&T, et al. (Cause No. DV 08-1797). With regard to the Yellowstone Valley lawsuit, Ms. Balzarini referred the Board to the letter from the law firm of Browning, Kaleczyc, Berry and Hoven, which is legal counsel for Montana Municipal Interlocal Authority. The letter acknowledges that Yellowstone Valley has amended its Complaint to add the City of Great Falls as a defendant. The letter from MMIA states that the firm of Moulten Bellingham will represent Electric City Power and the City of Great Falls. MMIA believes there is a common interest, so separate counsel is not necessary. This is similar to the cooperatives and Southern Montana having one law firm representing their interests.

She reported that, because the Board packets had already gone out, she forwarded an email on Friday of Southern Montana’s response to Yellowstone Valley’s Amended Complaint. That pleading will be incorporated into the Board packets next month for the record.

Director Pancich asked City Attorney Gliko to explain the exclusions identified in Kaleczyc’s letter. Mr. Gliko answered that the fact that MMIA is providing a legal defense is indicative that there is some possibility of insurance coverage available. The exclusions and disclaimers noted in the letter are typical on claims. If there were no possibility of coverage, then MMIA would have sent a letter stating it was not providing a legal defense and that the City was on its own.

Co-Gen facility PSC application update.  Ms. Balzarini reminded the Board that last month the co-gen facility was filed as part of ECP’s renewable portfolio. Subsequent to preliminary review of the application by PSC, the PSC’s legal counsel returned the application stating the document had to be signed by an attorney. Due to Mr. Gliko’s pending retirement, Harley Harris will sign the application.

Chairman Golie noted that NWE’s rates went up approximately 4% in June. The Board discussed the gas plant being built by NWE and firming power. Director Pancich inquired if there was sufficient infrastructure in the state of Montana to bring enough gas to supply all the gas plants that are coming on, such as are the lines big enough and pressurized enough. Chairman Golie explained that he understood that improvements had been made to a pipeline in Montana. Gas is stored in a loop in the pipeline for volume when it is needed. Director Pancich also expressed his concern regarding whether the pipes in Montana were sized large enough to keep the pressure up to service all the requirements for the firming power for the windmills coming on, as well as SME. After further discussion, it was the consensus of the Board for the Executive Director to schedule a presentation by an expert.

II.  NEW BUSINESS

Accept Board Meeting Minutes of May 4 2009. Lee Ebeling moved, seconded by Bob Pancich, to approve the May 4, 2009, Board meeting minutes.

Chairman Golie asked if there were any comments from the public. Hearing none, Chairman Golie called for the vote.

Motion carried 4-0.

Designate the next regular Board meeting date to be July 13, 2009, to accommodate the Fourth of July holiday.  Bob Pancich moved, seconded by Lee Ebeling, to schedule the next regular Board meeting for July 13, 2009.

Chairman Golie asked if there was any discussion amongst the Board members or comments from the public. Hearing none, Chairman Golie called for the vote.

Motion carried 4-0.

III.  BOARD MEMBER REPORTS

The Board reviewed Director Gilbert’s Letter of Resignation, dated May 7, 2009. Director Ebeling suggested, and Chairman Golie concurred, that it would be appropriate for the Chairman to write a letter to Mr. Gilbert thanking him for his service.

Chairman Golie stated that another seat is available now. Ms. Balzarini stated that one application was received. She discussed the options of having the application deadline extended, having the application reviewed by the ECP Board for recommendation to the City Commission, or ask the City Commission to make the appointment. Director Pancich stated that he firmly believes that it is a City Commission issue. The City Commission makes the appointment and should do the screening. Director Pancich further recommended that the City Commission may want to consider the pending review of whether ECP should exist and postponing an appointment until such time as that is determined.

Bob Pancich moved, seconded by Lee Ebeling, to recommend to the City Commission that an appointment not be made to the ECP Board until a study is done on whether ECP should exist.

Chairman Golie asked if there was any discussion amongst the Board members. Director Ebeling asked City Manager Doyon what the timeline was for the interview process and final report. Mr. Doyon estimated about a month for a preliminary review of how to go through the process of selecting a consultant. He concluded that it would probably be another 2-3 month project thereafter. Mr. Doyon encouraged the Board to not postpone the appointment because it still needs to have a functioning Board. Mr. Ebeling agreed since it was going to take up to four months.

Chairman Golie asked if there was any public comment.

Mike Witsoe, 510 11th Street South, suggested that the file be opened to previous applicants within the past year, and asked that the application deadline be extended 30 days.

There being no other discussion amongst the Board members or comments from the public, Chairman Golie called for the vote.

Motion failed 3-1 (Director Pancich dissenting from the majority vote).

Chairman Golie noted that said item was not on the agenda and therefore shouldn’t have been voted on. The Board members concurred.

IV.  COMMUNICATIONS

Public Comment.

Richard Liebert, 289 Boston Coulee Road, commended Director Gilbert’s brief yet exceptional service. Mr. Liebert believes the application process should be extended to find someone of equal caliber and courage to Director Gilbert. In terms of an energy expert, Mr. Liebert suggested a presentation by the PSC. Mr. Liebert also showed the Board a new technology light bulb that he purchased at Wal-Mart. Since the departure of Mr. Lawton, Mr. Liebert asked Executive Director Balzarini approximately how many SME meetings she attended in lieu of the city manager to cast votes on behalf of the City of Great Falls. Ms. Balzarini responded that she hasn’t missed a Southern meeting since last March, so she attended 14 meetings. She was designated as the delegate from the City for probably all of those meetings except two or three. She stated that she has not attended any SME meetings as a voting delegate because the City is not a member of SME.

Ron Gessaman, 1006 36th Avenue NE, commented that the NorthWestern Energy rates included in the Board packets were not the official record that shows the residential rates and signed by the PSC. Mr. Gessaman discussed the RFP for an energy industry consultant and disagrees with the proposal completely. He doesn’t believe the document distinguishes between Southern and SME. Mr. Gessaman commented that the public and the ECP Board should have a chance to comment about the proposals.

Mike Witsoe, 510 11th Street South, referred the Board to Ross Buckingham of Three Forks for a presentation about gas and infrastructure. Mr. Witsoe opined that the plant will burn as much gas as every residential customer in Great Falls. Mr. Witsoe asked if the Board closed the application process. Ms. Balzarini explained that appointments to Boards are made by the City Commission and is controlled out of the City Manager’s Office.

ADJOURN: Chairman Golie adjourned the meeting at 6:15 p.m. The next meeting is set for July 13, 2009, at 5:30 p.m. in the Gibson Room of the Great Falls Civic Center.