Electric City Power, Incorporated

JOURNAL OF BOARD PROCEEDINGS

October 5, 2009

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

CALL TO ORDER: 5:30 PM

ROLL CALL: Directors present: George Golie, Bill Ryan, Bob Pancich, Lee Ebeling and Olaf Stimac. Also present were the ECP Executive Director, City Manager, Acting City Attorney and the City Clerk.

I.  EXECUTIVE DIRECTOR REPORTS

Executive Director Coleen Balzarini updated the Board on the following:

Financials.

• Pages 3-18 of the Board packets contain the consolidated financial reports for July and August, which are the first two months of FY 2010.
• Page 4, Balance Sheet – the account receivables for that time period from energy customers was $1.5 million dollars. She explained that the customers consume the energy, NorthWestern Energy reads the meters and transmits that information, and then ECP bills the customers. It basically ends up being a two month cycle of billing in arrears. Under accounts payable, it shows ECP owing Southern Montana $792,000, which is a one month supply.
• The deferred imbalances were reduced by $57,803, resulting in a balance of $927,683.
• The amount on deposit with Southern as of August was $420,648. The total goal is one month’s average energy expense due to Southern.
• The significant difference between July and August under cash and cash investments was due to timing and having about three months’ worth of receivables at the end of June.

• She noted that there were newspaper articles and correspondence from YVEC regarding additional member guarantees. She reported that, at this time, there are no member guarantees required from any of the members for the revolving line of credit. The Southern Board has approved rate increases at the last two meetings. That has provided assurances to the bank that Southern Montana is doing what it needs to do to have adequate funds available. Any other questions and discussions above and beyond that, that are a matter of litigation between YVEC, the City, other member cooperatives, Southern Montana or SME, should be referred to the City Attorney or outside legal counsel.

  Chairman Golie inquired if the full deposit would cover the guarantee, or if those were two different things. Ms. Balzarini explained that it is two different things. The amounts that are due to PPL on behalf of ECP customers and that are under contract with Southern and PPL, have been guaranteed by the City. That is different than if there was a guarantee requested for the revolving line of credit between the member systems, on behalf of Southern Montana, for any type of operating cash flow needs. Director Pancich added that the City’s guarantee is only for supply to the supplier for ECP’s customers. Ms. Balzarini reminded the Board that the PPL related guarantee has never been drawn on, ECP’s customers have never been delinquent, ECP has never been delinquent to Southern, and Southern has never been delinquent to PPL.

• Page 5 – there is a positive balance of $68,375 under changes in net assets.
• Southern has experienced significant rate increases this year. She explained the rate increases by WAPA and Bonneville. As a result, the Southern Montana Board approved rate increases at the last two Board meetings. The net result to ECP is that the transition rate to the blended rate continues to provide ECP with a positive net income.
• The Board discussed the PSC not having jurisdiction over Bonneville, federal mandates, and when Bonneville will no longer serve the cooperatives.
• The consultants are wrapping up their review. She has a call scheduled with the consultants this week. The Burns & McDonnell report is expected in October or November.
• Page 7 – the net cash provided by operating activities is $90,184.
• Pages 8-13 - the notes to financials have been updated through June 30th. The final numbers have not been determined for the write down of the Highwood Generating Station. That amount will show in the June 30, 2009, audited financial statements.
• Pages 14-19 – contains detailed transactions recorded throughout the month regarding Southern’s billing to ECP, ECP’s billing to its customers, and how the transactions are accounted for in the accounting system.

Chairman Golie asked if there were any questions from the Board members regarding the financials. Director Stimac thanked Ms. Balzarini for the information included on pages 11-13.

YVEC correspondence, dated September 11, 2009.  Ms. Balzarini commented that this item was covered earlier. It is a matter of litigation and questions should be directed to the City Attorney or outside counsel.

City of Great Falls, et al. vs. PSC/NWE (Cause No.  CDV-09-127).  Ms. Balzarini reported that NorthWestern and the PSC filed responses to the City’s Motion to Reverse or Vacate Final Order and to Remand. She noted it was interesting to her that NorthWestern stated in its response that “what the legislature meant to do was create a vertically integrated utility which is essentially an authorized monopoly.” She commented that she spent a lot of time at the legislature in 2007 and doesn’t remember the word “monopoly” coming up. Prior to 2007, the intent was to have competition.

Director Pancich thought the PSC’s position on meters for the University system versus meters for the City of Great Falls was a double standard. The PSC allows the university system all the meters it wants, but not the City of Great Falls. He provided the hospital as an example with its new tower. Ms. Balzarini added that ECP has contracts with customers that agreed to take all of their power from ECP, and those contracts were in place prior to the 2007 legislature.

A part of the argument being made by NWE is that ECP did not make application to NWE in a timely manner. ECP disagrees. Ms. Balzarini added that there was an application paper trail indicating ECP did give notice of the new meters for an existing customer prior to the October 1 deadline.

Chairman Golie asked if there were any questions from the Board members for Ms. Balzarini. No one responded.

II.  NEW BUSINESS

Accept Board Meeting Minutes of August 31, 2009. Lee Ebeling moved, seconded by Bob Pancich, to approve the August 31, 2009, Board meeting minutes.

Chairman Golie asked if there was any discussion amongst the Board members. No one responded. A member of the audience requested public comment regarding approval of the minutes.

Travis Kavulla, 725 49th Street South, opined that several comments from the last meeting regarding Mr. Jergeson were objectionable. Mr. Kavulla quoted comments from the minutes made by Chairman Golie.

Chairman Golie responded that he didn’t mention Commissioner Jergeson’s name. He suggested an amendment to the minutes by removing his name. Recording Clerk Lisa Kunz responded that she would re-listen to the tape.

Director Pancich added that the minutes in the packet incorrectly spelled Mr. Jergeson’s name. Lisa corrected the spelling, posted and e-mailed the minutes to the Board members today.

Ron Gessaman, 1006 36th Avenue NE, pointed out that there was no mention that Vice- Chairman Ryan was presiding at the meeting. Mr. Gessaman also referred to the NWE proposed rates and adjustments and opined that the deferred component credit for July was an increase and not a reduction as reflected in the minutes. Ms. Balzarini explained that was because it was a credit. When the PSC granted the new deferred component, it granted a reduction from $2.70 credit to a reduction of $3.77 credit. It is a reduction in the total amount paid for the energy expense.

Motion carried 4-1 (Chairman Golie dissenting).

Amend prior meeting minutes.  Bob Pancich moved, seconded by Lee Ebeling, to amend the minutes of December 1, 2008, January 5, 2009, February 2, 2009, March 2, 2009, April 6, 2009, May 4, 2009, June 1, 2009 and July 13, 2009, to correctly state that said meetings were held in the Gibson Room.
Chairman Golie asked if there was any discussion amongst the Board members or any public comment. Hearing none, Chairman Golie called for the vote.

Motion carried 4-0 (Director Stimac abstained from voting).

NWE Proposed Rates and Adjustments – October.  Ms. Balzarini reported that this was included for information purposes. These are the rates proposed by NWE effective October 1 to be approved or disapproved by the PSC.

Chairman Golie asked if there were any comments from the Board members. No one responded.

III.  BOARD MEMBER REPORTS

Chairman Golie reported that, as of December 31st, his and Lee Ebeling’s terms will be finished, as well as his term as Chair. It will be up to the City Commission to re-appoint.

He also reported that he attended the air quality permit hearing for the proposed gas plant east of town. He thought the hearing went well and there was a lot of good information.

Director Ebeling commented that he did have issues and ideas to discuss with the Board but would wait until after receiving the report and recommendations from Burns & McDonnell.

IV.  COMMUNICATIONS

Written Communication – Handout from Larry Rezentes at August 31, 2009, meeting.
Billings Gazette article, re: Court reinstates emissions suit vs. utilities.

Chairman Golie asked if there was any comment regarding those two written items. No one responded.

Public Comment.

Ron Gessaman, 1006 36th Avenue NE. With regard to Item B2, Mr. Gessaman commented that he was curious why the minutes weren’t amended for September, October and November, 2008. Recording Clerk Lisa Kunz responded the Board met in the Commission Chambers during that time because speakers were being installed in the Gibson Room.

ADJOURN: Chairman Golie adjourned the meeting at 6:17 p.m. The next meeting is set for November 2, 2009, at 5:30 p.m. in the Gibson Room of the Great Falls Civic Center.