UTILITY COMMITTEE

The Utility Committee meeting was held on May 27, 2008 at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. McGiffin, Mr. Cregar, and Mr. Snaman. Mr. Leary was absent. Members of Council present were Mr. Slavin (arrived at 5:16 p.m.), Mrs. Williams, and Council President Hogan.

AGENDA ADDITIONS/DELETIONS

Mr. McGiffin moved for approval of the agenda, seconded by Mr. Cregar and unanimously carried.

2030 Power Plant Development

Mr. Lunt, Public Utilities Director, advised members that since May 2007, the Dover 2030 Energy Requirements Committee has been meeting approximately every month to review the PJM Market, evaluate the capacity/energy requirements of the City’s system, and identify action plans to address the City’s future energy needs. He stated that after extensive discussion on the market and capacity/energy shortfall, it was decided to solicit the energy development market to gain knowledge of what options are available to the City through a Request for Qualifications process. The goal was to gain information and knowledge from the potential developers and identify possible solutions to the City’s requirements. This concept was outlined at the January 14, 2008 Utility Committee Meeting.

Mr. Lunt indicated that the second phase of this process is beginning, which is to evaluate the four (4) submissions to determine the most economical and feasible solution to the City’s future needs. A summary of the four (4) responses was provided to members for information purposes. He explained that the recommended negotiated contract will be to compensate Pace Global Asset Management, LLC (PACE) for the expenses related to this evaluation. The authority to enter this partnership was outlined in the May 4, 2006 Energy Management Agreement whereby the City of Dover (City) and PACE contracted with PACE to assist the City with its energy procurement, energy sale, purchase of fuels, establishment and management of risk policies, operation of assets, develop and manage hedging protocols and related energy procurement challenges. Within this Agreement, Article 3 – Energy Manager Function, Section 3.1 (a) (iv) allows for other technical/consulting services at the disclosed hourly rate upon express written requests and instructions from Dover.

Mr. Lunt indicated that Dover has outlined the scope of work and reviewed the proposal received from PACE. He noted that, within the proposal, they anticipated that the second phase of this process would take approximately five (5) months with a cost of $30,000/month retainer fee, plus five percent (5%) G&A and travel reimbursement for a projected expense of $150,000 plus $7,500 G&A and $2,500 for travel, or a total estimate of $160,000. Mr. Lunt stated that there also is a true-up for the retainer fee where the final billing will be for the total actual hours expended during the second phase. If PACE expends less hours, the invoice will credit the City; however, if they expend more time than anticipated, the City will only be billed for the $30,000. This method will ensure that the City can control their expenses.

Staff recommended that the City Manager be authorized to execute the Pace Global Asset Management Generation RFP as presented for an estimated expense of $160,000.

Mr. Ruane advised members that he serves as a member of the 2030 Energy Requirements Committee.

Mr. McGiffin moved to recommend approval of staff’s recommendation, seconded by Mr. Snaman and unanimously carried.

Final Electric Cost of Service Study by Burns & McDonnell

During their meeting of May 12, 2008, members reviewed a presentation of the Electric Cost of Service Study. Members were provided an explanation regarding the need for adjustments, net margins, cost of service considerations, and potential rate adjustments. It was noted that the rate design analysis indicates the need for a seven percent (7%) rate adjustment on July 1, 2008, and that the rate adjustments by class may vary depending on the cost of service results. As a result of the Study being completed, Mr. Ted Kelley, Principle with Burns & McDonnell, reviewed a presentation of the Electric Rate Adjustment Considerations (Attachment #1).

Referring to the Residential Rate Comparison of other utility providers, Mr. Ruane requested that members be provided an up-to-date list, as of a date certain, when this matter is presented to City Council for consideration (Attachment #2).

Mr. McGiffin moved to recommend acceptance of the rate adjustments as recommended, seconded by Mr. Snaman.

Mr. Cregar relayed concern that members were not provided ample opportunity to review the material, noting that receipt of the information was provided during the meeting rather than included in the committee’s packet.

The motion recommending acceptance of the rate adjustments as recommended by Burns & McDonnell was unanimously carried.

2008 Comprehensive Plan Review: Utility Chapter

As directed, staff provided members with the Utility Chapter of the 2008 Comprehensive Plan for their review, which included Chapter 7 - Public Utilities and Infrastructure Plan.

Mr. Ruane suggested that staff include a section that would consist of a general outline of how the electric is brought to the City. He also suggested that if there is a goal statement, there should be a paragraph explaining why the goal is necessary (the problem or challenge).

PACE/NAES Monthly Report (April)

Mr. DePrima provided the PACE/NAES Monthly Report for April 2008. He reminded members that the reports are being provided to allow members the opportunity to monitor what is being sold in electric and the revenues received, which will give members a better understanding of any fluctuations and make improvements if deemed necessary. It was not his intention to make a presentation of the report; however, he welcomed any questions.

Mr. Snaman moved to recommend acceptance of the PACE/NAES Monthly Report for April 2008, seconded by Mr. McGiffin and unanimously carried.

Mr. Snaman moved for adjournment, seconded by Mr. McGiffin and unanimously carried.

Meeting Adjourned at 5:56 P.M.

                                                                                    Respectfully submitted,

                                                                                    Eugene B. Ruane

                                                                                    Chairman

EBR/TM/jg

S:ClerksOfficeAgendas&MinutesCommittee-Minutes20085-27-2008 UTILITY.wpd

Attachments

Attachment #1 -   Presentation by Burns & McDonnell - Rate Adjustments

Attachment #2 -   Residential Rate Comparison of Other Utility Providers as of June 1, 2008