UTILITY COMMITTEE

The Utility Committee meeting was held on October 22, 2007 at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. McGiffin, Mr. Cregar, and Mr. Snaman. Members of Council present were Mr. McGlumphy and Mr. Salters. Mayor Carey was also present.

AGENDA ADDITIONS/DELETIONS

Mr. Ruane noted that staff has requested that item #3, Proposed Ordinance - Chapter 110, Utilities - Article II - Electric Service, Section 110-32 - Pole Attachment Fee be deferred.

Mr. Snaman moved to defer item #3, seconded by Mr. McGiffin and unanimously carried.

Mr. Cregar moved for approval of the agenda, as amended, seconded by Mr. Snaman and unanimously carried.

Revised Electric Revenue Fund Financial Forecast FY08 - FY12 and Proposed Bond Issue

Members were provided the Revised Electric Revenue Fund Financial Forecast FY08-FY12 for the Proposed Bond Issue and the Preliminary Bond Issue Schedule. Mrs. Mitchell, Treasurer/Finance Director, reminded members that the issuance of $22,190,000 of Electric Revenue Bonds (repayment over 25 years) was included in the 2008 Capital Investment Plan (CIP) to assist with financing the following projects:

            69kv Feeder Lines #3 & #4 - Cartanza Substation                             $12,024,758

            St. Jones Substation                                                                             5,376,068

            Horsepond Road Substation - Transformer                                         1,020,000

            SNCR - Pollution Remediation Project at McKee Run Plant              1,079,174

            Total Bond Proceeds Applied to Projects (completed by 6/30/2009)       $19,500,000

            Estimated Cost of Issuance                                                                 500,000

            Bond Reserve (1 year debt service)                                                     2,190,000

            Total Bond Issue                                                                                $22,190,000

Mrs. Mitchell explained the various factors in the development of the revised forecast. She also reviewed the Electric Bond Schedule, Electric Revenue Fund Comparison of Prior and Current Forecasts, Revised Financial Forecast FY08-FY12, and Key Ratios FY99-FY12 and KWH History. She advised members that in preparation for the Bond Issue, a revised financial forecast was prepared for the Electric Revenue Fund.

In response to Mr. Ruane, Mrs. Tieman distributed and reviewed the Rate Impact Samples by Class (Attachment #1).

Staff recommended acceptance of the Revised Financial Forecast as of October 5, 2007 for presentation to the rating agencies as the basis for their analysis of the 2007 Electric Revenue Bonds, in the amount of $22,190,000 (including bond reserve).

Mr. McGiffin moved to recommend acceptance of the Revised Financial Forecast as of October 5, 2007, as recommended and presented by staff, for presentation to the rating agencies as the basis for their analysis of the 2007 Electric Revenue Bonds, in the amount of $22,190,000. The motion was seconded by Mr. Snaman and unanimously carried.

PACE Contract Amendment

Members were provided Amendment 1 to the Energy Management Agreement. Mr. Lunt, Public Utilities Director, advised members that on May 4, 2006, the City entered into an Energy Management Agreement with Pace Global Asset Management, LLC (PACE) to assist the City with its energy procurement, energy sale, purchase of fuels, establishment and management of risk policies, development and management of hedging protocols, and related energy procurement challenges. Within this agreement, there is a section that outlines the possibilities for incentives for PACE. Mr. Lunt stated that PACE management has contacted the City and expressed concern that the incentive fee was substantially higher than the projected budget amount. PACE suggested that this clause be re-negotiated as it was higher than they had projected and anticipated. Since this is a good faith effort, PACE also requested that the City consider extending the term of the Agreement. He advised members that the City and PACE have been negotiating this amendment and have reached a tentative agreement.

Staff recommended that the City Manager be authorized to execute Amendment 1 to the Energy Management Agreement with Pace Global Asset Management, LLC as presented.

Mr. Cregar moved to recommend approval of staff’s recommendation (Attachment #2), seconded by Mr. Snaman and unanimously carried.

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

Meeting Adjourned at 5:55 P.M.

                                                                                    Respectfully submitted,

                                                                                    Eugene B. Ruane

                                                                                    Chairman

EBR/TM/jg

S:ClerksOfficeAgendas&MinutesCommittee-Minutes200710-22-2007 UTILITY.wpd

Attachments

Attachment #1 - Rate Impact Samples by Class

Attachment #2 - Amendment #1 to the Energy Management Agreement with PACE