UTILITY COMMITTEE

The Utility Committee Meeting was held on February 14, 2011 at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. McGiffin and Major Kosior. Mr. Bonar and Mr. Snaman were absent. Members of Council present were Council President Hogan and Mr. Leary. Mayor Carey was also present.

AGENDA ADDITIONS/DELETIONS

By unanimous consent, the agenda was approved, as presented.

Green Energy Fund Grant Modification

Mr. Ron Lunt, Public Utilities Director, reminded members that approximately five (5) years ago, the State of Delaware adopted the Delaware Energy Act, which includes a Green Energy Fund Program. He stated that this program allows the City’s electric customers to contribute funds to financially support the installation of renewable energy resources and promote the use of energy efficient technologies. Mr. Lunt noted that this program is administered by the Delaware Municipal Electric Corporation (DEMEC) for municipal providers in the State, including the City of Dover. He explained that the Green Energy Fund Program specifies grant limits (a percentage of payment and total payment) for the installation of qualifying technologies and advised members that DEMEC suggested that the City modify the percentage of the grant payments, the total grant limits, and increase efficiency standards for geothermal heat pumps. Mr. Lunt explained that the modifications will assist in ensuring that funds are available for the greatest number of grant applicants. He indicated that, currently, the City of Dover has a backlog of applications dating back approximately 1.5 years.

Mr. Lunt reviewed the Dover Green Energy Fund Incentive/Grant Proposed Changes, which provides details of the proposed changes recommended by DEMEC and includes two (2) major variations recommended by staff. He noted that on December 10, 2010, Delmarva Power and Delaware Electric Cooperative modified their grant programs to incorporate similar recommendations.

Mr. Lunt explained that staff’s recommendations for variations from DEMEC’s proposed changes are as follows:

1)Non-profit applicants for photovoltaic system grants should be provided funding at the same level as non-residential applicants.

2)Non-profit applicants for fuel cells should be provided the same grant percentage calculation (20%) as residential and non-residential applicants.

Mr. Lunt stated that these suggestions from staff relate to the large number of schools, colleges, and other non-profit entities based in the City due to the fact that it is the State capital. Because of the substantial backlog of applications, he indicated that staff felt it more appropriate to treat all non-residential groups equitably. Mr. Lunt noted that non-profit groups were only identified by Delmarva Power as separate entities in the December 2010 modification; prior to this, they were classified in the same category as non-residential applicants.

In reviewing the Dover Green Energy Fund Incentive/Grant Proposed Changes, Mr. Lunt advised members that the proposed changes were noted in red text on the first line of the table that applies to each type of system, and that the second line includes current program guidelines. He noted that the two (2) boxes highlighted in yellow identify staff’s suggested deviations from DEMEC recommendations. Mr. Lunt also stated that system qualifications were modified to better reflect the value of the installation. For example, he indicated that photovoltaic and small wind turbine grants are now based on output rather than installation cost to incentivize the installation of more efficient systems and that these systems are now limited to a maximum size of 50 kW. Mr. Lunt stated that the same principle applies to solar water heater and geothermal heat pumps, noting that more efficient systems receive larger grants, or qualify for these grants. He stated that the least efficient geothermal heat pumps (previous units with energy efficiency ratings (EER) of 14) would be eliminated from the program, due, in part, to advancements in technology. Lastly, he advised members that the limit for the percentage calculation for fuel cell grants is being reduced to provide more equity between system options.

Responding to Mr. McGiffin, Mr. Lunt indicated his concern that a State facility could be classified as a non-profit entity. Disagreeing, Mr. McGiffin stated that he felt that the State of Delaware would not qualify as a non-profit entity.

To further encourage conservation, Mr. Lunt stated that residential applicants will be required to complete a City of Dover Public Utilities Residential Utility Service Audit, which may be scheduled by calling 736-7070. He indicated that all non-residential applicants will have an energy audit completed by a prequalified commercial auditor and that a listing of auditors can be found at www.energizedelaware.org/businessallies. Mr. Lunt noted that the expense of this audit will be the sole responsibility of the applicant and that the listing is maintained by Delaware’s Sustainable Energy Utility. He stated that this requirement is also included in the Green Energy Program administered for Delmarva Power customers.

Staff recommended adopting the Dover Green Energy Fund Incentive/Grant Proposed Changes as outlined and funding non-profit applications at the same levels/caps as non-residential applications.

Major Kosior felt that lowering the maximum grant amount could discourage non-profit entities from applying and suggested that DEMEC is attempting to encourage that specific sector. Responding, Mr. Lunt stated that the recommendation is not to discourage non-profit groups from applying, but to continue to consider non-profit applicants as they have been considered in the past, as part of the non-residential pool of applicants. He suggested that the proposed grant changes that reflect an inclination to encourage non-profits were made by Delmarva Power, which deals with various types of stakeholders.

Mr. McGiffin moved to recommend approval of staff’s recommendation to adopt the Dover Green Energy Fund Incentive/Grant Proposed Changes, with the stipulation that the proposed changes be revised to incorporate the Delaware Municipal Electric Corporation’s (DEMEC’s) recommendation to include a distinction for non-profit organizations (Attachment #1). The motion was seconded by Major Kosior and unanimously carried.

Retail Customer Demand Response Tariff Modification

Members were reminded that, in 2009, the Federal Energy Regulatory Commission (FERC) issued Order No. 719 which attempted, in part, to remove barriers to Demand Response Programs (DRP) operated by regional transmission organizations such as PJM Interconnection, LLC (PJM). Mr. Ron Lunt, Public Utilities Director, advised members that the City of Dover had a specific interest in a requirement that those utilities selling less than four (4) million MWh’s must have the relevant electric retail regulatory authority (City Council) approve the participation of their retail customers in the program. He stated that on February 22, 2010, City Council affirmed this intent and created a Retail Customer Demand Response Tariff to document that the City of Dover affirms participation in this program. Mr. Lunt noted that the tenets of the PJM-operated DRP include a provision to compensate customers who reduce their consumption during periods of tight energy supply or high usage. He indicated that the reduction of load also ensures electric grid reliability and helps alleviate costs associated with new generation plants and transmission upgrades, both of which are concerns on the Delmarva Peninsula.

Mr. Lunt explained that staff recommends that the City, or its authorized designee, be the only DRP authorized to administer this program in the City’s electric territory. He stated that, currently, staff intends to designate DEMEC as its authorized designee.  Mr. Lunt advised members that the reason for the modification to a single provider is twofold, as follows:

1)DEMEC solicited proposals from five (5) different providers and the proposal selected provided the greatest return to the customer (80% return to customer, 20% retained for operations).

2)The City could call on its customers to reduce load during local system emergencies and/or in an effort to reduce load during power peaks, utilizing this procedure as a local demand response program which could reduce future capacity expenses.

Mr. Lunt advised members that in calendar year 2010, there were nine (9) customers who participated in the DRP through various Curtailment Service Providers that are registered with PJM. He assured members that these customers will be notified of the change in the tariff and would transition into the DEMEC program within one (1) year.

Staff recommended adoption of the modifications to the Retail Customer Demand Response Tariff. It was noted that the proposed tariff has been reviewed by the City of Dover Utility Attorney, Mr. Kirk Betts, Betts and Holt, and that he has approved this tariff in its final form.

Mr. McGiffin moved to recommend approval of staff’s recommendation to adopt modifications to the Retail Customer Demand Response Tariff (Attachment #2), seconded by Major Kosior and unanimously carried.

Amendments to Renewable Energy Portfolio Standards (RPS) Legislation

Mr. Ron Lunt, Public Utilities Director, reminded members that, in 2010, Delaware legislators amended the Renewable Energy Portfolio Standards (RPS) legislation by requiring municipally-owned electric utilities to develop plans to include renewable power sources in their power supply portfolios by 2014. He indicated that the amount of renewable power sources must be compatible with the standards set for Delmarva Power, which plans to obtain 11.5% of its power from renewable sources by 2014 and 25% by 2025.

Mr. Lunt reviewed a proposed amendment to the RPS legislation, which would allow municipalities to include and count conservation, energy efficiency and demand-side management programs in their RPS plans. He noted that staff felt that these aspects of energy management are just as important as renewable energy sources and that a credit should be received for these efforts. Mr. Lunt explained that, in general, these kinds of programs are more cost effective than renewable energy sources at this time.

Staff recommended that the Mayor and Council President write a letter in support of the RPS Legislation Amendment.

Mr. Ruane requested that staff advise members when the proposed legislation is presented for a hearing so that they may attend to indicate their support.

Mr. McGiffin moved to recommend that the Mayor and Council President send a letter in support of the Renewable Energy Portfolio Standards (RPS) legislation amendment (Attachment #3), seconded by Major Kosior and unanimously carried.

Review of Utility Related Capital Investment Plan (CIP) (Electric and Water/Wastewater) (December)

Members were provided a Project Tracking Report, as of December 31, 2010, for the Utility (Electric and Water/Wastewater) Related Capital Investment Plan (CIP).

Mr. Ron Lunt, Public Utilities Director, stated that Council approved a change order for the inclusion of a force main as a part of the Delaware State University/Delaware Technical and Community College Force Main Rerouting Project. He advised members that the infrastructure has been installed and is currently being tested and if it passes, the project will be substantially complete. Mr. Lunt explained that blacktop work and seeding will be completed in the spring when temperatures are warmer.

In addition, Mr. Lunt noted that the City has received full approval from the Delaware Department of Transportation for the Route 13 Water Main Project and he anticipates opening the project for bids within the next two (2) weeks. He reminded members that this project includes the replacement of the Route 13 southbound lane water main, from State Street to White Oak Road, and will be a nighttime project.

Major Kosior moved to recommend acceptance of the Utility Related CIP (Electric and Water/Wastewater) Report, seconded by Mr. McGiffin and unanimously carried.

By unanimous consent, the meeting adjourned at 5:51 p.m.

                                                                                    Respectfully submitted,

Eugene B. Ruane

Chairman

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Attachments

Attachment #1 -    Dover Green Energy Fund Incentive/Grant Proposed Changes

Attachment #2 -    Modifications to the Retail Customer Demand Response Tariff

Attachment #3 -   Letter in Support of Renewable Portfolio Standards (RPS) Legislation Amendment