UTILITY COMMITTEE
The Utility Committee meeting was held on March 24, 2008 at 5:00 p.m. with Chairman Ruane presiding. Members present were Mr. McGiffin, Mr. Leary, Mr. Cregar, and Mr. Snaman. Members of Council present were Mr. Hogan (arrived at 5:10 p.m.), and Mayor Carey.
AGENDA ADDITIONS/DELETIONS
Mr. Leary moved for approval of the agenda, seconded by Mr. Cregar and unanimously carried.
Electric Cost of Service Study
Mrs. Mitchell, Controller/Treasurer, advised members that the Dover Air Force Base (DAFB) notified the City some time ago that they would not be setting aside the funds for the FY08 electric rate increase until they completed a review of the City’s rate study data and determined if the new rates were fair to DAFB. She stated that the DAFB has completed their review and both the City and base personnel met on March 18th to discuss their concerns. Also in attendance were Mr. Ted Kelly of Burns & McDonnell (City consultant) and Dr. Dennis Goins (DAFB consultant). Along with the Cost of Service Study, Burns & McDonnell will be providing the City with the tools necessary to do a cost of service by customer class simultaneously with the financial model updates.
Mrs. Mitchell stated that the main concern of the DAFB was the across the board rate increases the City implemented in July 2006, January 2007, and July 2007 without conducting a formal cost of service study. She explained that the across the board increases are done based on energy and no consideration is given to demand. The DAFB contends that the fixed cost components are being allocated on a per megawatt basis as you would do for power supply (variable cost). Therefore, the DAFB believes it was charged higher rates than it would have if the City had included the demand component. It was agreed that the City would perform a cost of service study to determine its FY09 rates.
In regards to the FY07 and FY08 rates, Mrs. Mitchell stated that the DAFB has agreed to provide the City with the necessary cost and pricing data forms to be completed. It had not been communicated to the City in the past (under prior base personnel) that it was necessary to submit these forms with notification of rate increases. The City explained that the current rate could not be retro-actively changed, as it would have adverse consequences on the City’s debt covenants and bond rating.
Staff recommended approval of an expenditure in the amount of $25,000 for the completion of a Cost of Service Study to determine electric rates by customer class for FY09 by Burns & McDonnell. Mrs. Mitchell assured members that the proposal submitted by Burns & McDonnell will be provided to members. Since Burns & McDonnell conducted the last cost of service study for the City, she explained that they have been requested to update the analysis, which would be less costly for the City. She also indicated that there are time constraints involved since DAFB is in need of this information as well as the City for budgetary purposes.
Responding to Mr. Ruane, Mrs. Mitchell stated that the study will provide information on all electric classes and would not benefit the DAFB only.
Mr. Leary moved to recommend approval for the completion of a Cost of Service Study to be conducted by Burns & McDonnell at a cost not to exceed $25,000 to be completed by May 20, 2008, with the understanding that this is an exception to the normal bidding process which is authorized by Council due to the time constraints involved. The motion was seconded by Mr. Snaman and unanimously carried.
Comcast Pole Attachment Agreement
The City of Dover enacted a Pole Attachment Ordinance on February 25, 2008 for all poles located within the City of Dover limits. Members were provided a proposed agreement between Comcast of Delmarva, Inc. and the City of Dover for the poles located outside of the City limits. The proposed agreement incorporates the tenets of the ordinance and has been modified into an agreement format for execution between the parties. The pole attachment rate mirrors the rate included in the ordinance, which is $8.17 per pole attachment. As a reminder, Mr. Lunt, Public Utilities Director, stated that this payment compensates the City for the carrying costs associated with constructing, operating, and maintaining the poles, ducts, and conduits. The attachment fee can be considered the cost of “renting” a portion of the pole, ducts, or conduit and are meant to recover pole, duct, or conduit related costs incurred by the City. The implementation of this Agreement is estimated to generate approximately $24,510 annually (estimated 3,000 poles x $8.17).
Staff negotiated an Agreement with Comcast of Delmarva and they concur with the proposed Agreement. Staff recommended approval of the Pole Attachment License Agreement with Comcast of Delaware, Inc. for Poles Located Outside of the City of Dover Limits and that the City Manager be given authority to execute this agreement.
Responding to Mr. Ruane, Mr. Lunt assured members that the agreement has been reviewed by legal counsel. Mr. Ruane noted that several of the documents being submitted do not include dates and, for clarification, he encouraged staff to include dates on the documents being submitted for consideration.
Mr. McGiffin moved to recommend approval of the Pole Attachment License Agreement with Comcast of Delaware, Inc., for Poles Outside of the City of Dover Limits and authorize the City Manager to execute the agreement with Comcast of Delmarva, Inc. (Attachment #1). The motion was seconded by Mr. Leary and unanimously carried.
Public Utilities Electric Capital Improvement Projects (CIP’s) FY 2008-09
Members were provided the Electric Capital Improvement Projects (CIP) by the Public Utilities for Fiscal Year 2008-09. Mr. DePrima, City Manager, explained that the CIP Projects proposed for the next fiscal year are being presented to the committee in order to provide them a better understanding of issues that are presented for their review and recommendation during the year.
Mr. Lunt, Public Utilities Director, reviewed the CIP’s, as follows:
69KV Feeders 3 and 4 Danner Farm Transformer
Replacement of 69KV Breakers Horsepond 600 Transformer
Distribution Upgrades SR1/SR9 Pole Line Relocation
Lighting Project and Rehabilitation New Developments
St. Jones Substation
With regards to the 69KV Feeders 3 and 4 Project, Mr. Lunt indicated that letters were sent to affected property owners and businesses advising them that there may be instances when it would be necessary for their service to be interrupted; however, he assured members that the interruption will be scheduled during times that would be less of an inconvenience to the customers.
Mr. Ruane stated that the public is very much interested in the City’s utilities and suggested that staff make every attempt to communicate with the residents the maintenance requirements of the utilities and their associated costs. Mr. Leary suggested that the City’s Public Relations Officer assist in this endeavor.
Mr. Leary moved to recommend acceptance of the reports provided on the Electric Capital Improvement Projects for FY2008-09, seconded by Mr. Snaman and unanimously carried.
House Concurrent Resolutions Related to Wind Power (HCR 38 and HCR 40)
At the suggestion of Chairman Ruane, members were provided House Concurrent Resolution #38, which recommends that the Controller General vote to approve the Power Purchase Agreement between Bluewater Wind and Delmarva Power because, in the opinion of the majority of the General Assembly, the proposed Power Purchase Agreement meets the criteria set forth in House Bill 6 of the 143rd General Assembly and is in the best interests of the citizens of this State. The Concurrent Resolution further requests that the Public Service Commission determine if the costs for the Bluewater Wind contract should be distributed among all Delmarva Power customers.
In addition, members were provided House Concurrent Resolution #40, which ensures that all of Delaware's electric customers are paying their fair share of costs in support of the proposed offshore wind farm. The offshore wind farm provides a societal benefit that should be paid by all Delawareans enjoying the benefit. The Bluewater Wind offshore wind farm is a renewable energy source that benefits all the citizens of Delaware since it uses the natural resource of wind to generate power, thus, does not produce any harmful emissions and promotes clean air for Delaware's environment. Therefore, this Resolution requests the Delaware Energy Office to promptly draft and submit to the General Assembly legislation to spread the costs of the offshore wind farm among all Delaware electricity users in a fair and equitable manner.
With regards to the HCR 40, members relayed concern regarding the costs and the requirement for the cots of the wind farm to be spread amongst Delaware electricity users.
Mr. Leary moved to recommend that the City Manager be authorized to formulate a letter to the General Assembly in support of HCR 38 and opposition to HCR 40, seconded by Mr. McGiffin.
Mr. Frank Tenusak, 880 Schoolhouse Lane, stated his understanding that the objective of the State legislators is to bring some certainty to the price of power in the future that is reasonably priced and affordable relative to the alternatives under the current conditions. In the environments where there is deregulation, there is another objective which is to assure there is environmentally sound power production, which wind would serve as a possible alternative. Mr. Tenusak relayed concern with the State not permitting competitive bids which allows Bluewater Wind to control a monopoly. He suggested that there be discussions to determine the basic objectives and, as an alternative, there may be consideration to re-regulate to assure any power that is competitively obtained by the traditional suppliers in the State to the consumer does not produce an unreasonable rate of return in accordance with historic public utility monopoly regulatory practices.
Responding, Mr. Ruane advised members that bidding was accomplished quite some time ago and Bluewater Wind was selected.
The motion recommending that the City Manager be authorized to formulate a letter to be sent to the General Assembly relaying support of HCR 38 and opposition to HCR 40 was unanimously carried.
PACE/NAES Monthly Report (January)
Mr. DePrima provided the PACE/NAES Monthly Reports for January 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.
In response to Mr. Ruane regarding PJM not dispatching the McKee Run or VanSant units in the month of January, Mr. DePrima suggested that it was due to a mild winter and the price of oil.
Mr. Ruane requested that staff provide a summary of major issues, both positive and negative, involving the electric utilities during the next committee meeting.
Mr. Cregar moved to recommend acceptance of the PACE/NAES Monthly Report for January, seconded by Mr. Leary and unanimously carried.
Mr. Leary moved for adjournment, seconded by Mr. Cregar and unanimously carried.
Meeting Adjourned at 6:14 P.M.
Respectfully submitted,
Eugene B. Ruane
Chairman
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Attachment
Attachment #1 - Pole Attachment License Agreement with Comcast of Delaware, Inc.