The regular meeting of the Board of Commissioners of Public Utility District No. 1 of Whatcom County was called to order at 8:00 a.m. by Commissioner Jeff McClure. Said meeting was open to the public and notice thereof had been given as required by law. Those present included Commissioner Mike Murphy and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager; Ann Grimm, Administrative Assistant; Barb Shosten, Director of Finance; Annette Smith, Assistant Finance Director; Lew Gaskill, Accountant I; Fred Disch, Water Systems Supervisor; Rebecca Schlotterback, Water Resource Technician; Paul Siegmund, Process and Control Engineer; Dennis Yabsley, Electric System Supervisor, and Duane Holden, Project Manager. Public attending: Rick Maricle, ConocoPhillips, Tom Perry, Murray, Smith and Associates, Mike Unger of ELCON Associates and Jeff Jacobson, Flow Renewable Ventures.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held February 8, 2011, and the following claims of February 22, 2011.

ACTION:  Commissioner Murphy motioned to approve the minutes of the regular meeting held February 8, 2011, and the claims of February 22, 2011. Commissioner McClure second the motion. Motion passed unanimously.

• Solar Installation Presentation - Flow Renewable Ventures
Jilk said he has been speaking with Jeff Jacobson from Flow Renewables about the District's solar goals and the possibility of locating a solar power system on District property. Jacobson gave a presentation about his company and community solar power opportunities.
• Generate significant reduction in utility costs
• Secure long-term fixed cost power source
• Achieve compelling return on investment
• Support environmental stewardship efforts

• Federal Incentives
Stimulus program will provide 30% of costs of renewable energy projects through December 31, 2011; funding only applies to projects that begin construction prior to the end of the year.

• MACRS Depreciation
Businesses may recover solar project investments on a five year accelerated depreciation schedule; the discounted value of the MACRS election is approximately 20 % of the total project costs. Bonus MACRS depreciation allows for 100% of the depreciation in year on for the calendar year 2011.

• Washington State Incentives
Department of Revenue Solar Energy Program is production based incentive payable to the investors of a Community Solar project totaling $1.08 per kWh; however, solar panels and inverters must be manufactured in Washington State.

State Sales Tax does not apply to the sale of solar muddles, inverters and the labor needed to install.

• Community Solar System Law
Senate Bill 6658 calls for the preferred size is 75 kW; located on PUD lands; owned and funded by community members who are all customers of the PUD and PSE; the system and transaction is managed by Flow Renewable Ventures (RFV), the administrator; and, system must use Washington State made modules and inverters.

House Bill 1144 calls for the cost recover incentive is increased to $25,000 per investor per year; and the Community Solar Project will be sold to the site host at "fair market value" after the expiration of the incentive.

• Community Solar System Design
RFV's role will be to design the system; supply all legal documents needed; procure 100% of the needed materials to build the system; fund the entire cost of the system with their investors; submit an RFP for the labor contracts to install the system; manage the installation and will manage, maintain, warranty the system for the life of the contract.

Design details of the system: best location is on land across from the office and to the south of the mobile office; 75,000 watts in size; ground mounted on racking fixed angle, building using the above mentioned parts built in WA state and will continually be monitored on line. Commissioner McClure inquired if 75 kWh was the highest amount able to be produced. Jacobson said yes, based on SB 6658 that 75 kWh is the preferred size. There have been extensive studies on solar power in Germany whose latitude is similar to the Northwest's. Per capita, Germany has a huge amount of solar projects. The limit of 75 kWh also minimizes transmission and other related costs.

• Model of the Community Solar Project
o FRV Role
"Administers" the project, facilitating 100% of all project tasks as outlined for the duration of the contract; manages the LLC "WPUD-Community Solar I LLC", manages production based incentive pay for each member of the LLC and manages and maintains the solar system.
o Investor Role
FRV investors are PSE rate payers living in Washington State. Each investor pays a portion of the needed funds to build the system and is paid a return on investment entirely based on the DOR rules at $1.08 per kWh, capped at $25,000 per year; and, each investor is a member of the LLC.
o District's Role
Leases the land area to the LLC for a ten year term at a cost of $1.00 per year; allows access to the facility 24 hours per day; and, agrees to purchase the system at year 10 for 10% of the original cost.

• Financial Model - Contract
o FRV shall lease the ground area to support the system; FRV will provide the power to the District at a cost which equals the PSE rate or FRV may enter into a PPA with PSE; ten year term; at the end, the District will pay to FRV a termination/buyout fee of $50,000.
o Revenue
WA State DOR will pay $1.08 per kWh (up to $25,000) per year to each project investor; FRV will own the rights to the Renewable Energy Credits (REC) estimated value of $.25 per kWh during the contract and will own the power revenue created by the solar system for the duration of the contract.

• Financial Model - Post Contract (Year 10)
o Financial Detail:
The District shall pay to FRV lease end fee of $50,000 at end of 10th year; shall own the power created by the system (est. $.12 per kWh); own the REC's (est. $.20 per kWh) and the PBI's (est. at $25,000 per year).
o Revenue
The value of the power asset is estimated to be $9,600 per year; value of the REC asset is estimated to be $16,000; and value of the PBI asset is estimated to be $25,000 per year.

• Community Solar Model
o Advantages
No need to utilize PUD funds to create; cost of the system when time to purchase will be a fraction of the cost; a good method to limit capital expenditure while at the same time guaranteeing the eventual ownership, operation and direct benefits both economic and environmental; Maintenance, warranty, and operation of the facility is the responsibility of FRV; FRV and its investors will bear the risk of production; and, the financial model of the Community Solar model includes the investors monetizing the tax credits and depreciation of the system, which the PUD cannot utilize. McClure asked about the life cycle of the solar panels. Jacobson estimated about 35 years.
o Disadvantages
A lack of control over the facility operation and an increased risk of liability by issuing a lease to PUD lands.

• Environmental Stewardship
o A unique opportunity to advance environmental efforts without sacrificing return on investment; solar power generation helps achieve larger objective of minimizing environmental impact of business operation and promoting sustainability; and, an opportunity for the District to assume a leadership role in the adoption of renewable energy generation.

• Solar Benefits
o PV technology has a 30+ year track record and is relatively simple; solar panel equipment has an expected lifetime performance of 25-30 years with minimal maintenance required; solar systems do not require additional transmission or grid capacity upgrades like other alternative energy sources; Washington posses relatively good solar resource qualities; Current economic incentives are superior to other forms of alternative energy and as a result, offers the highest return on investment.

• Why Flow Renewables
According to Jacobson, using Flow Renewables for the Community Solar projects would be an appropriate investment capitalization to execute a successful renewable energy project. The investment opportunity is only viable if the solar project effectively maximizes existing federal and state incentives; and, Flow Renewable's platform leverages deep finance and transaction expertise and a national capital perspective to create an optimal investment execution.

Jacobson added that they do not have any projects currently in Washington State. The Ellensburg solar project is now complete, the Okanogan project is in the works, and Poulsbo's project is under construction. The first step in the process would be the lease of the land and address any liability issues, then bring investors in and begin construction. He noted a long lead time on the solar panels. Jilk asked if RFV has had discussions with any other entities in Whatcom County. Jacobson replied he is meeting with the City of Lynden to discuss utilizing the water tower. He also indicated that the airport (Port of Bellingham) is also a good location for a solar project. Holden asked if there were any permitting issues because the panels are not impervious and Jacobson said there were no permit issues. Jilk said it is important to understand what the District is investing in and suggested a site visit to learn more about the solar projects. Jacobson will send a "working" spreadsheet model for the District to learn more about cost projections. Commissioner McClure thanked Jacobson for the information and presentation.

ACTION: Information only. No action requested or taken.

• Projects Overview - Elcon and Associates
Yabsley introduced Mike Unger, P.E. with Elcon and Associates. Unger is the lead on the District projects for Elcon. Unger gave an overview of the company, update on the refinery substation scope of work, the Enterprise substation project and the Ferndale Substation and transmission line project.

• Elcon Overview
Founded in 1975, headquarters in Portland, OR and branch office in Seattle. Their expertise is in electrical power systems, planning and studies, engineering and design (substations, transmission lines, distribution systems, and generation). Elcon's engineers have an average of over 20 years of experience with a large pool of designers and support staff. They have close associations with sub-consultants (geo-tech, surveying, permitting, etc.) and strong quality assurance and quality control. Many of Elcon's clients are public utilities, private utilities and cooperatives.

• Refinery Substation Scope
Existing substation has two 115 kV breakers, three transformers with HS CKT SWRS (under duty) and single contingency outages. The proposed upgrades are five 115 kV breakers and ring bus, new control house with solid state relays, no single contingency outage, and breaker or relay maintenance, loop maintained.
○ Project Schedule
Phase 1 - Kickoff meeting, data collection and on-site visit on December 1, 2010
Phase 2 - Design - Completion and Submittals
- 30% on February 17, 2011
- 60 % on April 12, 2011
- 90 % on May 24, 2011
- 100% on June 24, 2011
Phase 3 - Bid Document Preparation and Construction Management
- General Contractor Selection completion on August 1, 2011
- Construction Management, August 2, 2011 - March 15, 2011
- As Built Drawings completion on April 15, 2012

• Enterprise Substation Scope
Elcon is working on a study to develop alternatives to modify the substation, determine optimal configuration and provide a schedule and cost estimate. The study is part of Water Treatment Plant 2 improvements/modifications, which include reliability improvements to include increasing electrical supply to 4.16 kV power supply from 2.4 kV to have both voltages simultaneously during construction. Unger said this project is on schedule.
○ Project Schedule
Phase 1 - Kickoff meeting, data collection and on-site visit on December 1, 2010
Phase 2 - Preliminary Design - Completion and Submittals
- 90 % on March 31, 2011
- 100% on April 28, 2011

• Ferndale Substation 115 kV Tap Scope
The power is currently delivered on Puget Sound Energy's 115 kV line that runs north on the east side of Imhoff Road. Project construction will consist of installing a 3-way switch on the District's existing 115 kV line, build a new line (1.1 mile of 115 kV) on the west side of Imhoff road and then remove the Puget Sound Energy line on the east side.
○ Project Schedule
Kickoff Meeting - November 15, 2010
Survey Complete - December 31, 2010
Design Drawings & Specs Complete - February 28, 2011
Issuance of Bids - March 17, 2011
Contractor Selection Complete - April 17, 2011
Project Completion - June 17, 2011
As-built Drawings Complete - July 1, 2011

Commissioner McClure thanked Unger for the update and presentation.

ACTION: Information only. No action requested or taken.

• Manager's Report
No report.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 9:32 a.m.

President/Commissioner

Secretary/ Commissioner

Commissioner