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 Paul Kenner. Said meeting was open to the public and notice thereof had been given as required by law. Those present included Commissioners Jeff McClure and Mike Murphy and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager; Ann Grimm, Administrative Assistant; Brian Walters, Director of Utility Operations; Barb Shosten, Director of Finance; Annette Smith, Assistant Finance Director Fred Disch, Water Systems Supervisor; Paul Siegmund, Process and Control Engineer; and Duane Holden, Project Manager. Public attending: Rick Maricle, ConocoPhillips; and Tom Perry, Murray, Smith and Associates.

• Public Comment
No comments made.

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

• Water Treatment Plant 2 Design - Murray, Smith and Associates:
Task Order No. 19, Amendment No. 2
Note: At the prior commission meeting on March 8, the Commission asked that this agenda item be tabled pending questions and comments regarding the costs involved. Jilk said District staff has done further research into these costs and found that there are a number of different regional projects that are under design or being constructed to compare engineering costs to. He noted that the costs that are budgeted under this task order are appropriate for this type of project. The District has had more meetings with Tom Perry (MSA) and reviewed in detail the items and feels the cost of the work for final design is in the appropriate range.

Background: The PUD has approved a contract services agreement with Murray Smith and Associates for engineering services to the District. The District is completing certain capital improvements including Capital Project RW-1- Water Treatment Plant 2 Improvements.

The District has approved Task Order No. 19 and Amendment No. 1 to Task Order 19 with Murray Smith and Associates to provide engineering services related to pre-design of these Plant 2 Improvements. Amendment 1 to Task Order 19 expanded the original scope to include the preparation and submittal of the environmental and land use permit applications necessary for the project.

This effort evaluated different design alternatives and refined the project's objectives and design concepts, and concluded in December 2010 with the issuance of the draft report entitled Preliminary Design of Water Treatment Plant 2 Improvements (pre-design report).
Amendment No. 2 to Task Order 19 will provide for the Final Design of the proposed Plant 2 Improvements and the preparation of the bid documents to ready the project for bidding by January of 2012.

The District has included in the budget other capital projects at Plant 2 site including site improvements, settling pond material removal, maintenance shop/operations building. Engineering, architectural, geo testing and surveying services are budgeted to complete those projects.

The estimate for this "Final Design" phase of the projects, including the inclusion of other projects wrapped into this Plant 2 Final Design phase is now set at a total cost not to exceed $1,562,653.00 plus expenses. This amounts to a rate of approximately 10% of projected construction cost of Plant 2 Improvements. Murphy questioned the amount of "expenses". Jilk said the amount is approximately $14,000 for travel time, office expenses, copies of drawings, bid documents, etc. He added this amendment does not have an option for the General Manager to approve any changes orders to this task without commission approval since this is a "not to exceed" approval. McClure asked for a summary of the dollar volume for construction cost. Jilk said the grand total is $17 million; approximately $15 million for Plant 2 improvements, $1 million for standby generation installation.

Funding for this work is budgeted in the District CIP program and was included in the 2010 bond sale. This recommended action comes with no option for the General Manager to approve any change orders to this Task Order without Commission approval since this is a "not to exceed" approval.

Kenner thanked Jilk for the additional analysis on the project and is comfortable that the District is spending a similar amount on this as other public agencies and on similar types of projects.

ACTION: Commissioner McClure motioned to approve Amendment No. 2 to Task Order No. 19, Water Treatment Plant 2 Improvements, final design engineering services with Murray, Smith and Associates with a cost not to exceed amount of $1,562,653.00. plus expenses. Commissioner Murphy second the motion. Motion passed unanimously.

• Solar Project Update
The District has reviewed the information from Flow Renewables (FR) for a possible solar energy panel project on District property. The cost value as presented is not feasible for the District to get involved with at this time. Jilk said there is a possibility of the District leasing approximately one acre of land to Flow Renewables, the grass field across the road from the main office. Legal counsel would need to review the lease, liability, etc. and then the District would want FR to present a rendition of what it would look like. The lease payment would cover the amount to purchase the system at year 10, when the District would have the first option to buy it without the initial risk of liability and cost. Commissioner Murphy inquired about the length of the land lease and Jilk said it is a 10 year minimum, 20 year maximum. Kenner thought it is an odd location with the trees on the west side which would create a fair amount of shade.

FR works as the broker for a group of investors who can receive tax credits on the investment. Jilk said FR is working with the City of Bellevue on a similar project and Kenner said that he wants to wait to hear what happens on their project before considering any options for the District.

ACTION: For information only. No action taken.

• Manager's Report
World Water Day - Today is World Water Day and the theme this year is "water for cities."

BPA Residential Exchange Settlement
Walters said a tentative settlement agreement has been reached between public and private utilities in the Region with regard to the Residential Exchange Program (REP). The REP was established in federal law as part of the 1980 Northwest Power Act as a mechanism to extend the financial benefits of low cost power generated by the Federal Columbia River Power System (FCRPS) to residential and small farm customers of the Region's investor owned electric utilities (IOUs). Under the REP, the Bonneville Power Administration (BPA) provides payments to the IOUs, the magnitude of which is set according to a complex analysis that takes into account the size of the IOUs' residential & small farm electric loads and the difference between the FCRPS's average power costs and the IOUs'. The payments are included in BPA's costs used for setting its power rates paid by BPA's customers, including public utilities. The amount of the payments is set in a rate hearing process prior to each of BPA's two year rate periods. As a requirement to receiving these payments, the IOUs affected must pass the benefit through to its eligible customers in the form of a credit on their power bills.

The tentative settlement agreement if ratified by public utility customers of BPA, who in aggregate represent 91% of BPA's Tier 1 electric load, will then be included in BPA's current rate setting process and if approved by BPA will determine the amount of financial benefits to be provided to the Region's IOUs through 2028. As part of the settlement, the Region's public utilities will receive monthly credits (rebates) on their BPA power bills for the first eight years of the settlement period. The credits are compensation to public utilities for overpayments made by BPA to the IOUs under the REP during prior years, as determined in a federal Ninth Circuit Court proceeding.

Based on the payment structure agreed to by the parties who negotiated the agreement, the forecast through 2028 is that the District's power rates will be slightly lower resulting in a cost reduction with a net present value over the 18 year settlement period of approximately $3.5 million.

The Washington Public Utility District Association (WPUDA) supports the settlement agreement. There are a handful of utilities in the Northwest, including Benton County REA in eastern Washington, that are opposed to the agreement at this time. If the District desires to be a signatory to the agreement, the Commission must approve it before April 15, 2011, the deadline for signing. This item will be placed on the April 12th Commission meeting for consideration.

Biogas Update
Commissioner Murphy asked if there was an update on the biogas/digester project. Jilk replied there is no new news; however, a conference call is scheduled for later this afternoon with WSU Extension's Renewable Energy program. He will have more information at the next Commission meeting.

• Executive Session
Jilk requested an Executive Session to discuss potential water rights litigation with no formal action to be taken afterwards. Legal Counsel was present. There being no further business for the regular meeting, the Commission adjourned at 8:37 a.m. to Executive Session.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 9:25 a.m.

President/Commissioner

Secretary/ Commissioner

Commissioner