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; 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; Duane Holden, Project Manager; Rebecca Schlotterback, Water Resource Technician; Lew Gaskill, Accountant 1; Mike Macomber, IT/SCADA Technician and Dennis Yabsley, Electric System Supervisor. Public attending: Tom Perry, Murray, Smith and Associates and Rick Maricle, ConocoPhillips.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held April 26, 2011, and the following claims of May 10, 2011.

• BPA Residential Exchange Settlement Agreement - Amended
Background: The Residential Exchange Program (REP) was established in federal law, 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 IOUs, the magnitude of which are 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 or consumer-owned utilities (COUs), as they are referred to in the Settlement Agreement. The amount of the payments is set in a rate hearing process prior to each of BPA's two year rate periods, and then recovered through power sales revenues over the following two years. As a requirement to receiving these payments, IOUs affected must pass the financial benefits received on to their eligible customers in the form of a credit on the customers' power bills.

The Settlement Agreement approved by the Commission at its April 12 regular meeting required consumer-owned utility customers of BPA (COUs) representing 91% of BPA's Tier 1 electric load to approve the Agreement, before BPA would consider including the financial benefits outlined in the Agreement to be considered as part of the current BPA power rate setting process.

Walters said that by the April 15 deadline (imposed by BPA), only 81 % of the COUs approved the Agreement. Because of the importance of the Agreement, the COUs involved in negotiations with the IOUs agreed to set a new minimum threshold for ratifying the Agreement. Under the revised Settlement Agreement, three changes have been made:

1. The COUs approving the Agreement must represent a minimum of 75% of the aggregate Tier 1 load.
2. The signing deadline has been changed from April 15 to June 3, 2011.
3. BPA's deadline for certification of the Agreement (means inclusion in Rate Case) has been changed from April 25 to June 6, 2011.

The financial incentives outlined in the Agreement haven't changed. 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.

As part of the Settlement Agreement, the parties involved (COUs, IOUs, BPA) will work through their representatives to urge the U.S. Congress to affirm the Settlement Agreement in an effort to insulate the agreement from potential litigation over the long term.
The revised Settlement Agreement will lower the cost of federal power purchased from BPA over a multi-year period starting October 1, 2011 and ending September 30, 2028. Based on an analysis of the potential financial benefits to be derived from the Settlement, it is estimated that the net present value of the cost savings stream through 2028 for the District is approximately $3.5 million dollars.

ACTION: Commissioner Murphy motioned to approve the revised Residential Exchange Program Settlement Agreement (No.11PB-12322) and authorize the District's General Manager to sign the Agreement. Commissioner McClure second the motion. Motion passed unanimously.

• Whatcom County Franchise Providing Electric Utility Services
Background: The PUD owns and operates several miles of electric transmission lines in the County. The PUD is acquiring distribution lines from PSE and plans on construction of additional lines to supplement its' current operations. To operate more efficiently, plan for future operations and potential expansion of the District's facilities for the electric utility and to conform with Whatcom County regulations regarding use of County rights of way the PUD has, in working with County legal and public works staff developed a draft Ordinance for County Council approval that will provide a 25 year franchise to the PUD to locate, operate and maintain PUD electric facilities in County rights of way throughout Whatcom County. Legal Counsel Sitkin said that the District will also apply for a second franchise for the water utility.

The County Council will consider this ordinance at a public hearing, most likely in late May or early June, and then approve the franchise (ordinance) following the hearing.

Jilk said the franchise agreement is something similar to what Puget Sound Energy would have in place. He said he has notified PSE about the District's franchise agreement.

There is no fiscal impact to the District; however, it is critical to have the franchise approved in order to proceed with certain electric system projects in 2011.

ACTION: Commissioner Murphy motioned to approve the draft franchise agreement with Whatcom County for the District to locate, install, operate and maintain electric service facilities in Whatcom County rights of way contingent upon final legal review and authorize the General Manager to sign. Commissioner McClure second the motion. Motion passed unanimously.

• Solar Project
At the February 22 regular meeting, a concept for a potential solar project for the District was presented by Flow Renewable Ventures. Jilk indicated today that staff recommendation on the proposal was to not pursue the project. He cited reasons being (1) The costs do not work financially on the business model presented; (2) The only site on District property for the project would be the field across from the office. Based on the Plant 2 upgrades, the field may be utilized for trucks and other heavy equipment needing access for construction through 2013 and this would not be feasible given the timeline presented for the solar project.

Jilk added that there are also other significant projects on the table for the District including the biogas/digester. Jilk will be attending a team meeting on that project this afternoon.

Commissioner McClure said he appreciated the analysis and recommendation on the solar project and Commissioner Murphy indicated greater interest in the digester project.

ACTION: Information only. No action requested or taken.

• Manager's Report
No report but the Commissioners asked about an update on the biogas/digester project. Jilk said the Port of Bellingham and City of Lynden are participating in the project and there is a renewed interest with Western Washington University (WWU). Dr. Hart Hodges has indicated an interest in taking the lead role for the project. The project team is meeting this afternoon with Dr. Hodges to discuss the scope of work and how Dr. Hodges and the CEBR at Western can lead the project. Jilk said the team hopes to commence the project at the end June and be completed at year end.

Energy Northwest - Commissioner Murphy attended the recent meeting and said the topic of discussion was the Japanese earthquake/tsunami effect on their nuclear power plants and the need of designated authority on site to make critical decisions. Murphy also toured the Columbia Generating Station and gave him a good inside look at the plant and its intense security measures in place.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 8:30 a.m.

President/Commissioner

Secretary/ Commissioner

Commissioner