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 Commissioner Jeff McClure 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; Dennis Yabsley, Electric System Supervisor; Mike Macomber, IT/SCADA Technician; Duane Holden, Director of Engineering and Project Development; Alec Strand, Project Manager; Rebecca Schlotterback, Water Resource Technician; and Lew Gaskill, Accountant 1. Public attending: Rick Maricle, ConocoPhillips; and Tom Perry, MSA.

• Public Comment
No comments made.

• Approval of the Meeting Minutes and Claims
The Commissioners were presented with the minutes of the regular meeting held August 9, 2011, the corrected Minutes of July 26, 2011, and the following claims of August 23, 2011.

• Approval of District's Medical and Benefits Plan for 2012
The District has received the insurance plan renewal rate information for medical/dental and vision insurance coverage for non-union employees and Commissioners. The new rates take effect on September 1, 2011, as our rate period is 12 months beginning the first of September.

The District received quotes from Group Health and Regence Blue Shield. A third provider was asked to quote, Northwest Employees Trust (NET), because there was an expectation that this insurance "pool" resource may provide as good a coverage as we have now but with lower premiums. NET would not quote a plan.

Here is a summary of the options quoted:

Regence Blue Shield - Medical/Prescriptions/Vision:

Option 1:  Same plan we have currently: Regence Innova Plan Option 1 ($250 deductible, $2,000 co-insurance max/90% pay), with a 16% increase in premiums.

Option 2:  Raise the deductible from $250 to $500. All other costs/charges would stay the same with an 11% increase in premiums.

Option 3 Go to an 80/20 Coinsurance instead of the current 90/10% Coinsurance. All other costs/charges would stay the same with an 11% increase in premium.

Option 4 Change the prescription plan coverage from $5/$25/$50 plan to a $10/$35/$75 plan. If we keep all other coverage the same as we have now and change the prescription coverage we would have a 12% increase in premium.

Other options to consider would be to combine options 2, 3 and 4. The impact on rate increase choosing different combinations of the options would be different depending on options chosen.

Group Health
There would be a potential for lowering our premium by choosing one of the group health options but there would be a significant change in the benefits provided by the plan.

Jilk said a mini survey was completed by staff and Commissioners covered under this plan, and considering the cost of the coverage, in terms of a percentage of employee compensation/benefits, Jilk recommend that the Commission approve the Innova Plan quoted from Regence and choose the option of changing the prescription coverage.

Fiscal impact on the change, effective Sept. 1, 2011, will increase our operating expenses slightly above our budget for insurance costs in 2011 - approximately $6000 more for the remaining four months. A slightly lesser amount was budgeted for the increase for the remainder of 2011. Because other operating costs are slightly lower than budgeted, the District will experience no over-all budget change due to this change in premium.

ACTION: Commissioner McClure motioned to approve the Regence Blue Shield Innova 90/70/20 medical plan renewal for 2012, with the Option to change prescription coverage to a $10/$25/$35 co-pay plan effective September 1, 2011 and authorize the General Manager to sign on behalf of the District. Commissioner Kenner second the motion. Motion passed unanimously.

• Resolution No. 636 - Amend General Manager's Delegation of Authority
The delegation of administrative powers and duties of the General Manager will be modified by adding a new section in Resolution No. 636. Sitkin said there modifications deal with easements and temporary easements.

The modified section is as follows:

SECTION II.B. 1. A general utility easement form, and a temporary construction easement form have been prepared and attached as EXHIBIT A.

The Commission is authorizing the General Manager to sign and execute a general utility easement form and/or a temporary construction easement form as attached in Exhibit A, and consistent with any terms approved by the Commission in advance. This is not the authorization of the expenditure of any funds to acquire an easement.

The new section is as follows:
Section XVII. Policy regarding designation of general manager to accept offer to purchase bonds pursuant to RCW 39.46.040.

The District by resolution of the Commission is authorized to issue bonds for financing activities undertaken approved by the Commission. The District Commission authorizes the issuance of the bonds determining specific provisions pertaining to the bonds, including the issue amount, terms, conditions interest rate or rates, and other issuance details.

After the District Commission has authorized the issuance of the bonds, the District must formally accept the offer to purchase the bonds. This often would require the Commission to conduct a special meeting on short notice or at time during holiday seasons.

Sitkin said the State Legislature authorized local governments in 2011, to designate an employee of the District to accept, on behalf of the District, the offer to purchase the bonds on terms consistent with those approved by the District Commission. RCW 39.46.040 and RCW 39.46.040 (2).

The District will no longer be required to hold a special meeting for the singular purpose of accepting an offer to purchase bonds, having already authorized the issuance of the bonds and establishing the terms of the bonds.

This addition to the Delegation of Authority provides that the General Manager is the Commission's designated employee to accept an offer to purchase bonds on terms consistent with the Commission's requirements and conditions for the issuance of the bonds.

The Commission retains the sole authority to issue the bonds and to establish the specific provisions pertaining to the bonds, including the issue amount, terms, conditions interest rate or rates, and other issuance details. A Resolution to issue the bonds would call out terms and conditions. There is no fiscal impact to the District to modify Resolution 636.

ACTION: Commissioner McClure motioned to approve Resolution No. 636 modifying delegation of administrative powers and duties of the General Manager. Commissioner Kenner second the motion. Motion passed unanimously.

• Approve Change Order No. 1 - Elcon Associates' Work Order No. 9 for the Refinery Substation Redesign Project.
Background: The District executed Work Order No. 9 with EAI on December 1, 2010. EAI's original budget for services, including sub-consultants KPFF and EVO was $480,000. When Work Order No. 9 was executed, it was with the understanding that the District would handle the environmental permitting associated with the project because of its location within the boundaries of the Refinery and also the District would be the lead agency for the County SEPA process.

As the work of EAI and its sub-consultants proceeded Walters said there were several key factors that ultimately has significantly impacted EAI's scope of work identified in Work Order No. 9 and has prompted staff to request a change order increasing the budget for the work order. There are three major factors:

1. Environmental Permitting
Approximately $38,548 of the total change order amount is for environmental permitting and mitigation design work performed by the environmental consulting firm URS and the civil engineering firm KPFF. This work was not in EAI's original scope of work.

2. Design Specifications and Drawings
Because the substation was built during the 1950's there are no known existing drawings, for the subsation. The work of EAI and its electrical engineering sub-consultant EVO was significantly impacted by this and made things more complex due the lack of original design drawings for both the substation structural steel elements and the substation yard ground grid. This has required more site investigation and development of new drawings by EAI that was not anticipated in the original scope of work.

3. Phasing of Construction to Accommodate Refinery Operations
Originally the majority of the work needed to accomplished while the Refinery is in turn-around mode during the spring of 2012. District staff, working with EAI, found a way to accomplish the substation work to be completed without having to complete the work during a turnaround of the refinery. This created additional work by EAI though as some phasing of the project to coordinate and not interfere with Refinery operations was anticipated in the original EAI scope of work, much more work to refine the construction step by step activities was required.

Fiscal Impact of approval of the Change Order will increase the overall budget for EAI's and its sub-consultants' services from $480,000 to $571,723.

ACTION: Commissioner McClure motioned to approve Change Order No. 1 to Elcon Associates Inc. Work Order No. 9 (Project Design and Construction Management Services.)
Commissioner Kenner second the motion. Motion unanimously passed.

• BPA Power Selection for FY 2015 - 2019
Background: Beginning October 1, 2011, the District will begin receiving electric power supply from BPA under the new Regional Dialog Power Sales Agreement ("Agreement") it has executed with BPA. The first power purchase period under the Agreement will run through BPA's FY 2014, which ends September 30, 2014. For this period, the District previously selected BPA's Tier 2 Short Term Power Product to cover all of its power supply needs above its Tier 1 power supply allocation. The Tier 2 supply will be priced above the Tier 1 resource price, which is based on the cost of BPA's federal power resources. BPA will also provide load following services for all of the District's electric load variations.

The District must now (deadline is September 30, 2011) notify BPA of its choice of power supply resources to serve its above Tier 1 electric load requirements for the following reate period beginning October 1, 2014. Walters said that the load following product for Tier 1 is based on gas-fired combustion turbines and that gas prices are expected to stay low. Given the District's electric load forecast, currently the District has little need to acquire new power resources to cover its electric load requirements above its Tier 1 load allocation form BPA, which is priced at the lowest rate available for service to BPA's public utility customers. Therefore, District staff recommends the selection of BPA as its power supply provider for both its Tier 1 and Tier 2 electric load requirements. This is a status quo selection that staff believes to be in the best interests of the District from both a staff resource and cost perspective.

Commissioner Kenner asked if the short term (4 years) power can vary in rate. Walters said the rates are revised every two years. The District knows what the rates will be for FY 2013 and 2014 but not for the rate period beginning 2015. Walters added that BPA Tier 2 rates are now approximately $40 per MWh and $100 per MWh on wind generated power. Tier 1 averages $30 per MWh.

Selecting the Tier 2 power supply product option offered by BPA for the BPA FY 2015 through 2019 period will have no financial impact on the District's budgets for the preceding calendar years and the rate for the Tier 2 product will be known in advance and factored into the budget for future years covered by the power purchase period.

ACTION: Commissioner McClure motioned to approve the District's selection of BPA's Tier 2 Short Term power supply product for BPA contract years FY 2015 thru 2019 and authorize the District's General Manager to notify BPA of such choice. Commissioner Kenner second the motion. Motion passed unanimously.

• Manager's Report
EDI Board Presentation
Jilk gave a presentation at the EDI Board meeting on August 10, requesting funding for the Water Supply Plan. The EDI Board unanimously supported the request and sent it on to the County Council. The County Council will need to approve the funding and Jilk anticipates that to happen in their second September meeting. He said there were good discussions from all (Executive Kremen, Deputy Dessler, members from the Port, and small cities mayors) are all in very strong favor of the request.

Puget Sound Energy Water Contract
The first draft of the PSE Water Contract renewal for their Point Whitehorn location is now under development. Jilk said the existing contract terminates at the end of the year; however, he is working on the update now and expects to complete it by year end.

• Commissioner Kenner requested an Executive Session to discuss personnel matters related to the General Manager and Sitkin asked to include a brief update on water litigation. Kenner said the session will last approximately 10 minutes 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 8:23 a.m. to Executive Session.

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 8:44 a.m.

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