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, Commissioner Mike Murphy and Legal Counsel Jon Sitkin. Staff: Steve Jilk, General Manager; Ann Grimm, Administrative Assistant; Brian Walters, Director of Utility Operations; Annette Smith, Assistant Finance Director; Dennis Yabsley, Electric System Supervisor; Fred Disch, Water System Supervisor; Paul Siegmund, Process Engineer; Mike Macomber, IT/SCADA Technician; Duane Holden, Director of Engineering and Project Development; Alec Strand, Project Manager; and Lew Gaskill, Accountant 1. Public attending: Rick Maricle, ConocoPhillips; Jim Oakley, Energy Northwest; Tom Perry and Nate Hardy, 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 September 13, 2011 and the following claims of September 27, 2011.

• Energy Northwest - Jim Oakley
Oakley is the Senior Member Relations Representative for Energy Northwest (ENW). Highlights from the update include:

Columbia Generating Station
After the Japanese tsunami and nuclear power plant crisis, the Nuclear Regulatory Committee asked every nuclear power plant in the United States to address concerns of safety issues and potential loss of power in an emergency situation. All plants passed including Columbia. One safety measure updated at Columbia was the location of their large fire truck. The original design had the station constructed above the high water mark and it has now been relocated. Another required safety change is the ability for power generation when the plant is down. BPA supplies the power and Columbia also has backup generators and batteries. The batteries are designed to last four hours, long enough to properly shut down operations, however; the NRC now requests battery life lasts eight hours.

The plant was down longer than projected for the refueling. A condenser was replaced to improve efficiency and a lower radiation level. With the additional down time, maintenance that was scheduled for two years ahead was completed. As of today, Columbia will power up to BPA and be back online.

Packwood Dam
Packwood is operating at 100% with no cutbacks in generation.

Radar Ridge
ENW and the U.S. Fish and Wildlife Service (USFWS) continue to work through issues on permitting and Draft Environmental Impact Statement (DEIS) alternative actions. The DEIS is behind schedule. A USFWS contractor is preparing the DEIS and it is now currently on hold pending funding authorization. THE DEIS is requiring a $10 million mitigation fund and ENW may possibly walk away from the project. The Seattle Audubon Society as well as Pacific County citizens have indicated support on the project.

Nine Canyon
August 2011 net generation was 18,160 MWh which was the second highest generation in project history.

Kalama Energy Project
The Kalama Energy Natural Gas Generation Plant is a 346 megawatt natural gas combined cycle plant for Veresen. ENW recently presented 2011-2012 budgets to Veresen to reflect new permitting policies, preliminary plant cost analysis and power purchase structure. ENW estimates power price will be in the mid-$30 per MWh. Veresen pays for costs and additional expenses and ENW has the right to market 40% of the power.

Solar Generation Development
A joint development with Energetics LLC has a new project name: Christmas Valley Solar I. It is the largest utility solar project in the Northwest generating 4.99 MW. The project is completely permitted and ready to break ground. A power purchase agreement by Snohomish PUD is in final draft form, the BPA interconnection contracts are finalized and ENW is awaiting finalized local transmission agreements. The Business Energy Tax Credit making the power affordable expires in October 2011 so the project will need to receive notice to proceed with construction in order to take advantage of the federal and Oregon state incentives.

Commissioner McClure inquired about why BPA is not taking wind power and is there a solution because so many citizens are supporting wind power and it can't be used. Oakley said the reason has to do with salmon protection and spillage over the dams. When dams spill, it creates high levels of nitrogen in the water which can kill the fish. BPA requests the wind power be shut down because both sources create too much power for the grid. BPA offered "free power" to customers or negative pricing (pay the customer to take the power). When the wind power is shut down, customers are not receiving the Renewable Energy Credits. They claim that BPA violated the agreement but BPA said it was an anomaly with the unusually high level of run-off this summer. As such, a law suit is pending in the Ninth Circuit Court.

Another trouble created from high runoff is with transmission problems on lines going to California. BPA is working on getting more power on the existing lines. The situation of balancing power is the biggest problem. With too much power, the hydroelectric generation can't be reduced so the wind power is shut off.

Columbia is the only load-following nuclear generation in the nation. In the past, Columbia has operated at 80% capacity at night and then back up to 100% during daytime hours.

Commission President Kenner thanked Oakley for the update.

ACTION: For information only. No action requested of the Commission.

• Approve Change Order No. 1 - Interwest Construction
Holden said during the removal of solids from the Plant 2 east sediment pond project (RW-M-2), the contractor, Interwest Construction requested a change to the traffic control/safety plan. With the approval of the City of Ferndale, the number of flaggers was reduced from three to two, resulting in a project cost reduction for the District.

GeoEngineers analyzed the soils being exposed during construction and determined that some soils to the west end of the pond would be sufficient for use in the re-build of the ponds during the upcoming Plant 2 upgrade project. As such, the total amount of cubic yards removed was reduced below the engineering estimate. This also resulted in a cost savings to the District.

Whatcom County Public Works Dept. was unable to indicate the haul fees that would be charged to the contractor during the bidding process. As a result, there are two additional expense items for Whatcom County requirements added to the change order: The reimbursement cost of the bond and the reimbursement cost of the inspection fee. In total, the cost reductions and additions result in a net project cost reduction of $18,238.63.

There is no negative fiscal impact to the District's 2011 budget as the change order, if approved, reduces the cost of the project.

ACTION: Commissioner Murphy motioned to approve Change Order No. 1 to Interwest Construction, Inc's contract reducing the original approved contract dollar amount by $18,238.63 and authorize the General Manager to sign and execute. Commissioner McClure second the motion. Motion passed unanimously.

• Approve Resolution No. 637 and Purchase Order 11-0058 for Grundfos CBS, Inc.
Background: On August 12, 2008 the District's Commission approved Resolution No. 577, which authorized Grundfos CBS, Inc. as a Sole Source of maintenance repair work for the District's Water Plant No. 1 Paco/Johnston high head distribution pumps. Grundfos CBS, Inc. is the only regional factory authorized to do repair and reconstruction work on Paco and Johnston pumps. Therefore, the repair that is to be authorized with approval of the purchase order has not been competitively bid.

Walters said the Johnston Pump installed in the intake facility at Water Plant No. 1 needs repair service. Purchase Order 11-0058 covers the repair, including replacement of damaged parts. Included in the cost of service is the pick-up of the pump at the intake and the delivery once the service has been completed at the company's shop.

Resolution No. 637 authorizes Grundfos CBS, Inc. as a Sole Source of maintenance repair work for the District's Water Plant No. 1 Paco/Johnston pumps for not only high head distribution pumps, but also for intake pumps.

There is no fiscal impact on the District's 2011 Budget and will be funded out of the operations and maintenance portion of the raw water system budget.

Commissioner Murphy inquired why the District is bypassing the bidding process and the need for both a resolution and purchase order. Jilk replied that Resolution No. 637 indicates Grundfos CBS as the "sole source provider" (the only regional factory authorized facility) for maintenance/repair on the particular piece of equipment. The authorization of Purchase Order No. 11-0058 by the Commission is required because the amount of $31,680.92 exceeds the General Manager's purchasing authority.

ACTION: Commissioner Murphy motioned to approve Resolution No. 637 and Purchase Order 11-0058 for Grundfos CBS, Inc. in the amount of $31,680.92 and authorize the General Manager to sign and execute the Agreement. Commissioner McClure second the motion. Motion passed unanimously.

• Manager's Report
EDI Funding
On September 13 the County Council Finance Committee at their meeting reviewed the request for EDI funding for the Water Supply Planning project. A discussion lasting 1-1/2 hours about Roger Brown's letter and concerns about the funding was the main topic. At the full County Council meeting that evening, the EDI funding request was approved. Jilk said four of seven council members are relatively new and the County Council would like to have a discussion at the next County Water Resource Committee meeting in November regarding the project and the entire Watershed Planning Process. Jilk is working on an Interlocal Agreement with the county to implement the grant funded work. It is moving forward but not as quickly as he expected.

City of Ferndale
The city's water service contract will terminate at the end of the year. The city has asked the PUD for a month-to-month agreement in case their system does not go online when anticipated and also for a more long term backup supply plan.

Puget Sound Energy
The draft contract has been sent to PSE to review for their Pt. Whitehorn plant.

SSA/Pacific International Terminal
SSA took over the contract from Chevron in 2007 as it was assigned to SSA under the terms of property transfer. The PUD has received a request from SSA to revise the contract to reflect Pacific International Terminals. Staff will work to update the contract to bring language current and submit a draft to PIT for consideration.

Water Workshop
Commissioner Murphy indicated he would like to have a Commission workshop to discuss various water system issues. He is concerned about Ferndale dropping off the system and the financial impact that will create, the Grandview water system issues, and potential for new customers. Jilk said he would plan a workshop in addition to a regular commission meeting in October. Jilk also said that BP Cherry Point Refinery has mentioned that they want to reduce their operating demand and that this change, along with Ferndale City dropping off, will create a greater challenge to hold rates at the District's rate projections made a couple of years ago.

• Jilk requested an Executive Session to discuss water rights litigation. He expected the session to last about 10 minutes with no formal action to be taken afterwards. Legal Council was present. There being no further business for the regular meeting, the Commission adjourned at 8:45 a.m. to Executive Session. Commissioners came out of Executive Session at 9:10; and,

• There being no further business for the regular meeting, the Commission adjourned the regular meeting at 9:10 a.m.

President/Commissioner

Secretary/Commissioner

Commissioner