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PUBLIC POWER AGENCY MEETING MINUTES
April 18, 2007
Members Present: John Montone, Chairperson, Timothy C. Lattimore, Luke Rybarczyk, Vijay Mital, Dennis Zach
Members Absent: William Graney, Michael Luksa and Krste Biljanoski
Staff Present: John Rossi, City Attorney, Michael Long, Anthony DeCaro and Mark Storrs
One vacant position
Meeting of the Public Power Agency of April 18, 2007 was called to order by Chairperson John Montone at 4:00 p.m. Tabled acceptance of March 14, 2007 meeting until next meeting in May.
Kathy Stokes from OCM BOCES spoke about the gas agreement, which is expiring the end of April 2007 and asked for background on the Public Power Agency. OCM BOCES does not give you a proposal, what we do is when the contract comes up we bid new natural gas and/or electric, we send out letters stating what the prices are, where things are at and every one makes a decision whether it is the right thing for them to remain in the program or to opt out of the program. Locked in with Hess Corporation, they were award winner of our last bid, we asked for a one and two year deal, they bid a one and two year deal along with three other vendors and they also bid a five year deal. We are in the process of setting contract language and getting the attorneys to agree on the contract language for the contract to start
May 1. Once signed between OCM and Hess Corporation, then we start locking in prices. We are going out through 2012, doesn’t mean we have to lock in all of the gas through 2012, we can pick and choose what years, what terms. We have a five-year deal with Constellation on the electric, which does not expire on May 1, 2010. This is your option deciding if OCM BOCES program is the right thing for the City.
Couple years ago gas pricing, when we locked in, we were paying about $1.40 a therm for gas, that was high. When we locked it in Hurricane Katrina had hit, still reeling from that gas was locked, not producing gas in the Gulf of Mexico. Right now we are looking at the fact that they have predicted a major hurricane season. When Hurricane Katrina and Hurricane Rita hit those things put a whole different spin on what you are looking for pricing. We went month by month for a while, but when we locked in at $1.40 a therm for gas they were predicting $2.00 a therm for gas going into the winter months. Our job to give you the best protection and take out the most amount of risk by locking in something. Unfortunately when we locked in to give you some protection against the $2.00 gas and who
knew next January the market went down, you are paying for it, that is the risk we take. We try to give you the benefit of not taking those huge spikes, majority of our participants are school districts and when we ask all participants if they want us to do something different, they really want something to budget with. Unfortunately the down side of that is if we lock in what we think is a good price from the information that we have at the moment and some thing happens and the market turns down, we are stuck for the length of the time frame. This past year the market had come down and we had locked in only a particular section of that, you are paying about a $1.20 a therm. We are trying to do the best job we can with the information that we have at the time.
Chairman Montone asked the contract that was signed by the Mayor that took care of the electric and gas, was the pricing presented and proposed to them when you said you were going to lock in. Kathy stated that the City received a letter letting them know that Hess Corporation was the bidder and the price and they signed one of the participation agreements. Pricing will be somewhere between what City is paying now and down to about a $1.00 a therm. We only lock in what is called the bases price to get the gas from the Gulf of Mexico up to City gate, delivery point in NY State. We only lock in the bases price, which is the cost of doing business on the interstate pipeline. Once we sign contracts then we lock in the NYMEX for “x” amount of time. We can lock
in for the next five years or eighteen months, and keep going as the market warrants. Once we firm up the contracts I ask them to give me NYMEX pricing, they send me an email and I have an “x” amount of time to sign it or not. If the price is too high, I don’t sign it, we wait a day, we wait an hour, and we wait whatever. We try to get target points and try to come within those target points. If we are don’t like the price for the first year, we can go a month on the market price and market settlement at the end of the month and if the market settles down in May we can lock in for whatever amount of time. You need to understand that we pay all your utility bills for you, we pay all the supply bills for you, and we are the bill payer for you. You get reports, copies of your utility bills, your bills are audited, make sure you are getting billed the right rates from the utility company under the right rate structure. We have received over One Million Dollars in refunds from
the auditor. We have an arrangement with the auditor that they get 25%, or the past due, whatever they find due to erroneous billing, you get 75%, everything runs through us. The administrative fee for every thing no matter what we do or don’t do for you is $490 per account per year or $90 per account if it a low usage, $90 accounts are anything less than 25,000 kilowatt hours a year usage or less than 10,000 terms a year usage. The discrepancies with School Districts versus municipalities, the State Education Department has set up so that any School District running through a BOCES program that is aidable of which this is, not the cost of electricity and natural gas itself, but the program fee that is State aidable, so the districts get their State aid the following year on those administrative fees. They are paying the same $490 or $90 that you are, they get the benefit of the State aid on this cost. For municipalities it is truly a cost issue
doesn’t make sense to be in the program, are you saving enough money to be in the program? In the past few years that you have been on the program you have saved a tremendous amount of money and you have one time that you aren’t saving money and everything comes screeching to a halt. Take a look at your past years cost comparisons, we have done them for the last 4 years, and see how much money you have saved over all being in the program. Everything we do for you from paying your bills, to the audit, we don’t bother anyone here at City Hall for the audits, they come to our office, go through the file cabinets, we send you copies of things, send you reports, those are all services we provide for you.
The electric rate has been locked that is good for 5 years. The 5 year deal with Constellation the first two years remain the same as far as cost per kilowatt hour, the third year which we are going to enter into May 1, goes up roughly 3%, the 4th year goes up another 1% and the 5th year goes up 1%, so out of 5 years you are going to see roughly about a 5% increase across those 5 years. Never have we been able to give you that. Before it was from a 2-year deal to the next deal, it was roughly between 18 & 23%. We have sent the estimated costs to Lisa Green and you are locked in on the electric until 2010. John Montone asked if we had the ability to find 5 cents a kilowatt hour, Kathy said that we would have to pay their losses, what City of Auburn should been
consuming through 2010. If less is used there is no cap. You are saving tremendous amounts of money on the electric side, we do cost comparisons every year, it is an average across our whole group, gives you an idea where market prices have been, a spreadsheet and a graph showing you how much you have saved.
On agenda is review of Blue Rock agreement. Phil VanHorn as you recall was here before and gave us a presentation. Basically what the agreement says what he will do for us and what we would have to do. We will do the marketing, put a public relations campaign out, etc. So at some point soon we will need to make a decision if we want to go with Blue Rock.
Jim Olcott, an associate with Constellation Energy Project gave a presentation. The concept is to use your own resources to make your power and sustainability concept, everything is maintained in the City of Auburn. Everything from your hydro plants that can be re-commissioned that can increase in efficiency, your agency exists, your kilowatt-hours can be scheduled for you and basically consumed by you. This is a little down the road but the immediate situation here is the landfill and Constellation is not some body that comes in builds you something and then sends you a bill. They have a concept called the BOOM, which is the build, own, operate and maintain. That means they will come in design the plant, build the plant and operate the plant and simply work off the equivalent of a commodity
contract. You have the end users ready to commit to purchase this energy, we will come up and build the plants, that is the over all concept. The BOOM concept is that we will come in look for that blend, build the plant, will own the plant or finance the plant or a blend of the two. Take the landfill project as an example; ECOTS has been working very hard in creating this concept to create value out of the landfill. ECOTS asked the City if they could discuss this concept with Constellation to fast track this project. There are dollars that are being lost every day and ECOTS can quantify that value to justify why to move quickly on this. Constellation would come in and do everything that needs to be done to get the final stage, even though the first stage is 600 – 800 K generator. Then as we grow into use of that gas we will keep doing that infrastructure as long as the City of Auburn is still interested in continuing to consume that
energy. How will this help the City? There are a lot of risks associated with owing a power plant. Beepers go off in the middle of the night, engine heads blow, lot of issues that need to be maintained. Every time that happens there is a loss of revenue, an impact all the way down to the taxpayers. In this scenario those kilowatt hours are being produced, supplied to the City, if the power plant goes down, the power is then provided from a scheduled purchase, kilowatts are still there, nobody loses any power, the plant is the responsibility of Constellation to get it back up and running. Staff at the plant would be a combination City employees to maintain the day-to-day operations, for major overhauls we could come in and take care of that, any emergency breakdowns we take care of that. We turn the project around very quickly. Constellation would own the generating facility and the digester would belong to the Public Power Agency. Mark Palesh asked if we could buy it from
Constellation over a period of time. Jim said they would write it until after term of abandonment. We pay throughout the commodity contract. Mark asked if they have a client in New York that has done this. Our renewable project is in PA. Mark asked how involved they were with it. The company took it all the way through. If the City starts producing more power than they can consume Constellation can take that power and put it on the open market. John Montone said this is in the talking stage but we want to get it down to some serious discussion.
Next on agenda is clean renewable energy bond application. We met with ECOTS and Bill Cetti and they are going to apply for the clean energy bonds, 1.2 billion is available for projects like this. Moving forward with grant application. July 13, 2007 is the deadline for the applications.
North Division Street dam is back on line since April and with run off we have now it looks like power will be generated in less than a month. Not at full capacity, on a temporary transformer, running at about 625 KBA, expect transformer back in about 3 to 4 weeks.
Meeting adjourned at 5:45 p.m.
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