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PUBLIC POWER AGENCY MEETING MINUTES
August 30, 2007 at 4:00 p.m.
Members Present: John Montone, Chairperson, Timothy C. Lattimore, Luke Rybarczyk, William Graney, Vijay Mital, Mike Luksa, Dennis Zach, Krste Biljanoski
Staff Present: Michael Long, and Anthony DeCaro
One vacant position
Meeting of the Public Power Agency was called to order by Chairperson John Montone at 4:00 p.m. on August 30, 2007. Motion to approve the minutes from the August 2, 2007 meeting made by Vijay Mital and seconded by Mike Luksa and all in favor.
John Montone stated we would discuss the hydro first if Dave didn’t mind and then hear from Dave Koplas from Fluent Energy. John asked if the quote from Leffel in the amount of $42,300 is that for everything to be done and Tony DeCaro said it was, includes everything. Denny had put me in touch with this company, he had done work with them, he did the original wiring for that station. We also have a quote from Philadelphia Gear to refurbish the pivot gear for $97,000. Denny is bringing someone in next week, Brian Polcovich our mechanic and he is going to bring the bearings over to the plant to be examined to see if they are good. We have a spare set of bearings for the pivot gear and Philadelphia Gear can determine if those bearings are good we will be able to use that set rather than
purchasing new bearings. Some savings over the $97,000 quoted to refurbish the pivot gear. Mill Street is different from North Division in that the generator and turbine sit at right angle to each other so that the gearing has two pivot gears. John asked the total cost to refurbish and rebuilding, the total cost, is $100,000 to $200,000? Tony stated it is probably $200,000 because it won’t be until next week when I have someone looking at the generator. We are looking at $97,000 plus the $42,300 plus whatever the generator is going to cost. John said that is to put it back into working order, the way it was in 2003? Tony stated that is to get the wheel turning again. Mike asked if they would look at any of the energy efficiency if there was a different motor system? Tony stated it is refurbishing what is there. Mike asked if we should compare to a different turbine? John said Central Hudson had indicated to us that
they will help us with the hydro scenarios that we have going on here and not only do that one but the Dunn & McCarthy site and the other location. Central Hudson will be coming up once we get close, we have the agreement in place with the digester, we should get in a discussion with them on the hydros, and they may assign someone specifically for the hydros sites. Sephir said he would take a hard look at it. Tony asked with the deal with Central Hudson are we looking at having our staff doing the maintenance. Mike Long stated at this point in time we are looking at is what would they need and then we will see if it is something we can provide or not. Tony stated that would expedite our ability to assume in 15 years if our people are involved from the beginning. This would be the same for the digester. Mike Long stated there are going to be two levels of maintenance, one general to watch it to make sure things are running right, John
stated that the operation of the generation, the turbine has to be farmed out. That is all going to be in the agreement. John asked if this has been presented to City Council and Tony said all he has done is the inspections so far I am waiting to get more information. What to get all three figures, and see what recommendation the PPA wants to make. One of the things we have been looking at before which may or may not have a bearing on what we want to do at Mill Street at this point is some of the money that we were looking at would be necessary to get the wheel turning first but with some of the other ways that we have to pursue it, it may not be necessary to do that. If Central Hudson were to be a player and get that site and develop that it wouldn’t necessarily be important to us to have this site functioning first, they could just do a turn key. That gives us several options. End of December is when we have to start dropping
the lake, of course, with the weather we have had, we are over a foot where we should be because we are not getting rain. John stated that when you get the report bring it to the next meeting.
John introduced Dave Koplas from Fluent Energy; Dave represents Fluent out of Buffalo, handed out power point presentation. Dave said that Fluent Energy was formed in 1994 and we are energy consultants we specialize in the procurement of energy, the technical services associated with buying energy for large consumers in the natural gas and electricity markets. After being formed in 1994 when the New York Independent System Operator formed in November of 1999 we began managing, basically all our clients flipped from their gas to electric and we brought on a substantial load on the electric side. Electric is much more of a focus at this time even though natural gas is certainly gone through the roof and quiet frankly natural gas rises the cost of electricity in New York State. But essentially what we
do with respect to municipalities and most of our clients is aggregate load for the purpose of increasing the ability to participate in the wholesale market and maximize your purchasing power. You need a megawatt of load to purchase directly out of the electricity market if you have a significant volume of gas you attract suppliers that will give you a better price both on the bases which is the transportation piece bringing the gas up to New York State and the commodity supply piece as well you can trigger and hedge and budget your costs much better the more volume that you have. On the electric side what we often have is municipal aggregation groups, we have pretty much all the counties in up state New York. Many of them have 20 or 30 municipalities that will participate. What we do in the context of natural gas and electricity is provide reports that are tailored to your particular interests. We have reports that are tied to the individual facilities that
are part of an aggregation group and break down the wholesale cost, just aggregate them all the way down to the facility level, so in most cases we will have a municipality and will have a report that goes to Parks & Recreation, have a report that goes to Fire Department, Police, etc. and do a separate one for the City Hall building. That type of information allows the facility personnel and the CFO’s and the budget folks to view exactly where their dollars are going, in some cases find out where energy efficient projects are best focused. That same concept of reporting and cost tracking carries over to the electricity and again you are paying a wholesale invoice but all the costs are broken down to the individual facility level.
With respect to electricity, all electricity with the exception of bi-laterals and the types of things that John has explained to you that have been set up in certain circumstances where energy goes directly to the source, all energy in New York State is sold through the New York Independent System Operator. There are four ways to purchase; buy through utility which is the old way of purchasing your energy, you can buy from a traditional retail marketer, NYSEG Solutions, Constellation, that type of entity, you can buy from a wholesale aggregation group and in some cases wholesale may not be the right market, but a municipal oriented aggregation group is not profit oriented they can’t assume or take anything other than administrative costs so that is typically what we are talking about in this type of
situation. In that same vein we have a true not-for-profit corporation that is an ESCO the only one in the State, those types of entities we provide back in services to and turn those into turn key operations and a direct customer is very large entity that can purchase directly. Sales tax savings for a municipality but for private entities can save a fair amount of money on the sale tax as well because the transportation, transmission and delivery piece is not subject to tax. Mike Long asked if there is a minimum amount of electric you have to purchase in order to get into that kind of classification? NISO requires that you schedule in whole megawatt increments so you should have one megawatt of load there are circumstances where if you flip between ¾ and 1 ¼ you can massage schedules in that type of situation. Generally a flow of one megawatt is required. Most of our municipal aggregation groups 20 or 25 out of 30 members probably
won’t qualify for that one megawatt, you have a lead agent like the City of Auburn or County of Erie that could buy on their own and they bring sub-group members and they have done very well with the program. They just got the money from a grant A Shared Municipal Services Incentive Grant and they given $62,000 by this group that was formed a couple years ago to grow their aggregate so they are reaching out further into Chautauqua County, pulling in other potential entities, we are doing the analysis and savings in discussions with the different folks and those types of opportunities again are things that either you can individually do, take the lead or you can become part of an existing group that is something where you can take advantage of their infrastructure, billing and other services that they have already established and become a sub-group. The main factor is the size of your group.
From the perspective of risk management we have done more and more requests for proposals for bids on fixed products, traditionally in the electric market, you are looking at what they call contract for difference where the buyer and seller will agree on a strike price and settle upon the agreed energy at that price, it is certainly driven by budget and price certainty and that type of situation is very common especially with municipalities and schools. On the natural gas side what we will generally be doing is triggering at levels most of the time it is dollar cost averaging with our clients at this point, finding a market is not something that people are trying to do now, in the past they tried, watching for the dips, there have been quite a few dips in the market over the past month and a half, again whether or
not coming in and hurricanes not hitting, very similar to what happened after Katrina where the hurricane hit, winter didn’t come in and the prices dropped off substantially. But that type of thing on the gas side you can drive your risk management decisions toward delivering bottom line, that type of budget projection forward cost analysis telling you what your percentages that you are hitting the budget and where some flexibility or fluctuation going forward might impact that is all the type of thing that we do to make your job easier as far as facilities manager, budget or other issues along those lines.
Everything we do is open book any information we have is your’s, we store it in databases. Everything is tailored driven by your particular load change, your particular account, status, assortment of load and your ability to leverage relationships as opposed to being part of a large retail ESCO’s book, they will take advantage of opportunities that most often aren’t passed onto you. We discussed with John before when you have couple penny power or any type of NYPA contract, etc., there is nothing we can do for you, the only thing you can take advantage of are some of the ancillary services of load shedding, participation in response type programs. Mike asked what their rates are in terms of selling power to groups like ours. Dave said they don’t take title to the power so we
don’t mark it up, what you get from us is the wholesale market price that is set by NYSIO. Right now averaging about 6 cents. On average quoting with market has much better over the last couple years. Article 10 citing law that hasn’t been removed for four years, is a huge problem for the state and right now NYSIO is saying we won’t have enough power in 2010 maybe 2011, when Article 10 was in place it takes about a year to approve and five years to build a plant, so they are short power now so it doesn’t take much math to know the state is very short of power. Way they are managing that is with being a response piece and that is where if you have the ability to shut down services you can get paid for it and that type of situation will become more and more prevalent, more and more valuable. Municipalities do it through their water and sewer. We are paid based on kilowatt-hour usage of our clients’ facilities. We
put out an annual report that shows all your costs for the entire month, what we do every month is give a savings report too, results of what you purchased. We have a standard contract, typically a 30-day out. What we would do at that point would have you sign authorization form for us to account information for purpose of doing evaluation, would bounce whatever your load and cost figures off the wholesale market versus what you are paying right now and will give you an idea. John stated that we want to take it to the next level, to offer it to the community, residential, commercial and industrial. To give a savings to the community through Fluent, we would do some kind of campaign would you help us with that campaign. Dave said they do public meeting type things, list of F&Q’s tailor that to your situation. We are designed to have our people that have developed IT and software for 12 years do what you otherwise would have to hire how
many people to do as staff. Pay far more than you would for us to develop that. That is what we do across our entire customer base. There are grant dollars out there too.
Mike asked how many companies do this same type of service and Dave said they are aware of 3, not sure how many are active, the one that is active, I don’t know if they have like more than 2 or 3 customers they bid on a couple of things that we bid on and they took one of them, which was a state contract. They made their money managing ESCOs, they built infrastructure, then the ESCO needed them to rely upon for any changes, tweaks or problems so they have that recurring revenue, but I haven’t heard their name is probably a year – year and a half. Mike asked about MEGA, a not for profit group which is somewhat similar. Dave said what he understands about MEGA, we were involved in a SMI video conference and the manager of DPW for Erie County, submitted a question to the panel and I think
it was a bit of a shock the question coming in because what I think Erie County and the other groups they represent do something more sophiscated as I understand what MEGA goes they aggregate load, they put it out to bid and a bunch of ESCOs come in and I don’t know where MEGA’s feed come from, so I am assuming he gets a fee for whatever the RFP is and then the ESCO is going to have whatever premium they need, but in your case what you are doing, you are serving directly, buying out of the same market that ESCO is, everyone is buying out of that same market. If you can remove the middleman you only fee is our services. John asked how this agency get into that business to offer low cost or some kind of discount power to the community whether it be commercial, industrial or residential and have you do all the work. Dave said what we would need to have is approval from the Public Service Commission, you would need to present them with the type of contract
you are going to use with your customers, which I can help with because I have drafted most of them for type of customers that do that, you would essentially need educate them in some form or fashion. They would elect to join and they would transition into your group and the nice thing about municipal aggregation groups, the format of the credit department is changing a little, but early on what municipalities were allowed was a million dollar line of credit blanket line of credit toward their energy purchases, just because they were municipalities. What most municipalities were able to do was add an additional million for town or village that came on so out the gate some of these municipalities had 20 million of credit, but I think they are a little tighter now. You get set on the credit level and then with this contract arrangement whoever signs up is added to your group, that information comes in and affects our schedule that we submit to NISO and your NISO
bill grows as your load grows and you have an accounts receivable type function because you are getting billed calendar month by the NISO who has no more than 10 day turn around, you pay, you are getting meter reads from the utility like 30 days or so, your bank of some sorts, you can take deposits, or you can front it, that is one of the main things is the cash flow pace. Mike asked how often you aggregate up with new customers, add people at a date and then you cut it off for like a month. Dave said it is up to us, you can add daily if we want. Tim asked how it would work with the Empire Zone where the businesses are not being charged by the State, not putting the tax on it. What should happen because there are issues of that in different utilities, that should be coming off the T&D bill, so if it is coming off the transmission and delivery fees it does not impact the ability for them to save on the commodity fees and that type of thing again is an
analysis that we do because if it doesn’t make sense obviously we wouldn’t want them in with you. That was something that we had to argue with NYSEG and National Grid as well and some of the PSC cases because they originally took it off the commodity fees which meant they had those customers captive and of course they did it for all the larger customers so that now all those contracts should transition to where it comes off the transmission and delivery fees. We would look at it bill by bill. That is probably what you are going to get, more sophiscated folks, and larger businesses, that kind of thing. John stated that the tax savings is substantial and we have to look at that as to how much the City get in on the sales tax revenue off of that commodity. In Solvay we do not pay any sales tax on the utilities. Mike stated then the City would be short sales tax revenue. John said we don’t want to give it at one end and take
it away from the other, if your are burdening the City you are putting the burden on the taxpayers, not the ratepayers, so we have to take a hard look at it but we have the ability to offer tax exempt electric to these people. We could an electric tax on if you want. Mike said that right now NYSEG is paying the City back a 2% sales tax and if you take that off the fee then the City will be out, the General Fund will be out that revenue. John said we have to look at that; we have to crunch the numbers.
Mike asked to get our company involved do you give us a proposal of services? Dave stated we could put something a little more formal together, I am not going to send you 30 page, one I don’t want to do it and two you don’t want to read it. We will put something together that is a general overview and indicate if you would like us to help do an analysis, take initial account information review it for you, let us know at a point in time you become more serious we will start preparing applications and such to get your qualified. Again, you can be ready to go and not go, if you sit and shelve for a little bit. We will work with you to try and get you to a point where you feel comfortable. John stated a lot has to do with how we get the word out there, our goals to the people; this is
the first step that is a decision we need to make here. Dave stated that we could be an aggregator of load shedding entities and businesses that might join or larger users might join, we can commit 200 kw, line them all up, get their administrative fees, found money, that is why some people charge 50%. You have to qualify the load with the program and once you do that as long as you comply with the program it is going to be a good source of revenue. Mike asked if maybe the Power Agency had a resolution to endorse doing this initial feasibility portion of it, you did the research, come back with the numbers and then you do a contract. Dave said we will look into whatever type of information if you take a lot of times a half dozen large accounts and a half dozen small accounts, we will look at, see what the savings will be, whatever is the best sell for you internally we will facilitate. You want this popular; we will make it popular for you. You have
stats on average savings by service class, they are average, depends on different zones and such, but if someone was to call and say just how much will I save, say residents about 8%, if you float the market like the utilities do, you will save money. Mike stated as a board we can have you go ahead and get some numbers together, when you come back with the information, then bring that to Council at a public meeting. Tim made a motion to get started on this and Vijay seconded, all in favor.
Vijay made a motion to adjourn and Mike Long seconded. All in favor.
Notice will go out for the next meeting and that will be on hydro projects.
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