July 17, 2008
The regular meeting of the Board of Directors of the Omaha Public Power District was held in the Board Room on the Atrium Level of Energy Plaza East, on July 17, 2008, at 7:00 p.m.
Present were Directors M. J. Cavanaugh, N. P. Dodge Jr., J. K. Green, G. C. Hall, A. L. McGuire, J. R. Thompson, F. J. Ulrich and D. D. Weber. Also present were W. G. Gates, President; M. C. Bodammer, Corporate Secretary; and S. M. Bruckner, General Counsel for the District. Mr. Ulrich, Board Chair, presided, and Mrs. Bodammer, Corporate Secretary, recorded the minutes. Other members of Management present were D. J. Bannister, T. J. Burke, A. J. Minks, C. P. Moriarty, D. F. Widoe, R. T. Boro, J. T. Hansen, G. R. Williams, J. J. Hanson, S. R. Crites and M. R. Jones. Others present were K. S. Dowdy from I.B.E.W. Local Union #1483; and approximately sixteen customer-owners and employees of the District.
The Corporate Secretary read the following:
“Notice of the time and place of this meeting was publicized by notifying the area news media; by publicizing same in the Omaha World-Herald and Outlets; by displaying such notice on the Arcade Level of Energy Plaza since July 11, 2008; and by mailing such notice to each of the District’s Directors on that same date.
“A copy of the proposed agenda for this meeting has been maintained, on a current basis, and is readily available for public inspection in the office of the District’s Corporate Secretary.
“Additionally, a copy of the Open Meetings Law is available for inspection in the public meeting book located in this meeting room.”
It was moved and seconded that the Board reviewed the May 2008 Comprehensive Financial and Operating Report and that the minutes for the last meeting be approved. The vote was recorded as follows: Cavanaugh – Yes; Dodge – Yes; Green – Yes; Hall – Yes; McGuire – Yes; Thompson – Yes; Weber – Yes; and Ulrich - Yes. The motion carried.
Thereafter, the Corporate Secretary read the following:
“Persons wishing to address the Board on a particular item are asked to approach the microphone as that agenda item is discussed. Comments will be heard following Board discussion of the item and prior to a vote by the Board.”
The following resolutions were then read, and upon motion duly seconded, were placed on roll call. The vote on each resolution is indicated following the description of that resolution.
RESOLUTION NO. 5710 approves the final reports on the Public Utilities Regulatory Policy Act of 1978/Energy Policy Act of 2005 (PURPA/EPACT) Net Metering, Fossil Fuel Generation Efficiency, and Fuel Source Diversity standards, and initiates consideration of five new standards required by the Energy Independence and Security Act of 2007 on Integrated Resource Planning, Rate Design to Promote Energy Efficiency, Smart Grid Information, Smart Grid Investments, and Excess Power Generated at Waste Energy Projects. Steve Bruckner, General Counsel, responded to a question raised regarding the legal necessity of bringing this item before the Board. He stated that as a result the Public Utilities Regulatory Policy Act of 1978, Congress mandated that all utilities, both public and investor-owned, consider these standards. He said several standards have been considered since that time. The Energy Policy Act of 2005 added a number of additional standards and those are the ones that are up for approval. Utilities are required to consider the standards, but are not required to adopt them. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Dodge – Yes; Green – Yes; Hall – Yes; McGuire – Yes; Thompson – Yes; Weber – Yes; and Ulrich - Yes. The motion carried.
RESOLUTION NO. 5711 approves the award of Request for Proposal No. 2822 – 15.5 kV Outdoor Breakers for Substations 924 and 928 – to ABB in the amount of $175,406. It was noted by Director McGuire that this work is part of the Transmission and Distribution Improvement Program (TDIP) to improve system reliability. Vice President Widoe responded to a question raised by Director Thompson regarding whether this particular improvement is related to reliability issues related to animals. Mr. Widoe stated this work is to replace outdoor breakers with more modern, reliable devices and has nothing to do with animal control. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Dodge – Yes; Green – Yes; Hall – Yes; McGuire – Yes; Thompson – Yes; Weber – Yes; and Ulrich - Yes. The motion carried.
RESOLUTION NO. 5712 approves the award of Request for Proposal No. 2812 – Substation 1305 – Foundations, Cargill Campus, Blair, Nebraska – to General Excavating in the amount of $922,205. Director Green raised a question concerning the current load at the Cargill campus. Vice President Burke stated Cargill’s current load is approximately 100 MW and they will be adding 150 MW (100 MW off peak and 50 MW on peak). Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Dodge – Yes; Green – Yes; Hall – Yes; McGuire – Yes; Thompson – Yes; Weber – Yes; and Ulrich - Yes. The motion carried.
RESOLUTION NO. 5713 approves the Engineer’s Certification and authorizes the District to enter into a contract with Falk Renew Prager & Rexnord Inc. for the rebuild of the Nebraska City Station Unit 1 spare pulverizer gear reducer in the amount of $170,711.70. Following discussion, led by Director McGuire, the vote was recorded as follows: Cavanaugh – Yes; Dodge – Yes; Green – Yes; Hall – Yes; McGuire – Yes; Thompson – Yes; Weber – Yes; and Ulrich - Yes. The motion carried.
RESOLUTION NO. 5714 authorizes management to execute agreements for the coal supply, rail transportation, and track maintenance contracts for 2009-2013. Considerable discussion followed concerning the substantial cost of the contracts and the negative impact for the District’s customer-owners. Director McGuire indicated there will be rate increases as a result of the new contract agreements; however, she could not predict the size of the increase until a thorough evaluation is made. She commended management for their negotiating efforts stating they did all they could to get the very best market price. Director Green inquired as to why the prices were so high as compared to what we were paying for the last five years. Vice President Widoe responded that demand, as well as railroad capital investments and financial pressures by Wall Street (by the railroad) are probably the key factors. Mr. Widoe stated evidence indicates the rate which the railroad has proposed amounts to, in management’s opinion, more than their actual cost increases; however, in spite of this, they submitted the lowest bid proposal among the vendors solicited in the Power River Basin. The Powder River Basin is the only economically feasible supplier of low-sulfur coal that all District fossil stations are designed to operate with and that also complies with federal regulations of the Clean Air Act. Mr. Widoe responded to other questions concerning how coal fits into the District’s mix of fuel usage, stating coal makes up about two-thirds of the District’s annual generation and he added it is far more economical than gas, other fuel choices, including other forms of alternative energy. He confirmed Director Thompson’s comment that the previous contract awarded in 2003 contained substantial protection for the District and its customer-owners and was a very competitive rail contract. He also verified Director Hall’s observation that the utility industry as a whole is experiencing significant increases in fuel and rail transportation charges. Director Green posed a question to Vice President Moriarty regarding the affect of these contracts to the District’s bottom line. Mr. Moriarty indicated the net increase will amount to approximately $90 million annually which is not included in the budgets, rates or cash flows and which will need to be addressed. He also confirmed that there are no scheduled rate increases resulting from this contract for the remainder of 2008.
Director McGuire called upon President Gates to address what the District is doing with renewable energy. Mr. Gates reported on OPPD’s current investments in wind and wind farms, methane gas, and solar projects with Creighton University and Omaha businesses, with a primary emphasis to keep rates affordable and to ensure energy reliability. He commented this new contract exceeds what was originally budgeted for 2009, and therefore the budgeting process will be reviewed again. He followed with a brief update on the future of nuclear generation. Thereafter, Board Chair Ulrich commended management for its vision in establishing a diverse mix of various fuel sources. He voiced disappointment in the final bid proposals from the railroads. Director Green requested that President Gates address current conservation efforts and sustainability issues currently being evaluated, and Mr. Gates provided a brief update.
Board Chair Ulrich requested public comment on this resolution and Mr. Kurt Wullschleger, 128 Ginger Cove Road, Valley, Nebraska asked that the Board provide an explanation on the fuel costs projected in the Integrated Resource Plan which appear to need revision. Vice President Widoe explained the numbers projected in the current IRP do not reflect fuel costs associated with the proposed new coal and rail transportation contracts and will therefore need to be revised. Mr. Wullschleger requested that management and the Board become more proactive in developing renewable energy sources. After considerable discussion, Board Chair Ulrich requested that the Board return to the original contract issue being considered, and invited Mr. Wullschleger to continue the renewable energy discussion during the public comment segment of the Board meeting.
Director Green inquired whether the District would benefit from delaying action for 30 days in the hope of receiving better bid proposals from the railroads and coal vendors. Vice President Widoe replied such action would likely result in even higher bids and he would not recommend this action. Board Chair Ulrich again commended the management team for its efforts during the coal supply, rail transportation and track maintenance contract negotiations.
Thereafter, the vote was recorded as follows: Cavanaugh – Yes; Dodge – Yes; Green – Yes; Hall – Yes; McGuire – Yes; Thompson – Yes; Weber – Yes; and Ulrich - Yes. The motion carried.
Copies of the foregoing resolutions are filed in the District’s Corporate Records file.
At this time, Board Chair Ulrich recognized Ms. Denise Bradshaw, 1725 Bowie Drive, Omaha, Nebraska 68114-1616. Ms. Bradshaw asked the Board what they are doing technically to prevent the many power outages. She said there is a big problem within the older sections of Omaha, including her neighborhood, with repeated outages and she suggested that underground cables rather than overhead lines might be a solution. Board Chair Ulrich stated that most power outages, especially during the June 27 storm, are caused from trees falling down onto power lines. He commented that underground lines do not necessarily offer a solution because they are more expensive to the customer-owner and may also be unreliable because underground lines can also fail, are more difficult to locate and often involve rather invasive intrusion on property owners’ lawns. He said OPPD has an aggressive tree trimming program designed to prevent and reduce instances of power outages due to fallen limbs. Additionally, the transmission and distribution system is currently in the process of being upgraded to improve reliability. Ms. Bradshaw asked for clarification on his response. Director Ulrich restated that OPPD is currently working on a project to upgrade its transmission and distribution system by improving and in some cases rebuilding its infrastructure. Director McGuire added the program’s name is the Transmission and Distribution Improvement Program (TDIP), and verified with Vice President Widoe that $170 million has been allocated above the normal capital work in the system over the next ten years. Mr. Widoe said approximately $17-18 million of additional capital is allocated for 2008 for new and replacement equipment. Many of these things will be helpful, but he commented everything is susceptible to tree damage. Director Hall suggested that Ms. Bradshaw’s address be researched to determine what circuit she is connected to and to find out if any maintenance work is scheduled for her area. Ms. Bradshaw then asked if there is a tree trimming policy in place so that customers and neighborhood organizations might be better educated on their trees and their responsibilities for maintenance. Director Hall invited Ms. Bradshaw to stay after the meeting to provide appropriate information concerning her immediate needs.
Thereafter, President Gates presented the first President’s Award to Max Smelzer, a six-year District employee in the Facilities Management Division. In March 2008, Mr. Smelzer assisted a blind man, who had fallen face down onto the sidewalk at a bus stop near 16th and Farnam Streets. Max immediately ran to the scene to assist and asked a bystander to call 911 for emergency medical assistance. Just weeks prior to that incident Max had completed CPR and First Aid training classes through the District and was able to perform CPR and assist the man until an ambulance arrived, most likely saving the man’s life. Mr. Gates then read a complimentary letter written by witnesses of the incident. He introduced Max’s wife, daughter and other family members who attended the Board meeting. Thereafter, Max expressed his appreciation for the honor, thanked Mr. Gates for the award, and also thanked OPPD for giving him the opportunity to learn life-saving skills.
There being no further business, the meeting adjourned at 7:56 p.m.
A. J. Minks M. C. Bodammer
Assistant Secretary Corporate Secretary