The regular meeting of the Board of Directors of the Omaha Public Power District was held in the Blair city offices, 216 S. 18 Street, Blair, NE on August 16, 2012, at 7:00 p.m.
Present were Directors M. J. Cavanaugh, N. P. Dodge, J. K. Green, A. L. McGuire, L. Scheve, J. R. Thompson, D. D. Weber, and F. J. Ulrich. Also present were W. G. Gates, President, and S. M. Bruckner and Troy Meyerson, General Counsel for the District. Mr. Dodge, Board Chair, presided, and Ms. Emerson, Corporate Secretary, recorded the minutes. Other members of Management present were D. J. Bannister, T. J. Burke, E. E. Easterlin, M. I. Doghman, J. T. Hansen, S. L. Hutcherson, L. A. Olson, D. Jacobberger, A. Wunderlich, M. R. Jones, P. E. Lukowski, T. G. Tamke. Others present included J. Hazen of JD Power, and several OPPD employees and customer owners.
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 the same in the Omaha World-Herald and Outlets; by displaying such notice on the Arcade Level of Energy Plaza since August 10, 2012; 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 June 2012 Comprehensive Financial and Operating Report and approval of the minutes for the last meeting be approved. The vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Abstain; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Dodge – 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. Persons wishing to address the Board on all other matters will have an opportunity before the close of the meeting."
The following resolutions were then read, and upon motion duly seconded, were then placed on roll call. The vote on each resolution is indicated following the description of that resolution.
RESOLUTION NO. 5916 approval of the appointment of Investment Managers for OPPD’s Retirement Plan. Committee Chair Cavanaugh this item is to approve the appointment of Investment Managers for the OPPD Retirement Plan. In August 2011, the Board approved an updated Statement of Investment Policy (“Policy”) for the OPPD Retirement Plan that included the addition of five new asset classes. In September 2011, the Trust Selection Committee, assisted by Segal Rogerscasey, the District’s investment advisor, established an implementation plan for hiring investment managers in the new asset classes. As the final phase of the implementation plan, a search was conducted for Retirement Plan investment managers in the Emerging Markets Fixed Income and High Yield Fixed Income asset classes using criteria established by the Board of Directors. The Committee reviewed four leading candidates in the Emerging Markets Fixed Income universe and interviews were held with BlueBay Asset Management LLP (“BlueBay”) located in London, United Kingdom, and Stone Harbor Investment Partners LP (“Stone Harbor”) located in New York, New York. BlueBay and Stone Harbor both exceed all of the Policy consideration criteria for an investment manager. The Committee reviewed four leading candidates in the High Yield Fixed Income universe and interviews were held with Neuberger Berman Management LLC (“Neuberger”) located in New York, New York, and Oaktree Capital Management, L.P. (“Oaktree”) located in Los Angeles, California. Neuberger and Oaktree both exceed all of the Policy consideration criteria for an investment manager. The Committee recommends that the Board of Directors appoint Stone Harbor as an Emerging Markets Fixed Income investment manager and Neuberger as a High Yield Fixed Income investment manager for OPPD’s Retirement Plan. Attached is a letter from Segal Rogerscasey outlining the manager search process and concurring with the Trust Selection Committee’s recommendation to appoint Stone Harbor and Neuberger as OPPD Retirement Plan investment managers. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Dodge – Yes.
RESOLUTION NO. 5917 authorizes management to negotiate and enter into a contract to furnish Chemical and Volume Control System (CVCS) pipe replacement welding services at the Fort Calhoun Station. Committee Chair Thompson said that this is to authorize management to negotiate and enter into a contract for site welding services required to replace selected portions of the CVCS. This CVCS piping replacement needs to be completed prior to plant restart. A limited number of vendors have the capability to successfully provide the needed specialty welding services for this pipe replacement. The installation work will require special field machining and welding capabilities, as well as radiography services. Compliance with the sealed bidding provisions of the Nebraska State Statutes 70-637 through 70-639, as amended, would be impractical and not in the public’s best interest. The total value of the contract is estimated at $1.5 million. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Dodge – Yes. The motion carried.
The next item of business was presentation of the results of the JD Power 2012 Electric Utility Residential Customer Satisfaction study. Chairman Dodge introduced Mr. John Hazen who presented the following information.
On-line interviews completed across four quarterly fielding periods from July 2011 through May 2012
104,237 responses collected; OPPD has 1,015 responses
126 brands ranked in 8 regional size segments
Four regions (East, Midwest, South, and West)
Large utilities (500,000 households or more)
Midsize utilities (125,000 to 499,999 households)
Mr. Hazen reviewed the Midwest Midsize Segment overall Customer Satisfaction Index
He reviewed how the OPPD brand compares to the midwest midsize segment average
Mr. Hazen reviewed
Opportunity - CSI is 100 points higher for OPPD when customers recall restoration contact
Corporate Citizenship efforts
OPPD Environmental efforts
Opportunity – increase energy savings program awareness
At this time, Mr. Hazen presented the JD Power Award to Chairman Dodge. Chairman Dodge noted the last year has been very trying for the District and he credited all of the employees for their dedication and hard work. He added that it is because of the employees’ efforts that OPPD has been able to win this prestigious award a record 12 years in a row.
RESOLUTION NO. 5919 approves the sale of property at Substation 1236 (144th & Blondo Streets). Committee Chair Weber said this item is to approve the sale of property at Substation 1236. The property is located at the southeast corner of 144th and Blondo Streets and this action will allow street improvements by the City of Omaha with the sale of 36,375 square feet (0.84 acres). The sale of the property does not adversely affect the operation of the substation now or in the future. A permanent easement is being reserved over the entire purchased area for operation and maintenance of OPPD’s equipment with the ability to add future equipment. City appraisers have estimated the value of the property at $3.00 per square foot for a total amount of $109,125. OPPD will also provide a temporary construction easement of 4,425 square feet (0.10 acres). Director Weber asked the Board for authorization to convey the property to the City of Omaha for $109,125. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Dodge – Yes. The motion carried.
RESOLUTION NO. 5918 authorization for management to enter into an operating services agreement for the Fort Calhoun Station. Committee Chair Green said Exelon Generation Company, LLC, operates the largest fleet of nuclear power plants in the country. The benefits of operating within a fleet of nuclear units are widely accepted in the industry and by the Nuclear Regulatory Commission. Exelon is considered a top operator within the industry. Since January 2012, Exelon has been providing services to the District related to the recovery and restart of Fort Calhoun. Exelon has proposed to transition to a long-term operating agreement. The District would remain the licensed operator of Fort Calhoun. Management has negotiated a contract with Exelon to provide operating and management support at Fort Calhoun for up to the remainder of the plant's license period. This support would be provided through a team of key onsite personnel from Exelon, including the site vice-president and plant manager. Exelon also would provide its corporate nuclear fleet services and the use of its nuclear management model. The District would pay fees for the onsite team, plus fixed annual management and licensing fees. Management's evaluation of the proposed contract shows a positive net present value when comparing the cost of the Exelon operating services agreement against expected efficiencies and performance improvements.
At this time, Chairman Dodge called upon Mr. Gates to give a power point presentation. Mr. Gates presented the following information:
Offline for refueling outage April 2011
Missouri River flooding summer 2011
0350 NRC finding December 2011
Restart date and costs continue to be pressured
Economies of scale
Lower energy output to support high fixed costs
Negotiating leverage for services, materials and supplies, and fuel
Attracting and retaining employees
Capacity to handle multiple large projects
Single unit challenges were recognized and understood in the past
Safe and reliable operations were achieved prior to 2011
2011 flood event and 0350 action intensified single unit operating challenges
Changing operating environment favors technical depth and access to a large leadership pool
As a result of these single unit challenges and changing operating environment, continued single-unit operations at Fort Calhoun may not be an effective option
Importance of fuel diversity
Nuclear energy has enhanced strategic value compared w/natural gas
Lower fuel price volatility
No carbon emissions
Traditional base load capability
Continued restart and recovery activities and enter into a long-term contract with Exelon Generation Company, LLC to manage FCS.
Exelon – Nuclear Overview
Owns and operates approximately 20% of US nuclear capacity
Largest U.S. owner of nuclear generation
17 reactors in 10 sites
8,700 nuclear employees
Proprietary Exelon Nuclear Management Model has a proven track record of optimizing nuclear plant performance
Currently providing services to FCS in recovery effort
Leading performance in key industry performance categories (capacity factor, outage duration, and non-fuel production cost)
Exelon Operating Agreement
OPPD remains NRC licensee
Key Exelon services provided
Responsible for day to day operation of FCS
10 initial key management positions, including Site Vice President/Chief Nuclear Officer
Reduced to a minimum of 5 positions beginning in 2016
OPPD CEO has right to approve Exelon personnel to fill positions, request removal of Exelon personnel for non-performance, and approve Exelon request to transfer Exelon employees off of FCS assignment
Review and submit recommendations for Fort Calhoun operating budgets, operating plans, and strategic plans
Develop and advancement of OPPD staff
Ability for OPPD staff to work and train in Exelon facilities
Opportunity to advance to all FCS leadership positions except site Vice President
Support of Exelon’s centralized fleet services
The operating and licensing agreements are forecasted to provide substantial financial benefits
Reduced resources to run the plant
Shorter duration of refueling outages
More favorable pricing terms w/vendors and suppliers
More cost-effective response to emerging markets
OPPD’s mission is to provide affordable reliable environmentally sensitive energy services to our customers
Preserve 20% of zero carbon emissions base load capacity
Increases the safety, reliability and efficiency of FCS
Provides a positive net present value of the contract term
Operating a single nuclear unit in today’s regulatory environment presents a significant challenge
Exelon is an experienced and highly regarded nuclear operator and potential partner
NPPD’s experience w/an outsourced management model at Cooper Nuclear Station has been positive
OPPD customers will experience long-term benefits from a FCS/Exelon partnership
Management recommends Board of Directors’ authorization to continue negotiations and execute an Operating Services Agreement and Licensing Agreement with Exelon Generation Company, LLC
Committee Chair Green commented on his history with the Fort Calhoun Station and reviewed historical events that occurred over the course of the plant’s operation. Mr. Green also noted that this past year has been extraordinary for the utility and that everyone has worked so hard - - from working to keep the plant from flooding to working towards bringing the plant back online. And after listening to the NRC, he is convinced that we are not going to be able to open the plant without this type of agreement. Mr. Green believes this is in the best interest of the utility. He also said that from an environmental standpoint, this is the right thing to do. He continued by stating the regulations are changing and the environment is changing, as well as the nuclear industry is changing; and OPPD must move with these changes. He also indicated this has not been an easy decision for the Board, but it is the right decision for OPPD, for its customer owners, and for the future of the Fort Calhoun Station. Mr. Green at this point, recommended approval of the resolution to support the operating services agreement for the Fort Calhoun Station.
Director Cavanaugh said the Board had the opportunity to tour the Fort Calhoun Station prior to the Board meeting, and noted the pride and dedication of the employees. He also stated this has been a hard and emotional decision, but noted it is the right decision for the utility.
Director Weber asked President Gates what would occur if the agreement was not approved. Mr. Gates said OPPD would recover the unit and would continue to have performance issues. He also noted that this proposal is a model of sustained high performance for the remaining 20 years.
Director Weber also asked if OPPD checked with other plants that Exelon is operating. Mr. Gates said OPPD does have access to Exelon performance data and noted that Exelon operates at the highest level and is very well regarded in the United States.
Director McGuire commented that as secretary of the Board that it is important for our customer owners to understand that Edward Easterlin and Steve Bruckner of the District’s legal counsel were negotiating with Exelon individuals until Wednesday evening. Only after an agreement was reached, was the item added to the Board agenda. Mrs. McGuire also thanked Dave Bannister as Chief Nuclear Officer, and noted that Dave exhibits tremendous character and also thanked him for his leadership and hard work over the years.
Director Thompson added that a benefit to the District’s relationship with Exelon is their amount of resources and expertise with all types of power plant issues.
Director Ulrich commented that he saw the Fort Calhoun Station rebound from performance issues several years ago. And as he has watched the nuclear and regulatory and economic environments change, it became clear the single plant in today’s world cannot exist. He added he is in favor of this agreement as he is dedicated to keeping nuclear power in the eastern part of Nebraska.
Director Scheve added that in the 30 years he has lived in the area, the plant is a vital part of the community and his very proud of the plant. He added this decision has been difficult but is necessary for the longevity of the plant and for the safe, reliable power to our customer owners.
Mr. Green concluded the discussion by saying over the last 17 months he has never seen people work so hard and so long for a cause and echoed Director McGuire’s comments about the leadership and character of Vice President Dave Bannister.
At this time, Mr David Corbin, 1002 N. 49 Street, Omaha, NE 68132, expressed his displeasure that the approval of the operating services agreement was not on the agenda at the time he attended Board Committee meetings on Tuesday, August 14. Information was provided by Mr. Bruckner of the District’s legal counsel.
Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Dodge – Yes. The motion carried.
Copies of the foregoing resolution are filed in the District’s Corporate Records file.
The next item of business was the President’s Report. President Gates gave the following report
-In July, OPPD burned 1,154,394 Mcf of natural gas at North Omaha, Sarpy County, and Cass County
This breaks the monthly modern day record that was set in July 2006 (1,020,058 Mcf).
The all-time record was set in August 1973 at 3,283,180 Mcf. This was a time when North Omaha primarily burned natural gas in the non-winter months.
-July 2012 net system requirements (retail sales plus losses) was budgeted for 1,178,000 MWh.
The previous all-time NSR record was 1,254,000 MWh in July 2011. Unofficial NSR for July 2012 is projected at 1,323,000 MWh,
-OPPD did not set a peak as all communication efforts were used to ask our customers to conserve energy
-Renewables account or 5.3% of retail sales YTD
-Construction has begun on the Natural Gas Supply Pipe for the Nebraska City Station.
-Fort Calhoun Station
Plant Status & Activities
Plant remains in a safe condition in cold shutdown with fuel loaded in the reactor.
Electrical power sources are in a normal alignment for plant conditions.
Plan and schedule has been created and docketed with the NRC.
Discovery is 95% complete (Scope expansion in 10 CFR 50.59 and Operability Evaluations)
TRANSMISSION & DISTRIBUTION (T&D)
-Severe thunderstorms moved through OPPD’s south rural area on July 25. The storms knocked down 15 transmission structures near Verdon and Falls City. Crews worked through the night on reconstruction of the 69kv line, and restoration was complete by 4:30am Friday, July 27.
-KCP&L and Omaha Public Power District announced in a press release that they are partnering to build a 150-190 mile 345 kV transmission line that will run from Nebraska City, NE to Sibley, MO.
The project is expected to cost approximately $400 million, and be in service by June 2017.
The line is part of a plan developed by the Southwest Power Pool regional transmission organization to address the need in this growing region.
-INPO and NATF (North American Transmission Forum) established a MOU to improve safety and reliability of nuclear plants and their substation and transmission interface.
-Tevi Lawson, an engineer in the Distribution Engineering department, was in the field working on Wednesday when he noticed fire coming from the window of a home.
He called 911 and then knocked on the door of the residence alerting the family within to the fire so they could evacuate. The family credits Tevi with saving their lives. KETV did a story on the incident which ran on the evening news.
-The District has reached an insurance settlement with the District’s non-nuclear property insurer concerning Missouri River flood mitigation and property damage expenses at Nebraska City Station, North Omaha Station and District substations. The District has agreed to settle the claim for $14.5 million.
-The District previously received a payment from the insurer of $7 million.
-The District has reached an insurance settlement with the District’s nuclear property insurer concerning the breaker fire at Fort Calhoun Station. The District has agreed to settle the claim for $4.25 million resulting in a net payment of $1.75 million following application of the $2.5 million insurance deductible.
-Staff continues to work with FEMA and the nuclear outage insurer to complete the requirements necessary to collect flood and extended outage costs at Fort Calhoun Station.
-UNMC has reported that, in partnership with OPPD, they have reduced approx. 4-5 MW of peak demand through the ECO 24/7 service that OPPD provides
-By mid-October, we anticipate meeting our 10,000 customer goal for the Air Conditioning Management Program
-OPPD piloted a new training program focused on Safety Leadership and Human Performance in our T&D area over the past month and roll it out thru the company in 2013-2014
-Approximately one fourth of OPPD employees are engineers.
Many of these engineers are, or will be, eligible for retirement in the near future.
In 2009, senior management at OPPD recognized these future retirements and proactively addressed the issue by forming an internal group to attract, retain, engage and develop engineers.
-The OPPD Society of Engineers, OSE, is an organization within OPPD that is open to all current OPPD employees, retirees, and interns that have or are pursuing a Bachelor’s degree in engineering.
-In its first two years, OSE provided over 700 professional development hours to its members, handed out two Engineer of the Year awards, and formally recognized engineers who have received their professional licenses.
-In addition, OSE has provided over 130 volunteer hours to the community focusing mainly on math, science, and technology programs for area students.
The next item of business was the opportunity for those in attendance to address the Board on any items of District concern.
Mr. Mark Welsch, 5611 Howard St. Omaha, Ne 68106 asked the Board to allow customer input to director meeting prior to Committee meetings.
Board Chairman Dodge concluded the meeting by thanking the citizens of Blair for allowing OPPD to hold its monthly Board meeting at the Blair city offices.
There being no further business, the meeting adjourned at 8:12 p.m.
Edward E. Easterlin D. S. Emerson
Assistant Secretary Corporate Secretary