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 September 20, 2012, at 10:00 a.m.
Present were Directors M. J. Cavanaugh, N. P. Dodge, J. K. Green, A. L. McGuire, L. Scheve, D. D. Weber, and F. J. Ulrich. Also present were W. G. Gates, President, 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 T. J. Burke, E. E. Easterlin, M. I. Doghman, J. T. Hansen, S. L. Hutcherson, L. Cortopassi, L. A. Olson, K. S. McCormick, D. C. Mueller, R. J. Rogers, D. Jacobberger, M. R. Jones, P. E. Lukowski. T. Lawson was present as well as 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 September 14, 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 July 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 – Yes; Scheve – Yes; Thompson – Absent; 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. 5920 approval of the use of accounting treatment of Fort Calhoun Station recovery costs. Committee Chair Cavanaugh reported that this item is to approve the use of regulatory accounting treatment of Fort Calhoun Station Recovery Costs (Recovery Costs) to amortize these costs over a ten-year period to ensure current and future customers share in the costs and benefits of enhanced station operations. The Governmental Accounting Standards Board guidance for regulatory accounting permits the District, under certain conditions and Board approval, to include revenues and costs in a period other than the period in which these revenues and costs would be recognized by an unregulated entity. Significant, unplanned Recovery Costs are being incurred to resolve performance and operational concerns identified by the District and enhance Fort Calhoun Station (Station) operations. Recovery Costs consist of operations and maintenance expenses incurred for the planning, execution and monitoring of restart and recovery activities commencing in 2012 until the exit from Column 4 of the Nuclear Regulatory Commission’s (NRC’s) Reactor Oversight Process Action Matrix. Recovery Costs are projected to be $113 million and $30 million for the years ended December 31, 2012 and 2013, respectively. The expenditures and associated operational enhancements will benefit the Station during future years. A regulatory asset will be established to levelize the impact of the Recovery Costs to ensure current and future customers share in the costs and benefits of the enhanced Station operations. The costs will be amortized over a ten-year period commencing the Station’s return to service. Board approval to use regulatory accounting treatment for Fort Calhoun Station Recovery Costs with amortization over a ten-year period commencing with Fort Calhoun Station’s return to service. Vice President Easterlin indicated this process was used by the District in the late 1980s and is an industry practice that is used when you have extraordinary conditions and expenses that provide organizational benefit that extend beyond the current year. He added that when Director Cavanaugh and members of management visited the rating agencies in late August, the rating agencies were comfortable with this process and have seen this many times in the industry. He also indicated that the District received an Aa1 (with a negative outlook because of our current situation) from Moody’s and added there are only three other utilities in the United States that have obtained the Aa1 rating from Moody’s. The District received an AA stable rating from Standard and Poor’s. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Absent; Ulrich – Yes; Weber – Yes; and Dodge – Yes.
RESOLUTION NO. 5921 authorizes management to negotiate and enter into a contract(s) for the modification of primary containment penetration feed-through assemblies at the Fort Calhoun Station. Director Ulrich said that this is to authorize management to negotiate and enter into a contract or contracts for the design, fabrication, delivery, installation and testing of seal modification kits and components to resolve issues associated with the qualification status of a population of primary containment penetration feed-through assemblies. The existing 614 non-EEQ primary containment penetration feed-through assemblies are sealed with Teflon and have wires with Teflon insulation. Calculations have confirmed that the insulation and seals were not qualified and would be compromised under postulated nuclear accident conditions. Compliance with the sealed bidding provisions of the Nebraska Revised Statutes Sections 70-637 through 70-639, as amended, would be impractical and not in the public’s best interest. The total estimated cost for this project is $7,257,500, including contingency funds. Mr. Ulrich added there are additional tests that are yet to be completed to see if this work is required; however, this action is critical to the restart timeline and authorization is recommended. Vice President Doghman indicated the additional tests should be completed in about three weeks and indicated that OPPD is the only plant that is using Teflon. Director Scheve added the cost of this work, as a part of the recovery costs, will be spread out over the next several years.
At this time, Mr. Laverne Thraen, 4728 Cass St, #12, Omaha, NE inquired why this work is necessary at this time. President Gates said this work removes the exposure of the Teflon that could potentially be a problem and added that OPPD identified this as part of the uprate process as OPPD looks to extend the power of the plant. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Absent; Ulrich – Yes; Weber – Yes; and Dodge – Yes. The motion carried.
RESOLUTION NO. 5922 authorizes management to award a contract to replace two layers of selective catalyst reduction modules and seals on Unit No. 2 at the Nebraska City Station. Committee Chair McGuire said this item is to provide SCR Catalyst Modules and Seals for the Nebraska City Station Unit 2 SCR System. Two layers of catalyst were installed during the original construction with a third layer installed two years later. Performance indicators have determined the need to replace the original two layers. This replacement will ensure continued compliance with NOx levels in the NC2 air permit. Five bids were received. Three bids are legally and technically responsive, with two bids legally or technically nonresponsive. The Engineer’s Estimate at the time of bid opening was $1,565,000 for one layer only. Ms. McGuire added that the District did secure guarantees on the life of the new equipment as well as appropriate NOx levels. Director Weber inquired how this proposal affects NOx limits and dry sorbent injection at the Station. Vice President Hansen added the even with this proposal, the Unit is below NOx limits and dry sorbent injection is currently being done only on Unit No. 1 and that Unit No. 2 is already compliant.
At this time, Mr. Laverne Thraen, 4728 Cass St, #12, Omaha, NE asked the Board to invest in improving efficiencies rather than burning coal. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Absent; Ulrich – Yes; Weber – Yes; and Dodge – Yes. The motion carried.
RESOLUTION NO. 5923 approves the compensation adjustment for Chief Financial Officer Edward Easterlin. Committee Chair Green said that compensation adjustments for corporate officers are approved by the Board of Directors on an annual basis. The compensation adjustment recommended for Vice President and Chief Financial Officer, Edward E. Easterlin is listed on the attached exhibit. The adjustment for Edward E. Easterlin is effective October 1, 2012. Mr. Green added that with all of the District’s challenges, Mr. Easterlin, through his hard work, was able to obtain high bond ratings for the District. Mr. Green said this adjustment is well earned and urged the Board to approve the compensation adjustment for Vice President and Chief Financial Officer, Edward E. Easterlin. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Absent; Ulrich – Yes; Weber – Yes; and Dodge – Yes. The motion carried.
RESOLUTION NO. 5924 approves the appointment of a Chief Nuclear Officer. Committee Chair Green said this action is to appoint Louis Cortopassi as the Chief Nuclear Officer. Effective August 27, 2012, Louis Cortopassi is occupying the position of Site Vice President of the Fort Calhoun Station pursuant to the Operating Services Agreement between Exelon Generation Company, LLC and the District. Louis has more than 27 years of experience in plant operations and training management in support of nuclear power stations. He joined Exelon Nuclear in June 2011, where he was vice president of Mid-Atlantic Operations. Prior to joining Exelon, Louis was the plant manager at Palo Verde Nuclear Generating Station. Louis has held leadership positions in Operations and Training at San Onofre Nuclear Generating Station (SONGS) near San Clemente, CA; Millstone Nuclear Power Station in Waterford, CT.; Indian Point Energy Center, north of New York City; and Columbia Generating Station in Richland, WA. He also served as a senior evaluator at the Institute of Nuclear Power Operations (INPO) for six years. Louis holds a bachelor’s degree in finance from Georgia State University. He has held reactor operator and senior reactor operator (SRO) licenses at SONGS, as well as an SRO certification at River Bend Nuclear Generation Station, north of Baton Rouge, LA. The President and CEO of the Omaha Public Power District recommends to the Board of Directors that Mr. Cortopassi be named Chief Nuclear Officer. In that capacity, he will be an officer of the District. Mr. Cortopassi would retain his current title and position as Site Vice President at Fort Calhoun Station. Mr. Cortopassi served as Senior Recovery Manager under the Advisory Services Agreement between OPPD and Exelon Generation LLC prior to August 27. Director Scheve complemented Mr. Cortopassi on the fine job he did at the NRC public meeting that was held on September 11.
At this time, Mr. Tom Barrett, 4907 Webster St., Omaha, NE 68132 asked for information around the Exelon contract costs as well as the status of some Fort Calhoun Station and Exelon employees. Vice President Easterlin said the amount of the contract ranges between $20 and $26 million per year and is dependent on performance incentives that can be obtained by Exelon. President Gates added this contract represents a positive net present value for the District.
Mr. Laverne Thraen, 4728 Cass St, #12, Omaha, NE welcomed Exelon and advised he looks forward to working with them. Following the discussion, the vote was recorded as follows: Cavanaugh – Yes; Green – Yes; McGuire – Yes; Scheve – Yes; Thompson – Absent; 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:
-Installation of the natural gas line to provide startup fuel for the Nebraska City Station is progressing well.
The entire 14 miles of right-of-way has been cleared and all the pipe has been delivered.
Approximately 40% has been installed in the ground starting at the plant and working toward a point northwest of town.
Completion of this portion of the project is scheduled for the end of October.
-On August 24, we received 7 proposals from four Powder River basin coal producers in response to our RFP for 3.5 million tons of spot coal for 2013.
The bids have been evaluated and the purchase will be reported to the Board System Management Committee in October.
The price for this spot coal is 5.6% lower than the 3.75 million ton contract coal purchases we reported in August.
-Renewables account for 5.1% of retail sales YTD. That doesn’t include the additional wind generation that we will bring on board later this year
-Plant Staff was informed that the North Omaha Station would be the recipient of the 2013 PRB Coal User’s Group Plant of the Year award.
This award will be presented at the PRB Coal User’s Group Annual Meeting in Chicago, IL on May 13, 2013. This award was based on the improvements that the Station has made over the past several years on safety, plant performance and utilization of industry best practices.
-At Nebraska City Station, both units remained in service for the entire month and operated with strong capacity factors:
NC1 C.F. = 87.06%
NC2 C F. = 86.54%
-The Nebraska Power Association Joint Planning Subcommittee completed the 2012 Statewide Coordinated Long Range Power Supply Study which was presented to the Nebraska Power Review Board and was approved.
The State does not expect to need additional capacity until 2024 under the base case assumptions.
Environmental rules or regulations could advance the State need date to 2019, or possibly 2015, according to the report.
Fort Calhoun Station
FCS Priorities are – Safety, Human Performance, Fix the Plant and use Corrective Action Program
Plant remains in cold shutdown and working towards December 1 heat up
No safety issues or injuries
TRANSMISSION & DISTRIBUTION (T&D)
-A 56 MVA transformer at Sub 1233 (143rd & Giles Road) failed on July 31.
On August 12 at Sub 1251 (Fort Calhoun Station) a 28MVA transformer failed. This event did not adversely impact station operations or startup activities. Some area customers and site buildings were momentarily impacted.
-Midwest Transmission Project (MTP) Public Outreach
KCPL and OPPD recently announced the Midwest Transmission Project - - a partnership to construct a 150-190 mile 345kv transmission line from Nebraska City, NE to Sibley, MO.
The project is expected to cost $400M, and be in service by June 2017.
Its purpose is to relieve congestion and improve reliability of the nation’s electric grid while also providing an additional gateway for renewable energy to reach customers in Nebraska and Missouri.
Rating Agency Visit
OPPD management and Board Treasurer, Michael Cavanaugh visited Moody’s Investors Service and Standard & Poor’s in New York to provide an update on the financial and operating condition of the District.
The information shared with the agencies included an update on the status of Fort Calhoun Station, the impact of environmental regulations on District facilities and an updated financial projection.
As a result of the information provided at the meetings, the District received an Aa1rating from Moody’s and an AA Rating from Standard & Poor’s.
OPPD Bond Sale
In July 2012, the Board of Directors authorized management to issue up to $550 million of Electric System Revenue Bonds for refunding and construction purposes through the end of 2013.
Due to the favorable interest rate environment, OPPD is currently in the process of selling two series of bonds.
The 2012 Series A Bonds in the amount of $270 million will be used to fund construction expenses.
The 2012 Series B Bonds in the amount of $221 million will be used to refund a portion of the 2005 Series B Bonds and the 2006 Series A Bonds.
Property Insurance Settlements
The District has reached an insurance settlement with FM Global (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 with FM Global for $14.5 million. The District previously received a payment from FM Global of $7 million. An additional payment of $5 million was received in August which settled the claim less the $2.5 million insurance deductible.
The District submitted the insurance deductible amount to FEMA for possible reimbursement.
-The District has reached an insurance settlement with NEIL (the District’s nuclear property insurer) concerning the breaker fire at Fort Calhoun Station.
The District has agreed to settle the claim with FM Global for $4.25 million. A payment of $1.75 million was received in August which settled the claim less the $2.5 million insurance deductible.
Negotiations continue with NEIL regarding the delayed outage claim.
-Federal Emergency Management Agency (FEMA)
Staff continues to work with FEMA on potential reimbursements regarding the 2011 flooding. The preliminary project worksheets have been filed with FEMA which resulted in submission of over $73 million in accumulated costs (including incremental fuel and purchased power costs incurred in 2011).
FEMA will reduce the District’s potential reimbursement for non-qualifying costs and the amount of property insurance previously received. Nebraska’s cost share agreement with FEMA permits the District to receive 75 percent of qualifying costs.
The estimated receivable from FEMA is under $19 million as FEMA has not approved reimbursement of the incremental fuel and purchased power costs.
-OPPD customer programs update:
Air Conditioning Management Program customers YTD - 8,952
In Home Electrical Protection Plan customers YTD - 19,937
Refrigerator Recycling Program customers YTD -1,817
The next item of business was the President’s Award presentation. President Gates said in 2008 OPPD created the President’s Award to acknowledge extraordinary accomplishments by OPPD employees. Professionalism, commitment to best practices and high standards are at the heart of the award. Before Tevi, only four others had received this award: Max Smesler, Charlie Moriarty, Dale Widoe, and Adrian Minks.
Mr. Gates continued by saying that on July 25, Tevi was designing a project in the field near 61st Ave & Elm Street when he spotted a fire from the rear of a home. He quickly called 911, knocked on the front door of the burning home, and alerted a family of four who were in the basement and unaware of the danger. He instructed the family to get out of the home and helped them to a safe area across the street. The fire and rescue personnel arrived shortly after Tevi got the family to safety, but by then the house was completely engulfed in flames.
Tevi grew up in Togo, Africa and moved to the United States in 2001 when he was 21. He then spent seven years as a student at Metro Community College and the University of Nebraska at Omaha. Tevi Lawson is currently working as an Engineer in the Distribution Engineering Department. He first started with OPPD as an INROADS Co-op in March of 2009.
At this time, Mr. Gates presented the President’s Award to Tevi Lawson. Tevi accepted the award and expressed his deep appreciation to the Board of Directors as well as his fellow employees and for the award.
The next item of business was the opportunity for those in attendance to address the Board on any items of District concern.
Ms. Bev Traub, current president of the Greater Omaha League of Women Voters (GOLWV) presented the GOLWV’s statement of position on natural resources.
Mr. Ken Winston, 4905 S. 149Street, Omaha, NE 68137, who represents the Sierra Club told the Board he recognizes and appreciates the communications he has had with OPPD’s executive team and for OPPD’s work with the City of Omaha on the Re-Energize Omaha Program. He also indicated his group is working on recommendations for a public engagement process and will share those with OPPD officials soon.
Mr. John Atkieson, energy policy director at the Nebraska Wildlife Federation, and advised the Board on his analysis on affordable solar energy. Attached is a handout.
Mr. Duane Hovorka, 409 310 Street, Elmwood, NE, executive director of the Nebraska Wildlife Federation briefed the Board on a Solar Energy Plan. Attached is a handout.
Mr. Laverne Thraen, 4728 Cass St, #12, Omaha, NE, presented a handout on solar air conditioners (attached) and voiced his concerns with the OPPD/Exelon presentation. His handouts are attached.
Mr. Leo Arens, 18129 Trail Ridge Rd. Omaha, NE, who represents the Nebraskans for Solar, addressed the Board on the group’s purpose. A handout is attached.
Mr. Ken Deffenbacher, 5016 Parker Street, Omaha, NE 68104, who is secretary of the Nebraskans for Solar, addressed the Board on community solar models.
There being no further business, the meeting adjourned at 11:17 a.m.
T. J. Burke D. S. Emerson
Assistant Secretary Corporate Secretary