6. Budget Update (Discussion)

Daryl Santerre was present for a budget update with the Commission. Mr. Santerre started by reviewing Fiscal Year ’07 financial results.  He walked through a Summary Income Statement, which indicated a January year-to-date net income of $2,948,000 as compared to a budget of $1,599,000. The primary reasons for the positive variance were: Net power supply costs were less than budget by $1,205,000; operating expenses were also down, by $540,000; and we had an additional $512,000 of other income due to the timing of contribution income from the Riverside Avenue project. Operating revenues were within 1% of budget year-to-date.

Mr. Santerre then reviewed capital projects budget vs. actual; and then the cash balances. Capital projects were, in total, 67% completed vs. budget, with five months of the fiscal year remaining. Distribution projects were at an 88% level of completion. All of this translated into an ending cash balance of $2,268,000, which was $350,000 better than our budget projection of $1,913,000.  Mr. Santerre then presented the summary schedules for the Fiscal Year ’08 Budget. He went on to explain that this was a "draft" and was introductory only, and there would be a complete budget presentation at the April 11, 2007 Commission meeting.

The key assumptions used in the budget development were as follows: (1) No revenue requirement filings planned, however, Phase 2 of the rate design order would be implemented as of July 1; (2) Labor and benefits per contracts and assumptions form the City, with operating costs up only 2.7%; and "controllable" costs up less than ½%; (3) Power Supply costs would increase by 1.7% over the FY ’07 budget; (4) Investment would be made in VT Transco (at the minimum required level), however, investments in new generation or emission equipment upgrades would be deferred until more definitive plans were in place; (5) $1,000,000 new general obligation bond (through the City), however, no new revenue bonds or surety bonds until new generation capital was also in place; (6) Variations in cash requirements would be met with additional short term-borrowing through the City (planned an additional $2,250,000 of a $5,000,000 allotment).

Mr. Santerre then went on to the Summary Income Statement Budget for FY ’08.  The Budget indicates a net income figure of $1,799,000. This is primarily driven by lower than expected power supply costs (up only 1.7% over FY ’07), continuing to control operating costs (1/2% increase in "controllable" costs), additional distribution income from our increasing investments in VT Transco, and lower interest costs as we continue to lower our outstanding debt balance.

He then did a very quick overview of the debt coverage schedule, which indicated a debt coverage ratio of 1.59 for FY ’08, well above the 1.25 required by bond covenants.

Finally, Mr. Santerre presented the cash graph for FY ’08. It indicates an "acceptable" cash position throughout the year, beginning and ending the year at approximately $500,000. During the year, there are highs and lows depending upon capital projects, and the general obligation bond monies, however, at no month end does the cash fund operate below $400,000.

7. Update on Legislation

Tom Buckley was present for a legislation update for the Commission. Mr. Buckley informed the Commission about the various bills currently being reviewed by the legislation. Discussion followed.

8. Review and Recommendation for Approval of Three-Year Turbine Maintenance Contract with Alstom Power Service for the McNeil Turbine Generator (Discussion & Vote)

As John Irving was not present for this Commission meeting as he was on vacation, Commissioner Johnstone asked if we bid the project. Mrs. Grimes stated that she did not know, but in any event, we followed the proper procedures. Upon no further discussion, Commissioner Johnstone recommended the approval of the Three-Year Turbine Maintenance Contract with Alstom Power Service for the McNeil Turbine Generator and that this item be forwarded to the Board of Finance and the City Council for final approval. The motion was seconded by Commissioner Wallace-Brodeur and approved by all Commissioners present.

Following Mr. Irving’s return, he informed Mrs. Grimes in the following e-mail, upon which Mrs. Grimes informed the Commission and upon request of Commissioner Johnstone, the response is added as an addendum (as follows):

‘We did not go out for competitive bids for the turbine maintenance contract. Alstom is the original equipment manufacturer (OEM) and most familiar with the equipment we have. Our turbine is of a European design, and different from most in the states. In the past, we have used aftermarket parts or had some of our parts "reverse engineered", and not always with good results. You may remember the problems we were plagued with last summer with the turbine turning gear. The root cause of that problem was that we had a main turbine bearing replaced by another company. We do our best to negotiate a reasonable price, and Alstom provides topnotch personnel and parts. The reliability of our turbine has been excellent.’

9. ***EXECUTIVE SESSION***

9.01 VELCO Update

Commissioner Johnstone moved that the Board of Electric Commissioners enter into Executive Session at 7:20 p.m. to discuss agenda item #9.01, VELCO Update, a contract and litigation matter; the premature disclosure of which could place the Burlington Electric Department at a substantial disadvantage. The motion was seconded by Commissioner Harris and approved by all Commissioners present. The Commission returned to regular session at 8:01p.m. upon motions of Commissioners Johnstone and Wallace-Brodeur.

There being no further business to discuss, Commissioners Johnstone and Wallace-Brodeur moved to adjourn at 8:30 P.M., which was approved by all Commissioners present.

Attest:

___________________________

Patricia J. Crowley, Clerk