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HomeMy WebLinkAboutMinutes 1997 - 1998• ENERGY COMMISSION MINUTES TUESDAY, JANUARY 7, 1997 7: l5 A.M. - ROOM 2404 APPROVED MEMBERS PRESENT: GRUMMAN, HOFFMAN, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: BAUMANN, CAIN, DOOLIN, KRAFT, PELSOCI, THOMAS STAFF PRESENT: MARINO, FARQUHARSON SUMMARY OF ACTION I. CALL TO ORDER The meeting was called to order at 7:27 A.M. 11. MINUTES OF DECEMBER 4,1996 In the absence of a quorum, the minutes from the December meeting were not approved. III. NEW BUSINESS Energy Briefing held December 18, 1996 Members who had attended the briefing commented about the meeting. It was noted that many suburban communities had sent representatives. Two representatives from the Chicago Department of the Environment had presented information about pending House Bill 3776 sponsored by the Illinois Coalition for Responsible Electricity Choice (ICREC), which would amend the Public Utilities Act. They stressed the need for an alternative proposal to be presented that would benefit residential users of electricity. A general discussion about deregulation ensued. Members noted that the CILCO Power Quest proposal presented some good alternatives to the ICREC proposal. In one of the articles handed out, Mr. Grumman noted that State deregulation legislation could actually be blocked by the Federal government. Ms. Hoffman explained that under the Federal Supremacy Clause, the Federal government can determine whether what a State does has inter -state effects. She added that there needs to be new legislation or a challenge to the current legislation and that various legislative groups will likely be writing deregulation proposals. Discussion arose concerning what, if anything the Energy Commission could do in this area. Janet Hoffman stated that it may be useful for the Energy Commission to monitor and comment on these proposals. If the City Council were to become involved, Mr. Marino noted that this would occur in the form of a resolution that may direct the lobbyist and involve monitoring and consulting at the State and Federal level. As to the future role of the ICC, Ms. Hoffman stated that they will likely comment on or propose legislation and can have considerable influence on the Federal government. • Energy Commission Minutes January 7, 1997 Page 2 Janet Hoffman anticipated that deregulation legislation in Illinois will move quickly. She suggested that direction be provided to the City's lobbyist. Mr. Marino indicated that the Council Energy Subcommittee be engaged in terms of what direction the Commission would recommend. Staff agreed to find out when the next session of the legislature begins and how long it will last. Janet Hoffman made two recommendations: First, If you want the City council to instruct Larry Suffredin to weigh his hand against bills that are not helpful to small manufacturing, small business and residential interests, that direction needs to come from the Council or Subcommittee. The Council needs to be made aware that these bills are in the process of being proposed and now is the time to have some comments on those and adopt some general principles. These could be: to give choice earlier to small business and residential consumers, no stranded costs, etc. If Mr. Suffredin is instructed to weigh in on legislation that is positive on those issues and weigh against legislation that is anti -those issues, then he has some instructions as he monitors legislation. Secondly, the City of Chicago has talked about becoming more active in this area and a liaison could be established with the City of Chicago, a coalition of governmental bodies to make the voices louder so those in Springfield will know. Mr. Nesvig agreed to contact Alderman Feldman to request a meeting of the Council Energy Subcommittee. ICC Memorandum dated 12/19/96 The ICC had completed its Assessment and Recommendations of the ComEd Evanston 11/28/95 Network Outage, which had been distributed in the packets. Dennis Marino noted that, in the third paragraph of the letter, the ICC stated that it will continue to monitor ComEd's implementation of their recommendations. Gary Michaels asked whether the ICC will be asked to assess the condition of Evanston's entire distribution system, not just the downtown area and could this be an agenda item for the Council Energy Subcommittee? fie stated that there is enough work to warrant a dedicated staff person again. Mr. Marino stated that this idea could be revisited when there is further direction. IV. OLD BUSINESS Franchise Analysis Subcommittee; Janet Hoffman, Chair Ms. Hoffman stated that the Subcommittee's role is one of monitoring at this time. When the group again meets, there will be some statement on the NWMC franchise. Energy Policy Subcommittee; Roy Warmington, Co -Chair Mr. Warmington reported that a meeting was held on December 4th, with guest speaker, Charlie Williams of Minneapolis Honeywell. This company is approaching State and local governments to install their energy saving equipment and promises a certain percentage of savings, increased comfort and reliability. [t was noted that because of the so-called "free electricity", this approach is not be attractive to the City of Evanston. J .I Energy Commission Minutes January 7, 1997 Page 3 Deregulation Subcommittee; Stephen Thomas, Chair - no report. Reliability Subcommittee; David Grumman, Chair - no report. Flexibility Subcommittee; Gary Michaels, Chair - no report. Consideration of Funding Mechanism for Electric Service Options; David Kraft - no report. Continuation of Discussion of Power Supply, Including regional Issues and Stranded Costs; Bud Nesvig - Mr. Nesvig commented that regarding stranded costs, he believed that the ICC has not forced utilities to build nuclear plants, but that the utilities have urged the ICC to allow this, and that House Bill 3776 is designed to keep the ICC in place to ensure higher rates. Referring to an outcome of the Energy Workshop, a letter was to be sent to the FERC under their "Declaratory Judgement" provisions. Gary Michaels asked whether the FERC could be asked to rule under what conditions the City of Evanston would not be subject to stranded investment costs. Roy Warmington noted that there is a 7 to 10 year limit during which stranded costs can be charged. Bud Nesvig added that you will pay for the stranded costs through your rates in the meantime. Roy • Warmington noted that some utilities are asking for higher transmission charges so as to thwart wheeling. Janet Hoffman added that the FERC has approved higher transmission charges already, for some utilities. Mr. Marino asked why the agenda was carrying all the subcommittees each month, when only certain subcommittees were active. Members decided to remove items D-G and add the Council Energy Subcommittee as item A. Mr. Warmington raised the question of whether the work the Energy Commission has been charged with should be revised. V. COMMUNICATIONS Dennis Marino summarized the communications. He addressed Mr. Nesvig's concerns listed in a memorandum dated January 6, 1997, and will seek clarification regarding #4 - who would decide where the 500 feet of underground cable will be installed in 1997, and where was it installed in previous years. Mr. Marino was asked to inquire as to whether the Legal Department has looked at the two pieces of legislation relieving them of responsibility that ComEd referenced in response to the $46,000 invoice from the City of Evanston to ComEd for cost of police and fire personnel during the November 1995 power outage. 0 Energy Commission Minutes January 7, 1997 Page 4 Janet Hoffman distributed a memorandum prepared by law student Amy Blumberg, on stranded investment cost recovery including an inventory of what other states are doing thus far on this issue. Ms. Hoffman offered to ask Ms. Blumberg to do a presentation and answer questions at the February meeting of the Energy Commission. Other handouts: House Bill 3776 Memorandum from Bud Nesvig dated January 3, 1997 re: House Bill 3776 Restructuring the Electric Power Industry: Overview and Impact on the Petroleum Industry Bristol Virginia Utilities Board (BVUB) Request for Proposals for Electricity Supply Memorandum from Bud Nesvig dated January 6, 1997 re: Bristol RFP BVUB Electric System Electric Rate Schedules May 1993 Article on Price, reliability govern Bristol's review of 19 offers State Utility Regulators Bid Goodbye to Coziness With Industry and Enter the Competition Wars - Dec. 27, 1996 article Wall Street Journal Industry Developments - from Energy Information Administration/Electric Power Monthly 9/96 ADJOURNMENT The meeting adjourned at 8:52 A.M. The next regularly scheduled meeting of the Energy Commission is Thursday, February 6, 1997 at 7:15 A.M. in room 2404. Jqi Farquharsin, Secretary ENERGY COMMISSION MINUTES MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: SUMMARY OF ACTION: FRIDAY, JANUARY 31, 1997 7:15 A.M. GRUMMAN, HOFFMAN, KRAFT, MICHAELS, NESVIG, THOMAS, WARMINGTON BAUMANN, DOOLIN, PELSOCI MARINO, FARQUHARSON I. CALL TO ORDER The meeting was called to order at 7:20 A.M. II. MINUTES OF DECEMBER 4,1996 AND JANUARY 7, 1997 The minutes of the December 4, 1996 meeting of the Energy Commission were approved with one abstention (Gary Michaels). The minutes of the January 7,1997 meeting of the Energy Commission were approved with two abstentions (Mr. Kraft and Mr. Thomas). Mr. Kraft asked that the Agenda item concerning a funding mechanism for electric service options be reinstated until the issue is resolved. III. NEW BUSINESS Council Energy SubCommittee Meeting Held Friday, January 24,1997 Bud Nesvig reported that the Council Energy SubCommittee had met on January 24, 1997 to consider the principal issues to be resolved in restructuring the electric utility industry in Illinois and reforming its regulation. There were 15 areas of agreement which had emerged out of the TAG's discussions with respect to these issues. The SubCommittee had requested that the Energy Commission review and comment on these areas of agreement. Discussion ensued as Commission members then considered each of the 15 items separately. There was full agreement with Items 41 and 42 concerning allowance of retail direct access and a continuing interest in maintenance of safe and reliable electric service. Item 43, concerning the transition period into a competitive -market system, generated discussion about the transition period for natural gas deregulation back in 1985. It was noted that CILCO proposed a I0-year transition into retail access. Should the transition period be no longer than that proposed by CILCO, or should a number of years be stipulated or a concept of timeliness? Members agreed that additional language should be added concerning the need for a speedy transition period. FFnergy r_Q miacinn AsTp 7 1 /11 /07 NA nulm Item 44 dealt with the allowance of stranded cost recovery. Members agreed that the concept of stranded cost recovery is not endorsed by the Commission. Ms. Hoffman noted that utilities continue to build the cost of their capital into the rates. Mr. Kraft motioned to delete the current language and replace it with "Evanston does not support the legislatively -imposed stranded cost recovery mechanisms." Motion passed (6 Aye, 1 Nay -Mr. Grumman). Mr. Grumman's reasons for his negative vote were that (1) it is generally agreed that some capital cost recovery by utilities is non- controversial and justified, and (2) that the document under discussion is still called "Areas of Agreement" and is not supposed to be an Evanston "wish list." Item #5 dealt with the obligation and opportunity of utilities to mitigate their potential stranded costs. Members agreed to precede the existing language by the phrase: "If there are stranded cost recovery mechanisms which are imposed by regulation, utilities must..." Item #6 dealt with all customer groups benefiting from a competitive market. The need to include all customers, and not lock into customer groups was the motivation behind a wording change substituting the word customers for customer groups. Customers were further identified as being both aggregated and non -aggregated. Item 47, regarding aggregation of customer loads, was reworded to ensure that municipalities are not cut out of benefiting from retail access. The item was reworded to include allowance of aggregation by units of local government. Item 48 concerning the generation market was deleted, since it represented an observation and not a position. In Item #9, the first sentence was deleted as an observation which requires no position. The word comparable was considered too vague and was replaced with "a price based on cost of service." Item # 10 as also deleted as an observation. Item #11 was revised to reflect the Council Energy Subcommittees' discussion. Thus, language was reworded to say that all suppliers need to follow the rules, not just non -utility suppliers, and the phrase "at a minimum" was deleted. Items # l2 through # 15 were achieved by consensus of the last 5 members present. There was considerable discussion concerning items #12 and #13 which dealt with funding social policy objectives and modification of taxes applicable to Illinois electric utilities. Although the Energy Commission did not have a position on these items, members emphasized that it does not mean that these items are unimportant and should be forgotten. Therefore, members chose to include a new item: "Issues regarding social political objectives, such as funding; universal service or taxes applicable to Illinois electric utilities were discussed with no formal recommendation from the Evanston Energy Commission." Items 414 and #15 were both deleted. Discussion concerning item #14 made the point that this could be an escape clause or bail -out for utilities to return to price regulation. Energy rnmmi%W* n PfTP I 1 /-A1 /07 Mundt Additional General Comments Concerning the Council Energy SubCommittee Meetings David Kraft summarized points that had been stated at previous meetings of the Council Energy SubCommittee. The Subcommittee expected to recommend a resolution that would request ComEd to declare the value of its distribution system, to lay the groundwork for the FERC, and a refinement of definitions regarding liability. Mr. Kraft also stated that the City Council is expected to declare its opposition to the NWMC franchise, begin and fund a public education initiative, and reaffirm its four goals of decreased cost, improved reliability, increased flexibility and attention to environmental sensitivity. There was expectation of a February 10 meeting of the SubCommittee. There were previous discussions concerning the fact that City staff is stretched thin, yet no increased funding or staffing has occurred for energy -related work. Mr. Kraft stated that he intends to raise the issue of funding at the next meeting of the Commission. He asked that members review the September 4, 1996 draft proposal to fund energy work. Concerning City Council rejection of the NWMC franchise, Gary Michaels asked whether a Council resolution would accomplish that, and would this result in there being no franchise after March of 1999. Mr. Marino responded that a resolution was a way to begin this process, but there may be other requirements. David Kraft asked whether another briefing was to be scheduled for February 24, 1997. As of this date, staff was not aware of firm plans conerning the briefing. Mr. Kraft also indicated that CUB's legislative proposal will be coming out February 8, 1997. ADJOURNMENT The meeting adjourned at 9:22 A.M. The next scheduled meeting of the Energy Commission is set for Wednesday, March 5,1997, at 7:15 A.M. in Room 2402 of the Civic Center. Jo arquhars i, Secretary .' r, MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: SUMMARY OF ACTION: ENERGY COMMISSION MINUTES WEDNESDAY, MARCH 5, 1997 7:15 A.M. GRUMMAN, HOFFMAN, KRAFT, MICHAELS, NESVIG, THOMAS, PELSOCI, WARMINGTON BAUMANN, DOOLIN MARINO, FARQUHARSON I. CALL TO ORDER The meeting was called to order at 7:22 A.M. II. MINUTES OF JANUARY 31,1997 The minutes of the January 31 meeting of the Energy Commission were approved with some clarification added by Mr. Grumman concerning his vote on item #4. Several Commission members expressed concern that the minutes were received much later than usual for this meeting. There was discussion as to whether a summary should be initiated by the Commission at the end of each meeting. Mr. Marino explained that the minutes serve as an official record of the proceedings and need to be handled by staff as an impartial party to any Board or Commission. At the suggestion of Mr. Grumman, Bud Nesvig agreed to take note of any action items at each meeting, rather than write a summary. The Chair put this forth in the form of a motion, seconded by Gary Michaels, which passed unanimously. Concern was also expressed that the Agenda did not include items that Mr. Kraft was expecting to consider at the meeting. Mr. Marino explained that the Agenda is developed in consultation with the Chair, but should members notice that an item is missing from the Agenda when they receive their packets, they can call staff prior to the meeting and something can be done about it. III. NEW BUSINESS Resolution 10-R-97 in Support of the Principal Issues to be Resolved in Restructuring the Electric Utility Industry in Illinois Mr. Kraft noted that the Council Energy Subcommittee had requested that the Energy Commission provide input on the principles set forth by the TAG, which occurred at the January 31st meeting. Certain staff revisions were then made which resulted in Resolution 10-R-97. It was noted that after the revisions, the Resolution actually contained some items that did not exist on the TAG list. Staff agreed to apprise Larry Suffredin of this. Fnergy rQWmi Ginn V;nwi-c page 7 14/i/47 Energy Briefing held February 24,1997 At the Briefing, a representative from the Citizen's Utility Board, (Marty Cohen) and ComEd (Hans Baumann) provided a summary of the deregulation proposals from their respective organizations. David Kraft related that Roger Crum, in his opening remarks at the Briefing, had provided a fine, succinct summary of a national ICMA conference he had just attended. David Grumman had made note of 7 key points from that summary concerning how things will shake out in the electric industry. These 7 points were: 1) Local distribution systems will remain a monopoly, 2) Cities must look out for the small users, 3) Universal electric service must be guaranteed, 4) Support must be provided for the low income users, 5) Stranded costs will have to be eaten by somebody, 6) We must review fee structuring - municipal taxes and the revenue stream will be affected, 7) Cities must be the aggregators. Mr. Grumman supposed that this last point referred to Cities looking out for the small users. Mr. Pelsoci added that, at a recent Conference, Art Miller, Chair of the ICC pointed out that if you have competition, there will no longer be the obligation to serve. The duty to serve is incompatible with competition. Returning to the remarks made by Roger Crum at the Briefing, David Kraft stated that he had asked Mr. Crum for a written summary of his comments which Mr. Crum had agreed to provide. Mr. Kraft would also like Roger Crum to elaborate on his perception of the fee structure, the revenue stream, and who would be affected. Staff agreed to follow up on this. There were five members of the Energy Commission and 18 municipalities represented at the Briefing. Alderman Guthrie had also been in attendance. It was noted that some municipalities may have their own lobbyist while others may utilize the municipal conference apparatus. The intent of these briefings has been mainly to inform and keep the flow of information current as well as obtaining some feedback. Regarding how this could be useful, Mr. Marino stated that when Mr. Suffredin seeks an opinion or support regarding an emerging issue in Springfield, relating to regulatory issues, he would contact those groups. There was discussion concerning whether any networking or follow-up has occurred after these meetings. Mr. Marino assumed that Larry Suffredin would, by the nature of his work, be doing that. The Resolution t Q-R-97 was mentioned and made available at the briefing, but Mr. Kraft was concerned that the import of the document was not made clear. Since some participants may not have received a copy, Mr. Kraft made the motion that the document be mailed to each member of the HWMC and participant at the Briefing along with a cover letter of explanation. Janet Hoffman seconded the motion. Mr. Kraft volunteered to draft the letter, which Staff indicated would appropriately be sent from Mr. Crum's office, and the motion passed unanimously. Mr. Pelsoci observed that action items need to be energized around objectives. What are the objectives or urgent issues and action items? It was noted that the legislature is expected to act in April, there is no interest or lack of information on the part of some communities, and that perhaps a message needs to get out to these communities soon. Mr. Pelsoci noted that the list of areas of agreement was too lengthy to serve as an action item list. It needed to be trimmed down to the few items that were most urgent. Discussion ensued regarding whether the Commission is to make FnergT otnmiccinn tUj=,-c Par I Vlq/07 action items out of the areas of agreement. Stephen Thomas stated that at least the documentation could prove useful as a representation of what surrounding communities want. Mr. Pelsoci suggested that instead of focusing on helping surrounding communities, Evanston should determine what is of urgency to this community. Ms. Hoffman noted that what is realistic for Evanston to continue to do, since the political support does exist for this, is to be at the forefront of educating and leading municipalities in the Suburban Chicago area. To the extent that the Energy Commission can support the current process, the Commission will reconnect in a positive way with what the City Council wants to do. She observed that the process which has begun is to start first with general principles, then determine how those principles apply to the legislation, choose which piece of legislation is the best, then determine how to change it to come closer to your principles. This would be a way for Evanston to be proactive in this process. How to go about building consensus and who becomes involved are questions yet to be resolved. Mr. Grumman observed that only one Alderman had attended the Briefing, and he queried whether this issue was of importance to them. Was the Resolution the extent of their involvement in the issue? Discussion of Three Legislative Proposals: David Kraft informed Commission members that the Board of Nuclear Energy Information Service (NEIS) may formally endorse the CUB plan this weekend. Mr. Kraft serves as the Executive Director of NETS and raised this issue from the standpoint of informing members of any potential conflict of interest. Mr. Kraft stated that if members feel that the participation of NEIS in support of a legislative proposal conflicts with Mr. Kraft's participation in the discussion, he offered to excuse himself. Responding to a question from Janet Hoffman, he clarified that he does not sit on the Energy Commission as a member of NEIS, but wished to follow the proper protocol. Mr. Grumman stated that each member of the Commission votes their mind on any given matter before the Commission, and if that is true, Mr. Kraft does not need to excuse himself. Mr. Kraft was asked to summarize the three proposals: CILCO's proposal stipulates that deregulation efforts should occur now and for the benefit of everyone; ComEd has taken a reasoned, methodical approach; and the CUB proposal is the newest. Last year, when the Deregulation subcommittee had performed a summary of the proposals, CILCO was the most aggressive proposal that had thus far been submitted. Thomas Pelsoci asked whether the Lobbyist would be interacting with the Energy Commission. Mr. Marino responded that Roger Crum, as City Manager, technically supervises Larry Suf redin as a contracted consultant and interaction occurs with the City Manager's Office. Another forum for interaction/exchange would be at the Council Energy Subcommittee level. Discussion ensued regarding whether the Energy Commission would take a position regarding the House Bills. Mr. Pelsoci noted that the bills are not the issue; they will change anyhow. He suggested that the Commission determine what the essential elements of these bills are. If we use the logic of where Evanston wants to be, what is best for Evanston, and work back from there, we Energy rommic inn nlitae R, gp d 1/1%iQ7 could determine the 3 or 4 things for Evanston to focus on. What would we need to implement that? Discussion regarding stranded costs revealed that although Evanston does not want to pay for stranded costs, total avoidance is not practical since there will likely be mitigation. Dennis Marino highlighted Larry Suffredin's involvement thus far and reiterated the six big issues that have come up in discussions thus far: I )protection of residential consumers and small users; 2) protection of low income users; 3) issues of tax revenue; 4) issues of municipal rights such as aggregation; 5) retail wheeling; and 6) stranded costs. Stephen Thomas raised the issue of valuationlcondemnation of the distribution system and municipalization. Janet Hoffman indicated that although this was not a part of the Public Utilities Act, and has not been addressed in the House Bills, nor been a part of this legislative agenda, amendments could be drafted for that Act which would address this issue. There was continued discussion as to what issues were of greatest importance to Evanston. Thomas Pelsoci stated that if retail direct access were accomplished (#1 in the Areas of Agreement), there could be a 90% solution achieved and you would not have to be concerned about aggregation. It would not be worth it to consider municipalizing the distribution system in order to avoid 3 to 4 years of stranded costs, nor the undersea cable idea. With retail direct access we could select our own supplier and ComEd would be obligated to deliver the electricity. Eventually, you will benefit from the cheaper cost for electricity after 3 or 4 years of stranded costs. Bud Nesvig suggested that volunteers develop a listing of areas of importance to Evanston. The Deregulation Subcommittee, chaired by Stephen Thomas will meet to develop a list in the next two weeks, to be distributed to members. It was asked whether Larry Suffredin would be available to meet with the Subcommittee. Dennis Marino suggested that should Mr. Suffredin meet with members of the Commission, it may be best for that to occur with the full Commission to allow all members to interact with him. Mr. Pelsoci added that the Commission should be clear beforehand as to what the important points are to focus on. Staff agreed to find out whether Mr. Suffredin could meet with the Commission in April. OLD BUSINESS Unresolved Issues This Agenda item addressed six issues listed below which had been discussed at the SVBK Workshop and meetings of the Council Energy Subcommittee and remained unresolved: 1) to obtain consulting services to develop an RFP; 2) that the City Council would take action to reject the NWMC franchise; 3) to vote on enacting a public relations/education campaign; 4) to request a declaratory judgement from the FERC; 5) valuation of the distribution system; and 6) reaffirmation of energy service goals. Concern was expressed that these issues were slipping by and that the process of interaction between the Energy Commission and the City Council was not working. F_nPw rnm i cinn Mimilec psgw S IIS/07 Staff suggested if the Commission desires to receive reaffirmation from the Council of the Energy Service goals that this should be taken back to the Council Energy Subcommittee. Members discussed what they understood had been agreed to by the Subcommittee and sought to clarify these issues. Mr. Pelsoci noted that legislation is a priority item right now, but Evanston's impact is limited. If you are going to do something, do it simply and do it fast. Each of the six issues were then discussed. Janet Hoffman noted that the RFP issue was a politically sensitive issue right now and should be deferred. Pressing for early resolution on the rejection of the NWMC Franchise Issue and reaffirmation of energy service goals were not considered controversial and could be pursued at this time. The valuation of the distribution system would prove useful if a consultant was going to be hired to assist in developing an RFP. Other questions raised were should the Commission flesh out what the repercussions would be of not rolling over into the NWMC franchise, should other issues be addressed and what will happen to the regulatory environment by 1999? The Energy Commission engaged in further discussion and chose to target three of the above -mentioned issues: Janet Hoffman motioned that the Energy Commission recommend that the City request a valuation of the Evanston distribution system from ComEd, that the Energy Commission request that the City Council redeclare its opposition to the NWMC franchise (canceling the automatic rollover into that franchise), and that the Energy Commission request the City Council to reaffirm its Energy Service Goals. The motion was seconded by Mr. Pelsoci. Motion passed 5-1 (Michaels - nay). Staff was asked to inquire when the final report from SVBK would be forthcoming. David Kraft announced that there would be a Deregulation meeting with representatives from CUB Monday evening at 7:00 p.m. at Evanston Public Library. Mr. Nesvig inquired whether Hans Baumann had officially resigned. Staff offered to check with the Mayor's office as to whether this had occurred. Staff informed members that Barry Cain had resigned. ADJOURNMENT The meeting adjourned at 9:20 A.M. The next scheduled meeting of the Energy Commission is set for Wednesday, April 9, 1997, at 7:00 P.M. in Room 2404 of the Civic Center. Jo FarquharsA, Secretary . "o MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: [:��1u lu �i`t��7.[+�I tiT�7►A I. CALL TO ORDER ENERGY COMMISSION MINUTES WEDNESDAY, APRIL 9, 1997 7:00 P.M. GRUMMAN, KRAFT, MICHAELS, NESVIG, THOMAS, PELSOCI, WARMINGTON BAUMANN, DOOLIN, HOFFMAN WOLINSKI, FARQUHARSON DAN HARTNETT, CHAIR OF THE ENVIRONMENT BOARD The meeting was called to order at 7:10 P.M. A quorum was reached at 7:20 P.M. II. MINUTES OF MARCH 5, 1997 The minutes of the March 1997 meeting of the Energy Commission were approved unanimously with some grammatical changes only. III. NEW BUSINESS Energy Commission Membership Issues Stephen Thomas announced that he has accepted a job in Massachusetts and that this will be his last meeting with the Commission. Members expressed their thanks to Mr. Thomas for his participation on the Commission and wished him well. Bud Nesvig expressed concern that Mr. Baumann has not attended meetings for some time and has stated to members that he would be resigning from the Energy Commission. The Mayor's office had not received Mr. Baumann's resignation. There was discussion about Mr. Baumann's role in the last energy briefing when he presented the ComEd restructuring proposal, and whether there was a conflict of interest for Mr. Baumann. Mr. Michaels noted that perhaps this is why he no longer attends Commission meetings. Responding to a question from the Chair, Mr. Wolinski stated that a letter to the Mayor might be sent informing her that he has orally stated his intent to resign. Restructuring of Joint Subcommittee (Energy Commission/Environment Hoard) Concerning Energy Policy Implementation Two years ago this joint committee was created by City Council ordinance to develop an integrated energy policy for the City of Evanston. Mr. Warmington, Co -Chair of the Subcommittee explained in a memorandum what difficulties had been encountered. Although monthly meetings have been scheduled, they have been poorly attended. The subcommittee has been unable to accomplish its objectives due to the enormity of the scope of work. lie suggested that new members be appointed Fly Cnmmiccinn Minwoe Antral d/4/07 to the subcommittee and that the City Council be apprised of the subcommittee's inability to accomplish its goals and that professional assistance may be required to achieve the results mandated by the ordinance. Dan Hartnett, Chairman of the Environment Board responded to these concerns. The former Environment Board Co -Chair of this Subcommittee, Helen Tai, had shared her assessment and possible solution with him. She had suggested that commitment of a full time City staff person was needed and she felt that these duties cannot be added as an additional duty to be handled by an existing staff person. The I6-member Environment Board has only 9 active members currently, two of which are employed by ComEd and have not been encouraged to serve on this Subcommittee. Mr. Hartnett observed that it will be difficult for a volunteer board to handle the responsibility of implementing the Energy Policy. One part of this would be to perform an energy audit of City buildings which would be an enormous job in itself. Mr. Pelsoci stated that in his mind an energy audit was a purchasing issue that could be handled by a purchasing agent. He urged that existing City staff be utilized to accomplish these goals and be trained to work in this technical area. Mr. Hartnett explained that an Energy Policy should involve land use decisions and construction standards. dim Wolinski responded that construction standards were already being addressed to the extent that the BOCA model energy code is being used in Evanston to ensure that new construction is as energy efficient as possible. During the discussion which followed, it was noted that much has changed in the energy arena since the City Council first envisioned the energy policy, and that there is as yet no implementation strategy. Mr. Pelsoci suggested that these matters be thought through and a limited list of what can be done provided to the City Council. It should be identified what the City has authority over and can do something about. Points were raised such as who is going to think this through and the struggle which occurs when funding is requested. David Grumman moved that the Energy Commission recommend that the Joint Energy Policy Implementation Subcommittee be disbanded and discontinue meetings at the Library, seconded by Gary Michaels. Mr. Warmington and Mr. Kraft, who have served on this Subcommittee, expressed agreement. It was noted that the Subcommittee can be reinstated at a future date. The motion passed 6 - 1 (Kraft). Dan Hartnett left the meeting after this discussion. Undergrounding Mr. Nesvig stated that the Village of Wilmette had to threaten to sue ComEd to get them to install underground wiring according to their agreement, and it was his understanding that 500 feet of underground wires were to be laid in Evanston according to the current franchise with Com Ed. Mr. Kraft understood that the provision of 500 feet of undergrounding was only included in the NWMC franchise document, which had not been accepted by the City of Evanston. Deregulation Subcommittee Report Concerning Pending Legislation in Springfield A summary/comparison of the pending deregulation proposals had been prepared by the Subcommittee and was included in the Communications section of this Commission packet. Stephen Thomas mentioned the high points of each proposal and members commented on these. Ennrgv%nmmiccinn Minutrc Pg6p I A/A/47 Mr -Thomas stated that, at this stage, the legal structure must be established before the end stage issues are resolved, such as who will maintain the delivery system. Mr. Pelsoci clarified that discussions thus far indicate that transmission and distribution will not be deregulated. He understood that transmission will continue to be regulated by FERC and distribution will continue to be regulated by the ICC. Deregulation will make it possible for you to buy power from a supplier other than ComEd and they will be forced to wheel that power to you at non-discriminatory rates. You will still be using a regulated high voltage transmission line for which rates will be set in a regulated way. You will still be using a regulated distribution system subject to maintenance requirements by the ICC. The rate schedules will be separated (unbundled) for distribution and transmission. Mr. Thomas added that there will be those that will build transmission lines as well. Regarding the situation in Evanston, Mr. Pelsoci said that a supplier would negotiate with ComEd because ComEd owns the distribution lines and until it is condemned has a right to the franchise. A company such as Enron would only be interested in Evanston to the extent that they would get into the retail wheeling market early to beat the competition. Retail wheeling is 3 - 4 years away, so there is a small window of opportunity. If Evanston said to Enron - help us municipalize and you will become our supplier of generated power, Enron would only be interested in that offer for the next 1-1'/s years. Jim Wolinski was asked to respond as to how these things might impact Evanston. He commented that concerning the municipal side, the City would have to determine what they want and if they determined they no longer want to be supplied by ComEd and open the bidding process or RFP process to other entities, it would have to be an open process. Mr. Pelsoci noted that the problem is that process takes a long time, during which the window of opportunity will close. Mr. Grumman observed that any bill does not spell out the implications which will occur when it actually goes into effect. Mr. Kraft stated that a fouth deregulation bill has been introduced into the Illinois state legislature. Additionally, the Governor's 3-person commission appointed to study these proposals should be reporting their recommendations in the next few weeks. Regarding stranded costs, the CILC4 bill requires all users to contribute to a trust fund, and utilities must petition the ICC to get money from the fund. Thomas Pelsoci stated that most people are saying that stranded costs will only be an issue for 2-3 years. Mr. Grumman noted that California has established a trust fund which they tali securitization, which enables utilities to cover some stranded costs. Mr. Thomas stated that the whole concept of ownership will change. He would like to see legal barriers to the acquiring of a system removed. Fie noted that each bill is silent on the issue of a municipality's right to condemn distribution, transmission or generation assets. If one wanted this issue to be addressed, perhaps the lobbyist could be advised of such. An arbitration system could be suggested instead of going to court to acquire a distribution system. Mr. Pelsoci noted that the pending bills are about retail wheeling, deregulating; the commodity, not the delivery system. He stated that the issue of municipalization is another huge issue which would drag down the deregulation bills and it is not likely that would be added on to pending legislation, although it is an option. Fncrg7 rnmmiccinn Mimrtpc Pngp 4 4/0/47 Concerning the Evanston distribution system, it was noted that much of it is quite old with few improvements being made. The EEC suggestion to inventory the system was never acted upon by the Council; there was no agreement as to the need for such a study. The ICC study of Evanston's downtown system utilized only ComEd records to determine its reliability. Was this adequate? If the case could be made that there is this window of opportunity, then it might be worthwhile to produce an RFP and have an engineering study performed on the system. Mr. Pelsoci noted that a Iegitimate, technical, independent study could serve to show the ICC that these are the reasons you cannot believe ComEd. It could also be taken to the Enrons of the world: that is a tangible thing that would benefit the City of Evanston. Members discussed this idea. It was noted that the scope of work would have to be defined. Perhaps the five worst spots could be studied. Gary Michaels asked whether a letter could be written to the lobbyist or our representative regarding reducing the barriers to municipal purchase of the distribution system. Gary Michaels agreed to draft such a letter and forward it to Bud Nesvig. Bud Nesvig referred to the situation in Bristol, Virginia, which owns its own system and is realizing many benefits from buying cheaper power. Mr. Pelsoci noted that in order for Evanston to acquire the system, it would have to undertake a legally uncertain & expensive process to condemn the system, then raise bonds to pay for the purchase, then spend money to improve it, then set up a department to run it. You would also be held liable for the stranded assets. Regarding pending Federal deregulation legislation, Mr. Kraft announced that he had attended a briefing in Springfield which contrasted the pending Federal bills. He reported that the Bumpers bill would impose vertical integration which is an example of how the Federal bills could cause changes in whatever Illinois legislation is passed. He also stated that there will be hearings held in Chicago on May 2nd regarding the Shaeffer bill. IV. OLD BUSINESS Unresolved or Deferred Issues Bud Nesvig asked for a volunteer to draft a resolution to forward to the City Council recommending rejection of the NWMC franchise. During the discussion which followed, Mr. Grumman indicated that he was not prepared to vote at this time, since there has not yet been discussion as to the implications of the City uQLhaving a franchise. What are the alternatives? Mr. Grumman would like to hear the pros and cons from a knowledgeable source. Would the legal department have information on this, and does Mir. Crum, the City Manager, have an opinion on this? Further discussion ensued. Without a franchise, could ComEd dig up any street they chose, or would a permit be required each time they were going to dig? In a franchise, ComEd agrees to abide by certain restrictions, and the City agrees to give them the right of way. When repairing the system, would ComEd place priority on communities that have a franchise? There are legal and practical implications. Perhaps a legal source can comment on the legal implications. Mr. Pelsoci commented that this may not be knowable. He compared it to divorce proceedings, it all depends on the specifics of each case. Perhaps the worst scenario could be outlined. aprgy f`nmtniccinn h&nWi-a No S A/0/47 Mr. Kraft noted that the question of not having a franchise could be broken into two questions: 1) what are the implications of not going with a franchise; and 2) what are the consequences of not going with the NWMC franchise. He asked whether City Staff could prepare a checklist of foreseeable problems and which City departments would be affected in the event the City did not have a franchise. Mr. Wolinski thought that staff could put something together for the next meeting of the Energy Commission. He suggested that a general range ofservices which would be impacted, using broadbrush strokes, to examine the implications of having and not having a franchise, without spelling out specifics, could be outlined. Recommend That Citv Request ComEd to Provide Valuation of Distribution System Bud Nesvig stated that it was his understanding that, by law, ComEd must provide this upon request. David Grumman suggested that the EEC recommend to the City Council that the Council make this request. The Commission Agreed by consensus to recommend to the City Council that a request be sent to ComEd to provide a valuation of the Evanston distribution system. Mr. Nesvig volunteered to draft a letter for staff to forward to the City Council. Recommend that Council Reaffirm Energy Service Goals There was discussion that this item be deferred until the new City Council Members were inaugurated. Mr. Warmington suggested that the EEC describe potential goals and ask the Council whether this idea conforms with their perception of energy service goals. David Grumman agreed to review energy service goals for the next meeting of the EEC. Funding Mechanism for Electric Service Opligns - Draft Resolution Prepared by David Kraft Mr. Kraft referred to the draft resolution, which had been prepared in September I996, and asserted that the kind of advice, expertise and coordination that seem to be required to continue energy activities in a meaningful way requires the stability of a professional. Discussion ensued. Mr. Pelsoci asked what overall tangible objective, what benefit to the City, would accrue as a result of the activities outlined in this resolution. He asked whether this was a research or lobbyist position. Mr. Kraft responded that dedicated personnel would facilitate action in certain areas, and this resolution refers to a staffed energy department position. He added that energy requires this kind of attention. Mr. Pelsoci noted that energy is not a traditional City function, but is a new function which is involved in intergovernmental activities at the Federal and State levels. The EEC objectives are unclear, so he would hate to see a staff person supporting the EEC at this time. He asked who this person would work for and what good would this do? Mr. Kraft responded that the deregulation process itself will carve out a very active position. The EEC's job would be to support that person. This would provide stability, direction and continuity over the long run. Mr. Pelsoci again asked what is the tangible criteria. Couldn't the City's Purchasing Agent handle the purchase of power? If that person lacks expertise, couldn't they learn it, rather than hiring 3 persons to do that? Mr. Kraft responded that the level of expertise needed so as to provide benefit to the City could not be quickly learned. There are many separate issues included in this resolution involving policy, Iobbying, research and purchasing which cannot be handled by one person. Mr. Pelsoci stated that the market will take care of reducing energy costs, not this proposed staff person. He submitted that the only way to achieve greater reliability from ComEd is through political pressure Vnergy rommiccinn Minntee P!IgF' F, d/Q/Q7 or to condemn the system. The City already has a lobbyist and if the City chose to condemn the system, it will need to hire a law firm - a staff person is not going to have an impact. As a taxpayer, he could not see the possible benefits that would justify hiring this staff person. He suggested not to spend allocated money just because it is there and added that if you don't have full time work year round, you hire a consultant. Mr. Kraft responded that there is no continuity of product with the use of a consultant, whereas a staff person could provide continuity. David Kraft motioned that the existing resolution, (with minor recommendations from Janet Hoffman, which he read), be accepted by the EEC, seconded by Gary Michaels. Mr. Pelsoci stated that this was a potentially good idea, that he wanted to understand why this is a good idea. and he hoped that someone could justify it so that he could support it. Gary Michaels stated that over the years, as a member of the Energy Commission, he observed that it is very hard to get anything done. In years to come, he sees the funding of a staff person as a good idea if the changes in the energy market require it, for example, to negotiate for energy on the spot market, but he did not know whether this would require a full time person . Mr. Pelsoci stated that the resolution, as it stands, may appear too general to the City Council, and given that energy issues are fast moving today, perhaps the tangible benefits could be outlined to them. He felt he could support the resolution then. Mr. Kraft had thought that if he was to reformulate it, he would base it on the three goals of reliability, cost and flexibility. Mr. Pelsoci suggested that it be thought through whether this person would primarily perform a business or engineering function. Mr. Pelsoci motioned to amend Mr. Kraft's motion (to recommend approval of the Draft Resolution for funding of energy issues) by tabling the motion to allow Mr. Kraft to draft a second version, which was seconded by Gary Michaels. (During the discussion which followed, Mr. Pelsoci withdrew his motion) Discussion ensued that members wanted somehow to support this idea. Stephen Thomas added that these positions work best when there is a pressing need. Members recalled that the Ordinance passed in 1993 defines what the City Council wants the EEC to do. The City Council had created the EEC to obtain direction on energy issues. One directive was to study municipalization, and there have been attempts since then to determine just what it is the City Council wants the EEC to do, but without success. So, the EEC has tried to determine what they should be doing. Gary Michaels noted that the one alderman who had been the most involved in this issue is no longer on the City Council. So where is this going? A vote ivas taken on Mr. Kraft's original, unamended motion that the Energy Commission accept the Draft Resolution concerning funding for energy issues. 3-Aye (Michaels, Kraft, Warmington), 2-Nay (Grumman, Nesvig), 2-Abstained (Pelsoci, Thomas). The motion failed for lack of a majority vote of members present. Mr. Kraft offered to redraft the resolution. FERC Stranded Cosl Letter Item deferred until the ComEd Report on reliability was received. Fner$g rammigcinn MinnfPe PaP.r 7 419/07 Rye nest for Proposals for Consulting Services Gary Michaels volunteered to draft a letter concerning this agenda item. OTHER BUSINESS At the March 1997 meeting of the EEC, members voted to request that staff send Resolution 10-R- 97 (concerning the points of agreement between Evanston and the TAG group) to all members of the NWMC requesting an accompanying letter from Roger Crum. David Kraft had drafted a letter, with input from other members of the Commission, for Mr. Crum's approval and had forwarded it to Dennis Marino. He inquired as to whether the letter had been sent. Mr. Wolinski stated that staff would follow up on this. Joan Farquharson indicated that the City Manager's office had directed that the resolution be sent to all those who had attended the February Energy Briefing, which had been done. Members agreed by consensus to send a thank -you letter to Alderman Guthrie for her attentiveness to the energy issues. It was also agreed that it would be appropriate to thank each out -going Alderman for their interest, and welcome those who are coming in. Bud noted that the three new Aldermen were invited to attend this meeting of the Energy Commission. The Chair agreed to initiate these letters. ADJOURNMENT The meeting adjourned at 9:40 P.M. The next scheduled meeting of the Energy Commission is set for Thursday, May 1, 1997, at 7:15 A.M. in room 2404 of the Civic Center. fL Farqu on taff Assistant ENERGY COMMISSION MINUTES Thursday, May 1, 1997 - 7:15 A.M. MEMBERS PRESENT: DOOLIN, HOFFMAN, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: BAUMANN, GRUMMAN, KRAFT, PELSOCI, THOMAS STAFF PRESENT: MARINO, FARQUHARSON OTHERS PRESENT: DELBERT LEPPKE, TONY GRUMWADE SUMMARY OF ACTION: 1. CALL TO ORDER The meeting was called to order at 7:30 A.M. A quorum of members was not present for the meeting. Mr. Delbert Leppke, a retired consulting engineer, was in attendance. I-Ie informed members that he had been introduced at the last City Council meeting for appointment on the Energy Commission. Mr. Nesvig stated that he would like the Commission to be notified when a new member is introduced to the City Council for appointment to the Commission. Mr. Tony Grumwade, a representative of the Toastmaster's speecli-making club was also in attendance. 11. MINUTES OF APRIL 9, 1997 Consideration of the minutes of the April 1997 meeting of the Energy Commission were deferred due to a lack of quorum. III. NEW BUSINESS Energy Briefing held 4/21/97 Roy Warminbton and David Grumman had attended the Briefing. Roy Warmington reported that the briefing consisted of a presentation from the CILCO representative who also entertained questions from the audience. Energy Commission Membership Issues Bud Nesvig reviewed the attendance issue and the fact that Steven Thomas had moved out of the area. Mr. Nesvig had spoken to Alderman Feldman and intended to speak to the Mayor about attendance issues, especially the lack of attendance of Hans Baumann. Reducing Barriers to Municipal Purchase of a Distribution System At the last meeting of the Commission, members noted that none of the deregulation bills pending before the State legislature addressed the issue of municipalization. Gary Michaels distributed a draft communication which he had prepared outlining this concern. Discussion ensued. Janet Hoffman indicated that a municipality has the right to condemn a distribution system, but the difficulty lies in that there are not legislative standards for valuation of the system, since it is a portion of an on -going business. The Commission agreed by consensus that provisions of each bill that are important for Evanston {such as provisions which would allow a municipality to be an FnPrgv Cnmmiccinn_MinutPc psknP 7 5/] /97 aggregator) should be enumerated and included in the letter to be forwarded to the City's lobbyist. Mr. Nesvig will contact David Grumman for a redraft of the letter and obtain the approval of members prior to forwarding to the City Council. Report of Deregulation Subcommittee Concerning Pending Legislation in Springfield This item was covered in the discussion of the previous agenda item. OLD BUSINESS Discussion of Impact of Potential Rejection of NWMC Franchise Dennis Marino distributed various memorandums dating from the period during which the City did not have a franchise with ComEd which addressed the potential impact of not having a franchise in terms of legal and financial risks to the City. Mr. Marino highlighted that the removal of the "free electricity" provided to certain City buildings would result in a $350,000 gap which would have to be covered and that the City currently pays for electricity servicing the traffic signals, which, under the proposed franchise, would not be charged the City. He suggested that the Franchise Subcommittee take a look at the impact of not signing a franchise. Janet Hoffman did not object, but stated that at some point the City may want to obtain independent Iegal counsel regarding this issue. It was noted that the obligation to serve may also be impacted by pending legislation. Bud Nesvig agreed to draft a recommendation, which Janet Hoffman offered to review, regarding termination of the franchise, (which was extended for 7 years from 3/5/92 to 3/5/99, with an opt -out provision 180 days prior to 3/5/99) to be considered by a quorum of the Energy Commission at their next meeting. Consideration of Draft Communication Transmitting Recommendation That City Request That ComEd Provide Valuation of Distribution System Bud Nesvig recalled that, at the February 1997 meeting, the Energy Commission had agreed to do this and in his recollection, the Council Energy Subcommittee had also agreed that this be done. Discussion ensued. Whether there is a law requiring ComEd to respond in a 30-day period to a request of this kind was in question. if this cannot be resolved, it was determined to remove that sentence from the request. Mr. Doolin asserted that ComEd well knows the value of their system, and if they wanted to provide the information, it would not take long to do it. Consideration of Recommendation to Establish Funding Mechanism for Electric Service Options A redraft of Mr. Kraft's proposal was expected and since Mr. Kraft was not in attendance, this Agenda item was deferred. Consideration of Recommendation to Issue Request for Proposals for Consulting Services At the previous meeting of the Commission, Gary Michaels and Thomas Pelsoci had agreed to work on this. A preliminary memorandum prepared by Mr. Pelsoci regarding the window of opportunity that exists for the City was distributed. Members were asked to review this. Consideration of this item was deferred until the next meeting of the Commission. Fnergnv C'nmmissinn MinntPc Pn PP I VI /97 Franchise Analysis Subcommittee Janet Hoffman reported that there has been no action since the last meeting of the Commission. Consideration of Recommendation That Council Reaffirm Energy Service Goals Roy Warmington reminded members that, at the last meeting of the Commission, this item was deferred until the new City Council was in place, and that David Grumman had agreed to review these goals. Communications Dennis Marino provided an overview of the communications. OTHER BUSINESS Reinstitution of the Committee Structure of City Council Dennis Marino informed members that the Rules Committee held a meeting on April 29, 1997, during which the committee structure was reinstituted. This means that the Administration and Public Works Committee, Planning and Development Committee and the Human Services Committee will replace the Committee of the Whole. This may impact the Energy Commission concerning their routing of communications to the City Council. Mr. Marino will seek clarification as to whether the Council Energy Subcommittee or the Administration and Public Works Committee will serve as the path to the City Council. Alma, Michigan Scenario Gary Michaels referred to Alma, Michigan, a community which is considering the establishment of its own municipal utility. The utility currently servicing Alma stated that if Alma left the system, it would be left with idle generating capacity and would therefore be entitled to recover stranded costs of $56 million. However, this utility had to purchase an additional 44 MW from another company last year in order to meet the demand for electricity. The legal argument is that you can't have it both ways. Mr. Michaels observed that ComEd has been seeking to shed load, offering to pay its large commercial customers to reduce their electricity use. ComEd used to say they had excess capacity. Now they are operating on 4 plants, 8 are down. Could the City of Evanston use the argument that it could immediately shed a certain amount of MW, and in lieu of a payment, it will accept the distribution system? Mr. Michaels offered to find out what ComEd is currently offering commercial customers to shed load, and inform Mr. Nesvig of this. Janet Hoffman offered to speak with her law partner who deals with Naperville (a community which has a municipal system). ADJOURNMENT Meeting adjourned at 9:10 A.M. The next meeting of the Energy Commission is scheduled for Wednesday, June 4, I997, at 7:00 P.M. in Room 2404. Jo Farquharso , Staff Assistant MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: ENERGY COMMISSION MINUTES Wednesday, June 4, 1997 - 7.15 A.M. DOOLIN, GRUMMAN, HOFFMAN, LEPPKE, NESVIG, PELSOCI, WARMINGTON BAUMANN, MICHAELS, KRAFT MARINO, FARQUHARSON TONY KELLY, SYDNEY ZWICK CALL TO ORDER The meeting was called to order at 7:22 A.M. CONSIDERATION OF MINUTES OF APRIL 9, 1997 AND MAY 1, 1997 Mr. Nesvig commented that the undergrounding discussion on page two of the April minutes conveyed some inaccurate information. He clarified that the 500 feet of undergrounding is included under the current franchise as well as the NWMC franchise document. The April minutes were approved, Ms. Hoffman and Mr. Leppke abstained. The May minutes were approved; Mr. Grumman abstained. NEW BUSINESS Introduction of New Member of Energy Commission/Membership Issues Bud Nesvig introduced the new member of the Energy Commission, Mr. Delbert Leppke, who is retired from Fluor Daniel, the successor of Pioneer Engineering Services, where he headed the Nuclear Department. Mr. Nesvig informed members that he intended to call the Mayor regarding Mr. Baumann who has not attended Commission meetings for some time. Recent Deregulation Activities in the Illinois Legislature Dennis Marino distributed several newspaper articles from June 2nd and 3rd concerning the pending Illinois deregulation bill which had passed the House but was not called to the Senate, and will next be considered in the fall Veto session. He expected to receive a full copy of the bill this week, which would then be distributed to members. OLD BUSINESS Discussion of Current and Future Franchise Relationships There was extensive discussion of the advantages and disadvantages of Evanston signing on to the NWMC franchise versus having no franchise at all. Janet Hoffman reviewed that the old franchise was exclusive, whereas the new franchise is non-exclusive. Having a franchise may be a deterrent to other suppliers in that, if a community has a franchise, that means that individuals would have to choose to switch to the new supplier. People's inertia is such that many would not switch. She added that a franchise does not guarantee customers to the utility. It regulates use of rights of way and imposes regulations on tree trimming, undergrounding, etc. but remains silent on many issues. N tI Energy Commission Mies Pago 6/4/47 , Janet Hoffman noted that, in the NWMC franchise, street lighting is included in the "rate payer subsidized" electricity which is granted the City at no cost. Thus, a financial disadvantage, if the NWMC franchise were not signed, would be the charge for street lighting. Mr. Nesvig stated that the City could include this in their agreement at any time by passing a law and notifying ComEd to charge rate -payers for that. Ms. Hoffman noted that certain regulations may apply to that. David Grumman raised the issue of whether Com Ed would put Evanston as a low priority when performing repairs after a storm if there were no franchise. Janet Hoffman mentioned possible ICC standards with regard to that, yet it was unclear how that plays into the obligation to serve. Mr. Marino added that, when Evanston was without a franchise, the City experienced timely repairs and was not neglected. ' Janet Hoffman stated that, without a franchise, a lawsuit is likely; Com Ed would probably send bills for ' electricity to the City again, and there is no guarantee that stranded costs would be avoided. The franchise does not require upgrades and does not address specific reliability standards. During a general discussion of this issue it was noted that without a franchise, the City would be in a better position to negotiate on inadequate provisions. Canceling the franchise would be a bargaining tool. A franchise applies to the deliverer of power and the utility is still responsible for maintenance of the distribution system. Tariffs are charged for use of the distribution system. A franchise allows certain access rights and real estate easements. It was noted that the bill pending before the Illinois legislature must address the issue of communities that are in the midst of long term franchises. Sidney Zwick mentioned that Winnetka buys cheaper power than Evanston gets from ComEd through a cooperative, IMEA, a wholesaler of power. He suggested that Evanston could do this as well. It was noted that Winnetka can purchase power from the cooperative because it owns its distribution system. Bud Nesvig asked whether a vote could be taken on how to advise City Council with respect to the NWMC Franchise at this time. Janet Hoffman suggested that members determine the advantages and disadvantages and take this to the Council Energy Subcommittee. Thomas Pclsoci urged members to focus on key issues and use the expertise on the Commission to target one subject and present an analysis that would carry some weight. Mr. Doolin suggested the Commission have an alternative plan to offer if they suggest canceling the franchise. Mr. Pclsoci stated that there are not many options for Evanston. Either Evanston can: 1) condemn the distribution system; 2) build a new distribution system; 3) if I or 2 are accomplished, then build a transmission link to Wisconsin; or 4) generate its own power. He emphasized the need to look at how deregulation is affecting these options. He suggested that the next meeting of the Energy Commission focus on addressing these options. The Commission agreed by consensus to do this. Mr. Pclsoci drew a chart on the blackboard to outline the options: Energy Commission Minutes Page 3 IKEY ENERGY ALTERNATIVES FOR THE CITY OF EVANSTON IMPACT ON ELECTRIC PRICE Renew ComEd's Franchise None This is an inactive approach Can only hope for some future Improvement Do Not Renew ComEd Franchise Acquire, Build New Upgrade and parallel Operate Distribution System ComEd Distribution Build, Own System through and Operate it Condemnation This is very This may be difficult. easier May take many years ofcostiy court battle to condemn Then would have to finance the rehab of system Economics needs to be "roughed out" This could be done without paying an "exit fee" Need legal Part of price will opinion to be the exit fee substantiate IMPACT ON None Potentially Potentially RELIABILITY could help could help Build or Acquire Distribution System and build transmission link to ship in power from Wisconsin Once we own distribution then we become a wholesaler and are guaranteed non- discriminatory access to ComEd High Voltage Grid Transmission link to wisc, may no longer be needed Potentially could help b/4/97 Wait for Retail Competition and Lobby Only thing we can do is lobby. Likely impact is minimal This is tantamount to waiting and hoping. None Mr. Pelsoci added that, in the scenarios to either condemn or build the distribution system, you could generate your own stranded costs if you weren't careful. Consideration of Draft Communication Transmitting Recommendation that City Request that ComEd Provide Valuation of Distribution System Bud Nesvig stated that he would be preparing this draft communication and will forward a copy to each member. Status of Requested Reimbursement for Downtown Outage November 1995 Dennis Marino agreed to check on the status of this request. OTHER BUSINESS Janet Hoffman indicated that summer law students were now entering the Pro-bono program at her n s Page a 6/4/97 law firm and she asked members to consider what projects they might want performed. After discussion, members decided that two projects would be useful: 1) List the advantages and disadvantages of cancelling the franchise, and 2) Review the Deregulation Bill that passed the Illinois House, disscussing provisions of that bill which have a direct impact on Evanston either with or without a franchise. Mr. Leppke noted that they should review what MW load is required to become an aggregator. Ms. Hoffman stated that the student would likely be available in July or August to give a presentation to the Commission. Janet Hoffman thanked Mr. Zwick, who had arranged for her to participate in a WNUR broadcast last Saturday regarding deregulation of the electric utility industry and a summary of where Evanston was with regard to this issue. It was hoped that a fall program would be arranged with perhaps three members of the Energy Commission participating and a call -in option for others. Tony Kelly asked whether Larry Suffredin could make a report to the Energy Commission. Mr. Marino suggested that there be a follow-up legislative briefing comparable to the two previous sessions sponsored by Evanston and attended by more than a dozen North and Northwest municipalities. Members decided by consensus to change the next meeting date from Tuesday, July I to Tuesday, July 8, 1997, at 7:15 A.M. COMMUNICATIONS Mr. Nesvig distributed a communication concerning the potential for lower cost and improved reliability and a news release from Bristol, Virginia whose City Council recently left the Tennessee Valley Authority and signed a contract with Cinergy Corporation as their wholesale electric power supplier. An article concerning this from the Wall Street Journal was also distributed. Mr. Grumman provided two handouts: proposed revisions to the City Council's charge to the Energy Commission and the Table of Contents from "Power Shopping", a publication from the Building Owners and Managers Association International (BOMA) which discusses deregulation. "Pint Size Producer of Power Unveiled", an article on generators that would let small businesses bypass utilities, was also distributed. ADJOURNMENT The meeting adjourned at 9:20 A.M. The next meeting of the Energy Commission is Tuesday, July 8, 1997 at 7:15 A.M. in room 2404 of the Civic Center. 14 FarquhaO& Staff Assistant .T MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: ENERGY COMMISSION MINUTES Tuesday, July 8, 1997- 7:15 A.M. GRUMMAN, HOFFMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, PELSOCI, WARMINGTON BAUMANN, DOOLIN MARINO, FARQUHARSON STEPHANIE STEEN, INTERN IN THE CITY MANAGER'S OFFICE, SYDNEY ZWICK CALL TO ORDER The meeting was called to order at 7:15 A.M. CONSIDERATION OF MINUTES OF JUNE 4,1997 At the suggestion of Mr. Pelsoci, the chart of Key Energy Alternatives for the City of Evanston which he had prepared (enclosed), was substituted for the chart which originally appeared in the draft minutes. With that change, the June minutes were approved. Mr. Michaels abstained. NEW BUSINESS Discussion of Memorandum from Bud Nesvig dated June 23,1997 including Thomas Pelsoci's Draft of Key Energy Alternatives for the City of Evanston Thomas Pelsoci discussed several options which could lead to action items as outlined on his chart. if the City renews the franchise there will be no impact on price or reliability of electric service, and he termed it an inactive approach. There would be no impact on rates that would not otherwise happen. If the City chooses not to renew the franchise, there are several options available: Option One: Acquire the distribution system through condemnation, then upgrade, modernize, and operate it. Mr. Pelsoci noted that this would be a very difficult, lengthy process requiring financing the rehabilitation of the system, and establishing a management structure to operate it. The condemnation price could include the exit fee, Depending upon the quality of the job done, the reliability could be impacted either positively or negatively. Option Two: Build a new, parallel distribution system. This may potentially avoid legal hassles and thereby be easier than condemnation, but the economics must be "roughed out". It is more likely that the exit fee would be avoided than if option one were adopted, and reliability would be impacted depending upon the quality of the job done. Option Three: Build a transmission link to bring power in from another source such as Wisconsin. Mr. Pelsoci noted that it only makes sense to pursue this option after having done either option (1) or (2), since you could purchase power but not be able to deliver it without owning the distribution system. A prerequisite for retail wheeling of power would be to own the distribution system. However, once you own s PV.L2 7/8/97 the system, you become a wholesaler of power, and the Federal Energy Regulatory Commission (FERC) mandates that ComEd must make transmission lines available to you and wheel power to you, which negates the need for a transmission link to Wisconsin. Option Four: Wait for retail competition and lobby. Mr. Pelsoci stated that this is a serious option, but it is uncertain as to when retail competition will occur. Once it does occur, however, there is no need to own the distribution system since you will be able to buy power through an aggregator who offers cheap power. There would be no impact on reliability with this option. Mr. Pelsoci stated that, should the Commission reach an agreement as to the option to recommend, then consideration of a legal opinion regarding exit fees and assessing the cost of the distribution system can be pursued. During the discussion that followed, it was noted that whether or not the franchise is renewed, one must still wait for retail competition. The difference may be that renewing the franchise could discredit the case against stranded costs, while not renewing could keep the options open. Another sub -option could be to renegotiate the franchise. Mr. Kraft stated that, if the franchise was not renewed, an open bidding process for electric power could be initiated. Janet Hoffman noted that one must assume that the bid would include the costs to acquire the distribution system or fund the alternative system. If the franchise is not renewed, Ms. Hoffman noted that the financial impact of the loss of rate -payer subsidized electricity must also be included as part of the calculations, as it would become a new expense for the City. Regarding who would operate and maintain a municipally owned distribution system, it was noted that this is either contracted out or handled by the municipality itself. As examples, Winnetka operates their own distribution system and has generation capability which they do not use. Naperville buys generated electricity from ComEd but runs their own distribution system and has some small transmission facilities. Janet Hoffman commented on whether the exit fee can be avoided if the franchise is not renewed. The logic behind the exit fee is to compensate the generator for their sunk costs and lost opportunities. Evanston can argue that ComEd shouldn't have been counting on them, and therefore the exit fee should be small. The City could hire someone to go in front of the FERC & get an answer, but this cannot be extrapolated from the FERC regulations. FERC has seemed to be in favor of some kind of exit fee, so the key is to keep it as low as possible. Ms. Hoffman added that it is possible that the State may make the decision on this since ComEd is primarily within one state. Delbert Leppke noted that the exit fee is mentioned as a transition fee formula in Senate Bill 55 (SB55), the current pending Illinois deregulation bill. On page 7, line 254, under "Transition Charge" the formula is based on the cost of service for the 3 years prior to exit, subtracting the market value of electricity and mitigating that by a percentage. Further, the new bill presupposes that every resident will pay an exit fee. A Bud Nesvig urged members to recommend that City Council issue an RFP for power supply and distribution system acquisition/construction. Mr. Grumman indicated that the Council will want to know all the options and reasons why the Commission recommends a certain option. Therefore, he suggested that the Council be provided an expanded version of this chart along with any recommendation. Mr. Leppke added that more data and specifications, such as whether Evanston would rely on one or more transmission systems, would be needed before this type of RFP could be issued. s P.1ge 3 718/97 Regarding the hiring of an engineering firm to initiate an RFP, discussion reviewed how Council responded to recommendations to hire a consultant in the past and what they would likely want to know prior to approval of such a recommendation. David Kraft noted that the Commission's job is to arrive at recommendations to present to Council. It is then their job as elected officials to make a decision. Mr. Pelsoci urged members to put forth the effort to clearly understand these options, which will involve doing some homework and analysis. It is a long process to determine what to pursue, have conviction about it, know why you want it, and then sell it. Mr. Grumman noted that each category on the chart can be expanded and the implications can be clarified, which would be a big help to the Council. Discussion ensued regarding the need to make some estimation on the cost figures to give the Council an idea of the magnitude of each option. Mr. Pelsoci suggested that an engineering firm be hired for 2 days to determine the financials on this chart such as: a credible ball park estimate of what the cost is to build a distribution system in Evanston and how much money it will generate. This is information a potential supplier would need to know, but to talk to a supplier now would be a mistake, according to Mr. Pelsoci. Members asked Dennis Marino what process would be required to fund such an engineering study. Mr. Marino responded that the City Manager is authorized to spend up to $5,000 without Council approval, and in that case the City would send letters to three firms to solicit responses. Members discussed Mr. Pelsoci's idea to recommend hiring an engineer knowledgeable in the business. Mr. Nesvig asked Mr. Pelsoci, Mr. Leppke, Mr. Grumman and Mr. Warmington to work together to flesh out the request and put together a scope of work and list of questions that must be answered. They agreed to work on this as their schedules would permit. The need for a facilities map was discussed. Janet Hoffman noted that Commission members have viewed examples of detailed facilities maps at ComEd, but the maps are not by municipality and therefore would be difficult, but not impossible, to use. ComEd has been willing to allow a consultant to examine maps under an appropriate confidentiality agreement. Mr. Pelsoci noted that another method to use would be to provide a map of Evanston to the consultant and ask them to design a system along with a substation. Members agreed by consensus that a draft of the work of this Ad -hoc Committee be faxed to all members, with comments or questions to be received back within 48 hours or deem approved. At the suggestion of Mr. Grumman, Bud Nesvig agreed to discuss this approved draft with the City Manager or Acting City Manager to apprise him/her of this effort. Mr. Pelsoci suggested that the Committee focus on a rough estimate of the scope of work at this time to get a ball -park estimate of the cost for a new distribution system now. Clarifying the chart can be the next step. Members agreed by consensus to this procedure. Mr. Kraft stated that it was his understanding that the Fire Code required Fire Department inspections of ComEd facilities in Evanston and if those inspections are being done, the City would have information to compile a facilities map. Mr. Marino responded that in terms of the distribution system, that information could be helpful but would not be sufficient. Staff will provide Mr. Leppke with any materials they have that may assist him in his work on this project. OLD BUSINESS Consideration or Recommendation to Issue Request for Proposals for Consulting Services This item was incorporated into the discussion which occurred under New Business. S Pqge 4 7/$/97 Discussion of Current and Future Franchise Relationships Mr. Leppke asked whether the City Council has ever responded to the January 3, 1996 memorandum from the Energy Commission transmitting the analysis of the proposed franchise by a summer associate at Kattcn, Muchin & Zavis under their Pro Bono Program at the request of Ms. Hoffman. There having been no response, Janet Hoffman replied that perhaps the analysis has served to point out that there is no nice comfortable franchise to fall into, and that there is need for a decision to be made. The idea arose of whether the Commission ought to consider formally endorsing this analysis. Mr. Leppke provided his personal opinion that it should be conveyed to the Council that ComEd should be informed that the City does not intend to continue the franchise agreement subject to some serious renegotiation. There was brief discussion that if Com Ed does not renegotiate, the City will receive bills for power, ComEd will receive bills for use of the public right-of-way and litigation will ensue as it did before. On the other hand, operating under the new franchise will give the City certain Ieverage that they would not otherwise have such as the right to inspect ComEd facilities and that ComEd must inform the City any time they are applying to the ICC for a change in rates. Janet Hoffman suggested that a summary chart be developed that would be directly related to the benefits and drawbacks of renewing or not renewing the franchise. Noting Mr. Leppke's enthusiasm for this subject, she asked him to work with her and the other members of the Franchise Subcommittee (Mr. Michaels and Mr. Kraft) during the first two weeks of August so as to make this summary available to Council by the beginning of September. She stated that it is time to present this sort of information to the Council since they now only have one year to act upon it. Consideration of Draft Communication Transmitting Recommendation that City Request that ComEd Provide Valuation of Distribution System Dennis Marino stated that he had received this from Bud Nesvig within the last week and would present it to Roger Crum when he returns from vacation in two weeks. Deregulation - State of Illinois Mr. Thomas, who had resigned from the Commission, was the Chair of the Deregulation Subcommittee. Janet Hoffman stated that it is her intention to utilize a law student in analyzing SB55. Dennis Marino stated that it was his understanding that Howard Lerner of the Environmental Policy Center is performing an analysis of S1355. David Kraft informed members that at l 1:00 A.M. today at the Public Interest Research Group (PIRG) office located at 202 S. State Street in Chicago, Citizen's Utility Board (CUB) would be providing a summary of S1355. David Kraft will make a copy of this summary available to members. Consideration of Recommendation to Establish Funding Mechanism for Electric Service Options Mr. Kraft deferred this item for consideration at the next meeting. He distributed copies of hisproposal and asked members to fax comments to him, which he intended to incorporate into the document for the next meeting. Consideration of Recommendation That Council Reaffirm Energy Service Goals This item related to that portion of the Ordinance which lists the power and duties of the Energy Commission indicating what the Council wants the Commission to do. Mr. Grumman had prepared a draft s Prig 5 7/07 of revisions which was previously distributed to members. Staff was asked to include Mr. Grumman's draft and Ordinance 49-0-93 when the minutes of this meeting are sent out. Restructuring of Energy Commission/Environment Board Joint Effort for Implementing Energy Policy Roy Warmington reported that several meetings ago, the Joint Energy Policy Implementation Subcommittee was temporarily disbanded due to several reasons. One reason was that the Environment Board had many vacancies and could not supply anyone for this Subcommittee. In order to reestablish the Subcommittee, Mr. Warmington stated that more direction was needed from the Council and support from some City Staff member was also needed. Bud Nesvig raised the idea of calling Alderman Feldman, Chair of the Council Energy Subcommittee, about this issue. Mr. Marino commented that it may be that the Energy Policy was created in the same context during which Ordinance 49-0-93 was adopted and perhaps more discussion should occur as a Commission as to the role of and reason for the Joint Energy Policy Implementation Subcommittee. Status of Requested Reimbursement for Downtown Outage November 1995 Bud Nesvig recalled that ComEd had responded that they were not allowed to reimburse the City. He contends that the outage was caused by ComEd. Mr. Nesvig asked whether he could send a letter to the City Manager recommending that he analyze whether it is legal for ComEd to cite laws that do not allow them to reimburse the City. Mr. Marino responded that Mr. Nesvig could do this as an individual or with the consensus of the Commission. The Members of the Commission who were still present agreed, by consensus that Mr. Nesvig could send a letter on their behalf. Janet Hoffman clarified that the laws Mr. Nesvig referred to are actually cases in the law. OTHER BUSINESS Mr. Sydney Zwick expressed his continued interest in the utility deregulation issue and the work of the Energy Commission. Mr. Zwick distributed several articles aimed at informing the public about these issues which had appeared in the Beacon recently, and he intended to continue to print similar informative articles. He also mentioned that he is expecting student volunteers from Northwestern University's School of Broadcast Journalism to assist him in the production of the''/2 hour programs that will appear on channel 3 as part of the informative process to let the community become more aware and involved in the issues. Mr. Zwick added that student volunteers could also be used to conduct surveys, and be utilized in other ways to assist in public relations work related to the work of the Commission if members would provide specific suggestions for work projects. Janet Hoffman inquired whether the City Council and the Energy Commission were interested in having continued radio programs on a dependable, scheduled basis, and she acknowledged that Mr. Zwick had been so helpful in producing such a program in the past. Commission members expressed continued interest in this and Mr. Zwick will determine what the students' availabilities will be as to how often such a program can be produced. lie added that the audience for the University radio channel extends from Waukegan to the Loop and that there is an FCC requirement that a certain amount of community service programming be carried. If these programs are well publicized they will be heard by far more than Northwestern students alone. Members discussed various ways of publicizing the broadcasts. Enema Commission Minutes Page 6 7/8/97 Reappointments Mr. Warmington noticed that three members of the Commission will complete their first terms this month, and he asked whether they had received any communication from the Mayor's office yet. They responded that they had not. Mr. Warmington asked if Staff could find out the status of their reappointments. Since this is exclusively handled by the Mayor's office, Mr. Marino suggested that it would be appropriate for the Chair of the Commission to approach the Mayor's Office about this issue. COMMUNICATIONS Janet Hoffman had provided an article for the packet concerning IRS private use rules. Mr. Pelsoci asked Ms. Hoffman to clarify why private use IRS rulings affect municipalities as being aggregators, and can they lose tax-exempt status? Ms. Hoffman responded that the private use IRS rules only apply if a municipality has a municipal electric system financed with tax-exempt bonds. Evanston does not. Acting as an aggregator alone should not have any effect on the tax -exemption of Evanston's current outstanding debt or on the debt of a municipality that had financed its municipal electric system with tax-exempt debt. Generally, if you finance a distribution system with tax-exempt bonds and buy electricity elsewhere, there is no problem. If the operations and management is contracted out, there are safe harbor provisions that the management contract would have to comply with, but it is possible to enter into a qualifying management contract. Mr. Pelsoci posed the example of a municipality that would buy SOMW base load, wheel the power over a tax-exempt bond financed distribution system, and seek to resell a portion to balance the load and supply, supposing there are times they only need 40MW. Ms. Hoffman responded that the existing tax Iaw contains two provisions impeding tax-exempt financed municipal utility systems from competing in deregulated/competitive markets. The current issues for tax-exempt financed systems are that there is a rule that municipal utilities generating power cannot provide power outside of two counties and the private use restrictions would prevent such a municipal utility from wheeling power generated by investor -owned utilities over their band -financed transmission lines. Under current law, public power utilities may allow investor owned utilities to use 10% of their transmission wires - or a maximum value of $14 million of the facilities - if they are financed with tax-exempt bonds issued after 1986. Otherwise the restriction is 25% of their transmission wires if the tax-exempt bonds were issued prior to 1986. Currently, the IRS and the Treasury Department are working on finalizing guidance for private use restrictions on public power. However, for the sweeping changes needed to maximize public power's flexibility in a deregulated market, revisions are necessary to the Internal Revenue Code which would have to be approved by Congress. ADJOURNMENT The meeting adjourned at 9:20 A.M. The next meeting of the Energy Commission is Friday, August 1, 1997 at 7:15 A.M. in room 2404 of the Civic Center. ,i W J n Farquh$'son Staff Assistant APPROVED ENERGY COMIVIISSION MINUTES Friday, August 1, 1997- 7:15 A.M. MEMBERS PRESENT: HOFFMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, PELSOCI, WARMINGTON MEMBERS ABSENT: GRUMMAN, DOOLIN STAFF PRESENT: MARINO, STEEN, FARQUHARSON OTHERS PRESENT: TONY KELLY OF THE CLARION JANILE HILL, SUMMER ASSOCIATE AT KATTEN MUCHIN & ZAVIS ROBERT WARMINGTON SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:25 A.M. CONSIDERATION OF MINUTES OF JULY 8, 1997 Janet Hoffman clarified her comments concerning private use IRS rules affecting municipalities in the Communications section of the minutes. She stated that there is currently great controversy in Congress concerning this issue. The current issues for tax-exempt financed systems are that there is a rule that municipal utilities generating power cannot provide power outside of two counties, and the private -use restrictions would prevent such a municipal utility from wheeling power generated by investor -owned utilities over their bond - financed transmission lines. Commission members Agreed, by consensus, that Ms. Hoffman could provide staff with clarifications to her comments, and with that change the minutes were approved unanimously. NEW BUSINESS Report on ICC Hearing regarding Senate Bill 55 (SB55) Stephanie Steen reported on an Illinois Commerce Commission (ICC) Hearing held July 25 in Chicago, which she had attended. Five Commissioners participated (two were present in Chicago and three were tied in by phone from Springfield). The primary goal of the hearing was to clarify concerns Commissioners had with SB55 and to work with staff to draft a response to the President of the Illinois State Senate. Prior to the meeting the five Commissioners had circulated among themselves a document detailing their concerns. Their concerns overlapped in three main areas: I) Market structure; 2) Market power or the environment for competition (i.e., that the bill would delay competition and there would not be a level playing field); and 3) Measurement, recovery and treatment of stranded costs (i.e., the transition period seemed too long, the bill seemed driven by stranded costs, and the calculation method itself being tied to the market price of electricity was of special concern) One Commissioner had stated that the bill lacks the rules of structure needed to assure competition and that, under this bill, Illinois customers would still be paying 40% more for electricity than surrounding states. They also discussed the possibility of creating a Midwest Independent Systems Operator. Ms. Steen will attempt to obtain comments of the hearing. 4 Pag,Lz 8/1 /97 Mr. Kraft referred to pending Federal legislation that threatens to overrule state legislation deemed non- competitive. There had been no discussion at the hearing concerning this issue. Discussion of SB55 Janet Hoffman introduced Janile Hill, a summer associate at Katten Muchin and Zavis who attends Yale University Law School and will be entering her third year this fall. Ms. Hill had prepared a written summary of provisions of SB55 that may be of concern to the City of Evanston as identified in the resolution passed by City Council (Resolution 10-R-97 - "Principal Issues to be Resolved in Restructuring the Electric Utility Industry in Illinois"). Ms. Hoffman reviewed the highlights of the summary, and discussion ensued. There is an opportunity for delivery service charges, and depending on how the ICC decides to allocate "excess generation costs" realized due to customer purchase of electricity from alternate suppliers, additional stranded costs may be applicable. The bill also states that the ICC would implement a consumer education program. There was substantial discussion concerning stranded costs. Ms. Hoffman noted that Illinois is among the first states attempting to deal with the stranded cost issue, but no federal legislation has yet been enacted nationwide. The formula for calculating stranded cost recovery in S1355adjusts the utility's stranded cost by the market value of electricity (which is subtracted from the stranded cost in the formula). So if the market price for electricity goes down, then the stranded cost goes up. The assumption is that, if the market value of electricity goes down, then competition is increasing. Mr. Nesvig questioned the rationale behind the stranded cost payment going up. Mr. Pelsoci explained that stranded cost is the part of the utility's cost that is not covered by revenues received. The investment cost is fixed, but the repayment mechanism is not. Two reasons why revenues no longer cover the investment are: 1) competition, which forces rates down; and 2) loss of captive customers, who now have the right to leave, which will reduce the revenue the utility receives and will affect the repayment of those costs. Mr. Pelsoci asked whether it was implied in the bill that customers who choose an alternate source and delivery mechanism for electric service could avoid stranded cost, (i.e. municipalization or constructing an alternate distribution system). Ms. Hill responded that, in that case, the calculation is different: the amount of revenue that the utility would have received from the customer for tariffed delivery services is not subtracted in the formula to calculate stranded cost. Ms. Hoffman stated that the bill seeks to impose transition costs on all customers. Mr. Leppke added that this transition cost would be paid either as a lump sum or by contract. Ms. Hoffman agreed that if the utility did not have reason to believe that a customer was going to continue to purchase power from them, then the law will probably be interpreted to not impose a transition fee. Bud Nesvig stated that Evanston seemed to have an excellent position in this regard, and a letter should be drafted to the FERC for a ruling. It was noted that the request should first be made to ComEd that they provide a valuation of the distribution system. A draft Ietter had recently been submitted to staff for the City Manager's signature regarding this. Mr. Kraft explained that this step would allow ComEd to respond first, before requesting a ruling from the I:ERC. Mr. Pelsoci asked whether a new industrial entrant to the ComEd system would be assessed stranded costs? What about a new resident? If not, could it be that a municipalized system would be considered a new entrant? If all customers must pay for stranded costs and municipalizing does not help the customer to escape stranded costs, that must be considered. Energy Commission Minutes Pau 3 8/m Janet Hoffman stated that this may be an opportunity to target a particular area of the bill, where, if certain terns are redefined (such as the specifics in Evanston's case), it could be made a lot easier for Evanston to do what it may want to do. A lobbyist could become very helpful in this area. There was discussion of what the criteria are to become an aggregator. Pages 4 and 6 of Ms. Hill's summary refer to this, and Mr. Kraft read from pages 13-14 of SB55 that: "Such aggregation may include any voluntary grouping of customers having a common agent with contractual authority to purchase power on behalf of all customers in the grouping." Mr. Leppke noted that, if the City were to become an aggregator, it may have to agree to certain controls on its load (as industrial customers do) and that an aggregator can ask for a competitive price five years sooner than residential customers (the year 2000 as opposed to 2005). Further discussion of aggregation revealed that there is no requirement to aggregate within a customer class, and it could occur within a municipal conference. Concerning the drafting of a letter to the FERC to address stranded costs, Janet Hoffman stated that outside legal counsel should be hired to handle that. Mr. Marino explained that if the Energy Commission were to make a recommendation to request a FERC ruling or opinion, it should be made to the City Manager. Janet Hoffman agreed to draft a summary of this issue for the Commission members to review at the next regular meeting prior to forwarding it to the City Manager. Ms. Hoffman clarified that the request to FERC is relevant to the City becoming a distributor of electricity (which involves condemnation and use of the physical assets and the issue of stranded costs, which comes into play if the City takes over the distribution system). Janet Hoffman reviewed what the Commission can do with respect to S1355. The Commission can learn about it, communicate this learning to others, decide which provisions can benefit Evanston and which get in the way of what Evanston wants to do and communicate that to the City Council, Then, through the Council or the City Manager's Office, this can be communicated to the lobbyist and through him to other municipalities and the legislature. That is all the Commission can do while we waist for the law to take effect. When it takes effect, the law will impact what Evanston's options are. The Commission decided, by consensus, to transmit SB55 to the City Council along with a revised final copy of Janile Hill's summary of the Bill. OLD BUSINESS Electric Service Options Bud Nesvig distributed a memorandum dated July 18, 1997 concerning a "ballpark estimate" on the cost of a parallel electric distribution system in Evanston prepared by David Grumman and Thomas Pelsoci. Mr. Pelsoci explained that figures were used from the Duncan & Allen Pre -feasibility study, completed in 1991, to determine estimated capital requirements for constructing a replacement distribution system in 1998. The figure was approximately $100 million. Discussion ensued. It was noted that this figure does not include any operating revenues or expenses, or what the power could be sold to residents for. Mr. Warmington stated that maintenance costs would be reduced and reliability increased as well, which are not reflected in this figure. David Kraft stated that another concern is the legal fight that would occur, but you could create the kind of system that would attract micro computer -oriented businesses. Another factor observed by Del Leppke was that by 2008 ComEd will have competitive rates, according to SB55, so Evanston may only have until 2008 to build a system and have the excess revenue that is being calculated. Thomas Pelsoci indicated that operating costs, revenues, margins and rate structures all need to be projected. Referring to the Duncan & Allen study, Mr. Leppke noted that the section on operating costs and revenues needs to be redone. The study assumes that EngrU Commission Minutes Page 4 9/1/97, rates would continue to rise, so if rates are reduced, how does this impact the figures? Mr. Leppke offered to take another look at that section of the study so as to get a "ballpark estimate" of the operating and maintenance costs. Janet Hoffman noted that Evanston currently has the highest rating on debt from Moody's, which it has said is due to its sources of revenue other than advalorum taxes. Mr. Leppke noted that the trouble with electricity is that it isn't as reliable as treating and selling water from Lake Michigan which is Evanston's primary other source of revenue: Mr. Pelsoci added that those who run municipalized systems are now concerned how their systems will be adversely impacted by deregulation and increased competition. The balance of the agenda was deferred until the next meeting of the Commission. OTHER BUSINESS Joan Farquharson informed members that Hans Baumann had resigned, which creates a second vacancy on the Commission. Bud Nesvig informed members that he had spoken to the Mayor concerning the reappointments of three members of the Commission. He stated that the Mayor intended to reappoint these members in August and that they should continue attending Commission meetings as usual. Stephanie Steen announced that a third Energy Briefing will be held in Evanston on September 9 at either 9:30 or 10:00 A.M., just after the Energy Commission meeting scheduled for the same day. Larry Suffredin will be making a presentation at the briefing about SB55 and the process that will likely occur in Springfield. Gary Michaels suggested that Mr. Suffredin also meet with the Energy Commission, Discussion ensued. Given the past lack of political will, Mr. Petsoci asked why meet with the lobbyist? Mr. Leppke suggested that perhaps there can be a forum for cooperative action, a strategy session to prepare for informing ComEd that the City intends to renegotiate the franchise. He felt that would be the future forum in which to bring our allies. Commission members discussed the idea of distributing an informational, one -page handout to participants at the briefing that would inform them of the efforts the Evanston Energy Commission has made that they may want to be aware of. David Kraft stated that this would be an opportunity to educate other municipalities about the kinds of things the Commission has been grappling with, which remain unresolved. Thcre needs to be a Wong municipal base in Springfield, and other municipalities need to be brought up to speed on these issues. Such information could pique their curiosity and give them options and ideas that they can take back home. Commission members agreed by consensus that David Kraft prepare something for distribution at the briefing highlighting the Commission's activities. He will fax a draft to members for their input and prepare a final version. It was suggested that perhaps the City Manager could announce at the Briefing that Evanston has an Energy Commission and this is a list of their efforts to date. ADJOURNMENT The meeting adjourned at 9:25 A.M. The next meeting of the Energy Commission is Tuesday, September 9, 1997 at 7:15 A.M. in room 2404 of the Civic Center. An Farquh= Staff Assistant ENERGY COMMISSION MINUTES Tuesday, September 9, 1997- 7:15 A.M. MEMBERS PRESENT: DOOLIN, GRUMMAN, HOFFMAN, LEPPKE, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: KRAFT, PELSOCI STAFF PRESENT: MARINO, STEEN, FARQUHARSON SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:29 A.M. CONSIDERATION OF MINUTES OF AUGUST 1, 1997 The minutes of the August I, 1997 meeting were approved unanimously with grammatical changes only. COMMUNICATIONS The following items were distributed at the meeting: September 5, 1997 memorandum from Bud Nesvig which highlighted topics for discussion and action at this meeting, Update for lawmakers regarding the application of private use restrictions to tax-exempt bonds, Update of Duncan & Allen Operating Cost Projections by Del Leppke, and article on Turbogenerator systems. NEW BUSINESS Energy Commission Election of Officers Current Officers were reelected unanimously for a one year term. Nesvig, Chairman; Grumman, Vice -Chairman; Hoffman, Secretary. OLD BUSINESS A. Stranded Investment Issues 1. Consideration of City of Evanston's Communication with FERC Regarding Stranded Costs - Possible Need for Legal Counsel David Grumman motioned that the Energy Commission request the City Manager to retain an attorney to petition the Federal Energy Regulatory Commission (FERC) requesting that Evanston be exempted from stranded cost, seconded by Janet Hoffman. Discussion ensued. It was noted that the FERC applies in inter -state relationships and must respond to such a request. Their answer will likely depend upon Illinois legislation; however, there is an appeal process. Mr. Leppke noted that stranded cost is a key issue that must be tackled. if Evanston must pay stranded cost, then it changes the calculation entirely for Operating and Maintenance projections. Gary Michaels added that in the next few years issues will arise for Evanston which will require professional assistance from a consulting firm in addition to legal assistance. Motion passed. (6-0) Dennis Marino agreed to transmit this request to the City Manager. 2. Adequacy of SB55 in Dealing With Stranded Cost Concerns of Municipalities Mr. Warmington motioned that the Energy Commission request the City Manager to elicit Mr. Suffredin's assistance to include in Senate Bill 55 (SB55) a ruling that all municipalities whose electric power franchises expire prior to January 1, 2000, be exempted from stranded cost, seconded by Mr. Michaels. Janet Hoffman 5 Pag2 9/9/97 explained that it is unconstitutional to have legislation so narrow as to name a specific City, so this would require that legislation be modified to permit some municipalities in a certain class to not be subject to stranded cost. The cover argument would be that legislation that substantially shifts the economic expectation of parties is always harsh on the people supporting this change who have the economics they were depending on changed in a way that adversely affects them. Those municipalities that have their franchise expiring in a short time have had a reasonable expectation that there wouldn't be a penalty on them for choosing another supplier because they have fulfilled all of their contractual obligations. Stranded cost legislation imposes an economic burden on Evanston because of a pre-existing contractual obligation that is about to end. Evanston's franchise will expire March 5, 1999. Ms. Hoffman added that, a Iegislator would have to make an amendment to SB55 in order to accomplish this. Ms. Hoffman added that this proposed amendment would also force those who are opposed to not imposing stranded cost on municipalities whose franchises are about to expire to make good arguments as to why they are opposed. Mr. Leppke noted that on ComEd's 1995 10K report there are only three municipalities (unnamed) whose franchises expire between now and the year 2007, involving 89,000 residents. Dennis Marino added that, in 1993 when ComEd offered the NWMC franchise to municipalities, there were perhaps seven communities that did not sign on in the first year. ComEd permitted a number of municipalities whose franchises expired far into the future to roll into the NWMC franchise, which has a 35-year time frame. Most municipalities appeared to do this because they then received free electricity for their traffic lights under the new franchise. Gary Michaels questioned how the stranded cost requests at the State and Federal levels might play out. Janet Hoffman clarified that, the FERC's ruling will determine what Evanston's stranded cost will be and will supersede the State's decision. If Evanston got the result it wants at the State level, then it could withdraw its request from the FERC, but ComEd could push the issue back into the FERC. Motion passed (7-0). (Mr. Doolin had arrived during the discussion of this motion.) Regarding aggregation, Janet Hoffman stated that there is nothing in SB55 that prevents a municipality from being an aggregator. Home Rule entities would be able to be aggregators, (typically towns of 25,000 or more), but non -Home Rule municipalities may have difficulty doing such because there is no legislative authority authorizing them to act as an aggregator. B. Consideration of Previous Discussion and Past Recommendations that the City Issue an RFP to Power Suppliers to Construct, Operate and Maintain a New Distribution System and to Provide Power Mr. Nesvig called for a motion to request approval from the Evanston City Council to have the City of Evanston issue a Request for Proposal to as many as twenty (20) electric power suppliers to: construct, operate and maintain a new distribution system; to contract to provide electric power for a period to be determined; charge current rates for electric power until the successful vendor has received payment for the new distribution system. Janet Hoffman so moved, seconded by David Grumman. Discussion ensued. Regarding charging current rates, Janet Hoffman suggested that what was meant was that, once Evanston switches over to the supplier's system, they will agree to charge not in excess of current rates until the system is paid for, as part of their proposal. It was noted that ComEd may lower its rates, and once the system is in, customers should not have to pay in excess of ComEd's rates at the time, so a power supplier would have to base his projections on what that rate would be. Discussion ensued regarding having the power suppliers bid on taking over the existing distribution system. Mr. Nesvig stated that ComEd may be willing to sell the Evanston electric distribution system reasonably once the City actually begins to build an alternate system. Dcl Leppke stated that there is margin available to pay off s Pqge 3 9/9/97 new distribution system, but with the expectation that ComEd would be decreasing their rates, the payback period would increase significantly to 10-15 years. There would still be enough margin for payback, however. There was discussion regarding cogeneration possibilities for the Evanston downtown area. Mr. Leppke suggested that this possibility not be excluded when drafting an RFP. Mr. Marino recalled that the Gas Company had previously indicated that there were very few businesses for which cogeneration would be feasible in the downtown area. Mr. Grumman added that both Northwestern University (NU) and Evanston Township High School (ETHS) have a central steam plant which makes cogeneration feasible for them. Mr. Nesvig stated that, within the last five months, both NU and ETHS purchase all their electricity from ComEd again. At ETHS, three turbine generators have been installed, which are currently sitting idle. David Grumman explained that ComEd has a special rate for that situation: a customer builds a generator, runs it for a certain amount of time, and then qualifies for ComEd's special rate. In NU's case, it had to pay $10 million up front in lieu of building a cogeneration system in order to get a special rate. It will get most of that money back in improvements to its steam system, as ComEd has agreed to pay for $7 million in improvements over the years. Mr. Nesvig pointed to this as evidence that ComEd may sell the electric distribution system to Evanston if Evanston is about to build its own. When updating the Duncan & Allen report, Mr. Leppke noticed the existence of a rate step where ComEd commercial/industrial customers pay the rate of 3.3 cents per kWh after the first 30,000 kWh purchased. Discussion ensued regarding whether a consultant should be hired to write such an RFP. The Chair asked for a motion to amend the request that a consultant be hired to develop an RFP. Delbert Leppke moved that the motion be amended to request that the City hire an outside consultant to develop an RFP, seconded by Janet Hoffman. Amendment approved, (6-0). Mr. Grumman abstained. When asked to clarify whether an RFP was required for this, Dennis Marino noted that a statement of requested services, which is not as elaborate as an RFP, could be sent to several identified names, but approval for such would proceed through Council. A vote was then taken on the main motion. Motion passed, (6-0); Mr. Grumman abstained. At Mr. Grumman's suggestion, Dud Nesvig offered to call a power supplier (such as Cinergy or Enron) to see if a representative is willing to meet with members of the Energy Commission to determine whether this idea has merit. C. Discussion of Current and Future Franchise Relationships -Consideration of Whether to Recommend City Council Action on Ordinance 105-0-93 Mr. Nesvig asked for a motion on this agenda item. Mr. Grumman motioned that the Evanston City Council be requested to cancel the Evanston franchise Ordinance 105-0-93 immediately to become effective December, 31, 1998, seconded by Mr, Doolin. Some possible consequences of cancelling the franchise were reiterated. ComEd would likely begin billing the City for electricity that is supplied to City buildings, and litigation could ensue. It was noted that tree trimming; is allowed by [CC regulations. Opting out of the franchise would be less confrontational. Janet 1-loffman stated that giving; ComEd advance notice that you are going to opt out puts you in a position of not having to cancel an existing arrangement. She added that the new franchise is cancelable and is also non-exclusive, so it is possible to be in the new franchise and not buy any electricity from ComEd. Signing the new franchise may make it harder to buy the existing distribution system from ComEd since they have some reasonable expectation that they will use that distribution system to serve their contractual obligations to the City. I f the City does not opt into their model franchise, that changes their expectations of what happens to the existing distribution system. If you build a new system, it is probably irrelevant whether you have opted into the new franchise or not because it is a non-exclusive franchise. Energy Commission Minutes Ripe 4 9/9/97 Janet Hoffman stated that she was not in favor of cancelling the franchise in advance and stressed that this issue should be discussed at the Council Energy Subcommittee level. Mr. Leppke suggested that ComEd be informed that the City of Evanston does not intend to sign the new franchise unless the areas of deficiency are changed, which may start some dialogue with ComEd. Mr. Doolin stated that if the franchise is canceled and legislation is passed regarding stranded cost, then perhaps the City could avoid this cost. Mr. Grumman asked whether a summary listing of advantages and disadvantages of having a franchise versus not having a franchise had been drafted. Janet Hoffman responded that she and Delbert Leppke had talked about that, and it was felt that this has been laid out in the various analyses and minutes, such as the June 1997 minutes and the summer associate's work. Also, Mr. Leppke had prepared a matrix directly related to options with regard to the franchise. Mr. Grumman asked that these advantages and disadvantages be finalized for a vote at the October meeting, and then be transmitted to the Council Energy Subcommittee. Janet Hoffman asked that the motion cancelling the existing franchise be withdrawn or tabled; with seconder agreeing. The motion was withdrawn. A new motion was introduced by Mr. Leppke to recommend to the Council Energy Subcommittee and the City Council that they consider informing ComEd that the City of Evanston does not intend to proceed into the NWMC Franchise unless it is significantly renegotiated, seconded by Mr. Doolin. Motion approved, (7-0). Gary Michaels left the meeting at this time. Bud Nesvig agreed to contact the Chair of the Council Energy Subcommittee, Aldcrman Feldman, to request an Energy Subcommittee meeting to present this motion and other recommendations. Mr. Leppke's improved matrix (citing the pros and cons of franchise renewal/non-renewal) should be attached to this. D. Restructuring of Energy Commission/Environment Board Joint Effort for Implementing Energy Policy; Should Energy Commission Proceed Separately; Consideration of Recommendation to City Council Bud Nesvig informed members that the Environment Board has three new members and may now have sufficient members to participate in the implementation of an Energy Policy. It was noted that the implementation of an Energy Policy could be a huge task which would require outside help. Mr. Warmington stated that many good ideas arose during previous meetings of the Joint Subcommittee, but who was going to actually do the work to implement these ideas? Discussion ensued regarding how to proceed with this effort. Bud Nesvig asked Roy Warmington to contact the Environment Board regarding new members to participate in this effort. It was noted that a new approach and redirection from the City Council is also needed. OTHER BUSINESS Bud Nesvig advised members that Aldennan Rainey had contacted him requesting that the Energy Commission provide a briefinglupdate to her and other new members of the City Council. Members discussed this idea and there was general support to hold a briefing with Council members. Perhaps a one -hour meeting could be planned. Mr. Nesvig agreed to contact Alderman Rainey. ADJOURNMENT The meeting adjourned at 9:19 A.M. The next meeting of the Energy Commission has been rescheduled for Monday, October 13, 1997 at 7:15 A.M. in Room 2404. ll Ja arquhars Staff Assistant, PIanning MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: ENERGY COMMISSION MINUTES Monday, October 13, 1997- 7:15 A.M. GRUMMAN, HOFFMAN, KRAFT, LEPPKE„ NESVIG, WARN NGTON DOOLIN, MICHAELS, PELSOCI MARINO, STEEN, FARQUHARSON GREGORY HICKS AND STEVE BIGGERSTAFF OF CINERGY CORP., TONY KELLY CALL TO ORDER The meeting was called to order at 7:20 A.M. NEW BUSINESS Presentation by Cinergy Mr. Gregory Hicks, Power Marketing Representative, and Mr. Steve Biggerstaff, General Manager, Business Development, made a presentation to the Commission. Cinergy is a power supplier to large industrials, businesses, municipalities and aggregated entities and has participated in or created many pilot programs around the country. Mr. Hicks provided an overview of what pilot programs accomplish. Pilot programs let you see restructuring occur. The three big concerns customers have regarding purchase of power are price, reliability and customer service. Results of the pilot programs were that marketing costs were high, but the price of power was lower than most expected. A local presence was very beneficial since customers wanted to call a local representative for customer service, and the pilots showed that aggregation worked. Mr. Hicks explained that any entity that has a relationship can be an aggregator, which means the City of Evanston could be an aggregator. In the Massachusetts and New Hampshire Pilots, Cinergy was selected to provide power to aggregators such as the retail merchants associations and co-ops serving industrial and commercial customers. Regarding reliability, Mr. Hicks noted that the Public Utility Commissions (PUC) in the various states determined that reliability was the responsibility of the local utilities since this was a part of the unbundled service cost. The customer, however, perceived that reliability was the supplier's responsibility. Mr. Grumman asked what Cinergy could do for Evanston, since ComEd owns the distribution system. Mr. Biggerstaff responded that Evanston could notify ComEd that it is looking at several options as an alternative to the franchise. If the City pursued municipalization, it could entertain a bid from ComEd to provide distribution. The franchise is the City's leverage. If power is purchased elsewhere, the City would have to compensate ComEd for use of the distribution system and possibly stranded investment costs. Mr. Hicks observed that Evanston will need to look at its stamina to pursue what it may want to do. Mr. Biggerstaff cited the example of Greenville, Illinois, a community that wanted customer choice regardless of what the Illinois legislature does. They own the distribution system and bought out of their contract for $40 million. They are now being supplied by Cinergy and calculate that there will be enough savings in four years s . PUS2 t 0/UL22 to pay off the loan if the electric rates are kept at the same level. After four years there will be a 30-40% reduction in rates. There was also the option of having a 10% reduction in rates and a payback period of b or 7 years, after which time they would receive a rate reduction of 25%. There are no savings immediately in California under the new deregulation law, Mr. Hicks stated. In California, all the power is shipped into a power exchange. If your energy cost is lower, then a transmission cost is added to compensate the utilities, accelerating their stranded cost recovery over the next four years. After four years they should get 100% of their stranded costs back, and that transition cost will then no longer be assessed. The example of Northwestern University (NU) was mentioned. Mr. Biggerstaff stated that Cinergy had been interested in providing power to NU if they hadn't cut a deal with ComEd. Both Cinergy representatives stated that there seems to be a lot of opportunity for Evanston right now. A utility places a lot of value on a franchise, and that is Evanston's main leverage. It was their perception that Evanston is in a good position to make a better deal than a 35-year franchise with ComEd. Nobody is signing 35-year agreements these days. Even 5 years is a long time. Janet Hoffman reviewed the history of Evanston's franchise expiration and negotiations with ComEd, extension of the franchise to 1999 and provision of free (consumer -subsidized) electricity to City buildings instead of a franchise fee. She added that Evanston, as a home -rule entity, can aggregate since it is not prevented by law from doing so. Mr. Grumman added that the Evanston Energy Commission had some time ago made a recommendation to the City Council to hire a consultant, and the City Council had done nothing with the recommendation. Mr. Hicks continued with his presentation on the subject of aggregation. He defined an aggregator as someone that maintains a relationship and a local presence with a desired customer group that provides said group with benefits that normally are unachievable on an individual basis. Evanston could be an aggregator. Customers can benefit by the diversity within the community to reduce the load factor, which will reduce their peak demand for electricity and therefore reduce the cost. He also spoke about how to work together with a supplier. Mr. Nesvig asked whether Cinergy would be interested in providing electricity to Evanston, building a duplicate distribution system and then paying for it out of the savings. Mr. Biggerstaff responded that Cinergy builds distribution systems everyday but would have to look at the typical costs and the potential for savings and determine whether a new supplier could create a revenue stream that would pay for the new distribution system. If realistic, Evanston's leverage with ComEd would first be the franchise and second replacement of the distribution system. Mr. Leppke asked whether Cinergy would still be interested if the payback would take 7 to 8 years. Mr. Biggerstaff responded that it might, but they may not need to do the entire distribution system. There may be aggregation potential such as an industrial complex or other customers that they could take a look at as a pilot. The Cinergy representatives agreed to take a look at the current franchise, the NWMC franchise and other electric service options which the Commission has explored. Commission members thanked the Cinergy representatives for their fine presentation. Consideration of Minutes of September 9,1997 The Minutes of September's meeting of the Energy Commission were approved with minor changes. 1998 Meeting Schedule The schedule of Energy Commission meetings for 1998 was approved by consensus. Energy Commission Update/Briefing to City Council Members Bud Nesvig announced that the briefing is scheduled for 7:00 p.m. on Thursday, October 23, 1997. He stated that members had received an outline of the topics to be presented and areas of responsibility. OLD BUSINESS Deregulation - State of Illinois Update David Kraft raised the question of whether the City of Evanston had a formal position on Senate Bill 55 (SB55). Dennis Marino responded that the City Council had enumerated certain goals that legislation should address. Mr. Kraft motioned that the Energy Commission recommend to the City Council that it resolve not to support SB55 in its present form, seconded by Roy Warmington. Mr. Kraft referred to the I l areas of agreement with TAG [put forth in Resolution 10-R-97] which are not included in the current bill. Janet Hoffman noted that the Northwest Municipal Conference (NWMC) has indicated they are in support of SB55, and if Evanston is silent on this issue, since it is a part of the NWMC, it will be presumed that Evanston also supports SB55. The motion was approved 5-1 (abstention -Grumman). Mr. Grumman explained that he abstained because he had not heard, at this point, any competent and factual opinion on whether this bill would be better or worse than the alternative. Perhaps Evanston ratepayers would be worse off with the alternative. Mr. Kraft suggested that if City Council takes this recommended action, press releases to local media and letters to Legislators Berman, Parker, Schakowsky and Schoenberg should be sent. Stranded Investment Issues - Update on Commission Request That the City of Evanston Seek a Ruling on SB55 in Dealing With Stranded Costs Concerns of Municipalities Janet Hoffman stated that there is some effort afoot concerning transition costs not being applied to municipalities whose franchises are soon to expire. Mr. Nesvig stated that he will call the City Manager to encourage him to contact Mr. Suffredin to urge lawmakers to consider exempting municipalities, whose franchises are about to expire, from stranded costs. Mr. Kraft requested that the Energy Commission consider, for November's agenda, to reformulate its strategic plan and find areas that it can be productive in. He offered to formulate an outline of a new strategic plan. ADJOURNMENT Meeting adjourned at 9:20 A.M. The next meeting of the Energy Commission is scheduled for Tuesday, November 4, 1997 at 7:15 A.M., Rm 2404. Joa arquharso , Staff Assistant APPROVED ENERGY COMMISSION SPECIAL ENERGY BRIEFING FOR ALDERMEN THURSDAY, OCTOBER 23,1997 - 7:00 P.M. MEMBERS PRESENT: NESVIG, DOOLIN, GRUMMAN, HOFFMAN, KRAFT, LEPPKE, MICHAELS, WARMINGTON ALDERMEN PRESENT: MORAN, RAINEY, WYNNE STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: MARINO, STEEN TONY KELLY, CLARION CALL TO ORDER The meeting was called to order at 7:15 P.M. Introductions were made. HISTORY OF ENERGY COMMISSION David Kraft reviewed the history of the Evanston Energy Commission (EEC). In March of 1990, Mayor Barr appointed a 14-member advisory group, the Energy Alternatives Task Force, (EATF). The ComEd franchise was due to expire in several years. The four main goals identified that should be considered in any future franchise agreement were: Iower rates; reliability (southeast Evanston had experienced numerous blackouts); flexibility; and environmental considerations. The EATF initiated several studies which showed that Evanston had the legal right to pursue municipalization and could realize substantial savings. A more detailed study was begun but was subsequently suspended. After 3-4 years, the EATF concluded its work. In October of 1993 the EEC was appointed and charged to explore options to the ComEd franchise. The franchise had been extended for seven years and will automatically roll over into the NorthWest Municipal Conference (NWMC) model franchise in 1999 unless the City opts out. The EEC is also charged with working with the Environment Board on an Energy Policy which has been done, but has not yet been implemented. Some work has begun on assessing energy savings activities for City buildings. The EEC has Iooked into cogeneration possibilities for portions of the City and had performed a search for outside consultants to do very detailed work on energy alternative options. Their recommendation was rejected by the City Council, but utility deregulation has since changed the focus from the municipalization concept and has spurred a lot of work in other areas. Currently, the EEC has recommended legislative efforts in Springfield and with the Illinois Commerce Commission ([CC) and the Federal Energy Regulatory Commission (FERC). Alderman Rainey asked about public outreach efforts since the EEC does not involve citizen's groups. Mr. Kraft responded that the deregulation issue has been termed the most important issue for every resident and two-thirds of the public nationwide don't even know it exits. He added that this kind of effort requires -a professional, but the leadership needs to come from the City Council. Energy Commission Aldermanic Briefing Page 2 October 23, 1997 Mr. Grumman added that the direction has been unclear since the work the EEC has been charged with four years ago is no longer relevant. Mr. Kraft added that the EEC was now in the process of reviewing that Iist and may submit some recommendations. Alderman Moran, a member of the original negotiating team, added that, in reviewing this history, it is important to mention that Evanston was the only community that did not sign the NWMC franchise at a time when all other communities whose franchises were up for renewal in the NWMC signed on to it. The seven year extension was very significant as it has kept the options open in a period of change and enables Evanston to deal with change in a forward -looking fashion. There were several comments about Evanston's leadership role. Mr. Kraft observed that Evanston is in uncharted waters and won't be getting lots of information from other parts of the country. It will have to determine what it wants itself and how to get it. Janet Hoffman reviewed that Evanston has held four Energy Briefings over the past year; these have been chaired by Evanston's Intergovernmental Affairs Consultant, Larry Suffredin. These briefings have dealt with pending utility restructuring legislation and those invited include the NWMC members, other surrounding communities and conferences and the City of Chicago. Alderman Moran commented that, although he had hoped Evanston could have banded municipalities together to advocate a "municipality view" of this issue and develop some legislative/lobbying force, it became apparent that municipalities are not monolithic with regard to this issue and differ greatly in what they want. RELIABILITY OF ELECTRIC POWER David Grumman referred to the southeast Evanston outages prior to 1993 and the two fires/outages in the downtown Evanston area in 1995. In this age of computer technology, even a momentary outage can knock out scores of computers. For a utility, reliability (or maintenance of the system) is a decision of economics. Power outages are generally inconvenient to residential users, but commercial and industrial customers may incur significant financial losses. Safety is another concern. There are two industry indices that measure reliability: the System Average Interruption Frequency Index (SAIFI), which is the average number of times a customer is interrupted during a year, and the Customer Average Interruption Duration Index (CAIDI), which is the average length of time that the customer is interrupted over the course of a year. Mr. Grumman cited excerpts from the SVBK presentation materials used in November of 1996. In 24 large U.S. cities, the SAIFI was 1.22 (interruptions/year/customer), and the CAIDI was 95 (minutes/year/customer). ComEd data for a different period (1993-95) revealed that system wide the SAIFI was. 91-.97, the ComEd northern area was 1.5, Chicago was down to .37-.44. The CAIDI system- wide ranged from 99-109 minutes, the northern region ranged from 94-112 minutes (a broader range), while Chicago ranged from 107 - 135 minutes. Delbert Leppke spoke about the Evanston system and distributed an analysis entitled Reliability & Price (attached as Exhibit A). He explained that ComEd must report interruptions in service to the ICC, and it was this raw data that he used to compile the analysis for the years 1993, 1995 and the first 10 months of 1997. The first chart sorts the data by the percentage of cause of interruption for 1997; the second chart sorts the same data by the number of customers affected. The third chart deals with price. There were fewer interruptions in 1997 than in 1995, which shows some improvement. For Evanston, the '4 Energy Commission Aldermanic Briefing Page 3 October 23, 1997 average number of interruptions is .46 per customer. All municipalities outside of Chicago have an average of .87 for 1997. Average duration per interruption for 1997 was 44 minutes for Evanston compared to 140 minutes for all municipalities outside of Chicago. Using that system, Evanston compares favorably to surrounding municipalities. The three big causes for interruptions of service are tree contact, wildlife and underground failure respectively. In 1993 there were 1,318 customers affected by outages caused by overloads. In 1995 that was reduced to 44, and for 1997 so far there are only three. Some of the terminology was then clarified. Overload is chiefly caused by the weather (such as heat waves); malfunctions mean that a switch or other infrastructure may fail to operate; dig -ins are due to digging into the underground system; underground failure is due to deterioration in the underground system and is a very high cause of failure in Evanston. Forty percent of failures were over -ground failures. Contamination is salt or atmospheric contamination in the switching area. "Customers" is defined as the account with ComEd, whether it is a large corporation or a resident. Mr. Leppke concluded that it seems the system is getting better, but there is still deterioration within the system. New technologies, which include remote monitoring and preventative maintenance monitoring, could be beneficial in detecting deterioration before it actually occurs as an outage. Mr. Nesvig noted that Boston Edison utilizes one of these technologies known as the SCADA system, which detects possible overloads or defects so the system can be repaired and outages avoided. ComEd uses this system in parts of Chicago. Mr. Leppke stated that this is the type of thing that could be discussed during franchise negotiations. COST Turning to Chart 43 entitled Case Studies - Evanston Electric Costs, Mr. Leppke explained that he took the number of residents, commercial and industrial accounts from the Duncan & Allen study that was done in 1991. The information on lines 5-10 was taken from randomly selected typical bills and shows the range of electricity use for various customer classes. The right-hand column is a summary of the estimated annual revenue for the City for 1998. The Electric Service Customer Choice and Rate Relief Law of 1997 - Illinois Senate Bill 55 (SB55), offers a reduction of 10% to the residential customer in 1998 and another 5% by the year 2000. For all residential customers who stay with ComEd, the average reduction in their bill would be 13.2% (line 17). There is no reduction for other customer classes; therefore, SB55 only provides a 3.6% reduction if applied to all electricity users in Evanston. Janet Hoffman added that the taxes are currently a percentage of the rate, but SB55 would change the measurement method to a percentage of the electricity used (fee per kWh). Otherwise, if the rates went down, the taxes would go down and the bill would not be revenue neutral. In effect, the taxes will go up as a percentage of the electricity cost, which is why the reduction in the electric bill becomes 13.2% and not 15%. It was not clear to Mr. Leppke whether the 15% reduction was applicable to the ComEd service charge as well as the customer charge. Mr. Leppke used Oata from the wholesale power contract between Wisconsin Electric Power Company (WEPCO) and the City of Geneva, negotiated in 1995 and which extends through 2005, to calculate the Energy Commission Aldermanic Briefing Page 4 October 23, 1997 supply cost figures on line 20. The WEPCO contract contains an escalator for energy supply costs, and the transmission charge is already included in the supply cost figures. Line 23 notes the estimated annual operating cost of a new distribution system. Mr. Leppke did not list the cost to finance a municipal distribution system but chose instead to examine the revenue stream and determine how much financing that would support. Line 26 lists the gross profit margin in the right hand column and is the difference between the total revenue on line 10 minus the supply cost on line 20 minus the system operating cost on line 23. That would be the annual amount that could provide the financing of a municipal system, assuming the municipality would charge the same rates as ComEd is charging now. Any rate relief would decrease that amount. Lines 27 through 29 list the gross reduced margins, which reflect the ComEd reduced price in line 12 minus the supply prices of lines 21 and 22. Therefore, Mr. Leppke explained, if Evanston obtained its wholesale electric supply from WEPCO, with rates remaining the same, there is an $18 million margin annually. That revenue stream could support a $70 million debt with a 7-8 year payback period and a 20% internal rate of return. This should be attractive to entrepreneurs who could build a new distribution system. If the City financed this independently through bonds, higher financing could be achieved, but that would require putting an appropriate management team into place. Line 31 estimates the transition charges per SB55 to be between $ I 1 and $13 million annually. Subtracting $13 million from $18 million leaves only $5 million annually for financing if transition charges (stranded costs) are assessed. Mr. Leppke applied his assumptions to the entire ComEd system up to the year 2008 and came up with a figure that is just under ComEd's current assets for equipment. If all their customers walked away, and they received these transition charges, ComEd would be able to pay for its existing equipment. He felt that the actual transition charge might even be lower than what he has estimated. Mr. Leppke noted that the calculation for stranded costs contained in SB55 contains a component called the cost of delivered services, which amount is unknown until rate -making occurs. So Mr. Leppke took the average ComEd cost and the average cost of Central Illinois Light Company (CILCO), and subtracted one from the other and utilized the difference in his calculation, Janet Hoffman was asked to explain securitization. Securitization is typically used when selling a security in the public market and the stream of revenue that pays it back is an undivided participation in something (accounts receivable, automobile lease payments, credit card payments for example). Typically, a pool is set up which is over -collateralized (more than 100 cents on a dollar) for the debt. Undivided participation interest in that is then sold as securities. The amount of over-coIlateralization is determined by what it takes tg sell those securities into the market and is determined by independent parties, not the utility. One legislative proposal currently put forth in another state is that a state agency would issue debt which would be securitized by the payments for stranded costs to the utilities, which would create a pool Energy Commission Aldermanic Briefing Page 5 October 23, 1997 of money today which the utilities would use to survive while they are living through the dissipation of these stranded costs. The securities would be paid back over time as rate -payers make payments on those stranded costs. Mr. Nesvig observed that a lot of money is being talked about here. If ComEd is allowed to securitize its stranded costs, it might be a good idea to buy its stock. He added that, regardless of what Evanston decides to do, it should strive to avoid paying stranded costs. Since Evanston is in a unique position whereby the franchise could end in 1999, Mr. Nesvig has spoken with the City Manager to push for inclusion in state legislation an exemption from paying stranded costs for municipalities whose franchises are about to expire. Mr. Michaels observed that this effort and any FERC determination would be the only way Evanston could avoid paying stranded costs. Alderman Wynne asked whether Evanston is truly unique in this regard, and what is its ability to capitalize on its special status? Alderman Moran responded that there is reason to believe Evanston is relatively unique in terms of Northern Illinois. Discussion ensued regarding the importance of this issue to Evanston, one that Mr. Suffredin should be working on right now. It was noted that any payment of stranded costs would be made over the next 5-10 years. Mr. Kraft added that, regardless of whether Evanston gets boxed in legislatively, a paper trail has been maintained over the years indicating Evanston did not intend to sign a long-term franchise with ComEd again. Therefore, ComEd has no reasonable expectation that Evanston would stay with them as a supplier. This may provide a basis for recourse in the courts or with the FERC. Gary Michaels questioned whether the reliability of the system was so bad that a new distribution system was needed? The reliability figures presented by Mr. Leppke show it is not so bad. It seemed to him that the best thing to do now was to try to get out of transition costs, and then see where deregulation takes US. The subject of notifying ComEd that Evanston did not intend to extend the franchise was raised. What leverage does the City have to bring to negotiations? Mr. Kraft stated that aggregation possibilities could provide leverage since they do not require purchase of the distribution system. The City could also pilot a downtown heating project which would take away ComEd's big customers in the downtown area, or the City could include this engineering possibility as part of any new development proposal in the City. It was noted that negotiations with ComEd would be for things other than price, such as reliability and technological innovations. Pointing to the direction franchises seem to be headed, Alderman Moran noted that easement maintenance fees have replaced franchise fees with Ameritech, for example, and eventually these types of franchises will no longer exist. Mr. Grumman stated that ComEd has said the distribution system is not for sale, and condemnation would mean years of litigatory agony. Mr. Leppke could not visualize a parallel electric distribution system in the community as a whole, but suggested a dual system in a small area, perhaps downtown. Mr. Doolin suggested that a letter be sent to ComEd informing them that when the franchise expires, the City will begin assessing easement fees. Mr. Grumman responded that ComEd will then start charging the City for electricity for city buildings, which is what happened before. He maintained that Evanston Energy Commission Aldermanic Briefing Page 6 October 23, 1997 has no good negotiating position. Alderman Rainey disagreed, stating that Evanston has a reputation of being unique. ComEd does not want to lose Evanston; that would create an enormous public relations issue. Mr. Leppke put forth the idea that Evanston and Wilmette could begin talking to Winnetka (which owns its own distribution system) about expanding their system. They are not subject to stranded costs. Discussion reiterated the fact that any power imported from any entity other than ComEd still can't be distributed in Evanston at this time as long as ComEd owns the system. Alderman Rainey stated perhaps the fact that so few communities would be affected by legislation exempting those whose franchises were about to expire from stranded costs would weigh in favor of its being passed. She stated that every effort should be made to tack this amendment on every bill going through the legislature. Alderman Moran raised the question of how to sell this idea. Mr. Kraft reviewed that deliberations begin in Springfield from October 28-30, then break for one week, with a second week of deliberations following that. The legislators involved would be Senators Berman and Parker. The idea was raised that stranded costs be paid in exchange for the distribution system. Mr. Kraft responded that the stranded costs are decommissioning and nuclear waste costs. However, he referred to the Chrysler bailout. In that instance, the government got something back from Chrysler. A reasonable argument could be made that, when you bail out, you should get something back whether it is management control, distribution control or shareholder equity. LEGISLATIONIFRANCHISE Legislation Janet Hoffman utilized an outline she had prepared (attached as exhibit B) and reviewed the legislative history of deregulation. This goes back to 1978 when the Public Utilities Regulatory Policy Act (PURPA) was passed and to 1992 when the National Energy Policy Act (NEPA) was passed, giving FERC the authority to regulate wholesale transmission services and set tariffs for such. With respect to stranded costs, FERC has supported full recovery of legitimate and verifiable costs, payable through an exit fee. A brief summary of the pending Illinois legislation was outlined. Ms. Hoffman observed that much legislation has been enacted or is pending in a handful of states. Many states are burying their heads in the sand on this issue. There are a few states that have pilots for retail wheeling, such as New Hampshire. The EEC has spent time reviewing legislative proposals set forth in other states and the results of those. The state's attempts to regulate this are so divergent, making lawmakers think that giving states the authority back in 1992 was a mistake. It may be that some of what the states have attempted to do will be preempted at the Federal level. Franchise Janet Hoffman reviewed the history of the Evanston Electric Service Franchise. The original franchise was scheduled to expire in 1992, but was extended until March 5, 1999. 1f the City does not cancel the franchise l80 days prior to 315199, it will have a minimum 35 year nonexclusive franchise with ComEd. Nonexclusive means the City could grant a franchise to another supplier or choose to set up another distribution system. If Evanston canceled the franchise and did not enter into the NWMC franchise, Energy Commission Aldermanic Briefing Page 7 October 23, 1997 ComEd would be legally required to provide electric service to any potential customer. Evanston could then charge ComEd for use of the public rights of way, and ComEd would have no contractual obligation to provide ratepayer -subsidized electricity to city buildings (which runs about $360,000 per year). 1f Evanston did enter into the NWMC franchise, traffic lights would be covered in the ratepayer -subsidized electricity (approximately $75,000 per year). Therefore, the ratepayers would be paying more out of their bills to subsidize traffic lights, Other provisions/drawbacks of the NWMC franchise are listed on Ms. Hoffman's outline (attached). A detailed analysis and comparison of the current franchise and the NWMC franchise was made available to the Aldermen. Tony Kelly asked whether the distribution system problem wouldn't be one of the most common problems nationwide that will have to be dealt with? Ms. Hoffman responded that retail wheeling would diffuse some of the power a utility has as the owner of a distribution system, but may not occur for another 5-10 years. Then the utility merely would have an asset that you would have to pay to make use of. The rate you would pay to wheel power over the distribution system would be determined by the regulatory bodies, just as FERC determines tariffs for wholesale wheeling over the transmission system today. Mr. Michaels observed that, if the City owned the distibution system, no matter who wheeled power over it, the City would be paid for that use. AIderman Rainey observed that you will either pay an enormous fee as an exit fee, pay an enormous fee for the system, or not pay the fee and keep the higher rates, so you're going to pay one way or another unless legislation could be passed that would exempt the community from stranded costs. Tony Kelly asked whether the distribution system question could be dealt with by a regulatory commission rather than through the courts? Janet Hoffman noted that right now any municipality has the right to condemn a private person's assets. Since there are prohibitions in the constitution for taking private property without adequate compensation, the owner could challenge the constitutionality of that and tie that legislation up for awhile. So if a utility felt the regulatory system set up to handle that was unfair, it could be challenged. Mr. Kraft added that determining fair market value of the system is what would tie it up in court but could be pursued ahead of time. First, the City has the right to request of ComEd a valuation of their distribution system. Second, the City can request FERC to order ComEd to do this. FERC's ruling would, however, be final, so should not be pursued first. A letter was forwarded to the City Manager some months ago to pursue the first option, but it was never sent to ComEd. Alderman Rainey suggested that the EEC report again to the Administration and Public Works (A&PW) standing committee. She added that it would be helpful if an easy -to -understand time line was put before the Council outlining what could be done now (such as this letter to ComEd), and what could be done in the coming months. It was noted that there is only one year left in which to do things. David Kraft suggested that the consensus points (based on similar points developed by TAG) that the EEC recommended as to what should be included in any legislation be given again to the Council members. Regarding SB55, it was his understanding that the bill, in its present form, was dead. He stated that Martin Coj er of the Citizen's Utility Board (CUB) intended to push for a 25% rate reduction and enhancement of environmental provisions of the bill. Energy Commission Aldermanic Briefing Page 8 October 23, 1997 QUESTIONS Janet Hoffman mentioned that any EEC member would be happy to serve as a resource to members of the Council if they needed to call on them. She asked if there were any specific questions at this time. Alderman Moran stated that, in his view, Evanston probably would not sign onto the NWMC franchise. What, then, should Evanston do? What are the ramifications, detriments and benefits and how can Evanston maximize the benefits and monitor change? The City needs to position itself for the future in a way that makes sense for all of Evanston. What protocol should be developed as a City to make decisions about this over time? Could the EEC assist the Council to develop a paradigm? Bud Nesvig responded that an outside consultant is absolutely needed. Things are talked about month after month, but a commission of volunteers just doesn't have the time to do all that is needed. The EEC makes requests for funding, and the Council doesn't give them an answer. Gary Michaels asked whether the Council would support an Energy Department, someone who is solely responsible for energy matters. Alderman Moran stated that he could not support an Energy Department as a think tank or without knowing what that person would do. Mr. Michaels responded that the implementation of the Energy Policy could be handled by this person as well. Alderman Rainey stated that the entire Council should really be asked that question. She personally would support an energy consultant who would provide direction on policy and action. She also indicated that she would not support an Energy Department given other City needs. Alderman Wynne stated that she would support a consultant, that this is a critical decision and given the significance of it; it would be foolish to expect volunteers to perform the work and not pay a consultant to do it. Then, depending on the recommendation of the consultant, perhaps an Energy Department could be established with very well- defined roles. Delbert Leppke added that municipalities need to develop a focused relationship with the [CC, and this could be strategized as well. Alderman Moran stated that he could give credence to a well -formulated, reasonable request for funding a consultant who would advise the City on strategic positioning. Bud Nesvig asked who was going to do this work, which raised the subject of staff support for the Commission. Mr. Kraft referred to his suggestion on funding energy -related matters, which was now two years old. As to the importance of this issue, he reminded all that electricity is what separates your town from the middle ages. Bud Nesvig thanked Alderman Rainey for initiating this meeting, and thanked the other Aldermen who were present. He added that the EEC will come to the A&PW Committee and keep them up to date. ADJOURNMENT The meeting adjourned at 9:30 P.M. c h lL�� Joan arquhar$on� Staff Assistant i EXHIBIT A RELIABILITY PRICE DEL LEPPREr ENERGY COMMISSION, 10--23--97 . ANALYSIS OF ELECTRIC SYSTEM INTERRUPTIONS CAUSE CUSTMIIS AFFCTI) % (9: I O fAL CUS'I MRS AI:F C I D % OF TOTAL CUSTMRS AFFCTO %.OF TOTAL year 1993 1993 1995 1995 199700 wks) 1997 1REE CONTACT 7,391 15.6% 6,267 22.7% 2,523 16.7% WILDLIFE CONTCT 587 14.6% 5,414 14.0% 454 14.5% UNDERGROUND FAILURE 81860 13.5% 10,323 11.3% 4.100 14.5% : IIGIIINING 193 11.5% 1,546 0.7% 307 13.2% MALFUNCTIONS 20 2.1 % 2,032 3.3% 2,214 6.0% WIND 3,651 3.1% 1,901 4.7% 186 4.8% ACCIDENTS 727 5.2% 2 0.7% 81) 3.6% OVERLOADS 1,318 3.1 % 44 4.7% 3 3.6% DIG -INS 758 4.2% 389 1.3% 771 2.4% CONTAMINATION 0 0.0% 0 0.0% 895 2.4% ' ICE 135 2.1 % 5,269 2.0% 22 1.2% PLANNED 127 11.5% 2,241 5.3% 1 1.2% UNSCHEDULED 139 2.1 % 353 4.0% 321 1.2% COMED ACCIONT 544 1.0% 0 0.0% 475 1.2% FIRE 0 0.0% 224 1.3% 0 0.0% UNDETERMINED 1,933 0.3% 888 16.0% 186 13.2% FOREIGN OBJECT 251 1.0% VANDALISM 1 1.0% TOTALS 26,643 100.0% 36.749 100.0% 13.269 99.7% TOTAL. INTERRUPTIONS 97 150 83 '97 prorated to a lull year 17,250 108 AVERAGE INTERRUPTIONS PER SYSTEM CUSTOMER • Evanston 0.461 - All municipalities 0.874 AVERAGE DURATION PER INTERRUPTION - Evanston 44.99 min. - All municipalities 140.02 min. OML/ 10.21-97 -jr I CAUSE year UNDERGROUND FAILURE TREE CUNTACT MALFUNCTIONS CONTAMINATION ACCIDENTS DIG -INS COMED ACCIDNT WILDLIFE CONTCT UNSCHEDULED LIGHTNING UNDETERMINED WIND ICE OVERLOADS PLANNED FIRE FOREIGN OBJECT VANDALISM TOTALS TOTAL INTERRUMON5 '97 prorated to a full year ANALYSIS OF ELECTRIC SYSTEM INTERRUPTIONS #2 CUSTMRS AFFC1'I) % 01' '10' fAI CUS1 1411S AI'I C 11) % OF TOTAL. CIIS I HIS Al I C I D %fit 101 Al. 1993 1993 1995 1995 1991(40 wks) 1991 8,860 13.5% 10,323 11.3% 4,100 14.5% 7,391 15.6% 6,267 22.7% 2,523 16.7% 28 2.1 % 2,032 3.3% 2,214 6.0% 0 0.0% 0 0.0% 895 2.4% 727 5.2% 2 0.7% 011 3.6% 758 4.2% 389 1.3% 771 2.4% 544 1.0% 0 0.0% 475 1.2% 587 14.6% 5.414 14.0% *15.1 14.S% 139 2.1 % 353 4.0% 321 1.2% 193 11.5% 1,546 8.7% 307 13.2% 1,933 0.3% 888 16.0% 18G 13.2% 3,651 3.1 % 1,981 4.7% 1 of; 4.8% 135 2.1 % 5,269 2.0% 21 1.2% 1.318 3.1 % 44 4.7% 3 3.6% 127 11.5% 2,241 5.3% 1 1.2% 0 0.0% 224 1.3% 0 0.0% 251 1.0% 1 1.0% 26,516 88.5% 34,732 100.0% 13,268 98.5% 97 150 83 17,248 108 DML 10-21-97 .14 ? CASE _ i COST ELhMrNT 2_ month of July'97 .3 4� _ KWH/MO ± 6 KW DEMAND 7 - ComEd BASIC PRICE 8 -ADJUSTMENTS 9- -TAX & FEE 10 TOTAL 12 -ComEd REDUCED PRICE'" .13 -ADJUSTMENTS 1,_4 -TAX & FEES .1 5 TOTAL 16 17 REDUCTION IN ELEC. BILL 18 REDUCTION IN ELEC. BILL 19 20 -MUNI SYSTEM SUPPLY CST 21 2000 2 2 2008 .2 3 -MUNI SYSTM OP CST Z 4 wo/financing chg 25 26 -GROSS BASIC MARGIN 27 -GROSS REDUCED MARGIN 28 2000 26 2000 30 31 EST. TRANSITION CHG 2000 �3 2 could be as low as 3.3 EST. TRANSITION CHG. 2008 3 4 coould be as low as STUDIES - EVANSTON ELECTRIC AVE.* AVE.* 1 APTMNT ! RETAIL i RSDNCE, RSDNCE BLDG STORE house apartment food (June '97) 6681 3211 42,360 37,500' 1 98 921 $78.98, $37.37 $3,139.131 $2.092.491 $1.161 $0.631 $73.71 ($15.75)1 $6.73! $3.211 $323.58 $288.BBI $86.87: $41.211 $3,536.42 $3,165.62f $67.53 ' $31.95 j $1,16! $0,63 $6.731 $3.21 $75.42. $35.79 $3,536.42 Val 165.62j I 13.2%, I 13.1 % 0,0% I 0.0%i: $11.45, $5.42 $0.00 $0.00! $24.62` $11.83,1 $1,561.181 $1,382.061 $26.30' $12.64 $1,667.921 $1,476.56j $34.44: $16.55� $2,183.87 $1,933.31 $7.01 $3.37. $444.701 $393.75` $41.35 $22.11, $1,133.11 $35.89: $16.75i $1,133.171 $34.21 $15.94! $1,026.43 $26.08� $12.031 $510.481 $16.70i i $9.35� COSTS UMi, 10-21-97 -0 RETAIL ' ' SMALL -CHURCH ALL CITY** STORE MFTRG (annual basis) Ixiwe 8050 30 $709.99 $14.01 $72.83 $876.03 $876.83 0.0% $0.00 $296.68 $316.97 $415.02 $84.53 26,701i 6,709• 110 $2,753.89- $46.47 $249.32 $3,049.681 .i F $3,049.68 1 i 0.0%11 $0.001 $984.36" $1,051.671 $1,376.90 $280.44 2,135. 16i $458.58 s1.46 $33.621 $493.66 611,300.000 144,80C $48.721,000 $122,26C + $1,840,954 i $50.684,214. $46,887,00C $122.260 $1,840,954 $493.66. $48,850,214 0.0%i 3.6% $0.00, $1,834,000 $78.69; $84.074 $110.07 $22.42, $21,823,410 $22,003,132 $22,722,021 $6.739,582 $1.116.60. $408.78 $1,489.09r $357.48 $20.158,008 $1,116.68 $408.78 $1,489.09 $357.48, $18,324.008 $1.022.16 $388.50 $1,421.78' $352.10 $18,144,285 $565.43 $290.45 $1,096.46i $326.09 $17.425,396 $750.00 $13,346,688 $11.700,000. $562.50' $9,985,672 $7,600,000 * AVE.HOUSEHOLD USAGE = 668 kwh/mo. APT. = 308 kwh/mo. ** WEIGHTED AVERAGE FOR FULL YEAR & ALL CLASSES OF SERVICE *** 10% 6 5% RESIDENTIAL REDUCTION PER SD55 EXxtioff B EVANSTON ENERGY COMMISSION LEGISLATION AND FRANCHISE BRIEMG October 23, 1997 ' Janet Goelz Hoffman, Member IN.TROL,UCTION: The Federal and State legislative framework is moving toward allowing (but not requiring) wholesale and retail electric customers to be able to choose who they purchase electricity from. r n1 — 1978 - Public Utilities Regulatory Policy Act (PURPA) — nonutilities can own and operate self -generation (such as cogeneration plants) and also sell power into the electric grid. — 1992 - National Energy Policy Act (NEPA) — FERC has authority to regulate wholesale transmission services — all generators have open access to transmission system — wholesale purchasers can purchase and wheel across the electric grid — FERC DOES NOT HAVE AUTHORITY RE RETAIL WHEELING - RESERVED TO THE STATES — FERC orders pursuant to NEPA — transmission tariffs — full recovery of stranded costs (legitimate and verifiable costs) — unbundles transmission and ancillary services — stranded costs payable though an exit fee — if a community moves from retail to wholesale (by municipalizing). FERC is primary forum — Future: There may be further legislation — regulating Public Utilities Holding Companies — more than 6 bills in last Congress — legislation that shaped the debate was Congressman Schafer's bill - Electric Consumer's Power to Choose Act of 1996 — transition to fully competitive retail markets by December. 2000 — State regulators required to address — reliability — recovery of pre 7/ 11196 investment costs — availability of comparable service to all customers — energy efficiency -1- STATE PROPOSED LEGISLATION — Immediate 5110% reduction in rates — Stranded cost recovery formula is complex; market related formula; financial result uncertain — Retail access - phase in 10% - 2iM 40% - 2001 70% - 2002 100% 2003 Xjtility continues to be responsible for transmission and distribution services Full completion for all services - not until 2009 Reliability continues to be supervised by ICC Certification required of alternative suppliers Creates renewable energy fund and energy efficiency fund and low income energy assistance fund Revenue neutral to municipalities (tax on electricity distributed) and municipalities can impose sales tax on electricity used within municipality FRANCHISE — Original 1957 franchise was scheduled to expire in 1992, extended until March 5, 1999. -- If do not cancel NWMC franchise by 180 days prior to 3/5/99, will have nonexclusive minimum 35 year franchise with Commonwealth Edison; with maximum 50 year term. — Upon termination of franchise — Commonwealth Edison must provide electric service to any potential customer unless an abandonment provision is filed with the RCC (current state law) — Evanston can charge Commonwealth Edison for use of public rights of way — Commonwealth Edison would have no contractual obligation to provide ratepayer subsidized electricity to city buildings — New franchise provisions — ratepayer subsidized electricity for city building and traf c i but not street lights or water station — extensive discussion of tree trimming rules — 500 feet (maximum) of undergrounding a year — maps of Commonwealth Edison facilities provided to Evanston — most favored nation clause - gives Evanston benefit of contract/rate provisions others negotiate; makes Commonwealth Edison less likely to make concessions to Evanston Not included — performance and reliability standards — ability to renegotiate if electric industry undergoes fundamental changes — energy assistance to low income families — mandates to work with Evanston contractors and subcontractors aDOCUtit NT/: CH0003A(99000=52•5) 3=29J'.DA?E,10a3197rnME.11:53a -2- MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: APPROVED ENERGY COMMISSION MINUTES Tuesday, November 4, 1997- 7:15 A.M. DOOLIN, GRUMMAN, KRAFT, MICHAELS, NESVIG, PELSOCI, WARMINGTON HOFFMAN, LEPPKE MARINO, STEEN, FARQUHARSON TONY KELLY CALL TO ORDER The meeting was called to order at 7:17 A.M. CONSIDERATION OF MINUTES OF OCTOBER 13, AND OCTOBER 23,1997 During discussion of the minutes of October 13, Mr. Grumman clarified his comments regarding why he had abstained during the vote on recommending to the City Council that it not support SB55 in its present form. He stated that he had not heard, at that point, any competent and factual opinion on whether this bill would be better or worse than the alternative. Perhaps Evanston ratepayers would be worse off with the alternative. These comments were incorporated into the official minutes of the October 13 meeting. With that change and certain editorial changes, the minutes were approved - 5 aye, I abstention (Michaels). Consideration of the minutes of October 23 were deferred until the December meeting. New copies will be sent out. Mr. Grumman stated that the minutes of September 9, 1997 did not reflect that he had abstained from voting to approve the August minutes, although he had abstained. NEW BUSINESS Follow Up to Aid ermanle Briefing of October 23, 1997 Bud Nesvig was pleased with the attendance at and participation in the Aldermanic Briefing. He also reported that the City Council had passed a resolution on October 27, 1997, that it did not support SB55 in its present form. The information had been transmitted to Larry Suffredin. Bud Nesvig sent notification to Senators Parker and Berman. Deregulation - State of Illinois Update It was noted that the State Senate passed a new deregulation bill. The new bill will be considered in the House during the fall veto session. Gary Michaels asked whether Mr. Suffredin would be holding another legislative briefing on the new bill. Mr. Marino will check into Mr. Suffredin's availability. Mr. Marino has requested a copy of the new bill and will forward this to members along with any summary that becomes available. He added, in response to a question, that regarding any amendment that would exempt Evanston from stranded costs, Mr. Suf iedin is aware of this desire and is in contact with appropriate elected officials. Later in the meeting, Mr. Kraft reported that although the main deregulation bill passed the Senate and likely will be signed by the Governor, there is talk of another bill that could develop in the spring Iegislative session that may ftne. Enerev Commission Minutes PVA2 11/04/97 tune the main bill. If that is so, it might provide a window of opportunity in terms of any legislative agenda Evanston may want to push, such as the exemption from stranded costs for municipalities whose franchises are about to expire. Mr. Kraft will find out more about this and report back to the Commission. Regarding how Senators voted on the bill, Mr. Kraft reported the vote was 57-2. Mr. Grumman wondered what their rationale was in voting for the bill. Bud Nesvig offered to ask Senators Parker and Berman how they voted and what their rationale was. Discussion of Meeting With Alderman Feldman and City Manager Crum Mr. Nesvig provided several handouts including a summary of the meeting. Mr. Nesvig reported that Mr. Crum had agreed to request a map and description of the Evanston electric power distribution system from ComEd and that Mr. Crum was not in favor of the NWMC franchise, but is in favor of a 2-3 year extension of the current franchise. Mr. Nesvig stated that nothing had been done since May with the draft letter he had forwarded to Mr. Crum concerning a request that ComEd value its distribution system. If someone does not intend to do anything, it would be nice if they would just say that rather than failing to respond for extended periods. Mr. Nesvig stated that the City Manager has no interest in hiring a consultant and speculated that the Commission will get no funds for a consultant approved by the City Manager. Discussion ensued that support for a consultant to advise the Council what to do with respect to the franchise may be found among City Council members, however. Mr. Pelsoci stated that there needs to be a clear perception of what the most important issue is for a consultant to work on. Once that is determined by the Commission, the Council can be approached with a request. Dennis Marino was asked which Council body should now receive Commission recommendations. Mr. Marino responded that the Commission is an advisory body to City Council, which historically had reported through the Administration and Public Works Committee (A&PW) although, during the past year, the Commission had joined with Council members in forming the Council Energy Subcommittee. He agreed to seek clarification of the role of the Subcommittee. Mr. Doolin arrived at this time. Draft Proposal for Evanston Energy Commission Work Plan - 1997-98 David Kraft distributed a draft timeline of duties and tasks to be performed leading up to the franchise expiration. He urged that the principle of flexibility be kept in mind in terms of the City determining what it needs as opposed to what others say it can have. The main goals are to identify how best to serve Evanston's energy users and advise the Council on alternative options. In response to a concern expressed about who would prepare documents communicating with the Council, Dennis Marino stated that an initial communication to the Council could be in the form of a 2-3 page memorandum, which staff could assist with, and would not require an elaborate RFP. Mr. Pelsoci stressed the need to have a clear, attractive and practical vision: one goal to concentrate on. The Council needs to be presented with a win -win situation. He proposed that the issue could be: "Should the City take an active role in reducing electric rates for residents?" This would mean that the City would be taking on a new role. He saw this as a critical issue that needs to be resolved first. If the City is not interested in that, perhaps it would be interested in promoting a private -sector solution. Discussion ensued regarding (1) how to proceed with these suggestions, (2) the yes and no responses the City has given to that type of question, (3) that a response would depend on how the question is framed, and whether there is any reason to believe that any recommendation has a chance of achieving success. Mr. Kraft noted that there is some level of interest in energy matters on the part of the City since, for eight years, groups have been appointed to study this issue. When the leaders lead, the people follow. Our work needs to be focused and deadlines for action need to be set. If there is no action, Mr. Kraft suggested that the EEC disband. Mr. Pelsoci rejected the idea that the EEC could not think through the logic of this puzzle and emphasized that it is for us Fnerey Commission Minutes PV&3 1 1/04/97 to determine the likelihood and practicality of alternatives and take the best alternative and sell it to the Council. If there aren't any good alternatives, then you ought to conclude that. Discussion ensued as to whether members believe there are alternatives. Mr. Grumman stated that there may not be anything effective that we can do. Mr. Doolin suggested that the EEC develop a plan & evaluate the politics of the situation and how to reduce any political damage or fallout. For example, the City is very diverse and one plan may be acceptable to the aldermen in one part of the City and not to the aldermen in another part of the City. Mr. Pelsoci added that there must be a plan that makes good business sense even before considering political consequences. If you were king of the energy universe, how would you reduce energy costs? What business equation would you implement? This needs to be thought through first. How can Evanston get access to cheap power and reduce transmission costs? Resolve that issue and then you can approach the City Council with the idea. Discussion occurred regarding this idea. Bud Nesvig indicated that Cinergy representatives (power marketers who made a presentation to the EEC last month) requested an estimate of what the cost of the distribution system in Evanston would be, which shows their interest. Mr. Pelsoci urged members to change their objective and see if there is a plan that would cut energy rates 20 -25% over and above what deregulation will allow, before five years or before stranded cost recovery would end. This could then be presented to Council. Mr. Kraft moved that the Commission take Mr. Pelsoci's proposal as a point of departure for EEC efforts in 1998, seconded by Mr. Doolin. Discussion ensued. Mr. Michaels stated that perhaps the Commission's role is to examine how Evanston can benefit from deregulation, and do what it has been doing (such as suggesting the amendment to Iegislation to exempt Evanston from stranded costs). Mr. Pelsoci stated that you need to talk to people in the market to see if this is doable. Mr. Nesvig asked whether David Kraft, Gary Michaels and Tom Pelsoci would formulate a coherent strategy, a solution to bring to the City Council. They agreed to meet to decide what work needs to be done on this proposal and other issues and return with work assignments which can be divided among members at the next meeting of the Commission. The motion passed unanimously. OLD BUSINESS NWMC Franchise Mr. Kraft called attention to the need to be prepared legally and legislatively. He suggested the need for a work plan to determine what to attain, anticipate, or be proactive in. Upcoming Federal legislation may preempt State legislation. The problem of stranded costs was raised. Discussion ensued that avoiding stranded costs would be a way to save an additional 25% on electric costs; that an attorney in this field could draft the argument that would go to the ICC or the FERC; and that Janet Hoffman has indicated this could have success, although the FERC has stated that it supports full recovery of stranded costs payable through an exit fee. Mr. Kraft noted that the franchise expiration comes up next year, and he urged early resolution of the franchise issue which would allow work to continue on the other issues. Bud Nesvig suggested that this issue be brought before the A&PW Committee. Mr. Kraft moved that the EEC recommend that the City Council decide not to enter the NWMC franchise and not extend the current franchise, seconded by Mr. Michaels. The motion failed - 3 aye (Michaels, Kraft, Nesvig), 4 abstentions (Doolin, Pelsoci, Grumman, Warrington). Mr. Pelsoci observed that members are perplexed on the franchise issue and that the City Council would be perplexed at such a recommendation unless it is clarified. Ideas must be sold to the City Council. Make it easy for them to say yes to this and get a respected lawyer to advise them on this. Discussion revealed that the Council is aware of the pros and cons of the franchise issue, but to assess the risks really requires true legal expertise in the field. Mr. Kraft moved that the EEC recommend to the City Council that it appropriate funds to retain a lawyer to evaluate the risks and benefits of signing versus not signing the NWMC Franchise agreement, with a final recommendation due back December 15, 1997, seconded by Mr. Pelsoci. There was discussion about the time frame, how much a lawyer would cost, who would chogse this firm and if the EEC could have control of the process. Mr. Pelsoci proposed an amendment to the motion to make funds available to the EEC to hire a lawyer so it can finalize its recommendations to the City Council. The amendment was seconded. In response to members' inquiries, Mr. Marino stated that this would be a very unconventional approach since contracts are authorized by the City Council and executed by the City s Pagg 4 11 /04/97 Manager, and the City Manager has the authority in such contracts. Mr. Michaels asked whether the work could be done with the cooperation of the EEC or under its direction. Mr. Marino stated that he foresaw two different levels of discussion that would arise out of such a request. One discussion would deal with the merits of your request and the other would deal with the unconventional procedure you are requesting if you ask to hire an attorney directly. He added that the EEC serves as an advisory body to the City Council and has no budget -making or contracting function, nor does any other board or commission. Mr. Pclsoci explained that he saw a need for the EEC to control the pace of things, the time frame; which is why he proposed that the EEC hire the lawyer. There was discussion on whether the Corporation Counsel to the City would be in a position to do this. Mr. Marino stated that the Corporation Counsel has franchise and contract law expertise, but no FERC experience. Mr. Kraft stated that he would not want to antagonize the Council and therefore could not accept Mr. Pelsoci's amendment. He hoped the target date would provide some control of the process. After further discussion, Gary Michaels proposed an amendment that the lawyer hired be an expert in the field and that the City's Corporation Counsel review and comment on the lawyer's findings. The amendment was seconded. Mr. Grumman asked that this would not rule out hiring the City's Corporation Counsel. The amendment passed, (7-0), as did the original motion. Energy Commission Funds Status Dennis Marino reported that there is $211,000 in the City's capital budget that is still earmarked for electric service options as of October 31, 1997. Mr. Nesvig asked that staff determine what was spent from that account for SVBK's services and what is being charged to that account presently. Mr. Michaels left the meeting at this time. Request for Electric Power Proposal and Need for Engineering Appraisal of Evanston Electric Power System Bud Nesvig stated that, as long as there is no peak load on the system, it probably works alright. But if there is another hot summer, that would put a strain on the system. Regarding ComEd's program to cycle AC units in the summer, Mr. Nesvig felt this program existed because the distribution system could not carry the load in some areas in the summer. Mr. Grumman responded that Mr. Nesvig took a huge leap to make that conclusion from the evidence. He stated that ComEd is always looking for ways to reduce their peak power demands and another reason may be smoothing out their load curve. Mr. Kraft suggested that ComEd also may have been under obligation by ICC pilot projects they signed on to. COMMUNICATIONS Mr. Marino drew attention to the articles highlighting the recent legislative action in Springfield. ADJOURNMENT The meeting adjourned at 9:17 A.M. The next regularly scheduled meeting is set for Friday, December 5, 1997 at 7:15 A.M. in room 2404. Jo =,,uharseh,�!ssistant .} ENERGY COMMISSION MEETING FRIDAY, DECEMBER 5,1997, 7:15 A.M. MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: SUMMARY OF ACTION: Approved NESVIG, DOOLIN, GRUMMAN, KRAFT, LEPPKE, MICHAELS, WARMINGTON HOFFMAN, PELSOCI MARINO, STEEN, FARQUHARSON CALL TO ORDER The meeting was called to order at 7:24 A.M. CONSIDERATION OF MINUTES OF OCTOBER 23 AND NOVEMBER 4, 1997 The minutes of October 23 were approved unanimously with editorial changes only. The minutes of November 4 were approved with editorial changes only; 5-aye, 1 abstention - Leppke. Mr. Doolin arrived after the approval of the minutes. NEW BUSINESS Deregulation - State of Illinois Update A summary of the new legislation and an analysis by Delbert Leppke had been received by members. It was noted that Senate Amendment #2 (SA#2) to House Bill 362 (HB362) had passed the Illinois House and was yet to be signed by the Governor. Mr. Nesvig asked whether a legislative briefing by Mr. Suffredin would be scheduled. Stephanie Steen responded that the Manager's Office was waiting until the Governor signs the bill before arranging a briefing. Response to Evanston Energy Commission (EEC) Recommendation to Retain Attorney to Address Franchise Issues - Administration and Public Works (A&PW) Meeting of November 25 Delbert Leppke reported that the general tenor of the A&PW meeting was that the City ought to take some time to get a response from the City's Corporation Counsel, and whether the Corporation Counsel can provide effective service or recommend another firm who can provide that service. Mr. Leppke reported that Bud Nesvig made a fine presentation charting the path that would be necessary: first with respect to the franchise, then concerning FERC and [CC reaction to the question of whether Evanston is obligated to pay transition charges. The Corporation Counsel was expected to respond to the Council Energy Subcommittee by December I Sth. Roger Crum Memorandum to Jack Siegel (November 19) Re: Questions Arising From Electric Deregulation Members had received a copy of Mr. Crum's memorandum in the packets. In that communication, the Corporation Counsel was asked to review certain questions regarding franchise processes and advise as to what type of legal services would be needed to provide appropriate guidance. That communication also included a statement that, since the bill is brand new, it may be premature to try to fully answer these questions until everyone has had a chance to become familiar with it. Energy Commission Page 2 ,nerernhPr 5 1007 I Mr. Nesvig distributed a draft response to that memorandum, outlining his concerns, for consideration by the Commission. Members reviewed the draft and discussion ensued. Gary Michaels observed that there seemed to be a conflict between the EEC and Mr. Crum, and he asked whether Mr. Crum was reluctant to move ahead on this issue. Dennis Marino responded that he didn't see this as a reluctance to move ahead on the part of Mr. Crum. The Nov. 19 memorandum is a response to a request from the ' EEC. It is perhaps a question of priorities and differences about priorities in terms of which direction to t move in first. This issue is now on the table in front of A&PW. Mr. Michaels stated that sending a response to Mr. Crum's memorandum may be unnecessarily antagonistic to Mr. Crum and may put him on the defensive when he is actually trying to respond. It was his understanding that Mr. Crum initially did not respond when the obtaining of a Iegal opinion regarding franchise issues was posed to him, but wanted to wait until the bill was signed before taking any action. Dennis Marino clarified, in response to Mr. Michaels' question, that there were two aldermen on the A&PW Committee who also advocated waiting until legislation was signed. It was the consensus at the first meeting of the A&PW to wait until their next meeting, which was on November 24th, and this issue has proceeded on that basis. Mr. Michaels summarized that the response memorandum prepared by Mr. Nesvig seemed antagonistic to Mr. Crum when it states that Mr. Crum asked the wrong questions and gave an opportunity to delay and didn't really pose the questions properly. Delbert Leppke was also uncertain of Mr. Crun's position. It seemed to Mr. Leppke that Mr. Crum was focusing strongly on the franchise; yet not demonstrating a willingness to deal with stranded costs or transition charges. As a possible explanation, Mr. Doolin stated that, perhaps until the aldermen decide what to do, Mr. Crum may be reluctant to take a position. Mr. Grumman queried why Mr. Crum is tying his actions to the new bill, since operating with or without a franchise is unrelated to the new bill. David Kraft suggested making changes to Bud Nesvig's response memorandum so as to convey the urgency of why legal counsel is needed and clarify any misperception as to the intent of the Commission. Gary Michaels suggested striking the items which convey Mr. Nesvig's disappointment, since Mr. Crum did make an effort. David Kraft stated that rather than express our concern, the Commission could respond to the questions that Mr. Crum raised in the memorandum of November 19. In response to members' concerns about the December l5 response due date from Corporation Counsel to Roger Crum (as contained in his memorandum), Dennis Marino reminded members that this issue is being dealt with in a committee structure, and that is the next date the committee will meet. Mr. Nesvig informed members that he had already sent a memorandum to Mr. Crum indicating his dissatisfaction with the December 15 response due date. Mr. Grumman asked when Mr. Crum will get the response. Dennis Marino stated that he will get it in time for the meeting on December 15. David Kraft proposed a motion that he and Bud Nesvig remain 10 minutes after the EEC meeting today to rewrite Mr. Nesvig's memorandum incorporating the following: 1) head up the memorandum with the real issue; 2) rework the list of concerns as observations; and 3) underline that a target date is essential. The memorandum would then be reviewed by Mr. Grumman before sending it to Mr. Crum. The motion was seconded by Gary Michaels. Mr. Grumman suggested that the third issue be what are the consequences of operating without a franchise? Del Leppke suggested that this issue of the status for municipalities whose franchises will end before the bill becomes effective also be raised in this memorandum. The motion passed unanimously 7-0. Energy Commission Page 3 flPrrmhrr 5 1447 Noting a statement in Mr. Nesvig's draft memorandum, Dennis Marino clarified that Evanston did incur legal costs during the period Evanston did not have a franchise with ComEd. Report of the Adhoc Committee Focusing upon Feasibility of Attracting Potential Business Partners to Build, Supply and Operate Electric System Gary Michaels reported that he and Tom Pelsoci had met, and Mr. Pelsoci had expressed concern over whether there would be support on the City Council for this effort and whether the EEC is authorized to do this. In response to these concerns, Mr. Michaels and Mr. Kraft had discussed the issue with AIderman Feldman, who they described as receptive to the idea of informally contacting power suppliers, with the caveat that: (1) it must be made clear where Evanston is in this process, (2) that this is a preliminary request, and (3) that in order to actually provide a future possible service for Evanston, a competitive RFP would have to be issued eventually. Mr. Kraft stated that Alderman Feldman had suggested that these presentations should be made to the EEC, with opportunity for the Aldermen to attend. Mr. Kraft also stated that Alderman Feldman had noted that the community was not ready for this since there has been no public outreach, and that this needs to be an issue in the community. To proceed, Gary Michaels stated that Mr. Pelsoci would contact power marketers, inviting them to make a presentation to the Commission, to determine whether any are interested in providing some service for Evanston at this time. Members discussed the need to do some preparatory work highlighting Evanston's demographics, electric usage by customer class, and outage data. Dennis Marino indicated that staff will check their files and request the additional information from ComEd, if needed, for the committee's use. Regarding what options were available, Mr. Kraft referred to a previously distributed article that could be utilized on how to create a community franchise. There are leaseback options, municipalization, mergers and other creative options that can be explored. Mr. Kraft stated that the Adhoc committee will develop a profile for use by Tom Pelsoci. He asked that members fax him their ideas by Monday evening. Education and Public Relations Efforts Bud Nesvig referred to the meeting that he, Mr. Crum and Alderman Feldman had had previous to the November meeting of the EEC. Mr. Nesvig stated that, at that meeting, Mr. Crum had stated that he was not interested in funding a public relations effort because it may raise expectations of the people higher than what the City can provide. Mr. Nesvig suggested that the EEC request funds for public relations efforts. Discussion ensued. Mr. Kraft noted that, according to the enabling ordinance, the EEC is charged with creating education, public relations and public involvement initiatives. Certain things can be done without money but would require members' time. Mr. Doolin suggested that members attend meetings of the various condominium associations, churches and block clubs so as to inform them, which would boost community support. Mr. Michaels stated that this assumes there is something to tell these groups. Evanston's franchise is expiring and we could raise public awareness of that, but there is nothing else to tell them. At this point in time, we don't know any companies willing to provide a service for Evanston. Mr. Leppke disagreed that there Energy Commission Page 4 Der- mhor 5 1 Q07 was nothing to tell people, and he referred to the 1991 study which has provided economic information , regarding the possibility of attracting a company to provide a service for Evanston. Companies may be interested in that updated data. Mr. Kraft saw the EEC at a much more fundamental level with the community. He suggested raising the question: why is the electric issue important to the community. Businesses must be active participants making their own electric energy choices. The energy policy could have benefited some businesses, but has never been implemented. Most people don't know there is a franchise or what it means. Members discussed the idea of preparing a primer. Dennis Marino recalled that the Energy AIternatives Task Force (EATF) had developed and distributed a brochure, a sample of which could be included in the EEC packets next month. He observed, however, that there has not been a constituency that has been evident on this issue through the years. Recognizing that there are hundreds of community groups throughout Evanston, Mr. Kraft suggested establishing a list of priority groups and utilizing teams of two EEC members to visit these groups. David I Grumman suggested that retail and residential customers would be interested in the excerpt from Delbert Leppke's projection on what the impact of this new legislation will be on their electric costs. Mr. Kraft suggested that smaller businesses be targeted to urge the Chamber of Commerce to take a more active role concerning this issue. There was discussion concenng the apparent conflict between what the EEC enabling ordinance states regarding public outreach efforts and what Mr. Nesvig has reported is the City Manager's view regarding funding public outreach efforts. Mr. Leppke asked if it could be determined whether Mr. Crum is open to further discussion on this issue. Mr. Marino pointed out that the ordinance statement about public relations and education is a very broad statement. The EEC is advisory to the City Council, whereas this discussion represents a fairly significant change. While the efforts just mentioned are within the realm of public education, they are akin to organizing and mobilizing support for an issue. Mr. Marino suggested that the EEC dialogue with the City Council about these proposed efforts. Discussion ensued. Mr. Kraft responded that the EATF brochure developed some years ago never articulated an advocacy for a particular direction or view, but merely put the issue on the map. The EEC could get the issues out similarly and the public will then set the agenda. Mr. Grumman stated that since the ordinance says the EEC can pursue public education, he suggested that they go ahead, rather than ask for permission to do it. Public education is different from organizing. Dennis Marino clarified that he was raising the distinction between public education on the one hand and advocacy and organizing on the other hand. Bud Nesvig requested that the EATF brochure be sent to members as soon as possible. Proposed Amendment to EEC Ordinance 49-0-93 Bud Nesvig asked for a motion requesting the City Council to reduce the quorum requirements for the EEC from 6 members to S members. Dennis Marino stated that, the boards and commissions city-wide, in which he is involved, require a majority of their positions to designate a quorum. Even though there are only 9 members on the EEC currently, it is an 11-member board. Discussion ensued among members Energy Commission Page 5 17Premher i 1997 that perhaps members should endeavor to encourage applications to the commission, or seek to change the ordinance that a quorum would be based on the number of filled positions. Mr. Kraft moved to request that the City Council change Ordinance 49-0-93 to allow a majority of the current membership to constitute a quorum. Mr. Doolin seconded the motion. Mr. Grumman said that, according to Roberts Rules, the actual number required for a quorum is usually stated in the by-laws of an organization. Further discussion occurred regarding the rationale for this request: most of the country would determine a quorum as being a majority of members. Mr. Warmington questioned whether this motion was necessary since, for the last few months, there has always been a quorum. He asked staff to check how many meetings the EEC has not had a quorum. The motion carried 5-2 (Leppke, Michaels). Our Town Evanston Broadcast at ECTV taped 11/15/97 - Del Leppke Delbert Leppke had been invited by the Republic Policy Group to participate in an "Our Town Evanston" program regarding how electric deregulation may affect the individual homeowner. He stated that his comments were well received by the group and that he had made a strong pitch for involvement. He indicated that he did not advocate any particular solution but simply laid out the problem. Mr. Kraft mentioned that Janet Hoffman was previously on a show which Nuclear Energy Information Service (NE[S) had put together dealing with deregulation issues. In 1998 they intend to put together /: hour shows on energy -related topics, and he asked members to consider making themselves available for participation in an informal discussion of these issues. Annual Report of Energy Commission Mr. Nesvig informed members that the Commission should provide an annual report to the City Council, as well as their plans for 1998. He will distribute a draft to members for their comment and input. These items will be placed on the Commission's agenda for consideration in January. OLD BUSINESS Commission's Position on the Northwest Municipal Conference Franchise Issue Two members of the Commission left the meeting around 9:00 A.M. Due to lack of a quorum, Bud Nesvig stated that a vote could not be taken on this issue today. He suggested that a special meeting be held to accomplish this agenda item. Update or Duncan & Allen Operating Cost Projections - Del Leppke Delbert Leppke noted that his projections have been distributed and that he was available to respond to questions and provide clarifications. In his opinion, it is still a fairly good study. OTHER BUSINESS Bud Nesvig, who lives in Wilmette, reported that there have been frequent electric outages occurring in the Wilmette (Kenilworth Gardens) area. He had obtained the last five Annual Summaries for the Village of Wilmette, which ComEd prepares as part of their NWMC franchise agreement. Even though it is not an Evanston franchise requirement, Gary Michaels asked whether a similar report is available for Evanston. Dennis Marino agreed to make a request for such a report, indicating that we saw the report that was provided to Wilmette. II Energy Commission page 6 j '�rr S 1007 I Delbert Leppke expressed interest in viewing records and data from ComEd. Regarding obtaining or viewing ComEd records, other than what is publicly available, Dennis Marino indicated that during the RFP process to select a consultant this issue had arisen. At that time, ComEd had indicated that an appropriate consultant could have access to records after signing a confidentiality agreement. Mr. Leppke stated that information will be needed regarding where the transmission delivery points are and the capacity of each. Mr. Marino noted that some information has been obtained and Mr. Leppke can contact him to view it and determine what further information is needed. A request to ComEd could then be framed on his recommendation. Mr. Leppke agreed to pursue this in January. Mr. Nesvig suggested that the Fire Department would also be a source of information. ADJOURNMENT The meeting adjourned at 9:24 A.M. The next meeting of the Energy Commission is scheduled for Tuesday, January 6, 1998 at 7:15 A.M. in Room 2404 of the Civic Center. L Jo arquharson f' Secretary, Planning Division Community Development Department MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: APPROVED ENERGY COMMISSION MINUTES Tuesday, January 6, 1998 - 7:15 A.M. DOOLIN, GRUMMAN, HOFFMAN, LEPPKE, KRAFT, MICHAELS, NESVIG, PELSOCI, WARMINGTON NONE MARINO, STEEN, FARQUHARSON STEVE EISBERG, ENVIRONMENTAL ATTORNEY TENIECE GUY, LAW STUDENT CALL TO ORDER The meeting was called to order at 7:15 A.M. CONSIDERATION OF MINUTES OF DECEMBER 5,1997 Roy Warmington moved that the minutes of December 5, 1997 be approved, seconded by Mr. Grumman. The minutes were approved with editorial changes only, 6 aye (Nesvig, Grumman, Leppke, Kraft, Michaels, Warmington), I abstention (Hoffman). Mr. Peisoci And Mr. Doolin arrived after consideration of the minutes. Janet Hoffman introduced Teniece Guy, a First year law student at Northern Illinois University's Law School. She will be doing research on the new deregulation bill and will provide a memorandum for the next meeting of the Evanston Energy Commission (EEC). Also in attendance was Steve Eisberg, a friend of Gary Michaels who is interested in energy -related issues and practices law as an environmental attorney. NEW BUSINESS Deregulation - State of Illinois Update Janet Hoffman informed members of a project the Center for Neighborhood Technology (CNT) is working on with the Chicago Board of Education to reduce energy use and pursue aggregation. Perhaps this type of program would suit Evanston. She added that Michael Smith of the CNT would be willing to make a presentation to the Commission. Mr. Michaels stated that there might be an agreement in the works between ComEd and certain City of Chicago entities with respect to aggregation. Several Members had seen the Monday, Jan. 5, 1998 "Chicago Tonight" program during which a panel discussed the "trial rate" ComEd has introduced for members of the Illinois Retail Merchants Association (IRMA). This rate represents a substantial savings for that market, and questions are being raised as to whether this deal had been struck prior to the passage of the deregulation bill. Mr. Kraft stated that Dan Miller of the [CC and Howard Lemer of the Environmental Law and Policy Center have expressed opposition to this special trial rate for the IRMA, saying that it is a form of discrimination. Mr. Kraft noted that there is a predicted tune-up of the deregulation bill in the spring session, and lie raised the idea that Dan Miller of the ICC is a potential ally for Evanston. Mr. Grumman stated that perhaps a briefing session would be the proper forum to which to invite Mr. Miller. Mr. Kraft added that it would be advantageous to do this before the Spring legislative session starts. Bud Nesvig stated that he had sent a letter to Roger Crum inquiring what efforts Mr. Suffredin has been making in Evanston's behalf. Dennis Marino noted that a briefing session might be an appropriate time for Mr. Suffredin to both recap what has been accomplished and to anticipate what issues may arise during the Spring session of the legislature. S Paga 1160 (At the end of the meeting, and at the request of David Kraft, Mr. Nesvig requested that staff arrange another Legislative Briefing and that Dan Miller, Chairman of the ICC be invited to attend.) Mr. Nesvig wanted to know what was being done now. He stated that things are not moving along rapidly enough with the Administration and Public Works (A&PW) Committee and that perhaps the Commission ought to do something on its own. Mr. Pelsoci responded that, as he read the correspondences between Mr. Nesvig and Mr. Crum, it had become clear to him that there is no support within Administration or City Council for condemning the distribution system or building an alternative system. He stated that Mr. Nesvig ought to note this and adjust his objectives relative to that. This should be discussed because, as an advisory body, the EEC is not authorized to do something on its own. Mr. Nesvig stated that he agreed with Mr. Pelsoci. Gary Michaels offered his view that Mr. Nesvig felt stonewalled and was being persistent, although he may sound harsh at times. Mr. Pelsoci responded that, putting style aside, it is important to note that there is no support as mentioned earlier, nor is there support for somehow using deregulation to put pressure on ComEd through lobbying. Mr. Pelsoci stated that Mr. Crum is an intelligent man who knows that taking the step of not having a franchise will lead to certain direct logical consequences that must be considered. Certain alternatives such as condemnation or replacement are not acceptable to Mr. Crum; that is not stonewalling. if there is no support for the things we are pushing, we need to adjust our activities accordingly. Mr. Nesvig disagreed that canceling the franchise would automatically mean condemnation or replacement. His personal opinion was that, when the City had operated without a franchise, there were no consequences. Mr. Grumman disagreed and reminded Mr. Nesvig that, at the last meeting of the EEC, some members felt there were consequences and might again be consequences, which is why the EEC agreed to ask the Council to hire a lawyer. Mr. Michaels stated that perhaps the Council has not heard a palatable package as yet. It was his understanding that Alderman Feldman was in agreement with the EEC contacting power marketers. Mr. Pelsoci stated that no significant company is going to respond unless there is real interest shown by the City Council or the Administration. If the Aldermen are willing to meet with these companies, that would be real interest. Mr. Nesvig stated that Cinergy is willing to come in again and provide a quote for power. in Mr. Pelsoci's view, Cinergy will send some low level salesmen and will jump at anything. No significant company is going to be willing to make an investment in Evanston's distribution system if no Council member is willing to talk to them. Recommendation to Retain Attorney to Address Franchise Issues It was noted that the A&PW Committee had approved the hiring of an outside attorney to advise the City with respect to its electric service franchise. Janet Hoffman submitted the resumes of two attorneys very knowledgeable in this field (David Narefsky of Mayer, Brown & Platt and Freddie Greenberg) as possible resources for the City Manager. Mr. Marino indicated that he would forward these directly to Mr. Crum. Mr. Kraft questioned the viability of ibis. Greenberg as a candidate since she has, through the years, been opposed to certain recommendations of the Energy Alternatives Task Force (EATF) and the EEC. Mr. Kraft was encouraged to make his concerns known to the City Manager. Mr. Leppke noted that Attorney Greenberg is currently representing the Chicago Housing Authority (CHA) in its case before the FERC concerning aggregation/wholesale customer status and that Evanston needs someone with this kind of expertise. Gary Michaels observed That, had the EEC participated directly in posing questions to the Corporation Counsel, perhaps some of the communication problem could have been alleviated. Members discussed whether the EEC could have some involvement with the attorney to be hired. Mr. Michaels motioned that the EEC recommend that the City Council hire an attorney expeditiously and involve the EEC in the process with respect to the scope of work and presentation of results. Motion was seconded by Delbert Leppke. Mr. Pelsoci noted that no one knows how to avoid stranded costs at this time since it is a regulatory issue. Motion passed - 8 aye, I abstention (Grumman). Mr. Grumman explained that he abstained because he felt this motion was not necessary. s P:ge 3 1 /fi/98 Report of AdHoc Committee Focusing Upon Feasibility of Attracting Potential Business Partners to Build, Supply and Operate Electric System Mr. Pelsoci distributed an article on Falls Church, Virginia and Palm Springs, California. These municipalities are considering becoming aggregators and becoming utilities without owning the distribution system. He suggested that this is the sort of case in which a power marketer might be willing to do a joint venture. Mr. Pelsoci again pointed out the need for Council support before any power marketers are called. High-level interest or commitment is needed on the part of the City for these high-level power marketers to come in. Delbert Lcppke agreed that City Council support was needed. Discussion ensued as to whether any Alderman had committed to a meeting. Gary Michaels understood Alderman Feldman as having said to go ahead and contact companies to respond to what is doable given the current situation, but he did not commit to a joint meeting. Mr. Kraft suggested that the EEC ask for a list of Council members who are willing to meet with a selective list of potential energy partners. Discussion ensued: perhaps Mr. Crum could participate in the invitation; this is a unique situation; we are looking for creative ways to avoid stranded costs; we need to look ahead now that the new bill has been signed and determine whether we can influence changes. Mr. Leppke pointed out that Northwestern University (NU) and the IRMA have made deals with ComEd. Thomas Pelsoci urged the Commission to unify its goal in one paragraph. It must be clear and simple in order to get political support. Bud Nesvig stated that he asked Cinergy if they were willing to examine the Evanston distribution system and estimate the cost to replace it. Cinergy now wants to send two persons to Evanston to view the system. Discussion ensued: the approach should not be to tell the firm what to do in advance; instead, the firm should come up with the idea of what would be doable in Evanston, what their best options are. It was noted that Cinergy had suggested isolating a smaller area in Evanston that could be provided an alternative distribution system. Mr. Grumman suggested that Evanston's interests be outlined and addressed succinctly: provision of low cost power, a system properly maintained and (hopefully) independent from ComEd, and avoidance of stranded costs. Mr. Nesvig asked that Mr. Grumman draft a clarifying letter to send to Cinergy. (During the meeting, Mr. Grumman drafted the letter, which he read at the end of the meeting. It read: "With respect to the electric power supply to users within the City of Evanston: the City's ultimate goal is low cost power delivered through a reliable and safe system, one that preferably is independent from the current electricity supplier, namely ComEd. Evanston's Energy Commission and interested City Aldermen would like to hear your proposal to help Evanston achieve the above goal at the earliest possible time. As part of your proposal, please address the following related issues: 1) Stranded costs: can they be avoided if the power provider is not ComEd?; 2) Is a distribution system independent from ComEd a viable andlor desirable course to pursue?; and 3) Would early cancellation or non -renewal of the City's franchise agreement have any impact on the above issues or on what you propose?" Del Leppke suggested that the questions be reordered to list the distribution system first, stranded cost second and the franchise third. Members agreed to the content of this letter by consensus. Mr. Nesvig stated that he would send the letter to Cinergy.) Mr. Kraft motioned that an outreach cover letter be written and sent to power marketers to determine their interest, seconded by Gary Michaels. Mr. Pelsoci suggested that the letter indicate that there is a window -of - opportunity time frame, what the objectives arc, and that a specific person will be following up to determine their interest. Members agreed that a synopsis should be included, as well as the deregulation bill and any available summaries of the bill. Mr. Pelsoci suggested that perhaps five companies could be contacted to begin with, then see what responses you receive, and then make any necessary changes or improvements to be incorporated in the next five to be sent out. The motion passed 8-0. (Janet Hoffman left the meeting prior to the vote). David Kraft, Tom Pelsoci and Gary Michaels agreed to work on a draft letter this week for use with power marketers, which they will forward to Bud Nesvig. q Pao 4 1/6/9g 1998 Plans of Energy Commission Mr. Kraft asked members to think about how the EEC should proceed and develop a work plan for 1998. Mr. Nesvig had previously sent members a draft of a work plan for the EEC for 1998. He asked for comments. Tom Pelsoci responded that there was too much included on Mr. Nesvig's draft, He suggested that there be no more than two or three objectives (what you want to accomplish), then list what needs to be done under each objective. Possible objectives could be: 1) to escape stranded costs, and 2) to get tangible proposals from business partners. Then you ask yourself which of these listed items support the objectives and strike the ones that don't. Whatever the objectives are should be the criteria used to determine what efforts are to be pursued, If we cannot find an objective for an activity, maybe the activity doesn't belong on the list. Dennis Marino suggested giving thought to including franchise negotiations as a 1998 work plan item. He also suggested that assessment of potential aggregation is a fourth topic to consider. There is a need to do research on aggregation and to learn what other municipalities around the country have been doing with respect to aggregation. Mr. Pelsoci stated that the subject of aggregation would arise out of these potential partner discussions. Dennis Marino indicated that staff could help generate some of the local data in terms of existing characteristics in Evanston and that Del Leppke had already requested such data. David Grumman emphasized that issues should simply be posed on the Workplan, without suggesting a conclusion or recommendation. For example: instead of listing "Cancel the ordinance", (which the EEC has not decided to recommend yet), it should be reworded as "Consider canceling the ordinance". David Kraft stated that there was a need for more involvement with other boards and commissions. Mr. Pelsoci asked why dilute the Commission resources we have with an additional two objectives when we can't even do the key issues. Why dilute these of forts with 15 groups, etc? Dennis Marino commented that the technical issues the Energy Commission deals with are unique. Most other boards and commissions may not feel technically qualified to engage in substantive discussion on technical electrical energy issues. Bud Nesvig expressed his view that a staff assistant with technical experience should be provided to assist the EEC in its work. Dennis Marino responded that Stephanie Steen is available, to a greater extent than she has thus far been used, to do research, and she has in fact been researching what other communities are doing in terms of aggregation possibilities. When dealing with technical issues that would require engineering experience, that expertise is not on staff but would likely be handled by a consultant. Mr. Nesvig asked for clarification as to what Ms. Steen could do such as compose letters to ComEd, for instance. Dennis Marino indicated she most certainly can compose authorized letters and perform numerous other tasks. Mr. Marino added that he sees the staff issue as a separate discussion, once the EEC determines its work plan. Bud Nesvig stand that he believes there are funds that could be made available for a staff person with technical background to assist the Commission. He stated that he does not think staff is interested in helping the EEC. Dennis Marino disagreed with Mr. Nesvig, asserting that staff has been available and responsive when the EEC has asked for support. David Kraft asked which items on Bud Nesvig's list of requested information could be handled by Stephanie Steen. Dennis Marino will review the list and respond as to what can be handled by staff. Education and Public Relations Efforts Members had received copies of the educational pamphlet that had been distributed by the EATF. Mr. Kraft indicated there was a second piece to that effort which included frequently asked questions about the City of Evanston's electric service franchise. Energy Commission Minutes Pl, 5 1I&M Discussion ensued regarding the need to educate the public now that the new deregulation bill has been signed. Mr. Pelsoci stated that to educate the public at this time is too big of a task. How can the EEC educate people when it does not have the answers itself and cannot sort through the complicated issue of what it should do? Mr. Doolin stated that perhaps there could be an informing of the public about issues such as stranded costs. Del Leppke stated that education must enter the political arena through City Council members. The EEC should not pursue this unless City Council members are willing to stir up interest in the community. If voters begin to ask Aldermen about these issues, then the EEC should provide information to the City Council. Another briefing session for the Aldermen may be the best approach. Mr. Pelsoci agreed that educating the Council makes sense. Mr. Grumman suggested that Del Leppke's chart be reformatted to be visually interesting and appealing. Del Leppke will work with Stephanie Steen to do this. It was suggested that then it could be sent to City Council members. OTHER BUSINESS David Kraft announced that the annual meeting of the Nuclear Energy Information Service (NEIS) will be held on Sunday, January 18, at 3:00 p.m. at his home at 2773 Garrison Street. Wynona Hauter from the Public Citizens Energy Group in Washington, D.C., will be speaking about deregulation at the federal level and other issues. He extended the invitation to all EEC members to attend. Bud Nesvig announced that Wilmette Trustees will be holding a meeting to discuss the ComEd outages certain areas of Wilmette have been experiencing. He added that residents of Wilmette have been calling their Trustees when they experience outages. ADJOURNMENT The meeting adjourned at 9:20 A.M. The next meeting of the Energy Commission is scheduled for Wednesday, February 4, 1998 at 7:15 A.M. in Room 2404 of the Evanston Civic Center. Joan Farquharson Secretary, Plann6ing Division APPROVED ENERGY COMMISSION MMUTES Tuesday, February 3, 1998 - 7:15 A.M. MEMBERS PRESENT: GRUMMAN, HOFFMAN, LEPPKE, KRAFT, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: DOOLIN, PELSOCI STAFF PRESENT: MARINO, STEEN, FARQUHARSON OTHERS PRESENT: TONY KELLY SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:16 A.M. CONSIDERATION OF MINUTES OF JANUARY 6,1998 The minutes of the January 6 meeting of the Evanston Energy Commission (EEC) were approved unanimously with several grammatical changes. NEW BUSINESS Energy Briefing Held February 2,1998 David Grumman reported on the briefing by Lary Suffredin. A handout entitled "Electrical Restructuring Timetable" was distributed which had been prepared and presented by City Manager Roger Crum at the briefing. This handout (attached) listed key requirements of the deregulation bill and when these would go into effect. It was noted that the Illinois Commerce Commission (ICC) must implement consumer education, per the bill. One intergovernmental agreement is currently allowed (for purposes of aggregation) among several units of government in Chicago. The utility tax formula will be based on kWh and not gross receipts. Mr. Grumman explained that this will mean utility taxes (as a percentage of the total bill) will increase for individual users. There is also a non-severability clause in the bill which means that if any portion of it is determined non -constitutional, then the entire bill becomes invalid. Mr. Nesvig added that this provision is intended to discourage large utilities from appealing any one section of the bill as they ►vould then lose out on other benefits they would have received under the bill. Gary Michaels asked whether the issue of a municipality's franchise expiring before the year 2000 was raised with respect to possible avoidance of stranded cost. Although this subject was not discussed publicly at the Briefing, Mr. Nesvig reported that Larry Suffredin had informed him that this issue has not been pursued. Mr. Grumman added that the ICC will have responsibility for setting reliability standards which out-of-state suppliers will also have to abide by. Dennis Marino reported that the ICC has opened a docket on reliability rulemaking and a draft of that docket was distributed to members. Del Leppke noted that there will be hearings held to set the precise rules for reliability and that the City should take notice of this and represent itself at those hearings. Dennis Marino will request a schedule of the ICC hearings and suggested that Dan Miller may provide insights on this issue at next week's briefing scheduled for Tuesday, February 10, at 10:00 A.M. Discussion ensued regarding whether a recommendation should be made to the City Council concerning involvement at the ICC hearings. David Kraft motioned that the EEC recommend that the City of Evanston become involved in the proposed ICC docket on reliability and that members of the reliability subcommittee be available to participate in drafting those comments, seconded by David Grumman. Motion passed unanimously. Staff will transmit this request to Roger Crum. David Kraft made a related motion that the EEC advise the City to retain an electric engineering consultant no later than March 15 for purposes of creating testimony for the ]CC docket, seconded by Delbert Leppke. Discussion ensued. Gary Michaels explained that there are things specific to Evanston that need to be evaluated and if a consulting engineer reviews these things, it may help the City. David Kraft referred to SVBK having identified seven ways to evaluate reliability. When ComEd claims they have been ranked as being highly reliable, what was it based on? Delbert Leppke added that a consulting engineer could offer an understanding of appropriate standards on which a penalty could be based and made rational. Without that rationalization, Mr. Leppke did not think there was any chance of convincing the ICC to write something. David Grumman felt that, given the normal pace of events in engaging any outside consulting, the hearings would be over before a consulting engineer could even be hired. David Kraft stated that reliability had been identified as important to the City, and much data and maps, etc. could be assembled right now. Energy Commission Minutes Page 2 2/3/98 David Grumman intended to ask Dan Miller what kind of testimony the [CC wants to hear. Dennis Marino suggested that the Reliability Subcommittee meet to determine what data are needed. Mr. Kraft urged that the motion be acted upon now, with the understanding that it could be withdrawn if it is no longer needed after the meeting with Dan Miller next week. The motion was approved 6 - l(Grumman). Members of the Reliability Subcommittee agreed to meet if necessary. Update on Process to Hire Attorney to Address Franchise Lssues Delbert Leppke provided an update on this process. The City Manager had sent letters to prospective firms. Five responses were received, but one applicant has since withdrawn. Mr. Leppke and Mr. Nesvig have been a part of the team interviewing the candidates along with Roger Crum, Herb Hill (the City Attorney), and Stephanie Steen. Interviews should conclude this week. Mr. Leppke was pleased with the quality of the interviews and the opportunity they have had to thoroughly question the applicants. The criteria the attorneys have had to meet are: previous association with the ICC and FERC and to be knowledgeable about the Evanston Franchise and the Deregulation Bill. Mr. Leppke stated that each applicant has demonstrated some level of competency in all four areas. Responding to the question of when the attorney would actually be hired, Stephanie Steen stated that the Administration and Public Works Committee has authorized Mr. Crum to hire an attorney, so the attorney could be on board as soon as the selection is made. Profile of Evanston Electric System Delbert Leppke had put together a profile of the Evanston electric system using data from the Energy Commission files and reports that were available. Mr. Leppke had also contacted Jerry Bowman at ComEd (the contact person replacing Eunice Collins) to obtain additional information. Mr. Bowman is compiling additional information for Mr. Leppke and will give him access to view distribution system maps so as to verify the profile of the Evanston system. Mr. Leppke noted that the Evanston distribution system does not start at the City limits. It starts at a substation that is outside the City limits. The Evanston system is fed at various points across the City boundaries, thus serving citizens of neighboring communities such as Skokie and Chicago. Mr. Bowman has promised Mr. Leppke a listing of where the feeders cross boundaries and how many residences outside Evanston boundaries are fed by this distribution system. Members discussed Mr. Leppke's document and suggested some minor changes including obtaining a total load figure, which he will incorporate into a final document. It was noted that several pages from the 1995 ComEd Network Outage Report for the downtown area should be attached to the profile. Proposed Amendment to EC Ordinance (49-0-93) This item was briefly discussed since certain parts of the Ordinance are now outdated. The Chair suggested not to proceed with any recommendations at this time. Members were in agreement with the Chair. OLD BUSINESS 1998 Plans of Energy Commission Bud Nesvig provided a copy of his Draft of Energy Commission Plans dated January I, 1998. He reviewed that, at the January meeting of the Commission, Tom Pelsoci had suggested condensing the goals for 1998 to 2 or 3 items. He „ asked members for their input as each of his 10 items was considered. tilr. Grumman suggested that all items be reworded as issues and not foregone conclusions. For example: Instead of stating "Cancel Ordinance 105-0-93," the item should read "Consider canceling Ordinance 105-0-93." Gary Michaels questioned what the Commission's position was on the issue of canceling the ordinance. Discussion revealed that the Commission has not taken a position as yet, but has been analyzing the ordinance and will be staying with this issue in the coming year. Gary Michaels stated that, since the attorney will be providing input on this issue, nothing can be done now. Mr. Grumman suggested the item be further reworded to say "Consider recommending cancellation/continuance of Ordinance 105-0-93", which would make it a neutral statement. There was general consensus that the item should be reworded as suggested by Mr. Grumman. Item 92 dealt with making an effort to obtain a map of electrical facilities in Evanston. Members discussed what purpose this could serve: a detailed inventory of the system could be used to support the [CC docket or to provide information to prospective power suppliers. Delbert Leppke noted that ComEd has a concern about sabotage to their system and does not intend for this information to be readily available to the public. Therefore, when approaching ComEd, the City would need to have an idea of how confidentiality would be maintained. Mr. Kraft added that public Energy Commission Minutes Page 3 2/3/98 safety concerns would suggest that the Fire Department have such maps in their possession. There was some discussion about what the Fire Department would do with such maps, whether the information contained therein would be in a form that they could understand and use and whether the Fire Department would even want them. Mr. Kraft further suggested that municipalities might be able to bill ComEd for any means they must employ to get the information they are legally entitled to. Delbert Leppke observed that the ICC has traditionally had responsibility for reliability, but the question arises: Do municipalities want to take some responsibility for reliability, and if so, then an ordinance may be required to do so. Members concurred that the item should be reworded to: "Continue efforts to contact ComEd to obtain maps of electrical facilities." Item #3 was reworded to: "Continue efforts to contact ComEd to obtain value of electrical power distribution system." Mr. Grumman asked whether ComEd had ever provided a valuation of their system. Bud Nesvig stated that the request was never made by the City Manager and he asked whether the EEC could make the request directly, Dennis Marino responded that to do so would not be following the procedure of obtaining authorization. Item #4 was reworded to: "Request consulting assistance for City Staff with electrical engineering education..." Item 45 was in process (to obtain legal counsel), and was reworded to include "...and to assist the City in its franchise negotiations". Item 96 was in process (to contact electric power suppliers), and was reworded as: "Contact electric power suppliers to determine interest in developing a plan of action for the City of Evanston". Item 97 dealt with aggregation efforts with other communities. Bud Nesvig stated that Heidi Voorhees, Village Manager of Wilmette, had indicated her reliability concerns to him and he felt she would be receptive to a joint effort. Mr. Grumman suggested rewording item #7 to say: "Contact other nearby municipalities to determine if there is interest in an aggregation effort to obtain lower cost power at greater reliability." Item #8 was eliminated as redundant. Item 99 was streamlined to read: "Initiate a Public Relations Campaign". Item # 10 dealt with implementation of the energy policy. Janet Hoffman suggested that the energy policy be reviewed in light of the deregulation legislation. Members agreed. David Kraft suggested that money be requested to host a conference: Get the municipal conferences involved and bring in guest speakers to address issues such as aggregation. This is doable in a 6-9 month time line and would build enthusiasm quickly. Janet Hoffman noted that there is no prohibition against municipalities aggregating with one another. Stephanie Steen noted that residential aggregation is not possible under the new bill until the year 2002. Non- residential aggregation will be possible in the year 2000. Bud Nesvig stated that he will redraft the list of Energy Commission Plans to reflect members' input. NWMC Franchise Analysis Bud Nesvig reminded members that the NWMC Franchise Analysis had never been embraced by the EEC. He asked for a motion that the Analysis be approved by the EEC. Bud Nesvig stated that the Analysis had been done by Janet Hoffman. Janet Hoffman clarified that Clint Uhlir had done the Analysis.' David Kraft motioned that the EEC adopt the NWMC Franchise Analysis, seconded by Roy Warmington. Dennis Marino asked for clarification as to whether the intent of this motion was to accept the Analysis as a communication formally or whether the EEC was agreeing to the contents of the Analysis. Janet Hoffman recalled that the Analysis had been accepted as a formal communication already and she did not think the EEC had to do anything more with it. David Kraft withdrew his original motion and introduced a second motion that the Energy Commission adopt the NWMC Franchise Analysis as its formal position on franchise analysis and forward it to the City Council in preparation for their deliberations on the franchise. Gary Michaels seconded the motion. Dennis Marino asked for clarification as to what the major content of the Analysis was. Janet Hoffman responded that the Analysis criticizes a variety of terms of the franchise, but site did not recall that it came to any final conclusion. Mr. Nesvig read the "Brief Answer" 'Clinton Uhlir, a 1995 Summer Associate with Kanen, Muchin & Zavis, prepared the analysis at the request of and under the supervision of Janet Goelz Hoffman, an Energy Commission member and Chair of the Franchise Review Task Group. Energy Commission Minutes Page 4 2/3/98 section of the document. He read: "No" and explained this means don't adopt it. He continued: "The Proposed Agreement is a significant improvement over the previous franchise agreement, Ordinance 13-0-57, but it is nevertheless deficient in a number of areas. The Proposed Agreement is unacceptable because (1) its language is extremely noncommittal; (2) it contains only loose performance requirements for ComEd; (3) it includes unrealistic quantitative provisions; (4) it allows ComEd to retain too much power and discretion; and (5) it contains other significant errors and omissions." Del Leppke expressed his concern that the NWMC franchise contained no significant reliability standards and the penalties imposed were almost non-existent. David Grumman asked what the impact of forwarding this Analysis, again, to the City Council, would be. Del Leppke stated that the EEC would be putting its stamp of approval on the document making it their recommendation. David Kraft explained that if the EEC puts something in motion, the City Council will have to indicate its position in some public arena. Mr. Grumman added that the Council could also ignore it. Roy Warmington suggested a cover letter accompany the Analysis stating that the EEC has reconsidered this recommendation since the passage of the deregulation bill and thinks it is still a viable issue. He added that perhaps some new Council members never saw the transmittal before. The motion passed 6-0-I (Janet Hoffman - abstention). David Kraft asked whether a cover letter will accompany the Analysis to the City Council. If so, he pointed out that this is the second officially appointed body that has rejected this document. Bud Nesvig asked Mr. Kraft to provide him some information concerning this, and he offered to draft a cover letter. Delbert Leppke asked whether the NWMC had a set of objectives which they are working on as it relates to franchises and energy issues. Dennis Marina responded that the NWMC franchise is their endorsed document, but they are working on a range of issues. He offered to obtain a list of what they are currently working on. Bud Nesvig later asked Stephanie Steen to obtain information on what the NWMC's overall scope of work is, not just energy issues. Since it was already 9:10 A.M., the Chair deferred the balance of Old Business and went to the Communications section of the Agenda. COMMUNICATIONS Dennis Marino reviewed the articles, which included several other states' experiences with deregulation and various perspectives on deregulation. Articles on Independent System Operators, transmission issues, and stranded costs were also included. Janet Hoffman had supplied a document on rulemaking from the Internal Revenue Service (IRS). The first page has been supplied and members can request the additional 30 pages from staff. Ms. Hoffman explained that there have been concerns that deregulation will cause problems for tax-exempt, bond -financed facilities because of concern that wheeling power would cause a kind of a private use. These regulations are an attempt, on the part of the IRS, to make those rules more flexible. Ms. Hoffman will continue to make summaries on this issue available to members. A list of Evanston retailers who had experienced an electrical outage in December was also made available to members. ADJOURNMENT The meeting adjourned at 9:18 A.M. The next meeting of the Energy Commission is scheduled for Thursday, March 5, 1998 at 7:15 A.M. in room 2404 of the Civic Center. Jo FarquhatVon S,Vcretary, Planning Division MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: ENERGY COMMISSION MEWTES Thursday, March 5,1998- 7:15 A.M. DOOLIN, GRUMMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, WARMINGTON HOFFMAN, PELSOCI MARINO, STEEN, GUTTMAN, FARQUHARSON TONY KELLY, THE CLARION SALINA KHAN, STUDENT AT MEDILL CALL TO ORDER The meeting was called to order at 7:17 A.M. CONSIDERATION OF MINUTES OF FEBRUARY 3, 1998 Mr. Grumman moved approval of the minutes, seconded by Mr. Doolin. There was discussion about statements made on aggregation, but no substantive changes were made to the minutes. The minutes were approved 7-0. Mr. Nesvig asked that the minutes be transcribed word for word and be reviewed by one or more members of the Commission prior to their being sent out in draft form. He felt that changes were being made by staff that were not on the tape. Mr. Grumman objected that this would be a waste of staff time. Gary Michaels agreed. Dennis Marino stated that the purpose for taking minutes for a board or commission is to provide summary statements and is not intended to be a transcript, nor is it intended to state everything that is said during the meeting. The Zoning Board of Appeals and Plan Commission, in a formal public hearing, are required by law to do transcripts. The standard minutes for boards, commissions and City Council is a summary. Gary Michaels noted that the time for making changes to the minutes is when the Commission considers approving them at their meetings. BUSINESS Status of Request for Technical Engineering Consultant A copy of the February 18, 1998 memorandum (request for consultant) which had been transmitted from Bud Nesvig to members of the Administration and Public Works Committee (A&PW) was provided in the packets. Mr. Nesvig expected that the request would be on the A&PW agenda this coming Monday, March 9, at 7.00 P.M. The memorandum also requests travel and living expenses compensation for EEC members who may travel to attend Illinois Commerce Commission (ICC) or Federal Energy Regulatory Commission (FERC) meetings. There was brief discussion about the likelihood of approval for the request for travel expense compensation. In response to a question, Dennis Marino stated that he was not familiar with a past request of this kind, but that on occasion persons serving on commissions received some reimbursement for training conferences. s PA"I 3I5I9$ Report From Michael Guttman, City Manager's Office Michael Guttman reported that he has recently become involved in Northwest Municipal Conference (NWMC) activities regarding their efforts in energy deregulation. He attended a meeting on February 25 and provided an update of that meeting to the EEC. He explained that the short-term issues facing Illinois municipalities deal with rate structure and reliability. He shared what the NWMC has been doing with respect to these issues, and their time line. The NWMC had issued an UP for a consultant to assist communities in converting the utility tax from a revenue -based fee to a usage -based, per kWh fee in accordance with the new deregulation taw. A Subcommittee of the NWMC has recommended the firm of Mayer, Brown and Platt (MB&P),which includes David Norefsky. They will be partnering with Energy Exchange, a utility tax consulting firm. MB&P has performed similar work for the City of Chicago, participated in writing the section of the deregulation law that set the rates for the utility tax and felt they could meet the tight time frame. In order to remain revenue neutral, municipalities must make the conversion in their utility tax structure by August 1, 1998, which is when the 15% rate reduction for residential customers is scheduled to go into effect. A non -mandatory option in the bill is the infrastructure maintenance fee (IMF), which is based on a ten -tiered usage system, and would be in Iieu of the "free electricity" received by municipalities. The IMF would provide an annual payment to the municipality. While the value of "free" electric service declines over time, the IMF payment would remain constant, so this option merits some thought. Mr. Kraft later clarified that the so-called "free electricity" is more appropriately termed rate -payer subsidized electricity. MB&P and Energy Exchange are proposing to do the utility tax conversion, a model ordinance for the IMF and all necessary filings with the ICC. The deregulation bill allows the ICC 90 days to make a decision, so the work of the consultants must be completed by the end of April. The consultants will work with the municipalities and ComEd to obtain the data necessary to complete this work. They estimate spending 3-4 hours per municipality to collect the needed data from ComEd, and are prepared to go before the ICC in order to obtain it if necessary. The Executive Board of the NWMC approved the consultants yesterday and the full membership is scheduled to do so on March 11, which is when the partnership will become effective. The DuPage Mayors and Managers (another group which is involved) will vote on the consultant on March 19. Regarding reliability, the City of Chicago and the NWMC have been taking the lead. They, the Illinois Municipal League (IML) and other councils of government (such as the West Central Municipal Conference) have hired an expert witness to testify before the ICC. He is Scott Norwood of GDS Associates of Austin, Texas. They have submitted proposed rules and are prepared to do direct and rebuttal testimony. There is a tight time frame as ICC rules will be published in .tune. The general areas the consultant will address are: a uniform reliability standard for all customer classes; reliability indicators easily understood by customers; a clear system of reliability standards to augment customer -based standards; provision of transmission and distribution (T&D) investment information in a format that facilitates trends and year-to-year comparisons; equally comprehensive criteria for evaluations of T&D providers' annual reports and for evaluations ofT&D providers' actual reliability performance; a clear requirement that the reliability information filed with the ICC be available to the public and clear mechanisms for enforcement of the reliability standards and of T&D providers' obligations. The Chair requested to see the resume of this firm once it is received by the Manager's office. Mr. Guttman explained that the consultant has asked the various conferences to collect data from their member municipalities. As Dan Miller suggested at the Evanston briefing session, the municipalities must work together as a group and must keep a reliability data base. The NWMC has issued a survey to member Energy Commission_ Minutes Pan 3 3= municipalities requesting outage data for 1997, what steps ComEd was to take to prevent future outages, whether ComEd took these steps and local news stories dealing with the outages. Evanston will forward the aggregate (outage) data for 1997 on which rebuttal testimony will be based. Mr. Guttman reported that, since the Energy Commission's February meeting, ComEd had been requested to appear before a special meeting of the A&PW to discuss outages. This meeting has now been scheduled for March 16,1998 at 7:00 P.M. Jerry Bowman of ComEd and a technical expert are expected to appear. ComEd has been preparing an outage report for 1997 and a response to the December outage in the downtown area which had been requested by Mr. Guttman. Copies of these reports will serve as the basis for discussion on the 16th and will be forwarded to EEC members in advance. The meeting will also include testimony from citizens. Gary Michaels asked how the EEC's request for an engineering consultant compares with the work GDS Associates will be doing. Bud Nesvig stated that he wanted a consultant that has technical expertise and will assist Evanston in coming up with the technical changes needed for reliability. Gary Michaels asked if the proposed scope of work for the engineering consultant should be understood to be specific to Evanston's equipment. Bud Nesvig stated that that is what was voted on. Regarding the work of GDS Associates, Del Leppke asked whether objective criteria will be established in addition to reporting criteria. Michael Guttman responded that ComEd's proposed rules only deal with reporting criteria, but the NWMC Subcommittee's recommendation is that the criteria must go beyond just reporting requirements. Del Leppke stated that the criteria established would relate to whether Evanston needs a technical consultant. He expected a technical consultant to set objective criteria for Evanston. Discussion ensued that the ICC will be setting the criteria; to influence the ICC to set it appropriately is why GDS Associates is being hired; and does Evanston want to go beyond that? David Kraft raised the subject of compensations or penalties for not meeting the criteria for reliability. He stressed that this should be addressed, both in the docket and in any upcoming negotiations Evanston has with ComEd. David Grumman referred to the time frame and asked whether a technical consultant could even be on board in time to influence the ICC. Del Leppke stated that if Evanston could have access to the consultant [GDS Associates] prior to the completion of their work, then our need for a consultant disappears. Michael Guttman clarified that proposed rules have already been submitted to the ICC and it is now time to defend those rules. He offered to distribute copies of the rules to members when he receives them. Mr. Guttman did not know how much interaction the Subcommittee will have with the consultant, but they will receive information at their monthly meetings. He also noted that the City of Evanston is paying approximately $200-$300 toward the $20,000 being paid GDS Associates. Responding to a question from Bud Nesvig, he agreed to find out what Evanston pays annually to the NWMC, which is based on population. Regarding the municipalities' joint effort, Mr. Kraft noted that the NWMC model franchise was a joint effort which hasn't gotten us anywhere, but instead diluted our control over our own destiny. An independent engineer could provide a reality check. Will this docket provide minimum or maximum standards for reliability? Referring to Mr. Nesvig's memorandum requesting that A&PW hire a technical consultant, Gary Michaels stated that aside from addressing penalties, GDS Associates is already doing the requested work: minimum performance criteria and national standards. Since someone is already dealing with the larger issues, he s PAge 4 3/= suggested that the scope of work be changed to concentrate on Evanston and not duplicate the services of the other consultant. Or, perhaps the technical consultant should review the work of GDS as it applies to the city of Evanston, and in that way build upon the work of GDS. David Grumman asked Mr. Guttman if the EEC is expected to take some action on this, and is the City going to go ahead with this regardless of what the EEC does? Michael Guttman responded that this is the first time he has had substantive information about what the NWMC was doing and he wanted to share it with the Commission. He had been concerned with duplication of efforts, since his interpretation of what the EEC is suggesting is the very thing the NWMC is already doing. Del Leppke stated that he was not aware of this consultant when the EEC passed the motion to recommend a technical consultant. Mr. Kraft saw the need for expert help to be on board whether it is a duplicate effort or not. Responding to questions from Bud Nesvig, Michael Guttman explained that he learned about these efforts of the NWMC when he attended their February 25 meeting. Regarding the proposed reliability rules, the City of Chicago initiated the process, and the NWMC got on board the effort about two weeks ago. The consultant's recommended proposed rules arc out and he is now prepared to go before the ICC to defend the rules and to rebut ComEd's rules. Gary Michaels again suggested that a consultant be used to review these issues with regard to Evanston. Del Leppke motioned that the scope of work for the technical consultant be revised to insert the word review instead of generate which relates to # l .a. of Bud Nesvig's February 18 memorandum request. The motion was seconded by David Kraft. Bud Nesvig asked Del Leppke and David Kraft to reword the request, which they agreed to do. There were no objections. The motion passed 7-0. David Kraft informed members that he had received a call from Mr. Bruce Bonebreak, Village Administrator of Frankfurt. Mr. Bonebrcak is very interested and informed on deregulation issues, and Mr. Kraft felt the Will County Municipal Conference would be interested in what Evanston is doing. Mr. Kraft provided contact information to staff regarding Mr. Bonebreak. Mr. Kraft requested a copy of the outline Michael Guttman was using. The Commission thanked Mr. Guttman for his presentation. Transmittal to City Council Regarding the NWMC Franchise Analysis Mr. Nesvig stated that the NWMC Franchise Analysis had been transmitted to the City Council. Update of A&PW Subcommittee Meeting Reports of February 9 & 23,1998 Reports had been received from Mr. Nesvig. The next meeting of A&PW is set for Monday, March 9, 1998 at 7:00 P.M. when the Commission's request for a consultant will be considered. Update of February 24,1998 Meeting with Patrick N. Giordano, Attorney Hired to Address Franchise Issues Delbert Leppke reported that he, Bud Nesvig and Stephanie Steen met with Mr. Giordano to discuss Task A of his work: to provide the City with a report that covers the legal and commercial consequences of terminating the authorization to extend the ordinance to the NWMC model franchise; must there be a legal document defining the relationship in place prior to March 4; what are the legal and commercial consequences Energy Commission Minutes PASe 5 3= if no document is forthcoming; and what effect does the new law have on the above questions. They had good agreement with the attorney on the scope of work. Mr. Kraft asked members to keep in mind that there are certain circumstances under which the Commission can convene into executive session. He believed two of those to be potential litigation and contract negotiations. Del Leppke did not think it necessary to convene into executive session at this time. He continued to report that the attorney's report is due March 10,1998, will be reviewed and a decision will then be made as to the next task. Mr. Giordano was very active in franchise negotiations with the City of Chicago and he has good background in negotiating and developing franchises, has done work on rate hikes under former States Attorney Richard Daley, and is currently working for the Sears Tower on their efforts to "municipalize." Report on Energy Briefing of Monday, February 10,1998 Featuring Dan Miller of the ICC Videos of the briefing had been made available to members. David Kraft recommended that the video be made available at ECMC for broadcast. Stephanie Steen thought that poor sound quality on parts of the tape might be the reason it has not been broadcast, but she offered to inquire about that. The question Bud Nesvig had in response to Dan Miller's comments was why had ComEd rates not been reviewed since 1993. Under the new bill ComEd rates will no longer be reviewed by the ICC. Since ComEd costs had decreased, rates should also have decreased. 1998 Agenda of the Energy Commission Mr. Nesvig distributed a revision entitled: 1998 Action Items. He explained that he had reworded each item according to decisions made at the February meeting of the EEC. Mr. Nesvig made a motion to accept the 1998 agenda, which was seconded by Mr. Grumman. Mr. Grumman suggested that Ordinance 105-0-93 be identified as the franchise ordinance. Referring to item 94, Mr. Grumman asked what was the purpose of citing the ordinance establishing the Energy Commission. Mr. Nesvig responded that one section of that ordinance deals with providing monetary assistance. Mr. Grumman did not think it necessary to cite this ordinance. Members agreed to the 1998 Agenda by consensus. Mr. Doolin left the meeting at this time. Profile of Evanston Electric System {Del Leppke} The Profile includes information on ComEd's service system; observations and a map based on Mr. Leppke's visit to the ComEd distribution map room, and Outage data for 1997 and other information on reliability; and ComEd rates for various user classes. Mr. Leppke had made arrangements to have access to the map room at ComEd. He learned that there are three subsystems within Evanston: the central area fed from the substation near the intersection of Emerson and Darrow; the southern area fed from a substation just north of the Metropolitan Sanitary District facilities in Lincolnwood at Oakton and McCormick; and the northwestern area fed by the substation at Church and Laramie in Skokie. There are 6-8 major feeds that cross the boundaries of Evanston, feeding both Evanston and surrounding communities. There are also 30 lesser distribution feeders that likewise cross the boundary. The distribution system therefore, does not recognize the City boundaries. If it were to be converted to a municipal system, considerable work would have to be done to define the boundaries, or commercial agreements would have to be made to sell and buy power to the areas across the boundaries. Energy Commission Minutes Pgge 6 31519g Mr. Leppke estimated the peak demand at 130 MW by noting the capacity of the transformers and using a 65% factor. Gary Michaels noted that if industrial (commercial) users comprise 2/3 of energy used in Evanston, ComEd should be able to determine what the demand is. Is average demand information for residential users available? Gary Michaels suggested that any information ComEd provides the consultant doing the reliability rules could also be useful to the EEC and perhaps could be obtained by Evanston. Mr. Marino will initiate a request for more up-to-date usage data. Business Partners Report Bud Nesvig will prepare a survey form, a request for interest (RFI), for distribution to various power suppliers. The deregulation bill and summary should also be included per Bud Nesvig. The RFI will be sent to five to ten suppliers from the list of 25 names Tom Pelsoci had provided. Valuation of Electric Distribution System Mr. Nesvig asked whether the EEC could make this request, since the City Manager has not acted upon the Commission's request. Dennis Marino suggested that Mr. Nesvig contact the City Manager concerning this. EEC members agreed by consensus that Mr. Nesvig should do so. Responding to a question from Dennis Marino, Mr. Nesvig clarified that the intent of this request is to get ComEd's version of what the valuation of the system is. Mr. Marino asked whether there was another way of obtaining this information, such as through ComEd filings with the ]CC, FERC, or NRC. He recalled that the Duncan & Allen report, done in 1991, gives three different valuation numbers using three different methods. Discussion ensued that the reason for making this request at this point in time is to get ComEd to give their number, to commit to a number. Mr. Kraft added that this is part of the necessary process before asking FERC for a ruling. Del Leppke reminded members that whatever records ComEd has will not be bounded by Evanston City boundaries. Mr. Kraft suggested qualifying the request by asking for what their reasonable estimate is of what is inside Evanston City boundaries. Stranded Costs, Exit Fees, Transition Costs Del Leppke had sent letters to Representatives Schoenberg and Schakowsky asking them to try to get an amendment to the deregulation bill that would allow municipalities whose franchises are about to expire to not be subject to transition charges. Representative Schoenberg did respond, and his letter explained that those who change electric suppliers prior to the last date for recovering stranded costs must pay a transition fee. This is true for municipalities who change suppliers upon the expiration of a franchise agreement or entities that enter into a contract with a new supplier upon the expiration of their existing contract. While the utility need not demonstrate that it had any reasonable expectation of continuing to supply electricity under these circumstances, this was one of many compromises made during the course of negotiation that was necessary to bring the bill to a vote. The letter will be made available to Mr. Giordano and EEC staff. Energy Commission Annual Report Bud Nesvig proposed using the Energy Commission's minutes of the Aldermanic briefing as the annual report. David Kraft so moved, seconded by Roy Warmington. The motion carried 6-0. s Pqge 7 3/5/9& Reliability Subcommittee Roy Warmington recalled that David Grumman had offered to review the goals of the Subcommittee and revise them in light of recent legislation. David Grumman stated that, at the appropriate time, input on reliability could be given to the ICC. He will review the goals of the Subcommittee. There was discussion about analyzing the ComEd outage reports also. Education and Public Relations Efforts David Kraft distributed a public education proposal in the forth of a written motion for a small budget and scope of activity. The motion read: Whereas, the City Council in its authorizing Ordinance has instructed the EEC to create and run a public education campaign in the Evanston community regarding the community's upcoming energy decisions, be it moved that the EEC recommends to the Evanston City Council the following: 1. that the Council allocate the sum of $5,000 for the use of creating articles and ads beginning May 1998, ending December 1998, in the Evanston Round Table, Beacon and Clarion, for the purpose of educating the public on the nature of energy decisions before the community; 2. that the Council authorizes insertion of regular update sheets and brochures to be included in all Arts & Recreation mailers distributed between May 1998 and March 1999; 3. that the Council authorizes insertion of informational brochures regarding the community's upcoming energy decisions in all City mailings going to Evanston's commercial, service and industrial electricity customers, between May 1998 and March 1999; and 4. that the Council grants permission for the Energy Commission to utilize Evanston cable access TV as a means of creating shows regarding the community's upcoming energy decisions, to be done between April 1998 and March 1999. Mr. Kraft explained that he had calculated the $5,000 cost of advertising by the frequency of publication of the papers using half and full-size pages. He did not recommend using the Evanston Review primarily due to its high advertising cost. The focus will be the negotiation process, any updates on the work of the EEC regarding stranded costs, or other options Evanston may have. Gary Michaels seconded the motion. Discussion ensued. David Grumman noted that the key component, what was going to be said, was not addressed in the motion, and the Council will ask about that. David Kraft responded that the EEC would need to develop this, explaining first what the issues are and what has been done, then the City will be into the negotiating period. Public meetings to gather public comment should occur during summer and fall, and could be sponsored by the EEC or any community group in Evanston. Ads would include public meeting announcements and questionnaires for the public. If ad space is purchased in bulk, it is less costly, guarantees a presence and control of content. David Grumman stated that this motion does provide a framework for a public relations campaign although the mechanism of how these pieces get written and what will be written about needs to be determined. David Kraft offered to flesh out topics and a time -line. The use of press releases was discussed. The point was made that the paper will take what they want from a press release and fit what they can in the space available. An ad guarantees that the information will be printed as written. Gary Michaels asked that press releases and the Evanston Review be added to the list. Mr. Grumman stated that there are significant issues that should be mentioned such as the expiration of the franchise, the rate decrease due in August and the [CC establishing reliability rules. Is there a public relations expert on staff at the City? Dennis Marino stated that there are individuals on staff who have experience in writing display ads and press releases. David Kraft also volunteered to write press releases. Tony Kelly Energy Commission Minutes AAge 8 3/519g volunteered to assist Mr. Kraft in writing ads and press releases. Mr. Kelly informed the EEC that,. aside from the Clarion, which was in limbo, there are now three independent newspapers in Evanston outside of the Evanston Review. These are: the Round Table edited by Mary Gavin; the Beacon edited by Sydney Zwick; and the Evanston Chronicle edited by Dan Zeal. Roy Warmington suggested that Item 01 of David Kraft's motion should include "all other Evanston media." The Chair called the vote and the motion carried 6-0. Energy Policy The Chair stated that implementation of the Energy Policy is at a standstill. Evanston GIS System Demonstration - Interests of Energy Commission Bud Nesvig asked that a presentation much like what was made to the City Council be given to the EEC. Dennis Marino was asked to try to arrange this for the next meeting of the Commission. Responding to a question, Mr. Marino explained that the Geographic Information System (GIS) involves mapping of data through computer grid maps. Currently the GIS staff are inputting the Water Department infrastructure. Energy Commission Membership The Chair stated that this was a reminder that the EEC needs more members. COMMUNICATIONS Gary Michaels thanked City staff for putting together the past correspondence between the City and ComEd which had been forwarded to members recently. Responding to a question, Stephanie Steen stated that she had forwarded the most relevant information in the correspondence to Mr. Giordano. Gary Michaels pointed out an interesting ComEd response to a March 10, 1992, City of Evanston data request for peak demand load forecast. Com Ed stated that no plant retirements are currently forecasted within the 20-year planning horizon. Mr. Michaels noted that within the last five years, ComEd has lost four plants. He cautioned members about ComEd's forecasts and predictions. Bud Nesvig stated that there is correspondence missing from the package received. Stephanie Steen indicated that all the ComEd correspondence in the Planning Division's files had been supplied. Dennis Marino stated that he had understood the Chair's request for this correspondence was to inform. members of the flavor and tone of the interaction between ComEd and the City. This has been provided. Bud Nesvig asked staff to check files other than the Planning Division's files to fill in any gaps in the correspondence, because he wants to see all correspondence between ComEd and the City. Several additional articles were distributed at the meeting. ADJOURNMENT The meeting adjourned at 9:20 A.M. The next meeting of the Energy Commission is scheduled for Friday, April 3, 1998 at 7:15 A.M. in Room 2404 of the Civic Center. !o Farquhar n Pl nning Division MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: ENERGY COMMISSION MINUUS Friday, April 3, 1998- 7:15 A.M. DOOLIN, GRUMMAN, HOFFMAN, KR.AFT, MICHAELS, NESVIG, PELSOCI, WARMINGTON LEPPKE STEEN, FARQUHARSON ALDERMAN BERNSTEIN, ALDERMAN FELDMAN ATTORNEY PATRICK GIORDANO CALL TO ORDER The meeting was called to order at 7:25 A.M. BUSINESS Legal Analysis of Operating Without a Franchise The Chair made a change in the Agenda and introduced Mr. Patrick Giordano, the attorney hired to address franchise issues. Mr. Giordano had completed his first work assignment for the City which was to provide legal and commercial consequences of the City of Evanston providing notice to ComEd terminating Franchise Ordinance 105-0-93 on March 4, 1999. Mr. Giordano stated that he had also been asked to comment on what effect the new deregulation legislation, if any, has on these issues. His work was distributed to members and Mr. Giordano presented his findings to the Commission. Mr. Giordano noted that the termination of Franchise Ordinance 105-0-93 (extension of original electric service franchise) would in fact terminate the underlying ordinance so that there would be no electric service franchise. Three key issues would arise if the termination is given: 1) What would ComEd's obligation to serve be; 2) What is Evanston's ability and legal authority to collect utility taxes; and 3) What is Evanston's authority to collect fees for the use of the public right-of-way. Q11]jeation to Serve: Mr. Giordano stated that in 1992, when the City operated for a time without a franchise, ComEd took the position that this did not affect their obligation to provide service to all Evanston consumers. Mr. Giordano agreed with that position and reported that under the Public Utilities Act (PUA), ComEd has an obligation to serve consumers upon request, independent of any franchise from a particular municipality. Cam Ed also has a certificate of convenience and necessity to serve Evanston. The new deregulation law could be viewed as an addition to the PUA and continues to obligate ComEd to deliver electricity from itself and multiple suppliers. Under the new law, when the ICC determines that a service has become competitive (reasonable substitute service available) then ComEd's obligation to produce power can be eliminated. The delivery of power will remain a monopoly service and ComEd will be obligated to deliver the power of your choice. Alderman Feldman asked what would happen in the event that another company provided generation service for the City, and that service became unsatisfactory in some way: is there an obligation for ComEd to provide generation in an interim period, or are we vulnerable to gaps? Mr. Giordano had not looked at that specific s P=2 al&$ question. Regarding obligation to provide back-up service, Mr. Giordano stated that when a consumer selects another generator of power, the law states that ComEd may provide stand-by service, but there was not a requirement to do so. He expected that ICC rules will be forthcoming and it is likely that stand-by power will be provided. Mr. Pelsoci added that in this marketplace someone has to make the business arrangement to provide power in those situations, but there is no question that power is available. Mr. Giordano stated that there will probably be an aggregator that will aggregate numerous residential customers. Evanston could conceivably sign up with an alternative aggregator that residents and businesses could voluntarily sign up with, or Evanston could preserve the option to make other choices. Mr. Giordano clarified that the [CC reliability rules focus on transmission and distribution. With respect to reliability of generation of power, there is a 15% reserve margin that must be maintained and historically, in the natural gas industry, there have been high penalties assessed if the supplier does not provide the gas. Mr. Grumman added that there is a provision that the local supplier will supply the natural gas in the event that the chosen supplier does not. Mr. Giordano stated that in the competitive market, he was confident that standby power will be provided by someone, it's just a question of price. It could be a function of the franchise, but ComEd may not want to provide stand-by if you choose a different supplier. Janet Hoffman added that there will likely be FERC reliability rules to govern generation that comes from another state. Mr. Giordano added that the Independent System Operator (ISO) will be running that transmission system and moving the power from the generators. Muoicil2al Utilily Taxes: Mr. Giordano stated that the authority to impose a tax is independent of a franchise. The deregulation law changes the way the tax is calculated (on a per kWh basis rather than on cost of service). The tax is collected by the deliverer of power. Evanston may want to analyze whether the new municipal utility scheme is truly revenue neutral for Evanston. jp&astructure Maintenance Fee: In the past, a franchise fee or "free" electricity was provided to municipalities. The new law provides that an infrastucture maintenance fee (IMF) can be imposed on the public utility. As long as a franchise was in effect at the time the law was passed, in December 1997, a continuing franchise agreement is not required in order to impose an IMF. The law does not cap the amount that municipalities under 500,000 can impose, and the IMF is collected by the distributor/deliverer of power. Gary Michaels stated that the description of these fees are that they are imposed on the utility or distribution company, when in fact the fees are imposed on the ratepayers and are just passing through the utility. Mr. Giordano agreed and referred to this in the footnote on page 7 of his report. If the City raises the fees, the increase will be imposed on the customers. Gary Michaels added that, at the present time, the City receives the benefits of this system in the form of what is called "free" electricity for some of their municipal buildings. Would a franchise not be necessary in order for the municipality to continue to receive this benefit, and for ComEd to continue to do the administrative work? Mr. Giordano responded yes. Mr. Grumman wanted it to be clear that the IMF is not a burden on ComEd, since it is passed through to the customers. Mr. Giordano added that this is a policy call for the City of Evanston. Stephanie Steen stated that it was her understanding that the difference between franchise fees and the IMF is that, whereas the City receives rate -payer subsidized electricity now, with the IMF the City will be receiving the revenue, not the "free" electricity. Mr. Giordano thought that the City might be able to impose a fee for "free" electricity, but that might be challenged. The safer route would be to impose a specific fee. Ms. Steen added that, assuming electric rates will decrease, it is probably in the City's interests to get the revenue rather than the electricity which will decrease in value. PAge 3 4/3LM Mr. Giordano offered to recheck the law to determine whether the IMF could be used as a franchise negotiating instrument with ComEd and not be collected from consumers at all, since it was his understanding that the utility is not required to pass the IMF on to the consumers. He doubted, however, that the utility would do this in the absence of a franchise agreement. What need for a Franchise then?: Alderman Feldman asked whether the whole concept of a franchise is now an anachronism. Mr. Giordano confirmed that the law does not require a municipality to have a franchise, but he stated that the franchise is still extremely relevant for distribution of power. The franchise can require the utility to make certain expenditures on the transmission and distribution systems and reliability issues can be addressed. Mr. Grumman noted that the distributors of power will remain subject to [CC review and presumably recovery of the IMF. Whether there is an agreement whereby the utility does not recover the IMF, this could be buried in their costs somewhere. Mr. Giordano maintained that an agreement could specifically state that the utility could not reflect those costs in rate -making and that recovery of the cost could be avoided by customers in Evanston. Mr. Pelsoci added that, with regard to the transmission and distribution side of ComEd, legitimate costs will be passed on to the rate -payer because the [CC guarantees this. Mr. Kraft asked whether a municipality could structure their fees or taxes in such a way that the first block of power could be assessed the least and it would not be regressive to the lower income community and whether certain customer classes in town could be assessed differently. Mr. Giordano stated that the municipality would have that flexibility. Mr. Giordano pointed out that even though there are two sides of the business (generation and delivery) they are both part of the same entity. During franchise negotiations, ComEd will take into account Evanston's actions with respect to distribution as well as generation. For example, if Evanston made a commitment not to aggregate, perhaps ComEd might consider not passing on its IMF to Evanston customers. What can be included in a franchise is rather broad and it is all a matter of negotiation. This will be the first franchise negotiated since the new law went into effect and will be a significant opportunity. Mr. Giordano was asked to elaborate on the purpose of a franchise. He responded that, in the past, the primary purpose of franchises has been to assure governmental revenues. Since those governmental revenues can be assured without a franchise, the purpose is now to assure proper reliability. Mr. Pelsoci asked how the absence of franchise could undermine reliability. Mr. Giordano responded that it wouldn't necessarily do so, but if you had a franchise, additional reliability standards could be put in. For example, if the City of Evanston is experiencing problems with distribution in a particular area, you could specifically have a commitment that a certain amount is going to be spent each year on this area, or indicate other specific improvements. Mr. Pelsoci asked though, that if all the benefits of a franchise Are for the City, why would ComEd have incentive to negotiate along those lines? Mr. Giordano stated that the utility especially seeks a long-term agreement and that there is always the threat of municipal takeover of the distribution system. Depending on how the franchise is written, it can prevent that threat, however, Evanston's franchise is silent on that issue. Alderman Feldman stated that another company might want to take over the actual distribution and ComEd may be concerned with that. He added that this community is very cynical about being able to maintain or enforce agreements with ComEd since their commitments have never been satisfactorily resolved. To be able to rely on a contractual relationship with ComEd has never materialized, and the community has no reason to believe it will ever materialize. Mr. Giordano felt that ComEd would have to improve its image in order to compete in generation, and the threat of losing customers on the generation side of the company may force ComEd to respond to customers on the distribution side of the company. Energy Commission Minutes Page 4 V3/9A Will ComEd feel that they continue to have an obligation to serve Evanston without a franchise under the new law? Mr. Giordano stated that we do not know because it is complicated legislation, and he was not asked to check with ComEd as to their interpretation of the law. The portions of the law that he has examined on the franchise issue do not appear to be subject to wide interpretation, and Mr. Giordano did not think ComEd will challenge that they have an obligation to serve, or that they must pay the IMF. Discussion ensued about whether the City could expect litigation to ensue without a franchise. Alderman Feldman deemed litigation as tolerable only if something will be dramatically improved at the end of it. Mr. Giordano felt that ComEd would want a long-term franchise to prevent eminent domain takeover. It was noted, however, that the franchise does not specifically prohibit the City from taking over the distribution system. Gary Michaels noted that the perception is that a franchise brings something to both sides, so why would ComEd want a franchise? Mr. Giordano stated that the franchise preserves the status quo, and although it is very different under the new law, it is his opinion that utilities would continue to want franchise agreements. Ray Doolin did not think ComEd cares whether they have a franchise or not since they have all their equipment in Evanston and would continue to repair theinsystem. Certain questions arose during discussion. Would the lack of a franchise cause ComEd to respond slower in emergencies? Mr. Giordano stated that legally they couldn't do that, but it was another matter politically or practically. Mr. Kraft referred to the regulating of the public right-of-way. If the franchise were terminated, how would this affect what streets get torn up when and what kinds of tree trimming can be done? Would ComEd invoke a higher authority such as public safety issues or (CC rules and overrule the City statutes or ordinances? A franchise establishes rules as to how the City and ComEd interact and hassles of coordination of work throughout the City would ensue without one. Returning to the subject of municipalization, Alderman Feldman pointed out that the franchise did not exclude the option to municipalize which was based on eminent domain. While that may be a threat to the utility, the City's municipalization benefits seem somehow to have disappeared. In the regulatory environment, the prospect of rebuilding the infrastructure and other benefits from municipalization revenues and taking control of our own destiny has become elusive. Tom Pelsoci stated that the context for obtaining a legal opinion regarding the franchise was to assist in evaluating municipalization. Mr. Kraft stated that additional reasons were to then pursue ComEd and FERC evaluations, which could then add to the argument that Evanston should be exempted from stranded costs. Bud Nesvig added that, in his view, the City would be in a better position to negotiate with ComEd if it did not have a franchise, and it could still pursue whether it is feasible to have an alternate system or power supplier. Mr. Giordano stated that his legal opinion responded to the City's concern that the NWMC franchise will automatically go into effect unless the City opts out. His analysis has given the City information to enable it to make a decision with regard to that franchise. Mr. Giordano stated that he thought that the City can opt out and still have its revenues and its service from ComEd, which gives it more flexibility. He would not recommend going without a franchise indefinitely, however. Mr. Kraft suggested that the meaning of municipalization be discussed in the new context and resolve whether you want to stay with ComEd. Alderman Feldman stated that he has lost faith in any business association with ComEd. He clarified that when he talks about a reduction in the so-called benefits of municipalization, he does not rule out the aspect of another company providing distribution of power. Distribution of power is still regulated and the City can contract with a distributer of power if they are willing to do that. He stated that the Engrev Commission Mi11U s Page 5 4/JM EEC needs to examine whether there is enough motivation and benefit for a company to invest in infrastructure and provide an alternative distribution system. If a path can be defined that is viable, reasonable, economical and dependable for the citizens, that would be a reasonable choice. At the meeting where ComEd was "called on the carpet," there was no one there from the public. The outrage that is exhibited on the night of the outage fades very rapidly. It is therefore incumbent on us to find a better system. When a business doesn't do a good job, you lose faith in their work, their performance and as a result look someplace else. Find this community an option. What we need is a big gorilla, equivalent to ComEd in capital, expertise, technique and power to mount an offense. Gary Michaels asked Mr. Giordano's opinion as to what the next step should be. Mr. Giordano stated that it is critical to determine whether the NWMC franchise is what you want, and if not, determine what franchise agreement you desire. He saw no benefit to canceling the franchise earlier than the last available day. He suggested that the City prepare for upcoming negotiations: set your strategy and consider alternatives now. To address the concern that certain customers may not be well served by ComEd, the City may want to have a preferred generation provider that consumers could sign up with. Focus on where you want to go and try to crystallize most things by September. Mr. Grumman referred to the difficulty in enforcing contractual provisions with ComEd. Having just reviewed the reliability testimony that is being prepared in connection with the NWMC efforts before the ICC, he concluded that what is being proposed on that level would be very beneficial. In his opinion, since the ICC is more able to enforce these rules, it would be a much better place than a franchise in which to put reliability requirements. Alderman Feldman summarized the main concerns: 1) We need to settle the question of controlling our streets and establishing performance requirements; 2) If the community wants to disassociate itself from ComEd, yet ComEd offers power at the same price as its competitors, how do we justify any move away from ComEd? In generation of electricity, price is everything. We must resolve what the benefits are to choosing another supplier. The debate within the community will be: If we can operate without a franchise, why would we want to do it now, or announce it now? Those reasons need to be established as well as what benefits will occur as a result of that; 3) Examine whether there are any benefits at all to signing a franchise with ComEd or with any company, short of the goals of reliability and conservation. The benefits would have to be commensurate with signing on to a long-term obligation. In addition, the question needs to be answered whether there is enough profit in distribution for a company to come in and spend a lot of money in negotiation, leasing, buying or building. Mr. Michaels stated that AIderman Feldman's comments have described a scope of work. Mr. Doolin mentioned that in his mind any new distributor would negotiate with ComEd on using and repairing their equipment. All Evanston should be concerned with is their relationship with the new distributor. Alderman Feldman stated that the questions are before us and if this body doesn't resolve it, it won't be dealt with. There may be a path, and he asked the EEC to find us a way that we can get what we want in the new environment. If the community is given a viable option to ComEd that they can understand and depend on, a company that is bigger, better, and more responsible to customers, it will happen. He referred to the recent meeting held with ComEd about reliability and stated that ComEd disclaimed responsibility for everything. They professed to have perfect accountability, perfect responsibility and that anything that happens to the system is beyond, not only their control, but any human being's control. That is not the way you relate to a community. Mr. Nesvig stated that ComEd sent some public relations people to the meeting who had no technical expertise. Alderman Feldman stated that if ComEd was really concerned, they should have sent the Vice President or R Page 6 4/M President of the Company to respond to this community's serious concerns. Janet Hoffman stated that if you don't cancel the franchise, you will not get their attention. Pat Giordano stated that the second step of the leverage is notification that you are going to exercise your option of eminent domain. Mr. Giordano was asked to advise the City how much his fees are to date so it may be determined what further work projects can be assigned. RFP for Technical Consultant to Analyze Electric Distribution System Reliability The Request for Proposals (RFP) was distributed to members as well as a list of recipients. Stephanie Steen reported that an advertisement had been placed in the Chicago Tribune and the Evanston Review. The RFP had been sent to 11 firms and responses are due back at noon on April 23rd. Responses are to be reviewed by two members of the EEC, two representatives from the City Manager's Office and the City Attorney. Alderman Feldman stated that a vital part of the RFP was the supplemental proposal that a technical inspection and evaluation of the distribution system be conducted. He questioned why this was not made a part of the original proposal. Janet Hoffman stated that she thought this was because the cost of that is likely to be substantial. Alderman Feldman hoped that the technical consultant would actually go to ComEd and took at the technical information they have. Bud Nesvig responded that viewing ComEd information and possible vault inspection are dependent on cooperation from ComEd. Alderman Feldman, as one of the principal negotiators, referred to an agreement that ComEd made during the negotiation period that would allow persons to go into their vaults and look at specifications. He recalled that that was agreed to by either the Vice President or President of ComEd. Stephanie Steen agreed to look for this agreement as well as any minutes kept during the negotiation period. COMMUNICATIONS Stephanie Steen reported that at the last meeting of the A&PW, the City Attorney was asked to clarify certain language of Ordinance 105-0-93 as to when the franchise termination notice would have to be given. A memorandum from Herbert Hill was distributed. Ms. Steen also distributed a public relations proposal that the City Manager's Office had developed. Additional articles and news clippings were distributed to members. OTHER BUSINESS Bud Nesvig called for an additional meeting of the EEC to be held on Friday, April 24th, 1998 at 7:15 a.m. Janet Hoffman informed members that the Summer Associates at her law firm will begin arriving in mid -May, and she asked members to keep this in mind and talk to her about possible projects they could do for the EEC. ADJOURNMENT Meeting adjourned at 9:23 a.m. The next meeting of the Energy Commission will be held Friday, April 24, 1998 at 7:15 a.m. in room 2404. J Farquhars , Planning Division MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: SUMMARY OF ACTION: APPROVED ENERGY COMMISSION MINUTES Friday, April 24, 1998- 7:15 a.m. DOOLIN, GRUMMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, WARMINGTON HOFFMAN, PELSOCI MARINO, STEEN, FARQUHARSON ROGER CRUM, CITY MANAGER TONY KELLY, CLARION DICK SCHOEN CALL TO ORDER The meeting was called to order at 7:I7 a.m. The Chair recognized two guests present near the beginning of the meeting. These were Roger Crum, City Manager and Dick Schoen, an independent consultant who works with utilities on new product development. CONSIDERATION OF MINUTES OF MARCH 5 AND APRIL 3, 1998 Gary Michaels motioned, Ray DooIin seconded, approval of the March 5 minutes. Minor changes were made in two areas. Mr. Nesvig's comments on the Energy Policy were reworded to say that implementation of the Energy Policy is at a standstill. Mr. Marino's comments were edited to say that more up-to-date usage data will be requested from ComEd. Mr. Kraft edited his comments under education and public relations efforts to include the point that purchasing ad space guarantees control of the content. The motion carried 7-0. Gary Michaels motioned, Ray Doolin seconded, approval of the April 3 minutes. Referring to ICC review of distributors of power, Mr. Grumman clarified that the ]CC would not have review "of their rates", so that phrase was deleted. Concerning the meeting with ComEd, the words were inserted that there was no one there "from the public." Mr. Kraft's comments about fee structure were discussed and the words "customer classes" were used to replace the word "blocks" in the sentence about whether a municipality could assess certain "customer classes" differently. The motion carried 6-0-1 abstention, Mr. Leppke. BUSINESS Update of NorthWest Municipal Conference (NWMC) Activities Stephanie Steen spoke with a representative at the NWMC concerning the electric tax conversion issue. That work is nearing completion and will be on the Evanston City Council Agenda May l lth. Mr. Nesvig asked what the City pays annually to the NWMC. Ms. Steen stated that it is approximately $18,000 per year. This covers membership in the NWMC and its subcommittees, lobbying efforts, participation in a wide range of issues such as: solving mutual problems in the areas of sanitation, landfill, economic development and police for example. There is also the benefit of joint bidding for municipal vehicles. Ms. Steen reported that testimony before the [CC concerning reliability rules will continue through early May. Discussion concerning this testimony ensued. Staff will obtain whatever additional information becomes available with respect to this testimony. r9 Paul 4/ 4/98 Mr. Nesvig asked what Mr. Suffredin is paid annually. Stephanie Steen stated that Mr. Suffredin is on retainer, but she offered to provide that information to Mr. Nesvig. Local TV Presentation of February 10, 1998 Meeting With Dan Miller, ICC David Kraft had checked with ECMC regarding the legal protocols involved in rebroadcasting this presentation on channel 3. He reported that consent forms would be needed in order to do so, either from the City who produced the program or from Dan Miller himself: Dennis Marino stated that Max Rubin would be the City Staff person responsible for giving releases, and he offered to seek clarification on the protocol for rebroadcast on channel 3. As to rebroadcast on the City's cable channel, members need only to contact Stephanie Steen to request this. Mr. Kraft added that NWMC members not at the February I Oth meeting could benefit by receiving a copy of the program. Roger Crum Comments Roger Crum, City Manager, stated that he was in attendance to learn from the Commission. He emphasized that the City is at a point where it must decide what to concentrate on in the near future. Should it be franchise renewal or an alternate, a legal challenge to stranded cost, or reliability concerns in a franchise? He expressed concern regarding trying to do too many things with limited resources. He would like to see greater reliability, examine potential aggregation for residential customers and how the City government can save electricity by shopping around when that option becomes available. Concerning ownership of the distribution system, Mr. Crum stated that he is less optimistic that an alternative to ComEd will be found. lie stated that he keeps up-to- date on the Commission's minutes and receives updates from Stephanie Steen. He is in contact with other City Managers around the country and keeps informed by the utility consortium, nationally, which is part of the City Manager's Association. Unlike most states, the State of Illinois has a utility deregulation law on the books. That law states that transition costs will end in 8.10 years, it gives City government flexibility on aggregation, but is not as strong on residential aggregation as he would have liked. Obviously a franchise which provides "free electricity" to the City is not the way to go anymore. Money in lieu of "free electricity" is the way to go. He is aware of discussions that have occurred regarding where this money comes from, and he knows ComEd is going to pay for it out of the rate base somehow. Evanston, being primarily residential, does not have the leverage that would be attractive in the industry. Mr. Crum stated that he is somewhat skeptical that an alternate power provider is going to want to serve Evanston, but he is not closed to the idea. He wants to keep a realistic approach and move things forward. Mr. Dick Schoen, an independent consultant who has worked with utilities in the area of new product development, introduced himself. He believed that all these issues were doable from the City's standpoint. Surrounding communities have had reliability problems similar to Evanston's. He felt that companies would be interested in coming in, perhaps their plan would involve putting a power plant in somewhere, but not necessarily in Evanston and he cited the current example of Duke Energy in Northern Florida. Mr. Grumman raised the subject of City Council approval of any plan. You need to distinguish what is possible from what is likely to happen, and concentrate on what is likely to happen. David Kraft explained to Mr. Schoen that this subject was raised six months ago and the EEC is trying to pursue that option. Mr. Doolin asked Mr. Crum if he had considered talking with some of the more industrial -based neighboring communities, to see if you can work out something with them? Mr. Crum noted that, in the current environment, industry can negotiate its own rate, and those communities are not very excited about doing something totally new. He added that there are no other municipalities in our northwest municipal region who are working on a franchise. There are a couple of communities elsewhere in Illinois who either do not have a franchise or are looking at a franchise. Mr. Crum recently hosted a statewide City Managers Association conference on energy Energy Commission Minutes pqu 3 4124L issues. He reported that Evanston's interest is higher than most communities' in terms of looking at alternatives. Mr. Grumman noted that what Mr. Crum is suggesting coincides with Items #1 and #7 from the EEC's listing of 1998 Action Items. Draft Memorandum to City Council to Accompany EEC 1997 Annual Report David Grumman submitted some wording changes to the cover memorandum. He moved that the cover memorandum be modified, seconded by Del Leppke. Motion carried unanimously. Staff will transmit the memorandum and EEC 1997 Annual Report to City Council. Status of Search for Consultant to Provide Analysis of Evanston Distribution System Ms. Steen reported that five consultants responded (PSE, R.W. Beck, Energy and Resource Consulting Group, SFT and Stanley Consultants) and a team will be assembled to analyze them. Mr. Leppke and Mr. Grumman volunteered to be part of that team. They will meet next week to review the proposals. The team will bring its recommendation back to the next EEC meeting, then on to City Council the first meeting in May. Reliability - Review of City of Chicago, NWMC and Others' Proposals to ICC on Reliability - David Grumman Mr. Grumman reported that the Reliability Subcommittee had met April 2, 1998 to review the testimony before the ICC from Mr. Norwood, Mr. Walter and others on electric service reliability. Mr. Norwood and Mr. Walter testified on behalf of Joint Petitioners which include the City of Chicago, CUB, Cook County State's Attorney, Illinois Attorney General, NWMC and other municipal leagues and associations. He gave a report and written summary. The new Illinois deregulation law requires the [CC to adopt reliability rules for Jurisdictional Entities, which include electric utilities, alternative retail electric suppliers or Independent Systems Operators by July 1998. Mr. Grumman reported that Mr. Norwood advocates that reliability rules should include a broader concept of reliability, that the ICC should take a more active oversight role and that constituents not be harmed by the rules. lie also proposes that strict reliability standards be included, as well as clear and effective enforcement procedures. Reliability is more than statistical data and the simple absence or occurrence of outages. Of equal importance are risks of future outages as indicated by age, condition, design and performance of the transmission and distribution (T&D) systems, also by investment in maintenance, repair, replacement and upgrade of facilities and equipment. Mr. Norwood advocates enforcement, because without it, utilities would have no incentive to make the effort or investment to meet the new rules. Mr. Norwood also wants a review process that minimizes cost and hassle for consumer complaints. Assessment of reliability should include both quantitative and qualitative aspects. Mr. Norwood proposes that reliability be measured differently. Currently there is no uniform, industry -wide definition and it is not possible to benchmark one utility against another. Mr. Norwood proposes using a Continuous Service Reliability Index (CSRI) which would be a recalculation of the existing three indices expressed on a scale of 1-100. Regarding qualitative factors, additional information should be obtained such as: time, date, cause, duration, number of customers affected and location (including circuit) of outage. The qualitative factors should be forward -looking and include age, condition and historical performance of existing T&D facilities as well as historical and planned expenditures of openrtions and maintenance and for capital additions and improvements. Mr. Blake (hired consultant) and Mr. Millard (ComEd employee) represented ComEd. Mr. Blake proposes that a customer should have a level of choice of reliability, and pay for that reliability. Illinois Power's testimony s Page 4 41Z$ seemed to be more in line with the testimony from Mr. Norwood and Mr. Walter. At the Reliability Subcommittee meeting, the original work plan of the EEC was reviewed. They observed that it is very dated, and many items either have been or are being done, or have become moot as a result of the consultant not being hired (an early recommendation of the EEC). Mr. Grumman stated that, personally, what is being proposed with respect to reliability is very good. He had discussed the rules with Janet Hoffman, who had not been able to attend the Subcommittee's meeting, and she had mentioned that, although it is fine to put reliability rules in a franchise, if the ICC adopts and enforces reliability rules, the rules arc more likely to be implemented than anything the City of Evanston could negotiate into a franchise. Since reliability involves also the quality of power, David Kraft asked if this was addressed in the testimony. Voltage fluctuation is not an actual loss of power but can cause computers and chillers to go off-line. Mr. Grumman responded that quality of power was mentioned in Mr. Norwood's testimony; and his definition of reliability does not include fluctuations that would cause a computer to go off line. He suspects that Mr. Walter's testimony might address that further. Mr. Kraft wondered whether the deadline has passed for the City's consultant to weigh in on that. Tony Kelly stated that if obvious penalties (such as monetary or free electricity) accompanied an outage of a certain duration, the details for correcting reliability would be taken care of due to economic necessity. Mr. Grumman responded that what is being proposed is that when customers experience interruption of service more than three times per calendar year (down from six), it shall be considered excessive and indicative of unreliable service. More than nine hours (down from 18) of total duration of outage shall be considered excessive and indicative of unreliable service. These proposed standards would also apply to distribution circuits serving 10 or more customers. Del Leppke was glad to see specific criteria for circuit reliability. Mr. Leppke had received 1997 outage data and information on the location of Evanston's 36 circuits from Com Ed. Using this information, Mr. Lcppkc had identified how many outages each circuit had experienced in 1997. One circuit had I I interruptions Iast year (C4713 bounded by Greenleaf, Dodge, Lyons and Lake Michigan), which includes downtown Evanston. Three circuits had eight interruptions; two circuits had seven interruptions; two circuits had six interruptions; four circuits had four interruptions; and five circuits had three interruptions. Using three interruptions per year as a standard; of Evanston's 36 circuits, only 20 comply; 16 did not comply. This information gave rise to questions such as how to develop reliability criteria that imposes some economic consequences, or how to deal with ComEd in the case of each of these circuits, to determine what the problems are so we can start figuring out how to appropriately address these problems. Mr. Leppke will make this information available to all members. Mr. Grumman asked if there is anything the EEC can do that would be effective in encouraging the adoption of these reliability rules by the ICC? Ray Doolin suggested that the ICC should inspect all circuits in Evanston experiencing more than 3 outages per year. Mr. Grumman responded that Mr. Walter recommended rive enforcement mechanisms, one of which is investigations conducted at the expense of the violator. Mr. Walter also recommends specific automatic fines and penalties. Del Leppke moved that the EEC endorse the proposed rules of Mr. Norwood and Mr. Walter, seconded by Mr. Grumman. Gary Michaels clarified that the motion was actually that the EEC recommend that the City Council endorse the proposed rules by the Joint petitioners as represented by Mr. Norwood and Mr. Walter, and that a letter be sent to the ICC. Motion carried 7-0. Energy Commission Minutes Page 5 4/24/98 David Kraft expressed concern that the proposed qualitative standards did not address voltage fluctuations. Gary Michaels added that there are methods of determining power quality that are used everyday in the field. David Grumman added that in a section of the proposed rules, there is reference to a report that deals with voltage variances. David Grumman suggested that a letter be sent to the [CC along with Del Leppke's analysis pointing out the circuit interruptions and tying it into the proposed rules. Dennis Marino stated that the circuit feeder boundary information Del Leppke is working from will be made available to all EEC members. Dennis Marino suggested that this infonnation be put on the City Council's agenda in May and be forwarded to them in advance of the meeting so they may read it beforehand. Mr. Crum left the meeting at this time. Business Partners Report Dennis Marino reported on the status of the sending out of inquiries to potential electric power suppliers per the Commission's request. Dennis Marino stated that he received a draft letter from Bud Nesvig and staff will be working on a packet of materials next week. Mr. Schoen was asked by Mr. Nesvig to provide a list of his contacts who may be interested in receiving the City's inquiry. Education and Public Relations Report Stephanie Steen referred to the memorandum she had submitted at the last meeting of the EEC outlining public relations guidelines. Typically, anything that is sent to all City residents in the name of the City needs to be approved by the City Council. She informed members that if the EEC has information to send out, it will be presented to the Council on a case by case basis. Dennis Marino explained that this procedure had been followed by the Energy Alternatives Task Force (EATF), which had submitted pieces for approval and distribution. David Kraft noted that timeliness is a concern. Stephanie Steen stated that she will make every effort to get these requests on the next Council Agenda following receipt of the request. For example, any information received no later than Wednesday before a Council meeting would allow her to get it on the Agenda for the coming Monday's Council meeting. She would not want to send something out without approval; that the Council either would not agree with, or that would cause dissention. Reimbursement of Commission Members' Out -of -Pocket Expenses The Chairman suggested that this item be dropped from the agenda and be handled as the situation arises. Stranded Costs, Exit Fees, Transition Costs (Work plan for Mr. Giordano) Bud Nesvig reported that a meeting was held on April 21 to discuss the next projects for Mr. Giordano to handle. Stephanie Steen provided a synopsis of that meeting which enumerated the four major areas discussed: stranded costs, FERC, franchise and state legislation. Mr. Nesvig reported that the stranded cost concern would cover what are the criteria for FERC exemption from stranded generation and transmission costs; examine whether Evanston has a case before the FERC; what the legal limits of FERC and ICC jurisdictions are; and filing the necessary papers with the FERC. There was discussion as to which items should take priority. There was considerable discussion about stranded costs and franchise considerations. David Grumman stated that the franchise issue should be #I. He noted that Mr. Giordano had indicated that the City should negotiate a franchise at some point, and the City needs to get thinks in order. Del Leppke stated that if we can get a legal opinion as to what a franchise might contain in this new environment, this may give us some indication how to deal with stranded costs. Gary Michaels agreed that the franchise issue is critical, but he would like to see the Energy Commission Minutes Page 6 4/24/98 issue of stranded costs finally dealt with. The EEC has been talking about this issue for years as a priority and now we have an attorney who can deal with it, so let him deal with it and put it to rest. He added that the stranded costs issue directly relates to the franchise issue and is not in competition with it. Gary Michaels motioned that the items be reordered as: #1 Stranded cost, #2 Franchise, #3 State legislation, #4 FERC (with sentence about unconstitutionality deleted), seconded by David Kraft. During the discussion that followed, David Kraft stated that the FERC Order should be examined as to whether it is totally valid. if one area is determined to be unconstitutional, then the entire Act becomes unconstitutional. Therefore, if the municipality doesn't get what it wants, it could challenge the constitutionality of the Act. Areas of vulnerability in the Act would have to be identified. Del Leppke proposed an amendment that the list be finalized in bullet format, seconded by Gary Michaels. Motion carried by unanimous vote. The original motion by Gary Michaels was then voted on and was approved unanimously. The subject was raised concerning whether the EEC should enter executive session for the above discussion or when discussions begin on franchise negotiation. Dennis Marino stated that pending or probable litigation would require executive session as well as franchise negotiations. Discussion concerning what matters to have the attorney pursue would not require executive session. He offered to seek further clarification from the Legal Department. 1998 Energy Commission Agenda (1998 Action Items Memorandum) David Kraft motioned that Item #7 be reworded to broaden its scope beyond finding out whether other municipalities are interested in aggregation. If it is determined that aggregation would be advantageous for Evanston, the item should include developing and promoting of interest in mutually beneficial aggregation proposals. Motion was seconded and passed 7-0. The Agenda will be transmitted to Council. COMMUNICATIONS Dennis Marino drew attention to requested usage data that had been received by Jerry Bowman from ComEd. It was asked whether Northwestern University had been included on this usage data. Mr. Marino will investigate this. Mr. Marino observed that there were 450 new residential customers from 1994 to 1997, which was very positive. The Commission was in receipt of ComEd's Electric Service Reliability Reports for 1995 and 1996 from the [CC. The information describes problems of the worst performing circuits and what remedial action was taken or planned. A key is available to identify the location of the circuits. ADJOURNMENT Meeting adjourned at 9:27 a.m. The next meeting of the Energy Commission is scheduled for Wednesday, May 6, 1998, at 7:15 a.m. Jon arquhars , Planning Division APPROVED ENERGY COMMISSION MINUTES Wednesday, May 6, I998- 7:I5 a.m. MEMBERS PRESENT: DOOLIN, GRUMMAN, LEPPKE, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: HOFFMAN, KRAFT, PELSOCI STAFF PRESENT: MARINO, STEEN, FARQUHARSON OTHERS PRESENT: KENNETH JACOBS, P.E.; STANLEY CONSULTANTS, INC. DAVID METZ, PROJECT MANAGER; STANLEY CONSULTANTS, INC. FREDDI GREENBERG, ATTORNEY; STANLEY CONSULTANTS TEAM PHIL MOVISH, ENERGY AND RESOURCE CONSULTING GROUP DAVID SHAFER, P.E., COMMONWEALTH ASSOCIATES, INC. DICK SCHOEN SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:25 a.m. BUSINESS At this meeting of the Energy Commission, two consulting teams were interviewed to provide analysis of the Evanston distribution system. These were Stanley Consultants, Inc. and Energy and Resource Consulting Group, LLC. Stanley Consultants, Inc. Mr. Kenneth Jacobs, Vice President of Stanley Consultants, discussed the qualifications of his firm. They had provided consulting services to the City 7 years ago. Mr. Jacobs stated that his firm specializes in working with municipalities and REAs. They have qualified personnel locally to do the job. lids. Freddi Greenberg, as a part of the team, has been closely monitoring the ICC. Stanley Consultants have also been researching rules on reliability around the nation. Mr. David Metz, the proposed Project Manager, would be responsible for running the project. Mr. Metz was glad to see the emphasis the City is placing on reliability issues prior to franchise renewal. Regarding a review of existing available information on reliability, Mr. Metz stated that reliability data is not universally standardized because utilities define reliability differently in terms of duration of outage and frequency. Stanley Consultants has performed work regarding reliability goals and will use what other utilities are using as a comparison with industry norms. New reliability indices are coming up and the users are setting these norms. In addition to the report included in the proposal, Mr. Metz distributed a report done by Bob Rusch, Chief Electrical Engineer at Stanley Consultants, defining power quality in a competitive environment. The SAIDI, SAIFI, CAIDI indices have been used, but Mr. Metz supports the "Draft Trial Use Guide" which proposes that momentary outages be defined and sustained outages be defined, which has never before been done. They will also provide recommendations. In reviewing the apparent capability and reliability of the Evanston distribution system, they will review system maps to determine where standby power is needed, locate critical loads such as hospital feeds, and look for back feeds. He anticipates asking the hospitals what their reliability needs are. s PV.0 516/9& Mr. Metz stated that an important first part of the study is to review the franchise agreement. The ICC's determination on reliability will be important and Ms. Greenberg will have to determine how much can legally be included in a franchise. He proposes that the firm would have three weeks to present information to the EEC. Then, after those comments are considered, the firm anticipates an additional 3 weeks to present a final report. Mr. Metz then referred to the second part of the study: evaluation of the distribution system by collecting data from the system itself. He will took for compliance with the National Electrical Safety Code, since things that are safe operate well. Stanley Consultants performed work in Cleveland investigating 12,000 poles and found a series of code violations. In Evanston, Mr. Metz proposes to evaluate the distribution system, 1,000 feet each of urban, residential and underground. He plans 5 days in the field for this part of the study. The City had asked for long range, medium range and short-term plan recommendations. Mr. Metz indicated that they would not do this, but instead they may recommend, as a result of their work, that ComEd provide a comprehensive plan to the City that addresses weaknesses identified by the consultant and other concerns the City has. Mr. Metz referred to additional personnel who will work on the project. Dick Hutmacher is their Cost of Service expert involved in unbundling of rates. Mr. Alan Wilson will help with investigations in the field. Freddi Greenberg, the attorney with Stanley Consultants, stated that she had just received the draft ICC reliability rule proposed by the Hearing Examiner. He made this proposal based on the evidence and briefs filed by the parties. Then the parties will write briefs commenting on whether the proposed rule is responsive to their positions. Generally a rule modification will occur and be voted upon by the [CC. She hoped to see something final within 34 weeks. She reported that there were a number of initiatives going on at the regional or national levels regarding formalizing legal reliability requirements. Members then questioned the Consultant team. Del Leppke asked about the typical goals for reliability. Mr. Metz explained that these are typical goals arrived at by the utility itself compiled from survey results. Mr. Metz stated that historical information from 5 years ago is not enough to determine reliability. It is difficult to determine reliability because it has not been defined at today's requirement levels and records are not kept in the way necessary for today's needs. Mr. Metz was not yet familiar with the proposed reliability indices calculation before the ICC. Mr. Michaels asked whether the consultants would expect to find safety violations in their examination of the distribution system. Mr. Metz has not yet had the opportunity to study the ComEd system for code compliance. Regarding obtaining data from ComEd, Mr. Grumman asked what the consultants would do if ComEd stonewalled the request for information. Mr. Metz responded that he would then defer to the legal counsel. Freddi Greenberg expected to see the ICC step in if their assistance is requested. She also felt there would be changes in how ComEd responds to its customers, and in her experience over recent months, the utility is reorganizing and making changes in this regard. When asked if they would be willing to sign a confidentiality agreement with ComEd to obtain information, the consultants responded affirmatively. It was determined that there is one engineer on the project who is licensed in Illinois. The consultants will bill for services at their hourly rate with a not -to -exceed maximum, and will complete the scope of work within that maximum dollar amount. The team will work out of the Chicago office (located near O'Hare airport) and draw upon the Muscatine office of the firm. Mr. Warmington asked whether studying 1,000 feet of each type of distribution system was adequate. Mr. Metz responded yes and added that the study of 12,000 poles in Cleveland included an initial study of400 poles. It was found that the results between the two did not vary much in percentage points. Mr. Metz stated that they will keep in mind that most of Evanston's system is old and will choose representative sections upon which Evanston can Paga 3 5/6/99 base their projections. Mr. Grumman referred to the downtown fires and outages of several years ago. When asked about reliability in underground systems, Mr. Metz responded that they have found that most underground cable installed in the early 1970's has been replaced already because the new cables are found to be much more reliable. A reliable underground line would have to be a looped line which is more reliable than radial and would not lose customers during repairs between transformers. This is one thing they would look for in evaluating the system. They may make some recommendations to improve reliability based on their findings. Gary Michaels asked what role Ms. Greenberg expects to play in the investigation and report. She responded that she would work with the existing and pending proposed regulation and reliability proposals to create a legal requirement. She would work with the consultants in looking at the franchise discussion and recommendation. She would also identify and solidify the trend in the policy aspect of the industry. Mr. Michaels asked whether she thought technical requirements could be included in the franchise. Ms. Greenberg stated that it may turn out that the teeth in reliability requirements will be in the agreement between ComEd and the utility delivering power and the entity purchasing the power rather than in a franchise agreement. These delivery service requirements are also being put together by the ICC. The actual supply of kWh would be addressed in the contract between the seller and purchaser of the power. Reliability can certainly be addressed in a franchise agreement, but we need to see whether what the ICC is doing will provide substance. The franchise definitely won't be the exclusive arena in which these things are dealt with, since contracts between buyers and sellers will become more important than they have in the past. Members thanked the consulting team for their presentation. Energy and Resource Group, LLC (ERG) Before starting his presentation, Mr. Phil Movish provided the final report of the SVBK workshop held November 22 and 23, 1996 for the City of Evanston. Mr. Movish is a principal of ERG, a national engineering, financial and management consulting group which is primarily a public sector practice. Representative engagements relative to reliability and franchise matters were: (1) City of New Orleans, served by Entergy; ERG provided ongoing review of reliability of that system and has been working on behalf of the City to establish mechanisms and proposed electric service regulations that would penalize or compensate for provision of service and reliability of service: (2) Proctor and Gamble's Folgers Coffee Mill, also served by Entergy; outages causing the loss of their process have resulted in $3 million loss over the past few years, ERG investigated the problem and negotiated with Entergy to implement design changes and greatly improve reliability. Other examples included: review and negotiation of a franchise with new provisions for Enid, Oklahoma, municipalization in Las Cruces, New Mexico, and other franchise and power supply efforts in various cities. Mr. Dave Shafer, a principal of Commonwealth Associates, will also work on the project. Commonwealth is an engineering firm specializing; in transmission and distribution services and will provide technical assistance to ERG. Their offices are in Michigan and Washington State. Mr. Shafer mentioned work done by his firm which included distribution system studies and long range plan studies performed in Fayetteville, NC; a municipalization study in Ogdensburg; a system evaluation in Sandy, Utah and other examples. Phil Movish explained that the proposed scope of services would include a technical review of electrical facilities based on data from the City and ComEd. They would provide a recommendation of performance criteria, penalties or compensation methods, review of the ICC reliability criteria and standards, and optionally, a physical inspection of the distribution system. He then enumerated each of these areas. Mr. Shafer stated that a comparison of ComEd with the indices would be done, environmental considerations, design and maintenance of the system, operating practices, and age of the system will be evaluated. They will examine what the response and repair practices of ComEd are. Regarding performance criteria, there is a need to define reliability and determine how Evanston compares with the industry. Mr. Movish stated that when they examined data two years r Page 4 S/6/9R ago, he characterized ComEd's performance system -wide to be "not bad". However, the data for Evanston was far inferior to the system -wide reliability. Therefore, bench marking on a system -wide basis is not realistic. They would give input on realistic reliability bechmarks. Regarding compensation mechanisms, they would provide a briefing on what other states are doing, and what can be applied to a franchise. Regarding review of [CC standards, Mr. Movish indicated he had not reviewed those standards yet. A consideration will be what standards will be applicable to Evanston. In various states, there are financial compensation mechanisms in place. Regarding the optional technical inspection of facilities, Mr. Shafer stated that near -term goals would likely be maintenance -type fixes or operating practices. Mid/Long-term goals involve the City's future load considerations, improvements in system technology that improve reliability, and what the impact of deregulation will be. Mr. Movish reviewed that penalties are important, but the goal really is to improve reliability. In New Orleans, they did a review of the capital improvement plan within the utility to upgrade the underground system and greatly improved the reliability. One proposal is that improvements be made on a fast schedule, and to the extent the utility does not adhere to that schedule, penalties will be incurred. Mr. Movish added that ERG would also be available to assist in negotiations, which is an area where they have extensive experience. He stated that ERG has no conflicts of interest and can provide total objectivity. Mr. Grumman began the questioning and obtained clarification that the proposed fee was a "not to exceed" figure and ERG would complete the scope of work within that amount. Mr. Movish, project manager, would be based in Denver, Colorado and Mr. Shafer, lead technical investigator, would be based in Jackson, Michigan. Mr. Movish did not see that as a problem, since most of this work would be done in the office. Mr. Movish was asked whether enough time had been alloted to obtaining information from ComEd. He felt ComEd would be more cooperative in providing information due to the upcoming franchise. If the utility is approached in the right way, they are often more cooperative. ERG is willing to sign a confidentiality agreement with the utility. Operating practices will be obtained mainly through the utility and the Energy information Association (EIA) and perhaps Edison Electric institute (EEI). What motivation would ComEd have to negotiate a franchise? Mr. Movish stated that they have a vested interest in providing low cost, reliable service to be a successful business. The Illinois deregulation bill allows for compensation and puts CotnEd on notice to improve performance. When asked about the iCC rulemaking process, Mr. Movish was not familiar with the testimony that had been presented, but he pointed out that ICC indices will be applied system -wide, but Evanston may wish to negotiate a formal arrangement to tackle reliability improvement within the City of Evanston specifically. It is in everyone's interest (including the utility) to improve reliability. You need to accelerate the fix to the problem. In New Orleans this is what happened. They got the utility's concurrence to apply new technology and to greatly accelerate what would have been a 10-year program to improve reliability. They found that the utility knew what the technical fixes were, but just weren't implementing them. They needed to budget more dollars and rearrange their capital improvement. Mr. Grumman asked what happened to SVBK. Mr. Movish indicated that a couple of the partners left the firm to do rate and cost of service related work primarily, which is not what ERG does. SVBK was then reorganized. Regarding licensing in Illinois, Mr. Movish thought that Mr. Vumbaco was registered and engineers at Commonwealth Associates are registered in Illinois as well. With state reciprocity agreements, they have never found licensing to be a problem. Energy Commission Minutes Page 5 51619R Commission members thanked Mr. Movish and Mr. Shafer for their presentation. Regarding the City's time line for the consultant, once the EEC makes a recommendation, Stephanie Steen explained that the City Council could approve a consultant on the same evening that the recommendation was introduced. Discussion ensued regarding the interviews. Del Leppke informed members that one highly qualified consulting fine (Power Technologies in New York) declined to submit a proposal because they could not meet the stated time line for completing the study since they were involved in a major reliability study currently. They inquired and were told by the City that there was not flexibility on the time line. Mr. Nesvig suggested that this firm be allowed to submit a proposal and the time line be made more flexible. Members did not agree to this. Mr. Nesvig saw nothing innovative in either consultant's proposal and he questioned why they did not mention the use of new technology that will detect overloads before they cause damage. Mr. Grumman responded that the consultants were not asked to design a system, but to evaluate the existing one. Mr. Leppke saw innovative ideas in the paper that Stanley Consultants had submitted as part of their proposal. Gary Michaels proposed that the EEC continue their discussion during a special meeting of the Commission. Members agreed to meet on Friday, May 8, 1998 for the purpose of making a decision on the consultant. COMMUNICATIONS Stephanie Steen provided an informational memorandum concerning the change in the calculation of the municipal utility tax (MUT). State law grants cities two options with respect to changing to a usage -based utility tax: proportional or alternate methods. The proportional method is modeled after the City of Chicago's energy usage patterns; the alternate method allows municipalities to devise their own declining block rate schedule which produces the same revenue as received in 1997. The City needs time to fully analyze the impact of these alternatives and in order to maintain an option as to the best method of tax calculation, staff has recommended that the City Council pass a resolution that will ask the [CC for permission to consider calculating the municipal tax based on the alternate method. This does not commit the City of Evanston to using this schedule. This will be considered at the May 11 meeting of the City Council. The EEC will be involved in analyzing the methods before a final decision is made on which method Evanston will use. The ICC needs 30 - 45 days to review the City's calculations. The NWMC has hired legal counsel (Narefsky) to examine these methods as well. NWMC UPDATE Ms. Steen now has and will distribute the new reliability rule currently before the ICC. The next phase of that process will be that briefs will be filed with the ICC concerning the rule. The ICC announced that it may be extending its June 15th deadline for a final rule. ADJOURNMENT The meeting adjourned at 9:35 A.M. The next meeting of the Energy Commission will be May 8, 1998. � C Jo Farquhars , Planning Division ENERGY COMMISSION MEETING SYNOPSIS Friday, May 8,1998- 7:15 A.M. MEMBERS PRESENT: DOOLIN, GRUMMAN, HOFFMAN, LEPPKE, MICHAELS, NESVIG, PELSOCI, WARMINGTON MEMBERS ABSENT: KRAFT STAFF PRESENT: STEEN CALL TO ORDER The meeting was called to order at 7:19 A.M. COMMUNICATIONS The following items were distributed at the meeting: Letter to power suppliers, ICC proposed draft rule, List of Discussion Topics for May 11, 1998 presentation to Administration and Public Works Committee; Letters to ICC and Com Ed regarding information requests made by Bud Nesvig. DISCUSSION OF TECHNICAL CONSULTANTS Roy Warmington supported Stanley Consultants, as they were the lowest -cost firm, and had extensive experience analyzing distribution systems (especially Michael Good). He did not see the same expertise listed in ERG's proposal. He also liked that Stanley was a local firm. David Grumman explained the scoring process that was used. He explained that R.W. Beck was not chosen because their project manager was not as qualified, they did not have as much technical experience in evaluating distribution systems, they assumed that they could get everything from ComEd, and their cost was in the $50,000 range. He felt that, overall, their project team was weak. Mr. Grumman and Mr. Leppke explained that ERG rose to the top for several reasons. They were impressed with ERG's work in New Orleans as the consultant to the regulatory body and the standards that they developed for reliability. They felt that the proposal was well -organized, with a comprehensive scope of work. They did raise concerns that ERG appeared to hide the fact that they were once SVBK, and also that they still have not provided their final report to the City of Evanston. Gary Michaels expressed the wish that Stanley had some of the polish of ERG's presentation. He questioned whcthcr the project manager was located in Muscatine, and if this would be a problem. lie was concerned that both teams appeared very confident that they could get information from ComEd. Del Leppke was impressed with Stanley's research paper, and David Grumman noted the fact that Ken Jacobs is registered as a professional engineer in the state of Illinois. In addition, the project manager, Dave Metz, is licensed by examination and has the opportunity to become licensed by reciprocity in the state of Illinois. It is not apparent that anyone from ERG is registered in Illinois. Mr. Grumman expressed concern that Stanley is a little thin on the description of the scope of work. Mr. Warmington agreed, adding his concern that Stanley won't be able to analyze the distribution system by simply looking at 1000 feet of an alley, etc. Del Leppke asked what the purpose of the consultant was. If we are looking to rebuild the system, it may not be the right scope of work. If we are looking to set up negotiations, he feels this is the right scope. He feels that we don't want to spend any more money than Stanley. David Grumman described what he wanted the consultant to do: get a better handle on how reliable the system is (give a technical rationale); provide ammunition for franchise negotiations; and get ammunition to complain to the ICC about the condition of our system. Mr. Leppke moved to recommend Stanlev C'ona&ants to the City Council, Mr. Grumman seconded the_motion. Motion nasscd unanimously (8-0). A discussion about the ICC proposed draft rule ensued. Members discussed how the new rule does include "targets" for utilities to follow, but the number of interruptions alone does not constitute a violation. Members then commented on the list of discussion points prepared by Bud Nesvig for the Energy Commission's May 11 presentation. Mr. Michaels questioned whether or not the Energy Commission had voted on canceling Ordinance 100-0-93. Mr. Nesvig responded that the Commission had not voted to cancel the Ordinance; he was just going to report on this topic. Mr. Leppke questioned what the Energy Commission's position was on this issue. He explained that, according to Herb }-till's legal opinion, the City can cancel during the last six months, or at any time before. Mr. Michaels commented that Pat Giordano had recommended that it was not necessary to cancel the Ordinance before the opt -out period (there is no benefit). He stated that the Commission should wait to do so. Mr. Nesvig commented that he believes that canceling the Ordinance would begin negotiations early. Thomas Pelsoci said that the Commission should wait to recommend canceling the Ordinance until they get ammunition from the consultants to aid us in negotiating. Roy Warminglon commented that if ComEd thinks we'll cancel the Ordinance, they will talk to the City. If Evanston bolts, it may start a landslide all over the state. Gary Michaels disagreed, saying that canceling now will provide no benefit and may cause ComEd to resist giving us information. Thomas Pelsoci agreed, saying that the environment is changing. Discussion ensued about the letters written to the [CC and ComEd. Bud Nesvig stated that he wanted ComEd's Union Agreement to see if they are contractually bound to keep all employees. If so, this would prevent them from reducing their costs. In response to a question from David Grumman about the use of this information, Mr. Nesvig explained that he wants to accumulate as much information as possible. Mr. Grumman asked what would be the best approach for asking ComEd to allow our consultant access to information. Members agreed that it would be better to wait for approval before proceeding. ADJOURNMENT The meeting adjourned at 8:40 A.M. The next meeting of the Energy Commission has been seheduled for Thursday, June 4 at 7:15 A.M. in Room 2404. R APPROVED MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT. SUMMARY OF ACTION: ENERGY COMMISSION MINUTES Thursday, June 4, 1998- 7:15 a.m. DOOLIN, GRUMMAN, LEPPKE, MICHAELS, NESVIG HOFFMAN, KRAFT, PELSOCI, WARMINGTON MARINO, STEEN, FARQUHARSON CALL TO ORDER The meeting was called to order at 7:19 a.m. CONSIDERATION OF MINUTES OF APRIL 24, MAY 6, AND MAY 8, 1998 Due to lack of quorum, the minutes were not considered at this meeting. BUSINESS Update of Northwest Municipal Conference (NWMC) Activities Stephanie Steen provided copies of the ICC final ruling on reliability to members. There is some administrative work yet ahead, but the ruling is final with respect to the public influencing the process. Concerning the municipal utility tax conversion, Ms. Steen reported that the City Council passed a resolution authorizing the ICC to look at the alternative method of calculating the tax. The other method is the proportional method, which was outlined at the last meeting of the EEC. The City is currently looking at which method will best suit Evanston. The City must have a method in place before August 1, 1998 in order to remain revenue neutral. It is Ms. Steen's intent to forward a summary of both methods to the Energy Commission so it can be discussed at their July meeting. Update on Attorney Patrick Giordano's Work Members had received a copy of Mr. Giordano's response very late the previous evening. Mr. Giordano had addressed two questions with respect to stranded costs and the franchise with ComEd. There was not sufficient time for members to read and comment on the response. There was a brief discussion of some points in the report. Members discussed the need for an additional meeting in June, at which time Mr, Giordano could be invited to make a presentation of his work. Members agreed by consensus to hold another meeting of the EEC this month and invite Mr. Giordano to present his report at that time. Stephanie Steen agreed to contact Mr. Giordano and members will be advised concerning his availability. Update on Consultant to Provide Analysis of Evanston Distribution System Ms. Steen reported that a contract had been sent to Stanley Consultants, but they have not as yet responded. June 15th was the expected date when they would begin their work. Mr. Nesvig asked to see the contract and he expressed concern about the technical aspects of it. Mr. Marino explained that it is standard procedure that contracts be handled by City administration. Ms. Steen stated that the contract itself is not technical, but incudes legal and insurance requirements. Tile scope of work submitted by the consultant has been included as an attachment to the contract. Other attachments include scheduled fees and the proposed start and completion dates. Ms. Steen added that there is a provision in the contract that if ComEd does not cooperate in providing 4. Energy Commission Minutes Pam 6/4/98 the necessary information for the consultant to review, the City has the option to terminate the contract. Bud Nesvig asked that a follow-up letter be sent to ComEd. Del Leppke indicated that he would be available to accompany the consultant to inspect the distribution system, which would primarily occur during phase 11 of the study. Deregulation - State of Illinois Update: Grumman; Reliability Subcommittee David Grumman reported that the ICC ruling contains several items that the City of Evanston could use to their advantage. Regarding reliability indices, the ICC rejected the approach the joint petitioners had asked for, and added that the targets (SAIDI, SAIFI, Etc.) Are just a fraction of what the ICC will consider when evaluating a jurisdictional entity's reliability. The ICC will require much additional information and reliability criteria should be placed as close to the customers as possible. The consensus rules have a three -pronged approach: 1) system indices; 2) worst performing circuits analysis and; 3) requirement to strive to provide electric service to its customers which complies with the targets it sets for three different voltage levels. This means that every electric consumer in Illinois will have his/her service reliability monitored by the jurisdictional entity (ComEd). The jurisdictional entity will correct reliability problems or face the prospect of being required by the consensus rules to file an annual report spotlighting its failures and highlighting its indifference towards customers. In summary, this provision allows for ongoing reliability problems to be reported to the ICC for investigation and resolution. Stephanie Steen reported that there had been two outages yesterday in Evanston: Dempster to Oakton/Dodge to McCormick and a separate outage in northwest Evanston. The City generally learns of these outages through citizen complaints, then ComEd (Greg Fetro) is called and further information is sought concerning areas of the City that are affected and when restoration of power is expected. Business Partners Report Dennis Marino reported that, of the 9 power suppliers contacted, one response had been received and was included in the EEC packets. Bud Nesvig stated that he would like to use the previous draft of his letter and send this to more power marketers. He referred to a previous meeting where this procedure had been discussed. Mr. Nesvig stated that he had names of more power marketers to send the letters to. Mr. Marino suggested that any revisions made to the letter that had already gone out be made available to EEC members for their review at the special meeting of the EEC which Patrick Giordano will be invited to. Franchise Negotiation Discussion Bud Nesvig provided a page of thoughts concerning issues to be considered with respect to franchise negotiation. The first item stated: No stranded costs - rebate Evanston's share of $1.4 billion already paid. He clarified that the City could ask for its share of the funds already set aside for decommissioning. Updates on Information Requests Stephanie Steen stated that she had not received a response as yet concerning the request for ComEd Employee Union agreements. Mr. Nesvig thanked Joan Farquharson for obtaining the Annual, I OK and I OQ reports from ComEd. Education and Public Relations Report Deferred until a subsequent meeting. s PqSe 3 614/9$ GIS System Demonstration This item will be considered at a future meeting of the EEC. Energy Commission Membership Bud Nesvig would like to know if any applications to the EEC have been received by the Mayor. COMMUNICATIONS Bud Nesvig provided two handouts. He distributed the Draft Trial Use Guide for Electric Power Reliability Indices, which he had requested because Stanley Consultants had indicated that they were going to use two of IEEE standards. He suggested that these norms may not be what Evanston needs. He also distributed a letter he had sent to ComEd in response to a survey his business had received from ComEd. Dennis Marino drew attention to the article "Preventing Power Glitches" which reported on an energy storage device which covers sags in power (not interruptions) for up to'l, second. ADJOURNMENT Meeting adjourned at 8:10 a.m. The next meeting of the Energy Commission is scheduled for Wednesday, July 1, 1998, at 7:15 a.m., although a special meeting will be scheduled in June. Jo FarquPlanning Division APPROVED ENERGY COMMISSION MINUTES Thursday, June 16, 1998- 7:1 S a.m. MEMBERS PRESENT: DOOLIN, GRUMMAN, HOFFMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, PELSOCI, WARMINGTON MEMBERS ABSENT: NONE STAFF PRESENT: MARINO, STEEN, FARQUHARSON OTHERS PRESENT: PATRICK GIORDANO AND TOM ANDREOLI SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:22 a.m. CONSIDERATION OF MINUTES OF APRIL 24, MAY 6, MAY 8 AND JUNE 4,1998 The minutes of April 24, May 6 and June 4 were approved with grammatical changes only. The minutes of May 8 were approved with minor wording changes. BUSINESS Presentation by Attorney Patrick Giordano Mr. Giordano introduced Tom Andreoli who had assisted him in preparing the response. He briefly summarized the scope of work he had been asked to address. Mr. Giordano stated that his report is confidential and is protected by attorney client privilege. He stated that this report should not be disseminated publicly since the City is about to enter negotiations. Discussion occurred regarding the use of executive session. Gary Michaels moved that the EEC enter executive session to discuss information that will be used in negotiations, seconded by David Kraft. In response to a question, Dennis Marino indicated that summary minutes of the executive session would be made available to EEC members, but not made available publicly. The EEC entered executive session at 7:30 A.M. by roll call vote (8-0). The EEC adjourned executive session at 9:02 A.M. Business Partners Report Materials included for this discussion were: the original letter sent to power marketers in May, as finalized by Bud Nesvig and staff; the list of power marketers who received the letters; the letter drafted by Bud Nesvig to send to the second group of power suppliers; an additional list of power marketers; and the draft version of the minutes of the A&PW Committee meeting of May 26, 1998 when this subject was discussed during citizen comment. Bud Nesvig stated that he and Mr. Marino disagreed about whether the EEC had agreed to send out more letters to power marketers. Mr. Nesvig sought confirmation from members that this effort should go forward. He also asked that the proposed letter be sent out rather than the letter sent out in May. Mr. Kraft responded that he had understood the process to include further mailings and he moved that the EEC continue sending letters out, seconded by Mr. Doolin. Mr. Kraft submitted two additional names to add to the list, from Amoco Power in Houston. Texas. Mr. Nesvig stated that the major difference between the two letters was that his letter did not s Pgg2 6/16/9R mention the possibility of building a distribution system, but was broader and leaves it up to the power marketer to state what they would do. Members suggested and agreed to several changes to the letter which had been drafted by Mr. Nesvig. These included: rewording paragraph six to clarify wording regarding the delivered average industrial rate being compared to the competitive wholesale power cost and deletion of the last sentence. Roy Warmington drew attention to Alderman Moran's objection to sending these letters out at the A&PW meeting of May 26. Bud Nesvig responded that the Aldermen are not involved because this is just an information -seeking effort. In Mr. Nesvig's view, Alderman Feldman had said that this issue had been settled when the subject came up before. Mr. Grumman noted that the new letter asks for a business proposal. Ms. Steen stated that the Aldermen have now received copies of the May 7 letter, but not the draft of Mr. Nesvig's letter that was now being considered. Mr. Kraft stated that the original intent was to leave the letters open-ended and provide background information for the power marketers. The motion carried (8-0) in favor of proceeding with further mailings. Mr. Michaels left the meeting at this time. Mr. Doolin suggested that someone make follow-up calls one week after the mailing, which Mr. Nesvig agreed to do. Update on Consultant Stephanie Steen reported that the contract had been signed by Stanley Consultants, and the City was now waiting for their insurance documentation before proceeding. Ms. Steen stated that ComEd had responded to the City's request for access to their facilities and would now like to set up a meeting with the Consultant. Ms. Steen stated that Del Leppke will be informed of this meeting so that he may participate. OTHER BUSINESS David Kraft informed members that the Chicago Tribune is now handling limited postings for non-profit organizations on the electronic pages of the Tribune. Mr. Kraft's organization, NETS, intends to post information about the Evanston electric issue (along with appropriate disclaimers) and he invited EEC members to provide input. He stated that the Tribune postings are an opportunity for the EEC or City Government to utilize free space. The balance of the Agenda was deferred until the next meeting of the Energy Commission. ADJOURNMENT The meeting adjourned at 9:24 A.M. The next meeting of the Energy Commission is scheduled for July 1, 1998 at 7:1 S A.M. in room 2404 of the Civic Center. Jeri Farquha n, Planning Division APPROVED ENERGY COMMISSION MINUTES Wednesday, July 1, 1998- 7:15 a.m. MEMBERS PRESENT: HOFFMAN, LEPPKE, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: DOOLiN, GRUMMAN, KRAFT, PELSOCI STAFF PRESENT: MARINO, STEEN, FARQUHARSON OTHERS PRESENT: BILL STAFFORD, FINANCE DIRECTOR PAT KEEGAN, GIS ANALYST SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:18 a.m. CONSIDERATION OF MINUTES OF .TUNE 16,1998 The minutes were not considered due to lack of quorum. BUSINESS Municipal Utility Tax Conversion Presentation Bill Stafford, City Finance Director was in attendance to provide an update. The two methods available to recalculate municipal utility taxes are the proportional method and the alternative method. Mr. Stafford explained that under the proportional method, the City would experience a loss of $45,000 in revenue. The alternative method is revenue neutral for Evanston and will affect only residential customers for the first two years. Initially, each resident's portion of the tax will go up slightly as the residential rate cut goes into effect. After December 2000, commercial customers will also experience a rate cut and their tax will be recalculated as well. The NWMC performed the utility tax calculations per municipality and Mr. Stafford agreed to make the NWMC calculations for Evanston available for distribution to EEC members. Responding to a question, Mr. Stafford stated that the City collects utility tax from Northwestern University (NU) but their recalculation will not go into effect until December 2000. Stephanie Steen stated that the ICC is currently reviewing Evanston's alternative method and a decision is expected in mid -July. The City Council will need to approve the method by the end of July in order to implement it in August. Update on Consultant to Provide Analysis of Evanston Distribution System Del Leppke indicated that the request for information which the consultant asked of ComEd was quite comprehensive. Stephanie Steen reported that Greg Fetro of ComEd will meet with the City Manager tomorrow to discuss the rcquest. Regarding access to facilities which would be required in Phase II of the study, Ms. Steen stated that it was Roger Crum's decision not to make that request at this time. Stephanie Steen reported that the ICC ruling on reliability was emergency and not final. That means there will be a 150 day period during which there will be opportunity for public comment. The NWMC is intending to provide comment. EnerU Commission Minutes PAu-2 7/01/98 Business Partners Report Bud Nesvig reported that he had received two telephone responses from the last round of letters sent out. Each caller had expressed an interest. Threat of Rolling Blackouts It was noted that a "brownout" could precede a "blackout". ComEd does provide some warning in the form of radio announcements to decrease electricity usage and notification is provided to the City Manager's Office. As part of the City's education and public relations program, Bud Nesvig suggested that the City Engineer inform residents how to protect their equipment in the event of a" blackout." It was noted that perhaps ComEd or the Association of Building Engineers would have this type of information. Stephanie Steen reported that outage information received from customers by the City Manager's Office is now being plotted on a map. Geographic Information System Presentation Pat Keegan, GIS Analyst reported that there are three employees reporting to Pat Casey, Budget Director, who work in the GIS area. They have utilized orthophotography (aerial), converted it to digital maps and have created a data base of features of the City. They are inputting the water and sewer system currently. Several maps were displayed. They are also working on a parcel layer map which will provide property EAV's and tax billing information. Mr. Keegan explained, however, that a good process is not in place as yet for updating the data. Regarding the electric system infrastructure, they only have feeder zones and power poles captured on the system. There is no data behind this information. If the EEC can obtain information on feeders, switches and transformers, GIS would be able to digitize a drawing. Information Updates Dennis Marino informed the EEC that, per Bud Nesvig's request, the Finance Department had provided a breakdown of the expenditure summary of Capital Improvement Program funds used for energy purposes for three of the last four years. The report will be provided after obtaining the additional year of data. Bud Ncsvig asked Stephanie Steen to try again to obtain the ComEd employee union agreement. OTHER BUSINESS Mr. Nesvig reported that Heidi Voorhees, Village Manager of Wilmette, had recently appeared on a Channel I I broadcast with a Mr. McCoy from ComEd. He stated that it was an informative program on which Ms. Voorhees expressed that residents were angry about outages and she was unable to obtain information from ComEd that she could provide to residents. She had also written ComEd and had received no reply or acknowledgment. Mr. Nesvig recalled that some mention had been made about the Council of Mayors having discussed this issue. He requested Stephanie Steen to provide a list of regional organizations in which the City participates. Members discussed whether attorney Patrick Giordano could be retained to do further work for the City. Gary Michaels stated that Mr. Giordano had reached some conclusions that could be followed up on. We need legal help to bring us to the next phase in franchise negotiations. It was noted that negotiations should begin in November and a team should be assembled now and be brought up to speed on these matters. The EEC can help Energy Commission Minutes PA;e 3 7/01 /9$ the negotiating team to identify issues a franchise should cover and recommend certain positions. Responding to a question, Ms. Steen indicated that previous negotiating teams had included Aldermen, Corporation Counsel and Energy Alternatives Task Force (EATF) members. Del Leppke suggested that the EEC recommend that a negotiating team be formed. Janet Hoffman suggested that EEC members put a list of recommendations together to be considered at the next meeting. Regarding rewriting the franchise, the City must decide what a franchise should say before Mr. Giordano could perform work on it. Mr. Michaels suggested that a scope of work be suggested for Mr. Giordano and that funding be requested from City Council. It was noted that work to be done in an amount less than $15,000 needs City Manager approval. Members present decided to reconvene one morning next week. Staff will poll members as to their availability. Members should identify points that a franchise should cover and determine which areas need further research in advance of this meeting. Priorities to adhere to should also be determined. COMMUNICATIONS Communications were accepted. Del Leppke reported on two recent articles that appeared in the Chicago Tribune. The articles reported on Northbrook and Orland Park, which communities are beginning to look at alternative electric systems. He stated that communities around Evanston are becoming more active on this issue now. ADJOURNMENT The meeting adjourned at 9:00 a.m. The next meeting of the Energy Commission is scheduled for Thursday, August 6, 1998 at 7:15 A.M. in room 2404 of the Civic Center. Joa arquharson,XZ�ingDivision APPROVED ENERGY COMMISSION MINUTES Monday, July 6, 1998- 7:15 a.m. MEMBERS PRESENT: DOOLIN, GRUMMAN, HOFFMAN, KRAFT LEPPKE, MICHAELS, NESVIG, WARMINGTON MEMBERS ABSENT: PELSOCI STAFF PRESENT: MARINO, STEEN OTHERS PRESENT: MS. LIANE CASTEN, RESIDENT SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:26 a.m. Ms. Casten, an Evanston resident, expressed her concerns about ComEd, nuclear power and the poor electric service in Evanston. Members suggested that she voice her opinion also to the City Council and the ICC. At the request of the Chair, Ms. Casten's letter which appeared in the July 2, 1998 edition of the Pioneer Press shall be attached to these minutes. CONSIDERATION OF MINUTES OF JUNE 16 AND JULY 1, 1998 The minutes were approved. CONSIDERATION OF NWMC FRANCHISE AGREEMENT AND RELATED FRANCHISE ISSUES Several items were discussed as possible courses of action for the City. Members suggested discussing franchise goals at the next meeting. CONSULTANT UPDATE Staff reported that the coordinating meeting with the consultant was very positive. They will meet with ComEd this week and are expecting information from them. DISCUSSION OF NEGOTIATING TEAM FORMATION Bud Nesvig raised the subject of employing a legal firm to write an Evanston -specific franchise. Discussion occurred regarding who should make these recommendations, the EEC or the negotiating team. Regarding formation of a negotiating team, Del Leppke had prepared a proposed resolution which he read to members (attached). The resolution contained a recommendation that the City Council appoint a negotiating team. He motioned that this recommendation be forwarded to the City Council, seconded by David Kraft. Motion passed 8-0. CONSIDERATION OF ADDITIONAL LEGAL ASSISTANCE SERVICES David Kraft was in agreement with Bud Nesvib's recommendation that additional legal assistance services be requested. Mr. Kraft motioned that the GEC request the City Counsel to provide funds and engage legal counsel to write an Evanston -specific franchise by a date certain, such as September 1, 1998, seconded by Roy PA,x 7/06M Warmington. Discussion ensued. Janet Hoffman stated that the EEC needs to first think about what the franchise should say. Members discussed the need for a strategy and to form the negotiating team first. Motion failed 7-1 (Nesvig). Another meeting of the EEC was scheduled for July 22nd to formulate what should be included in a franchise. For each concept, it should be asked what should be done if ComEd says no. Perhaps the work the EATF had done in advance of negotiations with ComEd in 1991-92 could be considered. COMMUNICATIONS Communications were accepted. ADJOURNMENT The meeting adjourned at 8:47 a.m. 'The next meeting of the Energy Commission is scheduled for Wednesday, July 22, 1998 at 7:15 A.M. in room 2404 of the Civic Center. Joan Fa#harson, P144ing Division MEMORANDUM ENERGY COMMCSSION TO: Members Energy Commission SUBJECT: Franchise Negotiation July 6, 1998 This is a record of the resolution passed unanimously by the Energy Commission at its meeting on July 6, I998. This was initiated by Del Leppke. PROPOSED RESOLUTION ON NEGOT ATION TEAM WHEREAS; the Energy Commission has recommended to the City Council that ComEd be notified as soon as permitted under the existing ordinance (Sept. 1998) of the City's intent not to enter into the NWMC Model Franchise, and WHEREAS; a new franchise agreement will be needed, prefe-rably rri&Td March 1999, when the existing franchise expires, and WHEREAS; this new franchise will be the first to be negotiated since the Rate Relief Act of 1998 has gone into effect BE IT THERE RESOLVED THAT, the Energy Commission advise the City Council, and recommend, that a negotiating team should be appointed as soon as possible, and THAT, the appointed negotiating team begin meeting with the Energy Commission immediately to prepare appropriate strategies and background data for such negotiating sessions. Eight of the nine Energy Commission members attended this meeting. The next meeting will be Wednesday, July 22, will be solely on franchise issues. g cc: Mayor Lorraine Morton Aldermen Roger Crum Stephanie Steen Dennis Marino Respond to: ERDCO Engineering Corporation Post Office Box 6318 Evanston, Illinois 60204.63IS Voice: 847-328-0550 Fax: 847-328-3535 e-mail: bud.neMg@erdco.com 1998 at 7:15 am, Civic Center. This meeting APPROVED ENERGY COMMISSION MQYUTES Monday, July 22, 1998- 7:15 a.m. MEMBERS PRESENT: DOOLIN, GRUMMAN, HOFFMAN, KRAFT LEPPKE, NESVIG, WARMINGTON MEMBERS ABSENT: MICHAELS, PELSOCI STAFF PRESENT: GUTTMAN, FARQUHARSON SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:13 a.m. CONSIDERATION OF MINUTES OF JULY 6,1998 At the request of the Chair, Ms. Casten's article was attached to the minutes. The minutes were approved, 6-0. CONSIDERATION OF ELECTRIC FRANCHISE ISSUES David Kraft moved that the Energy Commission enter Executive Session for purposes of discussing electric franchise issues which could be used in negotiations. The motion was seconded by Del Leppke and the Energy Commission entered Executive Session at 7:25 A.M. by roll call vote 6-0. The Energy Commission adjourned Executive Session at 9:02 A.M.. COMMUNICATIONS Communications were accepted. Several handouts were provided by David Kraft. ADJOURNMENT The meeting adjourned at 9:07 A.M. n FarquharAn, Planning Division APPROVED ENERGY COMMISSION MINUTES Thursday, August 6, 1998- 7:15 a.m. MEMBERS PRESENT: DOOLIN, GRUMMAN, KRAF r, LEPPKE, MICHAELS, NESVIG, PELSOCI, WARMINGTON MEMBERS ABSENT: HOFFMAN STAFF PRESENT: MARINO, STEEN, FARQUHARSON SUMMARY OF ACTION: CALL TO ORDER The meeting was called to order at 7:17 a.m. CONSIDERATION OF MINUTES OF JULY 22, 1998 The minutes of the July 22nd public meeting of the Energy Commission were approved. UPDATE ON RELIABILITY CONSULTANT PROGRESS (EVANSTON DISTRIBUTION SYSTEM) Stephanie Steen reported that the consultant had received all requested information from ComEd except ComEd's future plans for upgrading the system. The consultant was pleased with the maps received and continues to communicate with Greg Fetro at ComEd. Bud Nesvig asked that Ms. Steen obtain copies of maps and information for distribution to Energy Commission members. DEREGULATION - STATE OF ILLINOIS UPDATE Mr. Kraft stated that concern was building that if ComEd cannot provide power without instituting rolling black- outs, this will need to be addressed when the deregulation bill is reviewed in the fall session of the legislature. Mr. Kraft added that the City Council should be informed of the opportunity for Evanston's involvement in a legislative plan in conjunction with the NWMC and others. He added that Nancy Firfer, Director of the NWMC, and community leaders in Oak Park are very interested in what is going on in Evanston. Ms. Steen informed the Commission that Evanston's municipal utility charge had been approved and the rate reduction will be reflected in the September billing. INFORMATION UPDATES FROM STAFF Stephanie Steen stated that ComEd has shown City Staff their confidential Rolling Blackout Plan and has informed the City that they do not expect to implement the plan this year. Max Rubin, the City's Emergency Management Agency Coordinator, will continue to monitor this plan. He is compiling a list of those customers with a critical need for electricity. At the request of the Chair, Mr. Marino provided Mr. Nesvig a detailed listing of the expenditure of Capital Improvement Program funds for energy through the end of June. Regarding the request for ComEd Union agreements, Ms. Steen stated that this is proprietary information and ComEd will not provide it. The [CC also will not provide it. Bud Nesvig explained that his reason for asking for this information was to learn when the contracts expire and what the work rules contain. He wondered whether employees were allowed to strike under certain conditions. PuL2 CONSIDERATION OF ELECTRIC FRANCHISE ISSUES David Kraft moved that the Energy Commission enter Executive Session for purposes of discussing electric franchise issues which could be used in negotiations. The motion was seconded by Del Leppke and the Energy Commission entered Executive Session at 7:50 A.M. by roll call vote 7-0. The Energy Commission adjourned Executive Session at 9:05 A.M. Ray Doolin arrived during the Executive Session. Two motions were made during executive session and were repeated exactly during the open meeting. David Kraft motioned that the Energy Commission propose engaging an outside legal consultant for the purposes of advising the City, its negotiating team, and the Energy Commission on issues pertinent to franchise negotiation and related energy issues; and to assist in developing written materials and positions relating to the above energy issues, to be selected no later than September 15, 1998. The motion was seconded by Gary Michaels and carried 7- 1 (Abstention - Pelsoci). Gary Michaels then motioned that the Energy Commission propose engaging a Public Relations Firm for the purposes of advising the City, its franchise negotiating team and the Energy Commission on issues pertinent to franchise negotiations and related energy issues; to assist in developing written materials and positions relating to the above energy issues; and for the public dissemination of information of these issues, to be selected no later than September 15, 1998. The motion was seconded by David Kraft and carried 7-1 (Abstention - Pelsoci). Mr. Kraft mentioned the need for either a reconvening of the Council Energy Subcommittee or a recommendation that the Energy Commission meet with the new negotiating team. COMMUNICATIONS Communications were accepted. ADJOURNMENT The meeting adjoumed at 9:10 A.M. ! Farquhar3On, Planning Division W MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: SUMMARY OF ACTION: APPROVED ENERGY COMMISSION MINUTES Friday, September 4, 1998- 7:15 a.m. DOOLIN, HOFFMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, WARMINGTON GRUMMAN, PELSOCI MARINO, STEEN, RUBIN, FARQUHARSON CALL TO ORDER The meeting was called to order at 7:20 a.m. As this was the last meeting Stephanie Steen would attend, the Energy Commission thanked her for her time and work spent on energy issues. BUSINESS PARTNERS REPORT Bud Nesvig explained that the purpose of the meetings being held with various power marketers is in hopes of improving reliability and possibly reduce costs of electricity. Thus far, the Commission has hosted meetings with Louisville Gas and Electric as well as Enron. Mr. Nesvig reported that the Enron representatives have indicated they would be in a position to do something for the City of Evanston. CONSULTANT PROGRESS: ELECTRIC DISTRIBUTION SYSTEM ANALYSIS Stephanie Steen provided an update memorandum from Dave Metz of Stanley Consultants. Mr. Metz should conclude Phase I of their work and have a report ready by the end of next week, Concerning the outage data received, Del Leppke stated that Mr. Metz had found a poor correlation for past years between his information and the ComEd reports, which Mr. Leppke characterized as estimates because there is no good way to determine which customers are on which feeders. Some members felt strongly that further information was actually available. Mr. Leppke added that, since the 1CC does not require information by specific circuit, Mr. Metz is suggesting that the City pursue this. Regarding other states' reliability regulations, Stanley consultants have not found them to carry penalties. Also, the consultant will provide recommendations to include a revised tree trimming cycle and identification of the worst performing circuits annually along with a plan for improvement from ComEd. Bud Nesvig questioned when Phase 11 of the Consultants' work would begin. Ms. Steen stated that staff is reviewing the A&PW minutes and will need to contact Greg Fetro regarding access to the vaults before Phase If could begin. Dennis Marino informed members that the contact person for Stanley Consultants will now be himself on matters of contract administration, and Max Rubin will handle reliability and technical issues. Mr. Marino suggested that he, Mr. Rubin and Del Leppke meet with Mr. Metz after the report is completed, CONSIDERATION OF MINUTES OF AUGUST 6, 1998 A quorum was reached at 7:35 A.M. with the arrival of Ms. Hoffman, and the minutes of the August 6, 1998 public meeting of the Energy Commission were approved 5-1 abstention -Hoffman. EXECUTIVE SESSION David Kraft moved that the Energy Commission enter Executive Session to discuss franchise negotiations issues, seconded by Del Leppke. The Energy Commission entered Executive Session at 7:40 A.M. by roll call vote 6-0. (Mr. Doolin arrived during the discussion). The Energy Commission adjourned Executive Session at 8:30 A.M. Approved Energy Commission Minutes Pegg 2 9104/98 ELECTRIC FRANCHISE ISSUES Bud Nesvig moved that the EEC recommend to City Council that they cancel Ordinance 105-0-93 at the earliest opportunity, seconded by Ray Doolin. Mr. Nesvig explained that this Ordinance would cause the City to automatically accept the NWMC model electric service franchise, and he felt that canceling it would allow negotiations to proceed sooner. Del Leppke stated that he supported the motion because the sooner negotiations begin, the better position the City will be in to achieve its objective which is to increase reliability as part of new franchise. (Mr. Kraft left the meeting at this time) Janet Hoffman stated that the City needs to make plans to address the implications of canceling the franchise which could include the City being billed for electric service to its municipal buildings. She recommended that the motion be discussed by the negotiating team so the details can be worked through. She felt that cancellation of the ordinance was a strategy decision to be made by the negotiating team. Del Leppke stated that the model franchise does not adequately speak to the reliability issue and the EEC should say they have no interest in trying to accommodate that franchise. He did not see cancellation of Ordinance 105-0-93 as a strategy. There was further discussion an this issue. Janet Hoffman moved that Bud Nesvig's motion be amended to add that the EEC also requests that the negotiating team join the EEC in endorsing the recommendation of the EEC to City Council to cancel the franchise at the earliest date. The motion was seconded by Gary Michaels. Del Leppke spoke against the amendment, stating that the recommendation of the EEC is a clear statement and not strategy. Bud Nesvig felt that the amendment would delay action by the City Council. The motion failed 3 aye (Doolin, Hoffman, Michaels), 3 nay (Nesvig, Leppke, Warmington). The vote was taken on Mr. Nesvig's original motion and passed 54 (abstention -Hoffman). REPORTS FROM STAFF Dennis Marino responded to the request for information from ComEd regarding the ice storm and the 8K report. He stated that he will follow-up on obtaining information and will prioritize information requests to be made to ComEd. The balance of requested data from ComED was distributed today, Bud Nesvig asked that the Department of Energy monthly reports be obtained regularly for members. Bud Nesvig asked for more information regarding the use of Capital Improvement Program funds for electric service options. lie was interested in a beginning and ending fund balance. Dennis Marino suggested that he, Mr. Doolin and Mr. Nesvig meet to analyze the account information together. Regarding advice to ratepayers as to how they might protect their equipment in case of rolling blackouts, Mr. Marino informed members that he and Max Rubin will be moving forward on this and will report back to the EEC at a future date. COMMUNICATIONS Communications were accepted. Several handouts were provided by Staff. These were: Memorandum dated 9/1198 from Roger Crum to EEC Members regarding the outside attorney authorized by City Council; letter dated 9(2/98 from Roger Crum to Greg Petro regarding upcoming franchise discussions; an informational update from Stanley Consultants; and a ComEd response to the June 29 request for information from Stanley Consultants. ADJOURNMENT The meeting adjourned at 9:10 A.M. MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: APPROVED ENERGY COMMISSION MINUTES Wednesday, October 7, 1998 - 7:15 a.m. DOOLIN, GRUMMAN, HOFFMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, WARMINGTON NONE MARINO, RUBIN, FARQUHARSON ALDERMAN BERNSTEIN CALL TO ORDER The meeting was called to order at 7:21 a.m. APPROVAL OF MINUTES OF SEPTEMBER 4, 1998 The minutes were approved as submitted. b aye, 1 abstention (Grumman) BUSINESS PARTNER REPORT Bud Nesvig suggested that it was time to initiate RFPs to power suppliers. It was noted that five power suppliers had expressed interest in doing something in Evanston. There was discussion concerning the need for certain parameters to be developed, that the power suppliers need to know what the City wants, and that criteria would have to include reliability and lower cost. Del Leppke suggested that perhaps the RFP should specify the acquisition or lease of the distribution system. Discussion revealed that it will require some work to develop the scope of an RFP. Alderman Bernstein was asked whether the City Council was in a mood to accept a long-term relationship with a business partner/power supplier. Alderman Bernstein replied that he could not speak for the City Council, but the Council is aware that something must be done. He stated that no business partner would invest substantially without a long term contract. He further noted that the answer to that question will become self-evident when we get going on this. Del Leppke moved that the Energy Commission request the City Council to approve an RFP to potential power suppliers to respond with proposals designed to improve reliability and lower the cost of electric power in Evanston. The motion was seconded by David Kraft. David Grumman moved that the motion be amended that, if the A&PW Committee is receptive to this concept, the Energy Commission would be willing to appoint representatives to a joint committee with A&PW Committee members to develop a scope for the RFP, seconded by Del Leppke. The amendment and original motion passed unanimously 7-0. Responding to a question from David Kraft, Dennis Marino clarified that the Energy Commission's request would be forwarded to the A&PW Committee, and sent at the same time to the entire City Council. Approved Fnergy rnmmiccinn Minu i-c Par 7 iqj& EXECUTIVE SESSION The Energy Commission entered executive session by roll call vote (all aye) to discuss franchise negotiations issues at 7:57 a.m. By consensus of members, the Energy Commission adjourned Executive Session at 8:32 a.m. Mr. Doolin arrived during the Executive Session. CONSULTANT PROGRESS: ELECTRIC DISTRIBUTION SYSTEM ANALYSIS Dennis Marino reported that Stanley Consultants had completed their draft report and a second draft will be issued this Friday. Del Leppke explained that the technical content was completed. However, the report needed further organization and a summary. Mr. Leppke had prepared his own summary which he distributed to members. Dennis Marino stated that the components of the report not yet received were the recommendations regarding franchise issues and reliability. ComEd had provided the requested information to the consultant, albeit slow in some cases. He, Max Rubin and Del Leppke had previously concurred that it would be good to commence Phase II of the study. Dave Metz of Stanley Consultants can arrange to meet with the Commission on Wednesday, October 14, 1998 at 7:15 a.m. to discuss the report and the process for commencing Phase 11. Members agreed to this special meeting date, which staff will confirm. Del Leppke commented about the report, using his summary as a guide. The report was compiled from data supplied by ComEd. Mr. Leppke's summary included system description and data, an analysis of the system and conclusions. He noted that the six circuits identified as the worst performing in Evanston (over a four-year period) had not had improvements performed on them during that period, per ComEd records. He clarified that the downtown outages experienced within the last five years were not on these circuits, however. Max Rubin reported that the ComEd system map has been entered into the City's GIS computer system. ADDITIONAL REPORTS Dennis Marino stated that the negotiating team will be meeting soon. Mr. Nesvig asked about semiannual meetings that may occur between City staff and ComEd. Mr. Marino indicated that there are communications between the two organizations, but no set semiannual meetings as such occur. Regarding the status of the electric service options account, Mr. Marino provided two handouts detailing cumulative activity and an unspent balance of $182,667 as of8/31/98. He explained that the Capital Improvement Program computer data does not hold previous years in the line -item fashion. Ray Doolin requested a hard copy of the Capital Improvement Program data for previous years so that he may compile the data in a format that Mr. Nesvig was seeking. PUBLIC RELATIONS Bud Nesvig referred to the 9/I7/98 issue of the Evanston Review wherein several members of the Energy Commission were quoted. This was cited as an example of the scattered approach that exists Appmued Fj]P-rgU rnmmicainn Minith-c Par I 10/7/4R of informing the public. David Kraft stated that a unified approach is needed and he suggested that articles be prepared and space be purchased regularly in the papers. Bud Nesvig asked members if it would be all right for him to bring up the request for a public relations person at the next A&PW meeting. Max Rubin stated that, at the Iast A&PW meeting, all communications had to be tabled due to time constraints. Mr. Rubin hoped he could move the item up on the Agenda at the next A&PW meeting. Mr. Marino recalled that some members of the Commission had expressed the need to think through the relationship between strategy and public relations first. Dave Kraft stated that someone who knows which words to use in the language of deregulation and what effect they will have on the community would be very beneficial. A public relations expert would control the information that gets out, do educational pieces and serve as an advisor as to what to say and how to say it. Otherwise reporters will be putting their own pieces together based on who they may be able to contact at any given time. Del Leppke emphasized the need for the City to clarify how they are going to address public relations regarding this issue. David Kraft suggested that the Evanston Community Media Center (ECMC) be used to air two half- hour shows on Evanston Cable. The interview sessions with a live audience could include the City Manager, an Alderman, an EEC member and perhaps Mr. Pat Giordano. He offered to have Nuclear Energy Information Service (NEIS) sponsor a program on October 28. Max Rubin indicated that the City can request a free program at ECMC at any time, and NEIS did not need to give up its air time for this issue. David Kraft also suggested that Janet Hoffman appear on the "Open Mike" half-hour program, which would provide another opportunity to control the message. Max Rubin distributed September outage information which ComEd had faxed to him yesterday. ADJOURNMENT Meeting adjourned at 9:30 a.m. Jo r arquh6s, Planning Division MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: OTHERS PRESENT: APPROVED ENERGY COMMISSION MINUTES Wednesday, October 14, 1998 - 7:15 a.m. GRUMMAN, KRAFT, LEPPKE, MICHAELS, NESVIG, WARMINGTON DOOLIN, HOFFMAN MARINO, RUBIN, FARQUHARSON KEN JACOBS AND DAVID METZ OF STANLEY CONSULTANTS CALL TO ORDER The meeting was called to order at 7:22 a.m. This meeting of the Energy Commission was a special meeting with Stanley Consultants which had been hired to perform a Reliability Assessment Report on the electric distribution system in Evanston. The confidential draft report had been submitted prior to the meeting, allowing members time to review it. The report had been distributed as a confidential document since recommendations concerning franchise negotiations were embedded in the report. Mr. Metz presented the report highlights and answered questions from members. Mr. Metz explained that the draft report consists of an Executive Summary, Section I and explanatory appendices. Section 1 provides a technical analysis of the distribution system including a review of the apparent capability and reliability of the system. Sections 2 through 4 will follow. These will include: 2) evaluation and suggestions for performance criteria, 3) a review of and recommendation for penalties and compensation mechanisms; and 4) a review of the newly promulgated Illinois Commerce Commission (ICC) standards. The second phase of the Consultant's work, the study and viewing of the actual distribution system, should commence today. Mr. Metz explained that. in reality, reliability includes three key elements: quality, quantity and continuity of power. At present, reliability is measured by the industry in terms of duration and frequency of outages. ComEd defines an outage as interruption of power for more than one minute. The report was compiled with data supplied by ComEd, and Mr. Metz stated that ComEd had been helpful in fulfilling their requests, but timeliness had been an issue. The system in the downtown area was discussed. Mr. Metz stated that 4 feeders from the 1712 Emerson substation feed a downtown network which is designed to supply electricity to the area even in the event that ? feeders were down. This is accomplished through backfeeding of the system. Members asked about the two major outages that occurred on that network. Mr. Nesvig suggested that Mr. Metz review the ComEd report concerning the downtown outages. Staff will supply the report to Mr. Metz. Annrnved FnervT nmmicsinn Minigi-c PAgP 7 inITAlOR Mr. Metz then engaged in a detailed explanation of Appendix E-1, which is a summary of supply substation feeders. The electric distribution system is designed to have backfeed (can be supplied from more than one source) and emergency tie capabilities. The load capacity must be able to absorb the tied -in feeder. He noted that if a feeder is handling a load of power at greater than 75% of its capacity, it may not be able to handle a backfeed from another feeder. An analysis of the per cent of loading capacity of the feeders revealed that 29 circuits ( out of 64) are deemed to be inadequate now concerning backfeed capabilities. Given an annual load increase of 2'/2%, approximately 45% of the 64 feeders will be at or over design capacity with respect to direct load capabilities within the next ten years. The Isabella -Bryant feeder has no tie-in to another feeder as a backup. Mr. Metz suggested that a three or ten-year plan for improvement could address these problems. There was discussion about the projected future load increases. Based on 1991-97 ComEd data, Del Leppke reported that there had been a 1% growth for residential and a 2% growth for commercial users. Dennis Marino stated that, based on City permit data over the last 3 years, 2% is a reasonable estimate of load increase. Members asked how ComEd had arrived at the actual load figures. Mr. Metz explained that CotnEd has the loading information for substations and they allocate power based on the number of customers on each feeder. The actual load is therefore an estimate based on a proration of the known load for the substation. Conductor sizes for each feeder are not noted on ComEd maps. The subject of reliability indices was discussed. It was noted that existing reliability indices have been written by the utilities themselves. Mr. Metz highlighted Appendix I which consists of a research paper presented in 1997 entitled "Establishing Realistic Reliability Goals." The paper explores additional reliability indices that may work toward establishing reliability goals to include momentary interruptions and average service availability. In the draft report, the six worst performing feeders were identified. Mr. Metz explained that feeders were ranked according to the duration and frequency of outages from 1995 to 1998. Feeders that were among the worst in both categories and served over 30 customers were identified as the worst. They may not be the worst in a given year or in a given category, however. The cause of outages on these feeders, based on information supplied by ComEd, was then discussed. Trees accounted for a large percentage of outages, followed by an undetermined cause, and underground failure third. Mr. Metz highlighted that the data regarding cause of outage on the six %vorst feeders is sorted in Appendix N. Members made further suggestions which will be incorporated into the final report. Bud Nesvig stated that ComEd needs to improve their maintenance of the system. He stated that ComEd personnel have, at times, forgotten to turn the power back on after a lock -out, which then resulted in back feeding. In summary, Mr. Metz noted that the ICC is expected to approve a tariff regarding tree trimming by utilities which will supersede local ordinances. I1tPQ par Mr. Metz directed attention to Appendix M-2 which lists ConEd of New York as having a very low frequency of outages in the Manhattan area, which should be looked into. Mr. Metz did not feel that overload was a legitimate or reasonable cause for an outage because it is not beyond ComEd's control, but should be taken care of in the planning stage. Del Leppke offered to provide some input to determine which areas of the distribution system should be studied. Dennis Marino indicated that the A&PW Committee would be informed of the planned start of Phase II of the study (which is the study of a portion of the actual distribution system in Evanston.) In conclusion, Mr. Metz provided a hand-out detailing the locations of the outages of the worst six feeders on a map of Evanston divided into 7 parts. He will incorporate this data into the final report. Members thanked Mr. Metz and Mr.Jacobs for their presentation. ADJOURNMENT The meeting adjourned at 9:05 a.m. �ax &4a&hw,�. Jo Farquhars , Planning Division MEMBERS PRESENT: MEMBERS ABSENT: STAFF PRESENT: ENERGY COMMISSION MINUTES Thursday, November 5, t998 - 7:15 a.m. GRUMMAN, HOFFMAN, WARMINGTON DOOLIN, KRAFT MARINO, FARQUHARSON CALL TO ORDER The meeting was called to order at 7:20 a.m. APPROVED LEPPKE, MICHAELS, NESVIG, EXECUTIVE SESSION The Energy Commission entered Executive Session for the purpose of discussing matters related to negotiation of the electric service franchise at 7:21 a.m. by roll call vote of members present: 5-0. The Energy Commission resumed the Public Meeting by consensus at 8:29 a.m. Janet Hoffman had arrived during the Executive Session. APPROVAL OF MINUTES OF OCTOBER 7 AND 14, 1998 When a quorum was reached, the minutes of October 7 were approved with several editorial changes; 6-0. The minutes of October 14 were approved with several editorial changes as well: 5 aye, I abstention (Hoffman). BUSINESS PARTNER REPORT Dennis Marino recalled that, at the October 7 meeting of the Energy Commission, it was determined that some work will be required to develop the scope And substance of an RFP to potential power suppliers. Bud Nesvig offered to develop a draft and send it to members for consensus with the intent to present it to the A&PW Committee. Dennis Marino suggested that Del Leppke and Janet Roffman convey to the negotiating team the Commission's recommendation. Gary Michaels stated that it is good strategy to have this effort on the record. ADDITIONAL REPORTS Status or Advice to Ratepayers Regarding Rolling Blackouts Dennis Marino informed members that Max Rubin had been in the hospital and is now recuperating at home. Mr. Rubin had identified a brochure that fie would like to share with EEC members concerning this issue. Information on ComEd Plans to Improve Infrastructure or Evanston Distribution System Bud Nesvig stated that, some time ago, at a meeting in Roger Crum's office with Mr. Fetro from ComEd, nine informational items were promised and have not been provided. Mr. Marino offered to determine what has been received. Del Leppke added that ComEd's financial plans should be on file with the [CC, Del Leppke had checked the ICC Home Page on the internet and downloaded the reliability rules which were listed as revised on 9/1 I/98. Re discovered that the entire Section C dealing with penalties on reliability issues has been repealed. He wondered whether the N WMC has dealt with that. ApPmut'd F�—rrt g r nmmiecinn MinntPc P,"Of-7 Other Requests Bud Nesvig sought a way to contact persons in Evanston who are served by the six worst feeders and ask them if they care about the problem. He wondered whether names and addresses would be available on diskette from the Water Department. Discussion ensued. Another possible resource could be the Realtors Association. Dennis Marino stated that he would look into what is available. Another request of Mr. Nesvig was to determine what undergrounding of electric cable has occurred in Evanston since 1994. Dennis Marino will refer this to the Engineering Department if the Commission concurs. Janet Hoffman and Del Leppke agreed that this request relates to auditing ComEd's improvements and is appropriate. Dennis Marino mentioned two major improvements that involved undergrounding (Green Bay road development and CTA station improvements), but he was uncertain who actually funded the undergrounding of those projects. Regarding the obtaining of permits to perform undergrounding, Dennis Marino will check with the Engineering Department to clarify that procedure. Bud Nesvig referred to Quick Take provisions he had read about concerning certain developments and wondered whether this could be used to acquire the electrical distribution system. Dennis Marino clarified that Quick Take provisions speed up the real estate acquisition process that may be impeding a major development. It must be a condition precedent to doing the development, requires insertion into a legislative bill and a court proceeding. Janet Hoffman added that constitutional protections of an individual's rights to hold property strictly limit by statute the ability of a municipality to condemn property. Dennis Marino offered to confer with Herb Hill as to whether Quick Take provisions could apply to acquisition of the electrical distribution system. Bud Nesvig would like to see the actual request the City made in its recent request for Quick Take condemnation proceedings. Mr. Marino stated that he would obtain an explanation for Mr. Nesvig. COMMUNICATIONS Communications were accepted. Janet Hoffman noted that materials distributed in this month's packet contained an article from the Bond Buyer concerning the City of Buffalo, New York, challenging the Niagara Mohawk Utility in court to invalidate stranded cost provisions. She suggested that this case be followed closely and that City staff may want to contact Buffalo. Buffalo is also considering municipalization. Del Leppke noted that the transition cost strategy may have to become political and involve the NWMC. Another communication dealt with Proposition 9 in California which seeks to change the current deregulation law that was passed in that state and eliminate stranded cost provisions. In the discussion that followed, Del Leppkc noted that ComEd has sold coal-fired plants, which raises the question of whether the income from those sales is being deducted from the stranded cost figure. The current deregulation law in Illinois does not provide for transition cost changes. Last summer, ComEd could not provide enough power, so how can there be stranded costs if there is no excess power? ADJOURNMENT Meeting adjourned at 9:10 a.m. Jo ar uharso , Plannin Division q g A • APPROVED ENERGY COMMISSION MINUTES Thursday, December 3, 1998 - 7:15 a.m. MEMBERS PRESENT: DOOLIN, GRUMMAN, KRAFT, LEPPKE, NESVIG, WARMINGTON MEMBERS ABSENT: HOFFMAN, MICHAELS STAFF PRESENT: MARINO, RUBIN, LEYENDECKER, FARQUHARSON CALL TO ORDER The meeting was called to order at 7:22 a.m. Kristia Leyendecker, a Management Analyst from the City Manager's Office, was introduced. APPROVAL OF MINUTES OF NOVEMBER S, 1998 When a quorum was reached, the minutes of of the Energy Commission meeting held November 5 were approved with several editorial changes: 6-0. BUSINESS PARTNER REPORT Del Leppke reported that he had made a presentation to the A& PW Committee, requesting issuance of an RFP for Power Supply. He stated that the Committee was in general agreement that this effort might be useful for the negotiating team. They had asked for the rationale behind this request as well as a scope of services. Dennis Marino suggested that staff and EEC members meet to develop a written response. During the discussion that followed, Mr. Leppke pointed out that legal counsel may be needed in order to provide further information to the Committee. What is the [CC jurisdiction and should the RFP include what the City is prepared to do? Perhaps power suppliers are interested at present because the scope is so loose. Max Rubin reminded members that he would need further information in order to keep the item on the AB:PW agenda for the December 14th meeting. CONSULTANT PROGRESS: DISTRIBUTION SYSTEM ANALYSIS Del Leppke reported that a meeting had been held with the Consultant and Energy Commission members. A final report is due from the Consultant on December 10th. REPORT ON THE MEETING WITH SUBSITE SERVICES, INC, A FIRM WHICH INSTALLS UNDERGROUND UTILITY WIRES Bud Nesvig reported that, at the meeting with Subsite Services, Inc, he understood that the cost to underground electric wires is about the same as installing overhead wires. The company bores through the ground, the bore is computer -guided with 6,000 fl. end -to -end capabilities. Mr. Nesvig suggested that The company be invited to give the City a price for undergrounding several City blocks of different types. Mr. Marino had identified four blocks that were representative of the different types of blocks in the City. These were: Single family block - Dempster, Hinman, Judson: Multi -family block - Clyde, Brummel, Callan. Howard: Business district and Institutional - Central, Hartrey. Harrison. Prairie: and West side smaller, denser lots - Hartrey, Church, Grey. Emerson. Itwe A,a Fr '7 1,)n10& Mr. Marino suggested that the members of the Energy Commission speak first with the Director of Engineering before contacting Subsite Services. There being no objections to proceeding, Del Leppke and Bud Nesvig volunteered to meet with the Director of Engineering and move forward on this project. NOMINATION AND ELECTION OF OFFICERS OF THE ENERGY COMMISSION Roy Warmington moved that the Officers continue to serve in their current capacities, seconded by Del Leppke. Motion carried:6-0. The Officers will continue to be: Chairman - Bud Nesvig, Vice -Chairman - David Grumman; Secretary - Janet Hoffman. 1999 ENERGY COMMISSION SCHEDULE OF MEETINGS The Schedule for 1999 was approved. ENERGY COMMISSION MEMBERSHIP Roy Warmington noted that two members of the Energy Commission will complete their 2nd and final terms on the Commission during 1999. Members discussed how to encourage application to the EEC. Responding to a question, Dennis Marino indicated that the City does advertise for general Board and Commission involvement, but he did not recall that request for specific Commission involvement has been made in the media. Staff was asked to inquire of the Mayor's Office regarding membership applications to the Energy Commission. ADDITIONAL REPORTS Status of Advice to Ratepayers Regarding Rolling Blackouts Max Rubin reported that he had several brochures on disaster preparedness, but nothing specific to energy outages. He will investigate whether an energy -outage brochure is available. Bud Nesvig suggested that a firm like General Electric could be a resource and should have a maintenance policy that may cover voltage spikes or fluctuations. Information on ComEd Plans to Improve Infrastructure of Evanston Distribution System Dennis Marino suggested that these types of requests be routed to the negotiating team through Del Leppke and Janet Hoffman. Other Reports Bud Nesvig had requested information on the City's Quick -Take proceedings with Dave's Italian Kitchen. 1Ir. Marino understood this request to be linked with Mr. Nesvig's thinking that the Quick -Take procedure could be used to acquire the electrical distribution system. Mr. ;Marino offered to inquire whether the papenvork on the City's effort is a public document that can be shared, and he suggested that Bud Nesvig obtain a copy of the Act governing Quick -Take which would likely provide the information he may be seeking. DEREGULATION David Kraft reported that nothing had happened in the veto session of the Illinois Legislature with respect to the deregulation bill. Session will reopen in January and he suggested that now is the time for any legislative provisions to be developed and this perhaps in conjunction with the NW1vIC. rc Par I 17nlos- EXECUTIVE SESSION The Energy Commission entered Executive Session for the purpose of discussing matters related to negotiation of the electric service franchise at 8:34 a.m. by roll call vote of members present: 6-0. The Energy Commission resumed the Public Meeting by consensus at 9:23 a.m. COMMUNICATIONS Communications were accepted and discussed briefly. ADJOURNMENT Meeting adjourned at 9:30 a.m. �l V C[/l Jo Fargt:Etarson, arming Division