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Minutes

Note: These minutes are in draft form pending approval by the Board at its next public meeting.

NEBRASKAPOWER REVIEW BOARD

Minutes of the 784th Meeting

June 23, 2017

The 784th meeting of the Nebraska Power Review Board (“the Board” or “PRB”) was held in the Grand Island City Council Chambers, Grand Island City Hall, 100 E. First Street, Grand Island, Nebraska. The roll was called and present were Vice Chairman Morehouse, Mr. Grennan, and Mr. Moen. Mr. Hutchison had informed the Board that he would be unable to attend this meeting due to Naval Reserve training. Chairman Reida had contacted the executive director just prior to the start of the meeting and explained that his car had struck an object on the interstate and was disabled. He will at least be late, and may not make it to the meeting at all. Executive Director Texel stated that public notice for the meeting had been published in the Grand Island Independent newspaper on June 13, 2017. All background materials for the agenda items to be acted on had been provided to all Board members prior to the meeting and a copy was in each Board member’s notebook. The executive director announced that a copy of the Nebraska Open Meetings Act was on display on the wall in the back of the room for the public to review, and another copy was available in a three-ring binder on a table at the side of the room. A copy of all materials that the Board would consider was available for public inspection on a table in the back of the room, as well as extra copies of the agenda.

Executive Director Texel announced that Chuck Haase was in attendance. Mr. Haase served as a Board member for the past four years, until his term ended in April when Mr. Moen was confirmed by the Legislature. On behalf of the Board, Executive Director Texel thanked Mr. Haase for his years of dedicated and conscientious service. He presented Mr. Haase with a plaque thanking him for his service, and gave him the wooden name plate that had sat in front of him during meetings. The Board members also thanked Mr. Haase and said it had been a pleasure to work with him over the past few years.

The Board first considered the draft minutes from its May 26, 2017, meeting. The staff did not have any recommended changes. Mr. Grennan moved to approve the minutes. Mr. Moen seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse – yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3– 0 with two absent.

The next agenda item was acceptance of the expense report for the month of May. The expenses for May were $21,847.59 in personal services, $16,616.57 in operating expenses, and a net gain of $94.52 in travel expenses. The total May expenses were $42,003.61. Travel Expenses showed a net gain because the Board had $658.70 in travel expenses and received reimbursements totaling $753.22 from the Southwest Power Pool for Mr. Grennan’s travel to attend Regional State Committee meetings. The net difference was a gain of $94.52. Some of the reimbursements were from travel that took place in March or April. The actual expenses for May were $42,756.83. Vice Chairman Morehouse asked about the expenses in the computer software category. Ms. Hallgren stated that computer related items are labeled as a fixed asset and thus is shown as a capital outlay in the computer category. Mr. Moen moved to accept the expense report for May. Mr. Grennan seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse – yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3– 0 with two absent.

The next item on the agenda was an application filed by the Nebraska Public Power District (NPPD). The application was designated as PRB-3856. On May 24, 2017, NPPD filed an application to construct 1.07 mile of 69 kilovolt (kV) transmission line, .09 mile of 115 kV transmission line and a 115 kV substation in Rock County, Nebraska. The purpose of the line and substation is to provide increased reliability in the general vicinity of the City of Basset. The construction is located in the service area of KBR Rural Public Power District. KBR Rural PPD filed a Consent and Waiver Form. The Board consulted with the Nebraska Game and Parks Commission as required by Nebraska Revised Statute section 37-807(3). A letter was received on June 21, 2017 explaining the Commission’s findings. The project is in the range of the endangered American Burying Beetle and Whooping Crane, as well as the threatened Northern Long-Eared Bat, Redbelly Dace, Finescale Dace and Small White Lady’s Slipper. The Commission believes it is unlikely the species listed inhabit the project area, with exception of American Burying Beetle. NPPD agreed to implement conservation measures to minimize the possibility of harming any American Burying Beetles. The Commission determined that the project “May Affect, but is not likely to adversely affect” any threatened or endangered species, and the Commission does not object to approval of the project. Mr. Grennan moved to approve application PRB-3856. Mr. Moen seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse – yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3– 0 with two absent.

The next item on the agenda is an application filed by the Dawson Public Power District. The application was designated as PRB-3857. On June 5, 2017, Dawson PPD filed an application to construct .98 mile of 69 kV transmission near the Village of Elm Creek, Buffalo County, Nebraska. An existing line will be rebuilt in the same location, but the new line will be upgraded to 69 kV, but operated at 34.5 kV. The plan is to switch over to 69 kV in the future. The project is located in the service area of the Nebraska Public Power District. NPPD filed a Consent and Waiver Form. The Board consulted with the Nebraska Game and Parks Commission as required by Nebraska Revised Statute section 37-807(3). A letter was received on June 21, 2017 explaining the Commission’s findings. The project is in the range of the endangered Whooping Crane, Interior Least Tern, as well as the threatened Piping Plover and Northern Long-Eared Bat. The Commission stated that there are no records of these species in the project area. The Commission determined that the project “May Affect, but is not likely to adversely affect” any threatened or endangered species, and the Commission does not object to approval of the project. Mr. Grennan moved to approve application PRB-3857. Mr. Moen seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse – yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3– 0 with two absent.

The next item on the agenda was consideration of revising the Board’s assessment figure for fiscal year 2017-2018. At its May meeting, the Board approved an assessment figure of 12.971290 (cents per $1,000 gross revenue), using $114,000 as a cash reserve balance. The Governor’s Budget Office contacted the Board’s staff and indicated they would not approve the assessment figure. The Budget Office wants the Board to reduce the cash balance on hand. The new assessment figure recommended by the Budget Office is 11.7782105. This would begin to draw down the cash balance and the Board would not collect the full amount of its appropriation. The remaining balance would be the reserve amount of $114,000. The Budget office indicated that it does not want the assessment figure to be fluctuating. Vice Chairman Morehouse asked where this leaves the Board for cash on hand. Ms. Hallgren (the Board’s business manager) stated that her concern is the proposed $114,000 reserve would be tapped into to cover encumbrances incurred during the end of one fiscal year but actually paid in the next fiscal year. If the Board had a significant amount of encumbrances and no excess cash, the Board could find itself tapping into the reserves that are intended to pay expenses during the new fiscal year prior to the new assessments being received from the utilities. This was raised with the Budget office and it was admitted that this scenario was overlooked. Mr. Grennan asked if this is just a cash-flow issue that would even itself out by the end of a fiscal year. Ms. Hallgren replied that the reserve fund would be used to pay encumbrances, leaving the Board with potentially two months or so of cash reserve instead of three months. This makes the Board vulnerable due to the loss of excess cash for the previous year’s encumbrances.

The Budget Office believes the Board should use a special assessment if the Board finds itself in a situation where there will be a financial shortfall. The executive director told the Board the special assessment authority is not as clear as it at first appears. One statute ( 70-1020) authorizes the Board to collect funds through assessments on the utilities to defray its expenses. Another statute ( 70-1024) specifically authorizes the use of special assessments, if needed, to pay the costs of preparing a statewide long-range power supply plan. There is no specific authority in 70-1020 that authorizes the Board to use a special assessment to collect additional funds if the amount collected is insufficient to pay the Board’s expenses, but the appropriation is larger than the amount actually collected through assessments. The executive director told the Board it is his opinion that the Board likely has inherent authority to use a special assessment, as it is necessary in order to allow the Board to fulfill its mission. But someone could challenge the Board’s authority to engage in a special assessment that is not related to a statewide long-ranger power suppy plan. He said this is something he would like to see addressed through Legislation next year. He would like to have explicit authority to use a special assessment to allow the Board to collect funds for its normal operations. Mr. McClure, legal counsel for NPPD, asked if the utilities could just give the Board the money necessary to continue to operate if a shortfall occurs. Executive Director Texel and Ms. Hallgren replied that the State does not allow that type of financial transaction. It would be treated like a loan or a gift. No statute authorizes the Board to accept financial loans or gifts. Vice Chairman Morehouse stated that the Board should start the process of coordinating with the Budget Office sooner next year. Ms. Hallgren told the Board it spends about $515,000 in a year, and we will be collecting $480,000. The Board is already collecting below its projected expenses. However, the Board should be fine this year. The concern starts to be important next year. It would not be easy to operate the office if the Board had to institute furloughs and try to collect a special assessment. The process for collecting the special assessment would also overlap the regular assessment and surely cause confusion for some utilities. It is already difficult to collect from some small utilities. Then to have to explain that there needs to be another payment for a special assessment would be problematic. Also, with a smaller assessment, some utilities would likely be paying a dollar or less. The previous number was 12.971290. Using the new assessment would constitute a reduction of 1.1930765. Mr. Moen asked about the SPP consultant’s contract and how that would work in a budget crisis. Executive Director Texel explained that it is an annual contract, and it does include a provision that allows for curtailment of the contract if funding is unavailable. Vice Chairman Morehouse stated that due to the involvement of the SPP consultant, there would be a serious negative effect for Nebraska and its electric utilities if the Board essentially shuts down. The Board’s consultant is heavily involved in SPP and to simply stop working with SPP could have a significant negative for both Nebraska and the SPP. The Nebraska utilities could be effected by missing an important vote that could affect the State. The Board members agreed that the discussion cannot stop here that the Board may need to discuss this further with the Nebraska Power Association and the Governor’s Budget Office. Mr. Grennan moved to approve the new assessment figure of 11.7782105 cents per $1,000 of gross income. Mr. Moen seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse—yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3 – 0 with two absent.

Vice Chairman Morehouse stated that the Board should set up a time in January to review the agency’s proposed budget with the Governor’s Budget Office when working on next year’s assessment figure. The Board members said they would like to know what the Budget Office’s guidelines are when deciding whether to approve an assessment figure. Without guidelines it seems fairly arbitrary, which makes it difficult for the Board’s staff. The Board members also asked the executive director to think about what language would be necessary for to address the special assessment situation.

The next item on the agenda was to consider an amendment to Guidance Document No. 9. Executive Director Texel explained that last year the Legislature repealed the Certified Renewable Export Facility (CREF) language in section 70-1014.02 and replaced it with new language pertaining to privately developed renewable energy generation facilities. In section III of the Guidance Document it refers to CREF applications, so that needs to be deleted. Also, in section III.6. it references capacity purchase agreements entitling a purchaser to a set portion of a facility’s output. This language needs to be amended to acknowledge that capacity purchases are for capacity called upon when needed, not for percentage of output. Then new language would be added to address power purchase agreements where a purchaser does purchase a percent or amount of the facility’s output. Although important in effect, the changes are relatively minor and are more related to clarification and to remove outdated language than making any substantive changes. Mr. Moen moved to approve the proposed amendments to Guidance Document No. 9. Mr. Grennan seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse—yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3 – 0 with two absent.

The next item on the agenda was the executive director’s report. The first item discussed was an update on Southwest Power Pool (SPP) activities. Mr. Grennan discussed the upcoming SPP and RSC meetings in July.

The executive director informed the Board about an update to the Board’s website. Nebraska Interactive provides assistance with the website updates and any issues that comes up. They are designated by the Secretary of State’s office as the entity that provides this service to agencies without their own information technology personnel. The Board currently uses Amaya software to update the website, which was installed years ago by Nebraska Interactive. Nebraska Interactive informed the staff that the PRB is now the only agency that uses Amaya. When the staff installed their new computers there was an issue with Amaya and updating the website. Support is no longer provided for the Amaya system. Nebraska Interactive has an hourly service rate to update the Board’s website, but no one at Nebraska Interactive works with Amaya any longer. Nebraska Interactive proposed to update the Board’s website for a cost of approximately $6,000. They would not be able to start on the project until January or February of 2018. The Office of the Chief Information Officer had someone check our system and provided a temporary fix to the Amaya system, but if the problem recurs the staff will likely once again lose the ability to make any changes to the agency’s website. This will be an upcoming expense but there is no action required right now. There will also be an annual fee for the maintenance service. Executive Director Texel said he sees no alternative but to update the website and asked the Board if it agreed. All members agreed that the project is necessary to ensure access to the website.

The Board next considered whether it would give the executive director a salary increase comparable to raise that will go into effect on July 1 for all classified employees. On July 1 all classified will receive a one percent raise. Executive Director Texel recommended that the Board limit any raise to the one to be received by all classified employees. Mr. Grennan moved to approve giving a one percent salary increase to the executive director and general counsel, effective on July 1, 2017. Mr. Moen seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse—yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3 – 0 with two absent.

The Board noted its next scheduled meeting dates are on the fourth Friday of each month. The next meetings will be on July 28, August 25, and September 22.

Vice Chairman Morehouse moved to adjourn the meeting. Mr. Grennan seconded the motion. Voting on the motion: Chairman Reida – absent, Vice Chairman Morehouse—yes, Mr. Grennan—yes, Mr. Hutchison—absent, and Mr. Moen—yes. The motion carried 3 – 0 with two absent. The meeting was adjourned at 10:53 a.m.

_______________________________

Timothy J. Texel

Executive Director and General Counsel



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