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Public Utilities 1996/10/03 PUBLIC UTILITIES BOARD MINUTES OCTOBER 3, 1996 The agenda having been posted on Friday, September 27, 1996, the Regular Meeting of the Public Utilities Board was called to order by Chairperson Dale Stanton at 3:30 p.m. on Thursday, October 3, 1996, in the City Hall West, Ilth Floor Conference Room, 201 S. Anaheim Blvd., Anaheim, California. Board Members Present: D. Stanton, W. Wiseman, T. Kirker, R. Lawson, P. Lem, J. White Board Members Absent: D. McMillan Staff Present: E. Aghjayan, E. Alario, M. Bell, L. Moses, D. Tarkington, C. Barnhart, G. Broeking, J. Chavez A. Dubberly, P. Grimes, R. Howell, M. Long, J. Taghavi, L. Topaz, K. Welch, P. Wong, M. Houghtaling Guests Present: J. White, City Attorney 1. PUBLIC COMMENTS Chairperson D. Stanton asked for public comments. There being none, the Public Comments portion of the meeting was closed. 2. APPROVAL OF MINUTES OF SEPTEMBER 5. 1996 P. Lem said he would like to propose adoption of the September 5, 1996, minutes, but wanted to make some comments prior to making the motion. He stated that he admires the order of the City Council meeting and how the minutes are transcribed. He also expressed concern over the accuracy of the minutes of the Board and that they seemed to be biased, whereas the City Council minutes appeared to be neutral. D. Stanton ruled that P. Lem was out of order and requested that a motion be made to approve the September 5, 1996 minutes. W. Wiseman moved approval of the September 5, 1996 minutes as written. T. Kirker seconded the motion. MOTION CARRIED 5 -1. P. LEM OPPOSED. 1 ABSENT. 362 3. DISCUSSION OF PUBLIC UTILITIES BOARD GOALS. OBJECTIVES AND RESPONSIBILITIES E. Aghjayan stated that at the September 5, 1996 PUB meeting the Board asked to agendize an item for today's meeting to discuss the Public Utilities Board's goals, objectives and responsibilities. P. Lem had felt that there was some language that seemed to conflict in the City Ordinance with the City Charter and City Attorney Jack White agreed to attend today's meeting to be available to answer questions the Board may have. Jack White responded to a question to clarify the ability of the Board to amend the Charter or Ordinances. He said that the Charter is the paramount law of the City and it supersedes anything that would be inconsistent in the City Codes. Jack White responded to a question from P. Lem about conflicts between the Charter and the Ordinances and said that if there is a conflict between the language of the Charter and the Ordinances, regardless of which is adopted first, the Charter always prevails over the Ordinances. W. Wiseman asked if the function of the Board is a lawmaking organization, or if it is simply an advisory organization. Jack White replied that the function of the Public Utilities Board is to be an advisory body to the City Council. W. Wiseman asked Jack White what the relationship of the General Manager is to the Council and to the Board. Jack White said that the Public Utilities General Manager is a Department Head of the City and is appointed by the City Manager with the consent of the City Council. Responding to questions about the Board's oversight role in personnel decisions, E. Aghjayan explained that the Board has the opportunity, during budget review, to look at staffing levels and structure and, in that capacity, can look at an organizational structure and make recommendations on whether the Department has too many people or too few people. P. Lem questioned how the Board can make recommendations to the City Council on anything having to do with the operation and conduct of the Utilities of the City without considering the qualifications and duties of those personnel that will be conducting and operating the Utilities for the City. He felt that paragraph, .030 needs to be brought to the attention of the City Council and retained. T. Kirker asked if all of the Board's recommendations to the City Council were made through the General Manager of the Public Utilities Department and E. Aghjayan stated that in his capacity as Secretary to the PUB, he has a duty to report to the Council actions or recommendations the Board makes. Jack White advised the Board of the need to make sure they understand the distinction between communication with the Council, as a Board, and communication as an individual. Board members' authority is expressed by collective action, whereas individual action is conducted as any other private citizen would do. 363 R. Lawson stated his opinion that the PUB is very lax in communications among themselves, and they should be able to find out exactly what they feel and then take it forward as a body, not as a single member. Joe White stated that the way the Board is set up now seems to render the Board pretty useless and that he would like to know what items exactly the Board is supposed to recommend to the Council. E. Aghjayan stated that the Utilities Budget is presented to the Board for its review, which sets the stage for the programs and actions the Department takes during the year. He reiterated that the Board reviews the entire budget and has the time to set up individual hearings, set up committees, etc., and that staff is prepared to have more meetings if the Board wishes and to take more items before them. Joe White indicated he would like more information on previous transmission deals such as the Mead /Phoenix- Mead /Adelanto project and the $63 million in bond sales. P. Lem expressed interest in receiving the same information. E. Aghjayan advised Joe White that the staff had given updates on transmission projects when requested by the Board; but if the Board would like a regular update on these projects, it would be possible. He also advised Joe White that it was very difficult for staff when the PUB meetings were twice a month because of the necessary lead time for preparation of staff reports and updates required for the PUB packets. D. Stanton added that in the past, when the Department was getting into projects such as San Onofre, IPP, Four Corners, the Board was reviewing five to seven projects for coal, gas- fired, and hydro. The Department is not getting into new projects any longer so there is not the same amount of items brought to the Board for approval. E. Aghjayan stated that the new era with the Industry Restructuring will require more of the Board in making policy decisions on how it wants to handle issues such as direct retail access and programs for environmental set -aside. The Board thanked Jack White for his assistance at this Board meeting in answering questions the Board had and excused him from the rest of the meeting. E. Aghjayan said that the Board had offered to allow staff to bring up any issues they had with the Board and he had an issue to discuss regarding the item E. Aghjayan stated that he took exception to P. Lem's earlier comments where P. Lem said that he felt there is a bias in the way the Board meeting minutes are prepared intended to make him look like a troublemaker. E. Aghjayan stated that he hoped this was not intended as a reflection on the integrity or character of anyone that works on the minutes because the staff does not bias these minutes to reflect a point of view or perception. He stated that the minutes are prepared after carefully listening to the tapes and reviewing the meeting notes. 364 P. Lem responded that he was attacking the fact that the minutes do not accurately or logically represent the discussion that has taken place and he referred to the minutes of a past meeting (1994/95) that was a transcript of a public hearing to consider water rate changes. E. Aghjayan stated that he assumed P. Lem was referring to a mistake or an error in perception, and that he was not accusing staff of deliberately biasing the minutes and urged P. Lem to clarify that. P. Lem stated that it appeared that the minutes of September 5, 1996 referred to his comments repeatedly and that it seemed that the effort of this set of minutes was to present a picture of Mr. Lem as a troublemaker. E. Aghjayan expressed outrage at P. Lem's accusations that staff was trying to paint a particular Board member in a certain light and stated that if there is a record in the minutes of someone speaking, it is because they did speak. Any personal characterizations that staff is trying to cast P. Lem in a poor light, or that they are biasing the minutes, is inappropriate and should be condemned by the Board. D. Stanton and R. Lawson agreed with E. Aghjayan. E. Aghjayan proposed to agendize an item for the next meeting that the PUB minutes be prepared as the City Council meeting minutes are prepared - an action - oriented format of minutes. The Department would continue to retain the tapes from the meetings that cover the entire discussions and any boardmember would be welcome to listen to those tapes. • D. Stanton concurred and added that the tapes should not be thrown away. P. Lem recited the Municipal Code related to the Powers and Duties of the Public Utilities Board and reiterated his concern over the Board's oversight role in reviewing personnel qualifications. E. Aghjayan replied that he did not feel it was necessary to look at the duties and qualifications of personnel in order to judge the results of the operation of the Department. Mr. Aghjayan cautioned that if the Board members get into what they think should be the hiring process for a position, then they are getting into administrative processes that may constitute administrative interference, which is a very serious violation of the Charter. D. Stanton added that he felt the Board's involvement in the operation and conduct is meant, not to do with personnel, but strictly with materials and equipment, etc. E. Aghjayan reiterated his outrage at P. Lem's accusations and asked for an apology to staff regarding P. Lem's unwarranted allegations df bias in preparing the PUB minutes. E. Aghjayan felt that the accusations cast a poor reflection on the integrity of the employees of the Utilities Department. The minutes may not meet P. Lem's perception of what is accurate, but when he talks about bias and prejudice in attempting to put him 365 in a bad light, then that is a serious accusation and he takes strong exception to that accusation. D. Stanton agreed and asked P. Lem for an apology to staff. P. Lem replied that he had not accused anybody of falsifying the minutes and that what he had said was they were full of errors and did not give the appearance of being neutral. W. Wiseman asked P. Lem if he was saying that he was not accusing staff of falsifying the minutes or being biased in the presentation of the minutes and P. Lem responded that he was not accusing them of falsifying the minutes. D. Stanton stated his disgust that a Board member would make the kind of statements P. Lem made about staff s.preparation of the minutes and asked P. Lem if he wanted to apologize. P. Lem said no. W. Wiseman made a motion that the Board also sign E. Aghjayan's letter of complaint of Mr. Lem's actions. E. Aghjayan stated that he did not hear Mr. Lem use the word "falsify "; he did hear him use the word "bias" and heard him imply that staff was attempting to make him look like a troublemaker by the way it presented the minutes. E. Aghjayan indicated he would like to write a letter to the Chairperson that he may share with the members of the Board and to pass on to the Mayor or City Council if they wish. W. Wiseman made a motion to agendize this for the next meeting and the Board will review E. Aghjayan's letter to the Chairperson and make their decision whether to pass it on to the City Council and Mayor. 4. CONSULTING SERVICES AGREEMENT FOR ELECTRIC SYSTEM D. Tarkington addressed power outages in Anaheim that occurred several months ago. Those outages created concerns as to the reliability of the electric system. After discussions with E. Aghjayan and staff, the conclusion was reached to investigate the electric system in order to assure that Anaheim's customers had the most reliable service. It was decided to issue a Request for Proposal (RFP) for consulting services to assist in a management review of the Public Utilities Department's (Department) Electric System Reliability and Maintenance Program, Direct Buried Cable Replacement Program and Computerized Utility Maintenance Software. Five qualified companies responded, and Duke Engineering & Services (DES) was selected because DES has fully qualified and experienced staff, will utilize acceptable methods and procedures, and was the lowest bidder with a bid'of $59,370 with the next lowest bid being $108,344. D. Stanton expressed concern with the bid being so low compared to the other bids and asked if the agreement is safeguarded against additional funds being requested by DES 366 in the future. D. Tarkington replied that the proposal is a not -to- exceed agreement with a scope of work, hours and deliverables clearly committed to. W. Wiseman said it appeared that the DES bid of $59,370 is the cost of doing the job without any profit and asked if the difference of approximately $50,000 represents a profit for the other corporations. E. Aghjayan said that is unknown as there are variables in each bid, such as hours estimated to complete a project and labor rates. T. Kirker asked if DES bid the project with enough personnel and hours required to complete the project, as the funds allotted under "Extra Services" calculates to about 70 hours. D. Tarkington said staff is comfortable with DES as DES staff credentials were evaluated, along with the labor rates and the hours needed to complete the project. J. White moved approval to recommend that the City Council, by Motion, approve the Consulting Services Agreement as stated in the staff report dated October 3, 1996. T. Kirker seconded the motion. MOTION CARRIED 5 -1. P. LEM OPPOSED. 1 ABSENT. 5. ANAHEIM KEY PARTNERS PROGRAM M. Long gave a presentation on the Anaheim Key Partners Program (Program), with emphasis on the program's Phase I. She stated that this Program is expected to expand from the current 15 major business customers to 50 major business customers by the end of Fiscal Year 1996/1997. E. Aghjayan noted that the services are available to all commercial /industrial customers; however, with the personal customer contact, those companies will be more aware of all the services offered. T. Kirker asked if the 50 key companies have the preferred emergency services now. M. Long replied that the 50 key companies are located on the maps and can be identified if there is an circuit outage. D. Tarkington added that he believes that the 15 customers already have the preferred emergency services. W. Wiseman asked if an outage occurred that affected a small company and Disney at the same time, who would get the preferred emergency service, and if there was an extra premium paid for that service. D. Tarkington said Disney would, there is an extra premium for that service, and Disney pays that premium. W. Wiseman asked if a small company could acquire the preferred emergency service. E. Aghjayan said the same services are offered to small companies; however, there is a fairly high capital cost involved along with a monthly standby charge that usually is not fiscally prudent for small companies. D. Stanton asked if the Department has portable generators for emergency situations. D. Tarkington said the Department has a small, mobile "B" Bank unit; however, the Department assisted a customer having a problem with its 2500 kV transformer by restoring the transformer in less time and less cost than it normally would have taken. 367 D. Stanton asked if there are other utilities that have similar packages. M. Long said other competitors, such as Southern California Edison, have similar programs and packages. P. Lem asked if staff is currently being assigned to the companies. M. Long said certain current staff members have been selected as key representatives and are currently undergoing training and preparing customized packages for the 15 companies. D. Stanton asked if Board action is required on the Key Partners Program. E. Aghjayan said staff would like to have Board approval. Joe White asked if this item would be going before the City Council in the future. E. Aghjayan said no, as there are no budgetary changes or contracts involved. POLICY DECISIONS REGARDING ELECTRIC INDUSTRY RESTRUCTURING L. Topaz presented information and a projected timeframe for key decisions regarding Electric Industry Restructuring (AB 1890) dating from December 1996 through July 1, 1999. The basic areas requiring decisions are Conservation Programs, Direct Access Issues, Competitive Transition Charge (CTC) Issues, and Independent Systems Operator (ISO) Issues. White papers on these issues will be presented to the Board for its consideration at its meetings in December 1996, February 1997, April 1997, and July 1997 with follow -up decisions and recommendations at subsequent Board meetings and additional meetings called as the Board deems necessary. D. Stanton said it appears that currently not enough information has come from the State Government (Government) to date in order to proceed because the criteria has not been laid out by the Government. L. Topaz said that is correct, however, there are some basics, such as the budget, that can be worked on. T. Kirker asked what percentage of the City's revenues currently goes to Conservation. L. Topaz said out of this year's budget, 1.7% of the expenditures, which is not a revenue. The statute covers four areas: Energy Efficiency, Renewable Resources, Research and Development, and Low Income Assistance, and the City may already be doing some projects in those areas. T. Kirker asked if the Time -of -Use (TOU) meter comes under Conservation? L. Topaz said yes, if it were attached to TOU rates. E. Aghjayan said the legislative intent of the statute is that the Board may choose to fund low income programs rather than putting monies in Research and Development or TOU meters and may wish to exceed the 2.5% and recommend a low income rate to the Council. 368 T. Kirker asked if an Electric Industry Restructuring Subcommittee needs to be established. D. Stanton said perhaps, in the future, depending on the need for a Subcommittee. 7. COMPARISON REPORT ON WATER RATES OF NEIGHBORING CITIES G. Broeking gave a presentation comparing Anaheim's water rates with neighboring cities and a comparison with cities that have a similar water mix. D. Stanton asked, referring to Anaheim's residential bills versus other agencies with comparable water mix, why Anaheim's residential rates are 3.2% above other agencies and commercial /industrial 18% below other agencies. M. Bell replied that this is due to the five year phase in of decreasing residential rates and increasing commercial rates that was the result of the Citizens Committee Water Rate Study a couple years ago. G. Broeking added that the five year phase -in for water rate restructuring was adopted by the City Council in July 1995, and designed to make sure costs were transferred to make the rate structure more equitable among rate structure components and also among classes, with small user rates going down about 10% and large user rates going up about 10% over the five year period. W. Wiseman asked, referring to Attachment A (Water Supply Mix), why Anaheim gets 75% of its water from wells and Garden Grove gets 95% of its water from wells. E. Alario said the Orange County Water District (OCWD) has authorized Garden Grove to draw more water from its wells. Anaheim can pump more than the allotted 75% for an additional fee because Anaheim is not over the basin, but it is still more cost effective than purchasing water from Metropolitan Water District (MWD). W. Wiseman asked how the Orange County Water District (OCWD) allots acre feet. E. Alario said that allotment is arrived at by the percentage of what the City's total usage is; OCWD does not allot acre feet. W. Wiseman noted that Garden Grove also pays less for their water. E. Alario replied that he believes Garden Grove's General Fund subsidizes its water utility. 8. TELECOMMUNICATIONS DEVELOPMENT PROJECT UPDATE E. Aghjayan said there will be a Final Feasibility Study /Analysis presented on October 17, 1996. Although negotiations are proceeding slower than desired, it is anticipated that the timeline to go to the City Council in December 1996 and start a pilot system in March or April 1997 is still on schedule. T. Kirker asked if all the fiber optics are in place. E. Aghjayan said yes (about 50 miles). 9. AGENDA ITEMS FOR NEXT MEETING E. Aghjayan said a report on the Western States large outage that occurred in August is being compiled for the Board's information. 369 10. ITEMS BY SECRETARY E. Aghjayan said that Standard & Poor's Rating Group (S & P) recently lowered the City's bond ratings from AA- to A+ and will be lowering other cities during the next week. Duff and Phelps maintained the City's AA rating. Staff will be meeting with S & P on October 10, 1996. M. Bell noted that on Tuesday, October 1, 1996, the Anaheim Electric Refunding Bonds were sold through the competitive bid process. These bonds were structured in order that some of the San Onofre Nuclear Station (SONGS) debt can be retired three years earlier than previously planned, and, by refunding at this time, the interest rate was reduced. The winning bidder was Bank of America Securities, with a savings of $25.6 million achieved, higher than originally anticipated. It appears that S & P's negative rating did not have an impact on the sale of the bonds. E. Aghjayan added that by selling the bonds through the competitive bid process, . rather than through an investment banker, costs tend to stay lower, and Anaheim gets a better price. P. Lem asked if Bank of America charges Anaheim a commission. E. Aghjayan said no, as all costs are incorporated in the bid. P. Lem asked who handles the sale of the bonds. M. Bell said the City Attorney's Office is responsible for the legal work with the assistance of outside bond counsel, the City Treasurer's Office is responsible for any funds that move in and out of the refunding, plus there is an outside trustee that establishes an escrow account that pays off the previous bonds that have been refunded. T. Kirker asked how the Department's debt service would be affected each year by paying off the long term obligation (80%) as quickly as possible, and if, since 15% of the 1996/97 budget is for debt service, the debt service would be increased for a few years. E. Aghjayan replied that SONGS will be paid off three years earlier than originally planned, from the year 2008 to the year 2005, and reduces the City's stranded cost by approximately $41 million. For a few years, costs will be kept fairly level and the difference in the savings will be used to buy down the bonds. W. Wiseman asked if there is an appeals process in place to dispute unfavorable ratings. M. Bell said yes, but that it is a difficult process and cited the repeated attempts to meet with Moody's Ratings Committee (Moody's) before and after it lowered Anaheim's rating to Al. E. Aghjayan added that the highest rating for Investor Owned Utilities (IOUs) is A +. 11. ITEMS BY BOARD MEMBERS P. Lem said he would like to compliment Joe White on his discussion of the Public Utilities goals, objectives and responsibilities and his comments comparing the large amount of time spent years ago by the Board on projects to the Board's current 370 minimum participation. P. Lem continued by saying that, with the restructuring that will be going on and with the timeline given, he would like to support Joe White's comment that the Board really needs to devote time to the things that are coming up for decision in the upcoming years. E. Aghjayan replied that the Board has a schedule on the restructuring issues, and, to the extent that the Board wants to discuss restructuring or any other item in more detail, staff will be pleased to prepare white papers for the Board. Staff will look for guidance and direction from the Board on those issues. Joe White reiterated his request for an update on Mead - Adelanto /Mead- Phoenix and the whereabouts of the $63 million. T. Kirker requested updates on the status of the underground conversion program, the maintenance plan and the Pringle Bill. L. Moses replied that the Pringle Bill did not pass. D. Stanton said he had a couple of items. 1) He wanted to know what stranded cost is. 2) He also stated that 19 years ago, the Board adopted Roberts Rules of Order (Rules), and, since that time, have proceeded under those Rules. Recently, a problem has arisen that needs to be addressed. He would like for the Board, at the next meeting, to consider a debate. The format is that any Board member can discuss a given subject for a given amount of time. After each Board member has had the opportunity to discuss the subject, a rebuttal time is allowed. He recommends a time limit of five minutes per Board member per given subject with a rebuttal time limit of two minutes per Board member per given subject. He requested that this item be agendized. 12. ADJOURNMENT (NEXT REGULAR MEETING: NOVEMBER 7. 1996 J. White moved adjournment of the meeting at 5:55 p.m. W. Wiseman seconded the motion. MOTION CARRIED 6-0. 1 ABSENT. Respectfully submitted, l / Edward • hjayan Secretary, : blic Utilities Board 371