Kauai Island Utility Cooperative

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                                  KAUAI ISLAND UTILITY COOPERATIVE
                                          Held at 4463 Pahe`e Street
                                           Līhu`e, Kaua`i, Hawai`i
                                              On April 25, 2011


Call to order at 11:03 AM.

1.        Roll Call
          1.1        Present: Teofilo Tacbian (Chairman), Carol Bain, Stewart Burley, David Iha
                     (Secretary), Steve M. Rapozo, Allan A. Smith (Treasurer), Ben Sullivan, Jan
                     TenBruggencate (via phone conference) and Peter Yukimura (Vice Chairman).
                     A quorum of directors was present.

          1.2        In attendance: David Bissell (CFO/Acting CEO); David Proudfoot (KIUC
                     General Counsel);; Various KIUC Managers and staff; Pua Chin & Nadine
                     Nelson (Administrative Assistants); Members of the press (0) and Members of the
                     public (1).

2.        Invocation – Director Rapozo gave the invocation.

3.        Approval of Agenda - The agenda was approved as amended:
          3.1        Add under New Business Process for Special Meeting, Board Email and Board
                     Policies 5, 11 & 18.

4.        Public Testimony
          4.1        Oral testimony was received from Mr. Pat Gegen.

5.        Approval of Minutes
          5.1        The 03-29-11Annual Board meeting minutes were approved as presented.
          5.2        The 03/29/2011 minutes of the Regular Meeting and Executive Session were
                     approved as presented.

6.        Chairperson Report. Directors attended the 4/15/2011 Legislative Luncheon on
          Oahu and met with the staff and Representatives Kawakami, Morikawa, Tokioka and
          Senator Kouchi. The community outreach meetings were very well received and would
          very much like to see this outreach continue. Directors also met with Lt. Governor Schatz
          during his recent trip to Kauai. He was given a briefing on KIUC renewable projects, the
          process of KIUC’s Habitat Conservation Plan (HCP) and a tour of the Kapaia Power
          Station (KPS) and the algae farm. Chair Tacbian also met with Congresswoman Mazie
          Hirono and reminded her of the upcoming NRECA Legislative Conference. Chair

KIUC Board of Directors Meeting Minutes of April 25, 2011                                 Page 1 of 9
APPROVED 05/31/2011 (KPC)
          Tacbian was appointed to serve on the NRECA Resolutions Committee to evaluate
          NRECA’s resolutions process. The first committee meeting will be held in DC during
          the Legislative Conference.

7.        President’s Report. CEO David Bissell reported (written report attached)

8.        Financial Report: Corinne Cuaresma, Plant Accountant reported.
          8.1        The Board received the March 2011 preliminary financial results.

9.        NRECA Hawaii Director Report – None.

10.       Committee Reports
          10.1       Executive – Committee Chair, Phil Tacbian
                     10.1.1 The committee did not meet. Proposals are pending from two possible
                            consultants for a Board evaluation.

          10.2       Finance & Audit – Committee Chair, Allan Smith
                     10.2.1 The financial results were reviewed in detail. Eight of nine directors were
                            present. There are two items under New Business for consideration.

          10.3       Government Relations/Legislative –Committee Chair, David Iha
                     10.3.1 Mr. Koide, Mr. Yamane and CEO Bissell all met with the representative
                            of the Governor’s office and Mr. Bill Aila of DLNR to discuss the
                            approval process of KIUC’s HCP.
                     10.3.2 At the federal level, approval is pending from USFAW. A meeting has
                            been set with the Department of Interior in May.
                     10.3.3 The committee discussed having further workshops on FERC and the state
                            water rights processes.
                     10.3.4 The four national issues that will be discussed at the NRECA Legislative
                            Conference in May were discussed. Meetings have been arranged with the
                            congressional delegates during the conference.
                     10.3.5 Dir. Bain requested consideration of existing policy that attendance to the
                            annual Legislative Conference be opened to Board members outside the
                            Government Relations & Legislative Affairs committee.

          10.4       Member Relations – 2010 Committee Chair, Steve Rapozo.
                     10.4.1 Economic Development: Kawaikini Charter School RED Grant is still in
                            review with the Attorney General’s office.
                     10.4.2 Notice to members about the LIHEAP (Low Income Households Energy
                            Assistance Program) will be printed on their monthly bills beginning mid
                            April to early June.
                     10.4.3 Communications Update – primary focus was the three Community
                            Updates. Dir. Bain was complemented on her introduction during the
                            KIUC Earth Day presentation broadcast.
                     10.4.4 Next meeting scheduled for May 9th at 9:00 am.

KIUC Board of Directors Meeting Minutes of April 25, 2011                                    Page 2 of 9
APPROVED 05/31/2011 (KPC)
          10.5       Policy – 2010 Committee Chair, Peter Yukimura.
                     9.6.1 Director Carol Bain reported on the March 10th committee meeting.

Policy No.                                 Policy Title                           Comments
Board Policy                               Equity Management Plan                 Continued to August
                                           Conflicts of Interest and Conduct of   Revised, Pending Board
Board Policy No. 5
                                           Interested Persons                     approval
                                           Board Member Qualifications and        Revised, Pending Board
Board Policy No. 18
                                           Eligibility                            approval
                                           Patronage Capital Allocation and       Revised, Pending Board
Board Policy No. 11
                                           Retirement                             approval

          10.6       Strategic Planning – 2010 Committee Chair, Ben Sullivan.
                     10.6.1 Committee met on April 14th. The clean energy team update was presented
                            and the annual review of the committee charter was completed. Discussion
                            on a major review of the Strategic Plan will take place in June.

11.       Charitable Foundation Board Update - (Foundation Board President
          Allan Smith)
          11.1       The Foundation Board did not meet.

12.       Unfinished Business. None
At 12:00pm a short recess was taken and the meeting reconvened at 12:11pm.

13.       New Business.
          13.1       2010 Patronage Capital Retirement (F&A, Action Item)
                     13.1.1 The committee recommended the approval of $894,800 in 2010 patronage
                            capital refunds; and, the methodology for refunds be changed from paper
                            checks to bill credits for all members; and, members whose refund
                            amounts equal $10,000 or more be hand delivered a letter by a member of
                            staff and the Board. The Board approved the committee recommendation
                            with no objection.
                     13.1.2 Resolution 02-11 was adopted to include the approved actions of the
                            Board as noted in 13.1.1 above.

          13.2       New Radio System (F&A, Action Item)
                     13.2.1 The committee recommended approval of the request to move the unused
                            2010 $600k capital budget funds for this project into the 2011 capital
                            budget for this project thereby making the project’s revised 2011 capital
                            budget $1.4M. The committee’s recommendations were approved without

KIUC Board of Directors Meeting Minutes of April 25, 2011                                          Page 3 of 9
APPROVED 05/31/2011 (KPC)
          13.3       Discussion on FERC workshop (Strategic Planning)
                     13.3.1 Following discussion, it was the unanimous consensus of the Board to
                            have an Ad Hoc committee consisting of Directors Smith, Iha and Sullivan
                            organize a workshop(s) on FERC and Hawaii water rights issues and
                            processes to allow for discussion and discourse between directors and
                            presenters. It was further the consensus that General Counsel also be
                            present at the workshop(s).

          13.4       International Committee Appointments
                     13.4.1 Director Stewart Burley was appointed as Committee Chair along with
                            Director Yukimura as member. The committee will meet only as
                            necessary to act on items needed. The appointments were accepted with no

          13.5       Bylaw Requirements to call a Special Meeting of the members
                     13.5.1 General Counsel Proudfoot explained the bylaw requirements (Article 2)
                            (a)   Section 2 - is the right of members to call a special meeting of the
                                  members with 5% and/or 250 members by signed petition
                                  presented to the Board Secretary.
                            (b)   Section 6 – is members’ rights to vote and approve certain actions.
                                  This section is taken exactly as in the Hawaii State statutes.

          13.6       Board email
                     13.6.1 Emails received from members through the Board’s email address
                            ( are sent to all directors. There was discussion
                            on how to accommodate those directors who prefer to receive all email
                            directly and those who preferred otherwise.
                     13.6.2 After lengthy discussion and a brief recess, with suggestions offered by
                            various directors, this item was referred to staff to review the various
                            options and present a report at the May board meeting.
                     13.6.3 Item deferred to the May meeting agenda as Unfinished Business.

          13.7       Board Policies No. 5, 11 & 18 (Policy)
                     13.7.1 Review and approval of Board policies No 5, 11 & 18 were deferred to the
                            5/31/2011 meeting as Unfinished Business.

KIUC Board of Directors Meeting Minutes of April 25, 2011                                    Page 4 of 9
APPROVED 05/31/2011 (KPC)
14.       Calendar – The calendar was amended as follows:
          April 30 - May 5, 2011 – NRECA Legislative Conference
          May 5, 2011 – Policy Committee Meeting (2:00 p.m.)
          May 9, 2011 – Member Relations Committee Meeting (9:00 a.m.)
          May 17, 2011 – Executive Committee Meeting (3:00 p.m.)
          May 19, 2011 – Strategic Planning Committee Meeting (3:00 p.m.)
          May 20, 2011 – F&A Committee Meeting (1:30 p.m.)
          May 23, 2011 – GRLA Committee Meeting (10:00 a.m.)
          May 30, 2011 – HOLIDAY, KIUC Offices Closed
          May 31, 2011 – Regular Board Meeting (1:30 p.m.)

15.       Executive Session. None.

16.       Adjournment. There being no further business the meeting was adjourned at 1:34

/s/ David Iha
David Iha

KIUC Board of Directors Meeting Minutes of April 25, 2011                      Page 5 of 9
APPROVED 05/31/2011 (KPC)
                     President’s Report
                                       David J. Bissell
                                        April 25, 2011

                                   Month          YTD            Last YTD
      Recordable Accidents         0              1              1
      Lost Workdays                0              0              0

Availability and Reliability:
      Reportable Outages           5              15             17
      Average Outage Hours per
            Customer               .68            1.03           .47

      Net Plant Heat Rate          9,106         9,184           9,118
      Peak Demand                  71.23         76.29 (Feb)
      Diesel Price per gallon       3.51 (April)
      Naphtha Price per gallon      2.86 (April)

Residential Rates
      April is 42.63 cents per KWh up from 39.30 in March.
      Average residential user at 500 KWh would pay $223 up from $210 in March.

Other Items
      1.   Media Training for Board and Staff.
      2.   Presentation to the Barrel Tax Committee on Oahu, April 6th.
      3.   2010 Audit finalized
      4.   Met with Free Flow Power in Bellingham, WA on April 13th.
      5.   Attended the Annual Legislative Luncheon on Oahu, April 15th with Board.
      6.   Community Meetings April 18, 19 & 20.
      7.   Earth Day presentation at Kauai Community College April 20th.
      8.   Met with Lt. Gov. Schatz on April 19th.
      9.   Sargent & Lundy has been on site April 21st for biomass boiler assessment.
March 20, 2011
President’s Report
Page 2 of 2

          10.    $25M Line of Credit Refinancing – Approved by the PUC
          11.    Opened KIUC Facebook page. Need to “like” us, can’t “friend” us.
          12.    CAK Home Show held April 15, 16 & 17. Exchange incandescent bulbs for CFL’s.
          13.    Energy Services will have incandescent bulb for CFL exchanges once a month at
                 Kukui Grove “Friday Night at the Mall”

KIUC Board of Directors Meeting Minutes of April 25, 2011                             Page 7 of 9
APPROVED 05/31/2011 (KPC)
                                   RESOLUTION 02-11 OF THE
                                   BOARD OF DIRECTORS OF
                         KAUA`I ISLAND UTILITY COOPERATIVE ("KIUC")

          WHEREAS, at the conclusion of Kaua'i Island Utility Cooperative's ("KIUC") first Rate

Case before the Public Utilities Commission of the State of Hawaii ("PUC") in Docket No. 2009-

0050, by Order dated September 9, 2010, in Docket No. 02-0060 the PUC modified Ordering

Paragraph No. 8.b of its Decision and Order No. 19658 that required that on or before April 30

of each year commencing in 2004, KIUC must prepare and submit to the Rural Utilities Service

of the United States Department of Agriculture ("RUS") a calculation of its achieved operating

margin dollars for the prior reporting period, and based upon this calculation, KIUC must

propose and strongly recommend to the RUS approval for payment of patronage capital cash

refunds to its members in a total amount equal to twenty-five per cent (25%) of such reported

prior period margin amounts such that said Ordering Paragraph shall now read:

               "On or before April 30 of each year commencing in 2011, KIUC shall prepare and
submit to RUS and CFC a calculation of its achieved operating margin dollars for the prior
reporting period. Based upon this calculation, KIUC shall propose and strongly recommend RUS
and CFC approval, to the extent required, for payment of patronage capital cash refunds to its
members in a minimum total amount equal to the amount by which KIUC has exceeded a
reported RUS TIER of 2.0 for that prior reporting period."


          WHEREAS, in Calendar Year 2010 KIUC exceeded a reported RUS TIER of 2.0 by the

amount of $894,800; and

          WHEREAS, because KIUC's Equity Ratio is in excess of twenty percent (20%) both

before and after refunding the amount of $894,800 in patronage capital to its Members pursuant

to the PUC's Order, no approval from the RUS to make said refund is necessary; and

KIUC Board of Directors Meeting Minutes of April 25, 2011                            Page 8 of 9
APPROVED 05/31/2011 (KPC)
          WHEREAS, approval of said refund by CFC, KIUC's other lender is not required as long

as KIUC meets a per year average equity change of at least +2% for all prior calendar years,

which average is being met; and

          WHEREAS, the Board has determined that making said patronage capital cash refunds by

invoice credit is the methodology most appropriate for use in making said refunds for Calendar

Year 2010, with the ten (10) members receiving the largest refunds being presented a letter

detailing the amount of their refund and thanking them for their membership.

          NOW, THEREFORE, be it hereby resolved by the Board of Directors of KIUC as


                     1.         Patronage capital cash refunds to KIUC's members in a total amount of

approximately $894,800 which is the amount by which KIUC exceeded a reported RUS TIER of

2.0 for the period January 1, 2010, through December 31, 2010 (the "2010 PatCap Refund"), is

hereby authorized; and

                     2.         All 2010 PatCap Refunds shall be made by invoice credit to the applicable

accounts, with the ten (10) members receiving the largest refunds being presented a letter

detailing the amount of their refund and thanking them for their membership.

                                                SECRETARY'S CERTIFICATE

          The undersigned Secretary of KIUC hereby certifies that the foregoing Resolution of the

Board of Directors of KIUC was duly adopted at the Meeting of the Board of Directors held on

April 25, 2011, at Līhu`e, Kaua`i, Hawai`i.

                     Dated this 25th day of April, 2011, at Līhu`e, Kaua`i, Hawai`i.

                                                            /s/ David Iha
                                                            David Iha

KIUC Board of Directors Meeting Minutes of April 25, 2011                                      Page 9 of 9
APPROVED 05/31/2011 (KPC)