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									                  ARIZONA POWER AUTHORITY
            REGULAR MEETING HELD ON APRIL 17, 2007



PRESENT: John Hudson, Chairman
         Dalton Cole, Vice-Chairman
         Delbert Lewis, Commissioner
         Michael Francis, Commissioner
         Richard Walden, Commissioner

STAFF:    Joseph Mulholland, Executive Director
          Michael Gazda, Deputy Director
          Harvey Boyce, Director, Administrative Services
          Doug Fant, General Counsel
          Rita Gallant, Executive Secretary
          Marcia Kennedy, Financial Administrator
          Evelyn Magnusson, Utilities Rate Analyst
          Robert Nieto, Rate Analyst

OTHER:    Bill Baker, Electrical District No. 6
          Jim Bartlett, Guest
          Michael Curtis, A.M.P  .U.A.
          Dick Darnall, Utility Resource Services, Inc.
          Debby Emler, Western Area Power Administration
          Jim Horton, Consultant
          Gary Ijams, C.A.W.C.D.
          R. DeWayne Justice, Electrical District No. 7
          Joe Lane, Guest
          Gary Langford, Wellton-Mohawk I & DD
          Susan Lozier, Wellton-Mohawk I & DD
          Robert Lynch, I.E.D.A.
          Doug Milligan, Salt River Project
          Tony Montoya, Western Area Power Administration
          Jay Moyes, Moyes Storey
          Gale Pearce, Electrical District No. 5
          Elizabeth Story, Tonopah Irrigation District
          Don Sundby, Lewis Farm
Minutes of Regular Meeting
April 17, 2007



           Sheryl Sweeney, Ryley, Carlock & Applewhite
           Janie Thom, CAWCD
           Terry Urbine, Arizona Public Service
           Grant Ward, Electrical Districts No. 3 and 4
           Jeff Woner, K. R. Saline & Associates


CALL TO ORDER

      The regular meeting of the Commission of the Arizona Power Authority
was held on April 17, 2007 at the office of the Authority at 1810 W. Adams
Street, Phoenix, Arizona. The Chairman called the meeting to order at 10:00
a.m. All Commissioners were present. The Chairman recognized Janie Thom, a
Central Arizona Water Conservation District Board Member and welcomed her
to the meeting, noting the importance of cooperation between the two
organizations.



PLEDGE OF ALLEGIANCE

     The Chairman led the meeting attendees in the Pledge of Allegiance.



APPROVAL OF MINUTES

     A motion was made by Commissioner Michael Francis to approve the
minutes of the Regular Meeting and Executive Session of March 20, 2007. The
motion was seconded by Commissioner Richard Walden and approved
unanimously.



APPROVAL OF SPECIAL CLAIMS AND EXPENDITURES

     The Commission reviewed the APA and Hoover Operations Funds
expenditures presented by Marcia Kennedy, the Financial Administrator. After
completing the review, Commissioner Michael Francis then moved that APA
Operations Fund Claims 408-410 and Hoover Operations Fund Claims 3962-



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Minutes of Regular Meeting
April 17, 2007



4024 for the period of March 13, 2007 through March 29, 2007 be approved.
The motion was seconded by Commissioner Richard Walden and passed
unanimously.



FINANCIAL STATEMENT

      The Commission then reviewed the monthly Power Summary Statements
reflecting month ending and year-to-date operations as of March 31, 2007. The
statements compared actual operating data and expenses as experienced
during the periods to budgeted figures for the same time frames. Energy
delivered to the Authority from Hoover during March was approximately 9%
below budget due to abnormally dry conditions.

      The Commission then reviewed the remainder of the financial statements
and the Financial Administrator explained variances from budgeted amounts.
Administrative and General Expenses were approximately 18% below budgeted
amounts for the six-month period ending March 31, 2007. This variance is due
primarily to reduced expenditures for Staff, Outside Services and the
Commissioners.

      The Financial Administrator noted that the Assignment of Right-of-Way
for the ED-5 Substation was officially granted to the Authority on April 2, 2007
and the certificate was included in the Commission books.

      Ms. Kennedy also pointed out a letter from Standard & Poor’s, setting
forth the Authority’s bond rating at “AA”.



REPORT OF EXECUTIVE DIRECTOR

     The Executive Director reported on the following subjects:


      First, he announced that Tony Montoya is being promoted and is moving
on to higher levels in Western Area Power Authority’s (Western) Denver office.
He thanked Tony for his help and support and wished him well in his new
position. Tony thanked the Executive Director and said he hoped to continue



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Minutes of Regular Meeting
April 17, 2007



helping the customers in his new position and would be working to strengthen
relationships. He noted that Ron Moulton will be replacing him. He then
introduced Jean Gray’s replacement, Debby Emler, briefly mentioning her
background. Chairman John Hudson thanked Tony for his assistance to the
Commission and the customers, and welcomed Debby Emler.

      The Executive Director then reported that Mike Gazda, Robert Nieto and
Evelyn Magnusson attended a rate meeting at Western and reviewed the 1.25%
rate increase being considered for next year.

       Next, the Executive Director reported about recent activity on the
Western Transmission Project. On March 26th, Senator Kyl called Secretary
Bodman requesting a meeting regarding the Project. The next day Secretary
Bodman was briefed on the Western Transmission Project by the Department of
Energy (DOE) legal staff. Up to that point, the Secretary knew nothing about
our Project according to sources at DOE. That evening, Secretary Bodman met
with Senator Kyl and told him there were still problems to be worked out, but
DOE was willing to work with the Authority. Senator Kyl suggested the
Authority write a letter to Secretary Bodman summarizing its position and
requesting a meeting with him. After the letter is sent, Senator Kyl will contact
Secretary Bodman and request that he meet with the Authority. In preparation
for that meeting, Bob Ferdon suggested a preliminary meeting of the attorneys
representing DOE, the Authority and the Arizona customers to talk about the
legal issues. The Authority is attempting to arrange the “attorney meeting”
with DOE General Counsel David Hill, Bob Ferdon and Doug Fant, and to invite
Bob Lynch on behalf of the customers. He noted that Mr. Lynch has been very
helpful in this whole process and has a sincere interest in seeing this Project
succeed. Bond Counsel Bob Ferdon believes the Authority has a very strong
legal position and it is important for the DOE attorneys to thoroughly
understand the legal issues. Ferdon believes that a meeting with David Hill,
Chief Counsel, will give Mr. Hill an understanding of the legal arguments and
he will come to the conclusion that it would be in the best interests of everyone
for DOE to change their position and work with the Authority.

      The Executive Director also reported that David Hill, Chief Counsel for
DOE, wrote to Representative Trent Franks in response to a letter written to
DOE by the Congressman. David Hill said that DOE was aware of our program
and they were working to resolve several complicated legal issues.




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Minutes of Regular Meeting
April 17, 2007



      The Executive Director then called attention to a letter from John McCain
to Delbert Lewis in the meeting book. John McCain also contacted DOE about
this Project.

      Next, the Executive Director reported on the 2017 allocation of Hoover
power. The contract the Authority has with Western to purchase Hoover power
terminates in 2017 and the post-2017 allocation process for this power will
begin shortly. At the last Commission Meeting, Chairman Hudson suggested
we prepare a common interest in litigation agreement that we can enter into
with our customers and other interested parties in the State. Our purpose is to
present one unified position on behalf of the State of Arizona to get as much
Hoover power as we are entitled to receive. The Executive Director provided a
draft agreement to the Commissioners and said that the final agreement would
be presented to the Commission for its approval within the next few weeks.

      Commissioner Michael Francis commented on support for the refinancing
project from Senator Kyl’s office. The Executive Director said he thought that
when John McCain’s letter went out, Senator Kyl called Secretary Bodman.
Bob Lynch also reported on related conversations he had with Senator Kyl.

     Responding to Commissioner Michael Francis’ question about the
procedures for the Hoover 2017 reallocation, the Executive Director said this
would require a lengthy answer, but gave a brief summary. Commissioner
Francis asked that this issue be discussed during Executive Session at the next
Commission Meeting.


AGENDA ITEMS

      Power Operations Matters – Mr. Gazda presented the power operations
report and noted that March 2007 was another dry month in the Upper
Colorado River Basin. He discussed the status of the Upper Colorado River
Drainage Basin reservoirs and their current water levels. He noted that the
Upper Basin reservoirs were 56% full; however, Lake Powell is only 48% full
with an elevation of 3,600 feet. Mr. Gazda went on to report that precipitation
in the Upper Colorado River Basin was 89% of normal for the six months
ending March 2007. The latest projection indicates that during this year,
precipitation will be only 69% of normal. He then reported that Lake Mead is
at 53% of storage capacity with an elevation of 1,124 feet. It is anticipated that
Lake Mead will drop another 13 feet by summer’s end.



                                        5
Minutes of Regular Meeting
April 17, 2007




     Pending Legal and Administrative Proceedings – Mr. Doug Fant, the
Authority’s General Counsel, was asked by the Chairman to review the legal
and administrative proceedings in which the Authority is currently involved.

      Legal Counsel Doug Fant offered comment on a couple of topics. First,
the Arizona Republic referenced the Defenders of Wildlife v. EPA appeal on the
front page of the April 17, 2007 newspaper edition. The Republic stated that
the lawsuit would be argued today before the U.S. Supreme Court. The case
will decide whether the Endangered Species Act functions as an affirmative
obligation upon all agency action.

      Next, Legal Counsel mentioned the APS v. Aztec Land and Cattle
Company case. The case involves a private utility’s, Arizona Public Service’s,
efforts to condemn the well field pumping the groundwater under Aztec’s
property, and whether groundwater is an appropriate subject of an eminent
domain action. The case reflects a serious issue for landholders who may be
subject to similar actions by authorized parties under the relevant Arizona
eminent domain statute. Legal Counsel encouraged those present to monitor
this case closely.

      Legal Counsel then referenced the Navajo Nation v. US case. The case
involves the Navajo Nation’s efforts to obtain water rights to a portion of the
flow in the Colorado River-Lower Basin. Legal Counsel noted that negotiations
continue between the parties and that a conference call on the case’s status
would occur on April 24th.

      Next, Legal Counsel discussed the proposed Hoover Post-2017
proceedings draft confidentiality agreement. Counsel noted that the Authority
had commenced the process with a draft joint defense agreement, and then had
gone to a standard confidentiality agreement as the method of protecting
discussions and documents. After last week’s customer meeting on the topic,
and at the customers’ request, the Authority had gone back to a joint defense
agreement style of document which Bob Lynch had provided for use in the
proposed proceedings. The draft currently was being circulated among
interested parties for comment and revision.

    Finally, Legal Counsel noted an A.C.C. Special Meeting that was held on
Monday, April 16th. The A.C.C. hosted Jill Duggan from the United Kingdom. Ms.



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Minutes of Regular Meeting
April 17, 2007



Duggan is head of all emissions trading for the UK, located within the
Department of Environment, Food, and Rural Affairs (DEFRA). Ms. Duggan
gave an excellent presentation on both the UK emissions trading system and
the European emissions trading system, and how they relate. The presentation
was instructive since the State of Arizona recently signed the Western Climate
Change Group protocol and will be looking to regulate CO2 and other
greenhouse gas emission in the near future.



EXECUTIVE SESSION – FUTURE COMMISSION MEETING

      The Chairman called for a motion to authorize an Executive Session for
the next Commission meeting, if necessary. The motion was made by
Commissioner Michael Francis, seconded by Commissioner Delbert Lewis and
passed unopposed.



     There was no Executive Session at this meeting.



COMMISSIONER COMMENTS

     Commissioner Richard Walden talked about a new Immigration Reform
program being organized in which he is involved. Further information can be
found at azeir.org.



VISITOR COMMENTS

      Doug Fant called attention to Jim Horton’s report which included
pertinent information for
certain Authority customers.


ADJOURNMENT




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Minutes of Regular Meeting
April 17, 2007



     With no further business to come before the Commission, the meeting
adjourned at 11:10 a.m.




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