minutes

Regular Meeting

Governing Board of Sweetwater Authority

March 22, 2006

The Governing Board of Sweetwater Authority held a regular meeting on Wednesday, March 22, 2006, at the Sweetwater Authority Administrative Office, 505 Garrett Avenue, Chula Vista, California. Chair Pocklington called the meeting to order at 3:31 p.m.

• ROLL CALL

Directors Present: Alkire, Beauchamp, Doud, Morrison, Pocklington, and Welsh.

Directors Absent: Salas.

Others Present: General Manager Bostad, Operations Manager Rogers, Legal Counsel Cowett, and Board Secretary Schoonderwoerd. Staff members Rick Alexander, Debra Farrow, Hector Martinez, Bill Olson, George Silva, Jim Smyth, Don Thomson, and Tom Woodrum. Also present were Andy Trump, Joe Otahal, and David Hicks of Duke Energy; and Jeff Marston of Marston & Marston.

• PLEDGE OF ALLEGIANCE TO THE FLAG
Director Welsh conducted the pledge of allegiance to the flag.

• OPPORTUNITY FOR PUBLIC COMMENT (Government Code Section (54954.3)
There were no comments from the public present.

• CHAIR’S PRESENTATION
There was none.

ACTION CALENDAR ITEMS

1. PRESENTATION BY ANDY TRUMP, DEVELOPMENT DIRECTOR, DUKE ENERGY

General Manager Bostad introduced Mr. Andy Trump, who has been the organizer and lead since 2000 on Duke Energy’s local efforts to replace the existing South Bay Power Plant and formerly lead a successful effort to secure Energy Commission approval for modernizing the 1,200 MW Morro Bay facility in San Luis Obispo County. Mr. Trump introduced Mr. Joe Otahal, key liaison between Sweetwater Authority and Duke Energy, Mr. David Hicks, Duke’s Public Relations Manager, and Mr. Jeff Marston of Marston & Marston. Mr. Trump commented that the productive and direct working relationship between Duke and the Authority showed the professionalism of its staff.

Mr. Trump gave a PowerPoint overview of Duke’s program at South Bay. He said that some of the benefits of a redevelopment project in the South Bay include the opportunity to bring in local jobs; lower air emissions; no use of bay water; replacement of a 50-year old plant with state of the art technology; compatibility with the Bayfront Plan; local revenues, property taxes, and gas franchise fees; and most importantly, energy security and reliability for the region. Part of the 450-acre Bayfront Master Plan is designated as an energy utility zone. Construction of the new facility would open up 110 acres occupied by the current plant and switchyard, and the project would ensure the timely removal of the existing South Bay Power Plant. The existing switchyard would be relocated to the far south end of the energy utility zone. Mr. Trump said the foundation of the county’s existing energy supply consists of the South Bay, Encina, and San Onofre plants, and future facilities are planned in Otay Mesa and Palomar. The main transmission corridors into the area are San Onofre from the north and the Southwest Power Line from the east, and another future project in question is the Sunrise Powerlink. The San Diego Regional Energy Infrastructure Study calls for up to four new power plants to be built by 2020; the State of California’s Energy Action Goal stated the need for new energy infrastructure; and SANDAG’s energy strategy strongly supports ensuring adequate capacity for energy resources in the county.

Peak capacity requirements by 2015 in the area are 5,645 MW. Without South Bay there are about 1,400 MW of older generation in the county. Palomar, Otay Mesa, and new combustion turbines would bring about 1,500 MW of new generation. The South Bay Plant replacement would reduce the almost 3,000 MW balance necessary from out-of-area imports by roughly 640 MW. This is either an opportunity to import less or to repower more of the older power plants that remain even after South Bay has been considered.

The existing South Bay Power Plant is roughly 175 feet tall. The new plant would be significantly smaller in size at 125 feet in height, cleaner, more efficient, and will use no bay water. The combined cycle power plant (gas turbines with a steam turbine cycle) is a nearly 60 percent overall efficiency, very high for a central generated station and a significant improvement in the overall efficiency of the conversion of natural gas into energy. Duke Energy currently leases 110 acres. The 33-acre former LNG site is being considered for the new facility, but environmental and easement constraints, switchyard relocation, landscaping and other site features leave about 15 acres for the actual power block. It is proposed to lease the site from the Port under a long-term 30-year ground lease. Illustrations of current facilities and the proposed new power plant showed the difference in locations and size.

The once-through cooling system, which brings in bay water, sends it through the heat exchanger and back into the bay, causes some concern about the effects on the bay’s marine environment due to the temperature increase. Duke has held talks with the City of San Diego and Sweetwater Authority about the opportunities to use reclaimed water instead for the cooling cycle and is exploring a technology called dry cooling, which further reduces power plant water use. Today, maximum capacity is 600 million gallons per day of bay water, and with recycled water it would be a maximum of 5 million gallons per day.

The next steps in the timeline are to continue developing the necessary support; enter the almost 1.5-year application process with the Energy Commission; begin construction of the new plant in mid 2008 to be operational in 2010; and demolish the existing plant by 2011. The project cost is roughly $500 million to go to a 600 MW plant. Duke has been working closely with LS Power, who is stepping into the role of operator of the South Bay Power Plant. The terms of operation will not change, and LS Power has been positive about moving forward with the development project and committed to developing and filing the application with the Energy Commission by June 2006.

A brief question and answer period followed addressing issues related to water, air quality, and environmental concerns, the use of natural gas lines, and criteria for location of the new plant. Mr. Trump added that LS Power agreed with the message provided by Duke today, and its directive to Duke has been to continue forward and communicate that to the stakeholders in the community. As a point of clarification, he said that LS Power is acquiring about eight facilities from Duke Energy. South Bay is unique in that LS Power is assuming a lease obligation associated with the power plant, since the property is actually owned by the Port. Chair Pocklington thanked Mr. Trump for his presentation.

2. ITEMS TO BE ADDED, WITHDRAWN, OR REORDERED IN THE AGENDA
There were none.

3. APPROVAL OF MINUTES

Director Doud made a motion, seconded by Director Alkire, that the Governing Board approve the minutes of the March 8, 2006 meeting with changes as noted in Director Pocklington’s remarks under Directors’ Comments. Director Morrison abstained, as he was not present at the meeting. The motion carried.

4. APPROVAL OF DEMANDS AND WARRANTS

Director Doud made a motion, seconded by Director Morrison, that the Governing Board approve Warrants 104395 through 104568, including all voided checks. The motion carried.

5. OPERATIONS COMMITTEE (Meeting of March 15, 2006)

A. Director Doud made a motion, seconded by Director Welsh, that the Governing Board authorize the General Manager to sign a petition to initiate the continuance of the Downtown Chula Vista Property-Based Business Improvement District. The motion carried.

B. Director Doud made a motion, seconded by Director Welsh, that the Governing Board approve funding from the Repair and Replacement Reserve Fund in the amount of $100,000 to perform the Tobias Drive Sidewalk Improvements, Chula Vista, using the Authority’s time and materials contractor, Cass Construction, Inc., with the understanding that the City of Chula Vista will reimburse the Authority 50 percent, or $50,000. The motion carried.

C. Director Doud made a motion, seconded by Director Beauchamp, that the Governing Board approve funding from the Repair and Replacement Reserve Fund in the amount of $45,000 for the Highland Avenue Streetscape, 8th to 16th Street, National City, contingent on staff’s appeal to the City for alternative relocation of one of the proposed ramps to avoid conflicts with Authority meters. The motion carried.

6. FINANCE AND PERSONNEL COMMITTEE (Meeting of March 20, 2006)

A. Director Alkire made a motion, seconded by Director Doud, that the Governing Board award a contract in the amount of $218,118, to Haaker Equipment, 2070 N. White Avenue, La Verne, CA 91750, for the purchase of the 10-yard vacuum truck, and approve funding in the amount of $5,022 from the Unallocated Reserve Fund to cover the deficit. The motion carried.

B. Director Alkire made a motion, seconded by Director Beauchamp, that the Governing Board approve the discontinuation of the collection of the cross-connection fee, refund approximately $75,000 to the active accounts on record that are subject to the cross-connection fee, and modify the Authority’s Rates and Rules by resolution. The motion carried.

C. Director Alkire made a motion, seconded by Director Doud, that the Governing Board award a contract in the amount of $18,680 to John C. Lovio, 4502 Maryland Street, San Diego, CA 92116, for biological services support. The motion carried.

D. Director Alkire made a motion, seconded by Director Doud, that the Governing Board award a sole-source contract in the amount of $354,225 to MRO Software Inc., 100 Crosby Drive, Bedford, MA 01730, for phase 1 of the Enterprise Asset Management System implementation project and the continuation of services with MRO for future phases. The motion carried.

E. Review of Leak Adjustment Report for the Period October 1, 2005 through December 31, 2005. This was an information item and no action was required by the Governing Board.

7. ADOPTION OF RESOLUTIONS

Upon a motion made by Director Alkire, seconded by Director Welsh, the following resolution:

RESOLUTION NO. 06-02

RESOLUTION OF THE GOVERNING BOARD OF SWEETWATER AUTHORITY
CONCURRING IN THE NOMINATION CHARLES MUSE TO THE
EXECUTIVE COMMITTEE OF THE ASSOCIATION OF CALIFORNIA WATER
AGENCIES JOINT POWERS INSURANCE AUTHORITY (“ACWA/JPIA”)

was passed and adopted by the following vote, to wit:

Ayes: Directors Alkire, Beauchamp, Doud, Morrison, Pocklington, and Welsh
Noes: None
Absent: Director Salas
Abstain: None

8. NEW BUSINESS
There was none.

9. REPORT OF SOUTH BAY IRRIGATION DISTRICT REPRESENTATIVE AND THE CITY OF NATIONAL CITY REPRESENTATIVE TO THE SAN DIEGO COUNTY WATER AUTHORITY

Director Morrison reported that the Legislation, Conservation, and Outreach Committee will consider water conservation funding allocations for proposals from the Quail Botanical Gardens, Mira Costa College, and the Cuyamaca Water Conservation Garden. There will also be reports on the proposed infrastructure bond and the water/wastewater internship program. The Engineering and Operations Committee has a consent item to grant an easement to SDG&E for the realignment of an overhead power line as part of the San Vicente Pump Station project. On the action calendar is the potential transfer of almost $1 million from the ESP Pump Station at CWA’s treatment plant project budget to the San Vicente Interconnect Pipeline project and a $3.5 million construction contract to CCL Contracting.

Director Pocklington reported that the Administrative and Finance Committee will consider an ordinance repealing Section 16.1, Subdivision (a) of the Administrative Code, to be consistent with annexation policies and the cost of service connections. Also to be considered is a resolution to amend and implement the 2.5 percent at age 55 retirement contract provisions between CALPERS and CWA. The Water Planning Committee will hear an update on desalination at the Encina Power Station, including a closed session on property interests for a regional desalination project. The Water Authority’s draft Drought Management Plan will be distributed, with reviews scheduled in April and May. The Imported Water consent calendar will include an agreement with the State Lands Commission for CWA to purchase approximately 880 acres of property for the Coachella Canal Lining Project at a cost of $1.4 million.

10. APPROVAL OF DIRECTORS’ ATTENDANCE AT MEETINGS AND FUTURE AGENDA ITEMS

A. Padre Dam Municipal Water District Open House – Wednesday, April 5, 2006, 12:00 noon to 2:00 p.m., Santee Lakes. Director Welsh made a motion, seconded by Director Beauchamp, that the Governing Board approve per diem for Directors wishing to attend this event. The motion carried.

B. American Society of Civil Engineers Dedication of Sweetwater Dam as a National Historic Civil Engineering Landmark – Friday, April 7, 2006, 11:00 a.m. Director Doud made a motion, seconded by Director Beauchamp, that the Governing Board approve per diem for Directors wishing to attend this event. In response to expressed interest to extend invitations to Directors’ family members, at Chair Pocklington’s suggestion, it was agreed that including an additional family member would be appropriate. The motion carried.

C. CSDA Government Affairs Day – Tuesday, April 18, 2006, Sheraton Grand Hotel, Sacramento. No Directors present will attend this pre-approved event. No action is required by the Governing Board.

D. CSDA Special District Governance Academy – Module 1: Governance Foundations, April 21, 2006; and Module 2: Setting Directions & Community Leadership, April 22, 2006, at the Doubletree Club Hotel, Santa Ana, CA. Directors wishing to attend this pre-approved event will contact the Secretary. No action is required by the Governing Board.

11. REPORTS BY DIRECTORS ON EVENTS ATTENDED

Director Salas submitted a written report to the Governing Board on her attendance at the WateReuse Conference in San Francisco on March 12-14.

Director Morrison reported on attending the National City Chamber of Commerce monthly meeting on March 15 as the Authority’s designated representative. The District Attorney’s office gave a presentation dealing with identity theft and business relations within the community. Director Morrison also received a number of questions about water issues following the meeting.

Director Welsh commented that Mr. Peter Silva’s presentation at the Council of Water Utilities meeting on March 21 was very interesting.

Director Pocklington commented that Mr. Silva’s presentation was very good and that he is a great asset to MWD. Mr. Silva has a great interest in the South Bay and border issues, and Director Pocklington believes that he has the right approach to find comrades and allies in the desert area. Because of the major growth effort in the desert, there may be surplus water in the future, and MWD and CWA want to be first in line if that happens.

12. BUDGET REPORT – INTERIM DIRECTOR OF FINANCE FARROW
Report as of February 28, 2006

Interim Director of Finance Farrow reported that, in the eighth period of the budget year, we are at 67 percent to the whole budget, which is right where we want to be. Water Sales are approximately $307,000 over budget. Other Income is $22,460 under budget. The $1.1 million in Interest Income is 92 percent of what was originally budgeted for the entire year. Operating Expenses are $154,000 over budget. Year-to-date Capital Projects are 35 percent completed at this point, as opposed to the estimated 50 percent budgeted.

13. MANAGEMENT REPORT

A. Report of Operations Manager Rogers: Operations Manager Rogers reported that the last rainfall put us over the driest year on record. Since we stopped transferring water from Loveland to Sweetwater, we have had 1,000 acre-feet of runoff into Loveland and 400 acre-feet of runoff into Sweetwater. Mr. Rogers displayed photographs of a juvenile bald eagle and a mature bald eagle taken by Steve Parker in the past week. The juvenile eagle had a tag inserted by a breed and release program at Catalina Island, and we reported the sighting back to the release facility.

B. Report of General Manager Bostad: General Manager Bostad drew the Board’s attention to a Union Tribune news article on the HR 1190 reservoir intertie project funding measure, featuring Rick Alexander who gave a good presentation on the project. The measure has passed the House and moves on to the Senate. He noted that Gayle Norton has stepped down as Interior Secretary, and Idaho Governor Dirk Kempthorn has been identified as a possible replacement. Also, John Keys has stepped down as Commissioner of the Bureau of Reclamation. He called the Board’s attention to the order forms distributed for the Navy blazers, and Tom Woodrum had a sample blazer for them to view following the meeting.

14. DIRECTORS’ COMMENTS

Director Welsh commented on a news article distributed to the Board on the sale of bottled water to the world’s poor by private companies and protests that took place at the World Water Forum in Mexico City. Counsel Cowett provided background about a privatization movement in the past decade in Third World countries, with the idea that private companies could develop water resources and get water to the people better than the government. Rising water rates and protests indicate this is not true, and those companies are getting out of that field, as they cannot make any money and do a good job.

Director Doud read a quote from Peter Drucker, “The most important thing in communication is to hear what isn’t being said.”

Director Beauchamp expressed his thanks to Authority staff who gave his guest a tour of the Reynolds facility. Carlos Vidali, former Mexican Minister of Agriculture and Hydraulics and most recently Consul General of Mexico in San Antonio, now represents Water Tech, which supplies equipment for the military systems in Iraq and has an interest in developing a reverse osmosis facility.

Director Morrison commented that he attended the Local Government Commission Conference this past weekend and learned some fascinating facts on how we work with agencies outside of water to deal with discharge coming into our watersheds and how we deal with other jurisdictions on planning for water use. One individual from northern California expressed anger about southern California stealing all the water from northern California. Mr. Morrison challenged him by saying that northern California could quit sending its water to the south, southern California could quit sending money to the north, and we’d see which one dries up first.

15. CLOSED SESSION
There was none.

16. ADJOURNMENT

With no further business before the Board, Chair Pocklington adjourned the meeting at 4:36 p.m., to the hour of 6:00 p.m. on April 12, 2006.