Mr. Blodgett summarized plans for the day and asked for any updates since the May special. Place: 272tWest LOth Avenue, Kennewick, Washington

PUBLIC UTILITY DISTRICT NO. 1 OF

BENTON COUNTY

SPECIAL COMMISSION MEETING

Date Time

June 30, 20L5 8:30 a.m.

Place: 272tWest

LOth Avenue, Kennewick, Washington Present-Benton PUD:

Commissioners Hall, Sanders and Bush General Manager Bartram

Assistant General Manager Hunter

Legal Counsel Hultgrenn

Senior Director of Engineering and Power Management Dunn

Director of Finance Meyer

Director of Customer Programs Ball

Manager of Communications & Governmental Relations Miller

Manager of Human Resources Wenner

Supervisor of Executive Administration Cole

Executive Assistant to the Assistant General Manager Schlekewey

Guests: Tim Blodgett, President and CEO, Hometown Connections; Rich Nall, Northwest Open Access Network (NoaNet)

President Lori Sanders opened the Special Meeting of the Commission at 8:30 a.m., introduced

fellow commissioners Barry Bush and Jeff Hall, and stated the purpose of today's meeting was

to

hold discussion on strategic planning issues for 2Ot6.

General Manager introduced Mr. Tim Blodgett

of

Hometown Connections, who presented and

facilitated

the

last special commission meetings

of

May

12

and

t3,

2OI5, and stated those meetings were also for the purpose of discussin

_920t6

strategic planning.

Welcome and lntroductions

Mr.

Blodgett summarized plans

for the

day and asked

for

any updates since

the

May special

meeting.

Commissioner Jeff Hall and General Manager summarized topics held at

the

American Public

Power Association (APPA) annual conference, noting

three

primary

themes:

L)

impacts

of

Commission Meeting Minutes

distributed generation, including

impacts

on

rates,

2)

community solar, and

3)

customer

engagement. Mr. Blodgett acknowledged the District's efforts on strategic planning and stated

utilities should continually strive

to

move forward.

Mr.

Blodgett recapped

work from the

last strategic planning workshop, briefly discussing the visioning exercise and the General Manager's review of

the

District's measurable strengths. He

noted that the District did not discuss workforce culture at the last special meeting; however he stated based

on

his interactions and

other

professional feedback

he

has been provided the District has quality leadership and a culture of planning.

Mr. Blodgett stated

that

at the conclusion of today's workshop the goal is

to

have a clear set

of

strategic initiatives identified.

Future of Broadband

Senior Director

of

Engineering and Power Management introduced Mr. Rich Nall, NoaNet, and

gave

a

presentation

on

broadband, including.

a review

of

20L5

talking points

and strategic

planning history relating

to

broadband. At

the

conclusion of

the

presentation, Senior Director

confirmed

the

Commission's

direction and priorities

to

continue

with the current

mode

of

operation and

to

continue managing expenses against revenues

to

provide positive cash flow

back

to

electric ratepayers. The Commission encouraged staff and NoaNet

to

continue looking

for

opportunities

to

partner

with

other public and private entities and

to

bring

business

opportunities

to

them

for

consideration

on a

case

by

case basis

when

significant capital

investment is being contemplated.

General Manager

held

a

discussion

on

the

community benefit

of

the

District's broadband

network.

lt

was also noted

that

legislators

mandated an open

access

model,

with

only

wholesale authority being granted

to

PUDs, which has been challenging

to

manage but in the

end has facilitated partnerships

with both

public and private telecommunications companies using the District's open access service

to

provide service to the end users which helps drive net

revenues up. He

further

stated

this

partnership has helped enable 4G LTE services in the Tri-Cities, and that the District's broadband now has a positive cash flow.

Mr.

Nall explained

that

the

reason

the

District has a 100 gig capability is because of a decision

to

go

with

a convergence model

with

NoaNet's network, stating that

the

District is now a key

hub

in the

core

of

NoaNet's

network.

There

are currently

401 cell sites connected

to

the

NoaNet and member networks and 25 more

just added. Mr.

Nall stated

the future

may be

microcells on power poles and asked who the customer would trust for those types of services.

Commission Meeting Minutes

Senior Director stated

the

District

became cash

flow

positive

in

2}tt,

two

years ahead

of

schedule.

President

Lori

Sanders

clarified

strategic

planning

discussions concerning

the

question of

whether the original investment in broadband is a sunk cost or not, stating she does not believe

that it

is and

that

staff needs

to

continue

to

be mindful of

the

electric ratepayer investment in the District's broadband business. President Sanders stated that the debate continues today on

who is best suited

to

deliver broadband services -- public sector entities or private enterprise.

Senior

Director reviewed

20tr-5 strategic

direction

and confirmed staff's

understanding

of

Commission direction

to

continue on the current

path.

Senior Director discussed plans

to

hold

a

meeting

with our

retail service providers in July regarding

the

fixed wireless portion

of

our broadband business which continues

to

see revenue erosion and loss

of

customers due

to

the extension of competitors' broadband services and the inability of

the

District's wireless system

to

support high data demands of customers, particularly NetFlix streaming. Mr. Nallstated that the RSPs could urge for capital investment so they can add more end users.

General Manager

held a

discussion

with the

Commission

on

long

term

planning relating

to

broadband and

the

difficulty

of

predicting future technology and service needs relating

to

this

business sector as

well

as maintaining pricing

that

remains competitive, and how

the

market

and customer demand can fluctuate much differently than the electric

utility

model.

A discussion was held on a long

term

plan and President Lori Sanders stated that given the high

level

of

uncertainty related

to

future

broadband services,

a

long

term

plan was

not

an

expectation and the other commissioners concurred. President Lori Sanders stated she wahted

to

recover the principle investment, stating that the District's goal should be

to

recover costs

to

repay the investment. A discussion was held on the increasing value of the District's broadband business and

not

knowing when

or if the right

opportunities

to

sell

the

business

will

arrive.

General Manager stated

the

District's

net

investment

in

NoaNet is

_{53 million,}

and

that

the District owns2O%

of

NoaNet which may have a higher

value.

The Commission concurred that

the

broadband business

is a

community asset

and

capital costs going

forward

need

to

be discussed as business opportunities arise.

President

Lori

Sanders asked

about

the

recent

NoaNet

outage, potential liability and

the

perceived value

of

NoaNet

if it

is considered as unreliable by customers/RSPs. Senior Director reviewed

the

quick reactions by NoaNet in response

to the outage.

Mr. Nall stated

that

PNNL was working

with

NoaNet on issues relating

to

the outage and

that

the outage has resulted in

significant improvements

to

NoaNet's processes and procedures. Commission Meeting Minutes

President Lori Sanders

affirmed

that

the

District's

and

NoaNet's broadband networks have

perceived values and

that it

is difficult

to

know what they are worth, particularly since there are

no

active

offers by potential buyers.

Senior Director

affirmed that the current

broadband

business model does

not support

broadband

to

the

home

in

rural areas

for either

public or

private

companies

and

that

perhaps something

similar

to

the

'REA"

movement

for

early

electrification may repeat for fiber to the home.

Commissioner

Jeff Hall stated

it

was difficult

to

quantify

the

value

of

broadband

to

the

community,

to

know

who

it

has

brought into

the

area,

and

stated

that

in

the

broadband business rates aré based on market position, not just on costs.

Mr.

Ken Mey, customer, stated

that

in the absence

of

a cost of service analysis

for

broadband,

how are prices established

for

services

to the

RSPs? Senior Director explained

the

purpose

of

the

NCS contract

with

NoaNet

to

operate

the

broadband business and how

the

District has access

to

a

statewide NoaNet sales

team.

Senior Director stated

the

NoaNet

staff

receives

feedback

from

our retail service providers (RSPs) _{on a regular basis} as

to

what is happening in

the

market and

if the

District's rates are

competitive. Mr.

Mey continued his comment that there seems

to

be a disconnect in costs. Senior Director explained that operating expenses are

clearly known and

that they

haven't varied much

in

the

past

few

years,

Senior Director explained

that the

incremental cost

to

provide higher bandwidths is very small and near zero

once

the

electronics

to

light

the

fiber network

have

been

purchased, and

that

it

requires

working with the RSPs

to

know what is happening in the market and to determine how

to

make

adjustments

in rates.

Broadband is a competitive business and

without

the

right pricing the District would be out of

the

market.

Mr.

Blodgett stated

that

when .assessing value,

the

District should consider

what

it

loses

if it

goes away, as this is where

the

benefits will show up.

At

9:50 a.m., President Lori Sanders announced

that the

special commission meeting would

recess

for

L0 minutes.

At

1-0:00 a.m., President Lori Sanders reconvened

the

special commission meeting

into

regular

open public session.

Manager of Communications briefed

the

Commission on interviews that occurred this morning

with the

media on electricity usage due

to the

high temperatures in the area and

the

impacts

on

customer

bills.

The Communications

group is working on

energy

tips

and encouraging Commission Meeting Minutes

customers

to

contact

the

District

for bill

payment assistance, including possible extensions in

payment arrangements. She stressed continuing

the

message that

the

District is its customer's

trusted

energy

partner.

Manager

of

Communications stated

the

solar project is expected to

begin generation tomorrow and this was discussed

with

KONA earlier today.

Strategic Challenges

Mr.

Blodgett directed

the

Commission

to

a visioning exercise, and asked each commissioner

what

their

idea

of

a

"trusted

energy partner" looks like

today.

A discussion ensued on ideas

relating to the meaning of a trusted energy partner.

Mr.

Robert Gretzinger, customer, asked if

there

were plans in place

to

mitigate an emergency

relating

to

a shortage of electricity, and General Manager reviewed plans in place. The District

is also looking

into

a demand response program and is meeting

with

Energy Northwest in July

to

discuss

this possibility.

A brief discussion was held

with the

Senior Director

of

Engineering

and Power Management relating

to

critical water, and

that

no plans were currently in place

to

build generation into the mid 2020's.

Mr.

Blodgett

discussed

what

strategic direction

and

issues

are important and should

be

addressed in

the future,

and a discussion was held

with the

Commission and

staff.

Strategic

topics

identified

were

demand

response

(more

customer options),

community

involvement/visibility, more social media presence, energy storage, water resources, cost/rate

alignment,

possible

work

from

home, economic development, electric

vehicles

and

BPA

integration.

General Manager discussed becoming a trusted energy partner, being knowledgeable about "all

things

energy".

Commission and

staff

identified

the following

strategic initiatives

that

were

developed

from the

discussion

on the future

as

follows:

electric vehicle charging stations,

home automation,

economic development,

rate

alignment, energy storage,

solar,

demand

response,

distribution

automation, and customer/constituent

engagement.

lt

was discussed

that

each

of

these initiatives

would require additional information

to

be

brought

to

the

Commission in August for continued discussion.

At 1L:30 a.m., President Lori Sanders announced that the commission meeting would recess

for

L5 minutes.

At

LL:45

â.ffi.,

President

Lori

Sanders announced

that the

commission

meeting

would reconvene into regular open public session.

A discussion was held

with

staff on each strategic

initiative.

At the conclusion of the discussion,

Mr.

Blodgett asked about workloads

in

association

with

the

initiatives, and General Manager

stated

that the first

round

of staff

review on

the

identified items could be accomplished and

brought to the Commission in the August timeframe.

President Lori Sanders asked

that the

strategic plan be completed

prior

to

the final

budget

approval for 2OL6.

Mr. Blodgett thanked the Commission

forthe opportunityto

be a part of the District's strategic

planning and

how

impressed he was

on the work

being done and

the

communications ànd conversations that continue with the commission and leadership staff on the District's future.

Hearing no objection, President Lori Sanders adjourned the special commission meeting at

L:L2 p.m

Lori Kays-Sanders, President ATTEST:

Secretary

Commission Meeting Minutes