PUBLIC UTILITY DISTRICT NO. 1 of Jefferson County February 21, 2012

REGULAR MEETING MINUTES

The Regular Meeting of the Public Utility District No.1 of Jefferson County was called to order by the President of the Board of Commissioners at 5:00 p.m. at the District Office, 230 Chimacum Road, Port Hadlock, Washington. Commissioners and staff present were:

Barney Burke, President Wayne King, Vice-President

Ken McMillen, Secretary James Parker, District Manager

Kate Pike, Brisa Services

AGENDA The Agenda was approved with the notation that Action Item a) NoaNet PA and ILA's not be addressed as documentation had not been received.

APPROVAL OF MINUTES MOTION: By Commissioner McMillen, Second by Commissioner King, carried unanimously, to approve the Regular Meeting Minutes of February 7, 2012 and those of the Special Meeting of January 27, 2012.

APPROVAL OF VOUCHERS MOTION: By Commissioner McMillen„ Second by Commissioner King, carried unanimously, to approve payment of: Warrants No.18326 through 18337 in the amount of $ 21,510.27; and Warrants No.18338 through 18370 in the amount of $ 32,098.95;

For a Total Amount of $ 53,609.22

COMMISSIONER'S REPORTS

Commissioner McMillen February 9 & 10: Attended Washington PUD Association meetings and training in Olympia. Commissioner King February 16: Attended lunch meeting with Karl Karzmar, PSE consultant, regarding conservation and rebates. February 16: Met with Cindy Pollard, Quilcene School District Business Manager. February 17: Connected with State Representative (and Clallam County Commissioner) Steve Tharinger regarding Public Works Trust Fund. February 22: Expect to attend meeting of the Transition Advisory Committee. February 24: May attend Washington State Court of Appeals regarding Case No. 41545-3-11, Ted Shoulberg & Charles Haniford vs. PUD No.1 of Jefferson County. March 6: Expect absence from PUD No. 1 Regular Meeting as having out-of-state travel. Commissioner Burke February 23: Expect to attend meeting of Peninsula Development District. February 24: Expect to attend Washington State Court of Appeals regarding Case No. 41545-3-11, Ted Shoulberg & Charles Haniford vs. PUD No.1 of Jefferson County.

MANAGER REPORT - electrical power transition update The Manager presented a summary of total costs of $1,424,710. Costs for lawsuit relative to Peterson Lake is $190,809.10. With regard to Bonneville Power Administration (BPA) process, meetings with BPA and Port Townsend Paper Company to discuss electric (wheel turning) loads continue, with decision imminent . Brown & Kayser counsel will meet with the Manager within the next week to discuss on-ground engineering. Regarding financing, the Rural Utilities Service (RUS) loan application continues through the approval process. Concerning upgrade of the accounting system, Springbrook will meet with staff on February 27 to review; actual upgrading is expected in April. Regarding

transmission, there is consideration to replace the Under Frequency Load Shedding (UFLS) and Under Voltage Load Shedding (UVLS) relays to the Port Townsend Paper Company; these relays are a last effort to prevent system collapse. The option preferred by BPA and the Paper Company is to transfer the relays from that site to Fairmount. There is continuing discussion on Puget Sound Energy's conservation programs being transferred to the District. The next Transition Advisory Committee is scheduled for February 22, 2012.

ITEMS FROM THE FLOOR (not listed on the Agenda) Ned Schumann, OlympusNet, questioned correspondence to Department of Transportation, Olympic Region, regarding telecom franchises granted to PSE for portions of Jefferson County roadways. The Manager explained some of the purpose for franchises and some of the process of transfer to the District. The Resource Manager will contact NoaNet to follow up.

ACTION ITEMS a) NoaNet Participation Agreement and ILA As documentation's not been received, this item was not addressed. b) Resolution 2012-05, Declaration of Surplus The Manager presented Resolution 2012-05, declaring certain vehicles and equipment to be unserviceable, inadequate, obsolete, worn out or unfit to be used in the operations of the District and the intent to sell same. MOTION: By Commissioner McMillen, Second by Commissioner King, carried unanimously, to adopt Resolution 2012-05, Declaration of Surplus, and declaring certain vehicles and equipment to be unserviceable, inadequate, obsolete, worn out or unfit to be used in the operations of the District and the intent to sell same. c) Resolution 2012-06, Cancellation of Warrants The Manager presented Resolution 2012-06, canceling outstanding warrants that have not been redeemed within one year. MOTION: By Commissioner King, Second by Commissioner McMillen, carried unanimously, to cancel two outstanding warrants that have not been redeemed within one year, Warrant Numbers 16979 and 16983.

DISCUSSION ITEMS a) OPSCAN As OPSCAN representation was absent, this item was not addressed. b) State Revolving Fund Loan Request The Manager presented information regarding a March 1, 2012 deadline for water-project State Revolving Fund applications. The program this year apparently has $130 million available for low-interest project loans and loan forgiveness for projects that meet certain criteria. The District is considering making application for two potential projects: a) Water District No. 3 at the end of the Coyle Peninsula; and b) a possible purchase of a Kala Point System. It was noted that the manager had spoken with representatives of the Coyle water system, and the PUD agreed that there would be no action on a possible purchase of the Kala Point system unless and until there is a proposal and the public has the opportunity to comment on it. c) BPA (Bonneville Power Administration) Relay (see Manager Report) As addressed in the Manager's electrical power transition update, a project is under consideration to replace the Under Frequency Load Shedding (UFLS) and Under Voltage Load Shedding (UVLS) relays to the Port Townsend Paper Company; these relays are a last effort to prevent system collapse. The option preferred by BPA and the Paper Company are to transfer the relays from that site to Fairmount. d) Ruralite Proposal The Manager presented for review copies of the Ruralite magazine and information regarding cost differences between the Ruralite offer and in-house newsletter production and mailing. e) PURMS Resolution The Manager presented for review correspondence from the PURMS (Public Utility Risk Management Services) regarding the PURMS' revised Resolution adopting amendments to the Interlocal Agreement, designed to implement compliance with new Washington Administrative Code (WAC) regulations. A draft Resolution for PUD No. 1 of Jefferson County was also presented.

Wayn Ki g Vice Pres!

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Kenneth A. McMillen, Secretary

MANAGER'S REPORT/OLD BUSINESS Indian Island: Regarding any proposed water system transfer, there has been no further communication from the U.S. Navy. Regarding the water transmission line to Marrowstone Island, advertisement, bid opening and award, as well as County permitting has occurred. Pre-construction meeting and start of construction is pending. An additional bid process is needed for a pressure reducing station at East Marrowstone Island. Sperling Well: Approval by the Department of Health is pending and initial permits have been provided by Jefferson County. CH2M Hill is requesting execution of engineer management documents; staff is reviewing.

PUBLIC COMMENT None

CORRESPONDENCE 1. Letter from Bob Purvis Port Ludlow, regarding taste and oder in water 2. Letter from Dan Nasman, Ocean Grove Association Manager, regarding sales of water service connections for LUD No. 3. 3. Response letter from James G. Parker to Dan Nasman.

ADJOURNMENT MOTION: By Commissioner McMillen, Second by Commissioner King, carried unanimously, to adjourn the Regular Meeting at 7:29 p.m.

Barney Burke, President