SNOHOMISH COUNTY PUBLIC UTILITY DISTRICT

Regular Meeting November 6, 2018

The Regular Meeting was convened by President Kathleen Vaughn at 9:00 a.m. in the Commission Meeting Room. Those attending were Sidney Logan, Vice President; Tanya Olson, Secretary; CEO/General Manager John Haarlow; General Counsel Anne Spangler; Assistant General Managers Teresa D' Alessio (Interim), Tom DeBoer, Glenn McPherson, and Brant Wood; Chief Information Officer Dean Galvez; other District staff; members of the public; Clerk of the Board Melissa Collins; and Deputy Clerks of the Board Allison Morrison and Lela Wall.

* Items Taken Out of Order **Non-Agenda Items

1. CEO/GENERAL MANAGER BRIEFING AND STUDY SESSION

A. Updates

1. Media. Media & Public Relations Liaison Neil Neroutsos reported on District related articles and showed a KING 5 news clip about the District's energy storage.

2. Community Engagement. Customer and Energy Services Program Manager Kelly Strand provided an update on the Clean Energy Fund 3 (CEF3) status and spoke about the Grid Modernization Program. Ms. Strand mentioned that Snohomish County requested a partnership on a CEF application for a sustainable Microgrid project, which the County would manage and eventually own, for the purpose of an Emergency Operations Center. Discussion occurred about how that operating agreement would work.

3. Other. Assistant General Manager Generation, Power, Rates, and Transmission Management Tom DeBoer provided an update on the West Coast Energy Pipeline explosion in British Columbia, Canada.

B. Snohomish County Easement

Manager Real Estate Services Maureen Barnes detailed a request made by the Snohomish County Public Works Department to purchase a non-exclusive easement, over a small portion of the PNT right-of-way. The easement would be for the SWIFT II Pedestrian Facilities project.

The County proposed to pay the District $4,900 fair market value as compensation for granting the easement and would plan to bid the project in mid-November, with construction slated for spring, 2019.

Next steps included declaring the property surplus, to the needs of the District, and allowing the Manager of Real Estate Services to execute the necessary easement document (s ), subject to the final review of General Counsel or her designee

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C. Bonneville Tariff Settlement Process

Power Analyst Ian Hunter provided a presentation on the history and timeline of the settlement process for the Bonneville Power Administration's (BPA) transmission products, offered via its Open Access Transmission Tariff (the Tariff).

Discussed were the effects from the Tariff that the District could expect as a Point-to-Point (PTP) transmission customer and whether Slice could be eliminated. Mr. Hunter mentioned that if the Hourly Firm product quality of service was eliminated, it could have the highest potential for adverse cost impacts.

The next step was for BPA to have all customers sign the settlement by November 30, 2018; however, if a customer did not plan to sign the settlement, they would need to provide written notice to BP A by that same deadline. General Counsel Anne Spangler added that staff's recommendation would be presented before the deadline, but first required further information be provided to the Board in an Executive Session.

The meeting recessed at 10:29 a.m. and reconvened at 10:40 a.m.

D. Rate Redesign Status Update

Senior Manager Rates, Economics, and Energy Risk Management Brian Booth provided an update on the status of the District's Rate Redesign, which included why the District needed to change its rates and the process, analysis, and delivery involved in the rate redesign.

A discussion ensued about community outreach and education.

The proposed timeline began with the steering team providing information to the Leadership Team (LT) in December and again in February 2019, with the completed roadmap sketched out. Starting in February 2019, outreach, and design will begin, and a Commission workshop will be held in April. LT and Commission consideration will be at the end of June, followed by implantation of the new Rate Redesign.

EXECUTIVE SESSION

The Regular Meeting recessed at 11 :04 a.m. and reconvened in Executive Session at 11 :07 a.m. to review the performance of a public employee and discuss the legal risks of a current practice or proposed action, under the terms set forth in the Open Public Meetings Act. It was anticipated the Executive Session would last approximately 30 minutes, with no public announcements. Those in attendance were Commissioners Kathleen Vaughn, Sidney Logan, Tanya Olson; CEO/General Manager John Haarlow; General Counsel Anne Spangler; Assistant General Manager Tom DeBoer; other District staff; and Clerk of the Board Melissa Collins. The Regular Meeting recessed immediately upon conclusion of the Executive Session at 12:20 p.m.

Regular Meeting 3 November 6, 2018

RECONVENE REGULAR MEETING

The Regular Meeting was reconvened by President Kathleen Vaughn at 1 :30 p.m. in the Commission Meeting Room. Those attending were Sidney Logan, Vice President; Tanya Olson, Secretary; CEO/General Manager John Haarlow; General Counsel Anne Spangler; Assistant General Managers Teresa D' Alessio (Interim), Tom DeBoer, Glenn McPherson, and Brant Wood; Chief Information Officer Dean Galvez; other District staff; members of the public; Clerk of the Board Melissa Collins; and Deputy Clerks of the Board Allison Morrison and Lela Wall.

* Items Taken Out of Order **Non-Agenda Items

2. RECOGNITION/DECLARATIONS

A. Team of the Month for November - Hancock Creek and Calligan Creek Hydroelectric Projects Development Team

The Hancock Creek and Calligan Creek Hydroelectric Projects Development Team was recognized as Team of the Month for November.

The meeting recessed at 1 :45 p.m. (inaudible on recording) and reconvened at 1 :55 p.m.

3. COMMENTS FROM THE PUBLIC

Bill and Pat Jack, Snohomish, provided a handout at places, and made a part of the packet, and expressed their concerns and requested a meeting regarding capital improvement billing for the former members of the Kia-Ha-Ya Water Company. Assistant Manager Water Utility Brant Wood met outside the meeting with Mr. & Ms. Jack to obtain their contact information and set up a time to address their concerns.

David Chan, Everett, spoke about balancing renewable energy with rates, and mentioned his concern for rate-payers who struggle to pay their bills.

Commissioner Vaughn responded to Mr. Chan, noting that Initiative 937 was voted for by the citizens and it forced the District to bring on wind and solar. Ms. Vaughn also mentioned that the District does have resources available for those struggling to pay their bills.

4. CONSENT AGENDA

A. Approval of Minutes for the Regular Meeting of August 7, 2018, the Special Meeting of August 20, 2018, the Regular Meeting of August 21, 2018, the Regular Meeting of September 4, 2018, the Special Meeting of September 6, 2018, and the Special Meeting of September 7, 2018

Regular Meeting 4

B. Bid Awards, Professional Services Contracts and Amendments

Public Works Contract Award Recommendations Over $25,000; None Formal Bid Award Recommendations $60,000 and Over:

November 6, 2018

Request for Quotation No. Doc1453613332- One 13.8 kV Metal Clad Switchgear Request for Quotation No. Doc1478669130- HANA Servers and ESX Hosts Professional Services Contract Award Recommendations $200,000 and Over: None Miscellaneous Contract Award Recommendations $200,000 and Over: Miscellaneous Contract No. RFP No. Docl398290492-Energy Efficiency Retail and Smart Rewards Program Cooperative Purchase Recommendations: Contracts: Purchase Order No. 4500042541/PSC CW2235461 with Aronson Security Group Amendments: None Sole Source Purchase Recommendations: None Emergency Declarations, Purchases and Public Works Contracts: None Purchases Involving Special Facilities or Market Condition Recommendations: None Formal Bid and Contract Amendments: Miscellaneous Contract No. CW2228324 with Hosted Advanced Application Agreement (HAA) Professional Services Contract No. 80131 with Engineering Services for SR 530 Relocation and Systems Improvement Contract Acceptance Recommendations: Public Works Contract No. CW2233145 with Interwest Construction, Inc. Public Works Contract No. CW2233924 with Interwest Construction, Inc.

C. Consideration of Certification/Ratification and Approval of District Checks and Vouchers

D. Consideration of a Resolution Providing that Public Utility District No. 1 of Snohomish County Shall Participate in the Washington Paid Family Medical Leave Programs Provided by Washington State in Providing Paid Family Leave and Paid Medical Leave to Non-Union District Employees and not Offer Voluntary W APFML Self-Insured Programs at this Time

A motion unanimously passed approving Agenda Items 4A-Approval of the Minutes for the Special Meeting of August 20, 2018, the Regular Meeting of August 21, 2018, the Regular Meeting of September 4, 2018, the Special Meeting of September 6, 2018, and the Special Meeting of September 7, 2018

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A motion passed approving Agenda Item 4A - Approval of Minutes for the Regular Meeting of August 7, 2018, with Commissioner Vaughn abstaining.

A motion unanimously passed approving Agenda Items 4B -Bid Awards, Professional Services Contracts and Amendments; 4C - Certification/Ratification and Approval of District Checks and Vouchers; and 4D - Resolution No. 5874 providing that Public Utility District No. 1 of Snohomish County shall participate in the Washington Paid Family Medical Leave Programs provided by Washington State in providing Paid Family Leave and Paid Medical Leave to Non-Union District employees and not offer Voluntary WAPFML Self-Insured Programs at this time.

5. PUBLIC HEARING

A. Continue Public Hearing on the 2019 Proposed Budget

President Vaughn opened the public hearing.

Manager Budget and Financial Planning Sarah Bond presented a continuation of the 2019 proposed budget, with a focus on the Water System, and a look at Operating Revenues for the Water System and the Electric System.

Noted was that steady growth for the Water System fueled the need to purchase more water and attain more assets. Rising purchased water costs drove a three percent increase in operating expenses. The outstanding debt balances have been declining and reserves were forecasted to remain stable.

Assistant Manager Water Utility Brant Wood mentioned that the focus for 2019 remained replacement of aging infrastructure, focused around the Lake Stevens area and the design work for the Warm Beach project. Mr. Wood also stated that the District does not intend to impose the 2 percent rate increase in 2019; however, the Cities of Lake Stevens and Gold Bar will impose a 6 percent municipal tax on water revenues.

The 2019 proposed operating revenues for the Electric System currently includes a 2.9 percent rate increase that will be revisited prior to the budget being finalized. A decline in energy wholesale sales is expected from 2018 and no significant change is expected in the other operating revenues. The Electric System retail sales are growing, despite lower loads and the historical rates are trending below the Consumer Price Index (CPI).

The 2019 Budget remaining hearing schedule was as follows:

November 20, 2018 Electric System Operating Expenditures Generation System Proposed Budget Electric System Capital Expenditures Electric System Operating Reserves and 5-Year Financial Forecast

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December 4, 2018 Present, and discuss suggested modifications to the 2019 Proposed Budget

December 18, 2018 Consider adoption of the 2019 Budget

A motion was unanimously passed continuing the public hearing on the Proposed 2019 Budget to that evening, November 6, 2018, at 6:30 p.m., in the District's Commission Meeting Room at 2320 California Street in Everett.

6. ITEMS FOR INDIVIDUAL CONSIDERATION

A. Consideration of a Motion Accepting the 3rd Quarter 2018 Financial Planning and Budgeting Monitoring Report (Note: Correct Title was "3rd Quarter 2018 Financial Conditions and Activities Monitoring Report")

Senior Manager Controller & Auditor General Accounting & Financial Systems Julia Anderson and Chief Financial Officer Glenn McPherson provided the Third Quarter 2018 Financial and Budget Results for the District's Electric System and Water System.

A motion unanimously passed accepting the 3rd Quarter 2018 Financial Conditions and Activities Monitoring Report.

B. Consideration of a Resolution Authorizing the Manager, Real Estate Services, to Execute All Necessary Documents to Purchase Certain Vacant Real Property With an Address of 9009 84th Street NE, Arlington, Washington (Assessor's Parcel Number 30052400200100), for Future Use as a District 115 kV Switching Station, 230/115 kV Transmission Substation and Other Possible Uses

A motion unanimously passed approving Agenda Item 6B - Resolution No. 5875 authorizing the Manager, Real Estate Services, to execute all necessary documents to purchase certain vacant real property with an address of 9009 84th Street NE, Arlington, Washington (Assessor's Parcel Number 30052400200100), for future use as a District 115 kV Switching Station, 230/115 kV Transmission Substation and other possible uses.

C. Consideration of a Resolution Authorizing the Manager, Real Estate Services, to Execute All Necessary Documents to Purchase Certain Vacant Real Property Located in Arlington, Washington (Assessor's Parcel Number 30051300301000), for Future Use as a District 115 kV Switching Station, 230/115 kV Transmission Substation and Other Possible Uses

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A motion unanimously passed approving Agenda Item 6C - Resolution No. 5876 authorizing the Manager, Real Estate Services, to execute all necessary documents to purchase certain vacant real property located in Arlington, Washington (Assessor's Parcel Number 30051300301000), for future use as a District 115 kV Switching Station, 230/115 kV Transmission Substation and other possible uses.

7. COMMISSION BUSINESS

A. Commission Reports

Commissioner Logan attended the Stanwood Chamber of Commerce; the Solar Summit and the Energy Leadership Summit.

8. GOVERNANCE PLANNING

A. Governance Planning Calendar

Commissioner Logan inquired on the topics waiting to be scheduled. Clerk of the Board Melissa Collins advised that she would work with CEO/General Manager John Haarlow and that most items were being scheduled for early 2019.

The meeting recessed at 3:35 p.m.

RECONVENE REGULAR MEETING

The Regular Meeting was reconvened by President Kathleen Vaughn at 6:30 p.m. in the Commission Meeting Room. Those attending were Sidney Logan, Vice President; Tanya Olson, Secretary (telephonically); CEO/General Manager John Haarlow; Acting General Counsel Joe Fina; Assistant General Managers Glenn McPherson and Brant Wood; Chief Information Officer Dean Galvez; other District staff; members of the public; and Deputy Clerks of the Board Allison Morrison and Jenny Rich.

* Items Taken Out of Order **Non-Agenda Items

9. PUBLIC HEARING

A. Continue Public Hearing on the 2019 Proposed Budget

Commissioner Vaughn reconvened the public hearing.

Budget and Financial Planning Manager Sarah Bond repeated the Afternoon Session's continuation of the 2019 Proposed Budget, which included the Water System Proposed Budget and the Electric System Proposed Budget - Operating Revenues.

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The following citizens spoke:

Steven Keeler, Edmonds, requested clarification between number of meters and number of customers.

Rebecca Wolfe, Edmonds, inquired about the extra capacity available to sell.

A motion was unanimously passed continuing the public hearing on the Proposed 2019 Budget to November 20, 2018, at 1:30 p.m., in the District's Commission Meeting Room at 2320 California Street in Everett.

ADJOURNMENT

There being no further business or discussion to come before the Board, the Regular Meeting of November 6, 2018, adjourned at 7: 10 p.m. An audio file of the meeting is on file in the Commission Office and available for review.