Shedding Some Light…

Lo and behold! I was driving by the Town Clerk’s office and noticed an agenda posted under Light and Water. I pulled over to see what I could see. There is an agenda posted for the (I kid you not) Massachusetts Municipal Light Department Wind Energy Cooperative Corporation (MMLDWECC) Board of Directors Meeting. The meeting of the MMLDWECC is scheduled at 2:00 p.m. on Tuesday, November 6, 2012 at the offices of the Princeton Municipal Light department, 168 Worcester Rd, Princeton, MA 01541. A meeting on Election Day? Isn’t that a big no-no.

At this point, I became very curious why a meeting for a Princeton Municipal Light Department (PMLD) would appear at the Templeton Town Clerk’s office.

I thought I would go home and look up this meeting on the Town of Templeton website. Not there. Hmmm. How odd! A public meeting of a public body in the Town of Templeton is not posted on the town website. Must be some kind of mistake…it’s for Princeton right?

I googled up “Massachusetts Municipal Light Department Wind Energy Cooperative Corporation”. I discovered a few documents. One of those documents is the Princeton Municipal Light Department and Subsidiary Financial Statements December 31, 2011 and December 2010. This is the audit of the PMLD and subsidiary. I still can’t figure out the Templeton connection. I guess I’ll have to read this thing.

Found it! On page 23 Note 19 :

“In October 2009, the Templeton Municipal Light & Water Plant (Templeton) joined the Cooperative in order to finance, purchase or otherwise acquire, construct, install, operate and maintain, or cause to be operated and maintained a wind turbine and ancillary equipment for the production of wind energy to be installed in Baldwinville, Massachusetts (Templeton Facilities).

If you continue reading this document, you will find information about the finances of the wind turbine projects in Templeton and Princeton. I will include this information at the end of this blog.

It appears this audit- Princeton Municipal Light Department and Subsidiary Financial Statements December 31, 2011 and December 2010. is part of the audit I had requested when I was a Light & Water commissioner. We voted to have an audit of the wind turbine project. I believe we paid a significant sum of money to have this audit completed. The auditor sent us a letter over a year ago, indicating the audit for MMLDEWCC needed to be completed first before the audit could be completed for the Templeton turbine project.

I hope once this meeting on Election Day (November 6, 2012) in Princeton is held, more information will be forthcoming on the financial status of the turbine in Templeton.

My opinion…supported by FACTS ! ! !

Julie Farrell

Not quite the entire text of Note 19 is pasted below:

NOTE 19 – MASSACHUSETTS MUNICIPAL LIGHT DEPARTMENT WIND ENERGY

                   COOPERATIVE CORPORATION (COOPERATIVE):

The significant accounting principles and policies utilized by the Massachusetts Municipal Light

Department Wind Energy Cooperative Corporation (Cooperative) are as follows:

Reporting Entity

The Cooperative is organized under Chapter 164: Section 47C of the State of Massachusetts Statutes and constitutes a municipal lighting plant cooperative.  The Cooperative was formed by Massachusetts Municipal Wholesale Electric Company (MMWEC) and the Princeton Municipal Light Department (PMLD) for the purpose of financing, owning, constructing and operating wind generation facilities located in the town of Princeton, Massachusetts (Princeton Facilities).  In October 2009, the Templeton Municipal Light & Water Plant (Templeton) joined the Cooperative in order to finance, purchase or otherwise acquire, construct, install, operate and maintain, or cause to be operated and maintained a wind turbine and ancillary equipment for the production of wind energy to be installed in Baldwinville, Massachusetts (Templeton Facilities).

The powers of the Cooperative are exercised by the Board of Directors who has the right to conduct business and carry on operations.  The Board of Directors is comprised of one director who represents MMWEC and two or more Directors who represent PMLD and Templeton.

Nature of Operations

The Cooperative has constructed and is operating two 1.5-megawatt wind turbines at the PMLD wind farm in Princeton, Massachusetts and one 1.65-megawatt wind turbine at the Templeton wind farm in Baldwinville, Massachusetts.  The Cooperative provides wind energy to the customers of Princeton and Templeton and is a self-sustaining operation, providing both operational and financial value to PMLD and Templeton.

Regulation and Basis of Accounting

The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting.  Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred. Revenues, expenses, gains, losses, assets and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place.  Additionally, the Cooperative follows Codification ASC 980, Accounting for the Effects of

Certain Types of Regulation as it relates to the deferral of revenues and expenses to future periods in which the revenues are expected to be earned or expenses are expected to be recovered through future billings.

The Cooperative complies with Generally Accepted Accounting Principles (GAAP).  The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles.  Proprietary funds and similar component units apply Accounting Standards Codification (ASC) and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case GASB prevails.

NOTE 19 – MASSACHUSETTS MUNICIPAL LIGHT DEPARTMENT WIND ENERGY

                   COOPERATIVE CORPORATION (COOPERATIVE) (Continued):

Fair Value of Financial Instruments

The Cooperative’s financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses and debt instruments.  The estimated fair values of these financial instruments approximate their carrying values at December 31, 2011 and 2010.  The estimated fair values have been determined through information obtained from market sources and management estimates.

Depreciation

Property and equipment is stated at cost.  Minor additions and renewals are expensed in the year incurred.  Major additions and renewals are capitalized and depreciated over their estimated useful lives using straight line method.  Depreciation expense for 2011 and 2010 was $242,059 and $259,664, respectively.

Taxes

The Cooperative is exempt from federal income taxes.

Advances from Princeton Municipal Light Department

PMLD has advanced amounts to the Cooperative in order to pay for development costs associated with the Princeton Facilities that are in excess of the bond proceeds.  The advances are classified as long term as repayment is not anticipated within the current year.  There are no specific repayment terms.  The total advances to the Cooperative as of December 31, 2011 and 2010 were $691,211, respectively.

Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Prepaid Insurance

Prepaid insurance represents insurance premiums paid in the current fiscal year benefiting future periods.

Amounts Recoverable /Payable in the Future

The difference between revenues received and expenses paid are charged to the amounts

recoverable/payable in the future account.  Such amounts will be recovered or settled through future billings.

Revenues and Expenses

The Cooperative distinguishes operating revenues and expenses from non-operating items.  Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the utility’s principal ongoing operations.  The principal operating revenues of the Cooperative will be the contract charges to the PMLD and Templeton and the sale of renewable energy credits.  Operating expenses for the Cooperative are the costs for running the facilities.  Other revenues and expenses are classified as non-operating in the financial statements.

NOTE 19 – MASSACHUSETTS MUNICIPAL LIGHT DEPARTMENT WIND ENERGY

                   COOPERATIVE CORPORATION (COOPERATIVE) (Continued):

Revenues and Expenses (continued)

With the generation of wind power, there are renewable energy credits (RECs) that are sold on the open market. PMLD purchases the power and all attributes of the power and consequently, the RECs are settled through PMLD, as opposed to the Cooperative.  The total amount of REC sales attributed to generation for the Princeton facility during the years ending December 31, 2011 and 2010 were $100,257 and $86,283, respectively.  These amounts are not reflected in the Cooperative financial statements.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Cooperative considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Proceeds from Grant

During 2008, the Cooperative was awarded a $470,000 grant under the Renewable Energy Systems and Energy Efficiency Improvements Grant Program of the Rural Business-Cooperative Service, United States Department of Agriculture (Grantor).  The purpose of the grant was to help fund the purchase and installation of two 1.5 megawatt wind turbine generators at the Princeton site.

Expenses not included in the approved budget cannot be funded with the grant unless approval is received in writing from the Grantor.  The Cooperative must follow several laws to maintain civil rights compliance.  The Cooperative used the funds received for the purchase and installation of wind turbines and other activities as specified in the grant agreement.

Cash:

 Custodial Credit Risk

The Cooperative’s funds on deposit with financial institutions are fully insured by the Federal Deposit Insurance Corporation (FDIC) and the Deposit Insurance Fund of Massachusetts (DIF). 

Related Parties:

On behalf of the Cooperative, MMWEC records and accounts for bills received and paid.  MMWEC is also accounting for monthly contract charges rendered and payments received from PMLD.

The Cooperative entered into an agency contract with MMWEC on October 30, 2007, under which MMWEC is to serve as the Cooperative’s agent in all matters with respect to financing the construction, purchase, ownership, lease or other acquisition by the Cooperative of the Princeton Facilities or energy generated from other facilities and other property or interest therein.

Under both the agency and service contract, MMWEC is to serve as the Cooperative’s representative in the New England Power Pool (NEPOOL) and in matters relating to ISO New England, Inc. (ISO-NE) in connection with the Princeton Facilities, the purchase and sale of energy therefrom or from other facilities and other property or interests therein.

NOTE 19 – MASSACHUSETTS MUNICIPAL LIGHT DEPARTMENT WIND ENERGY

                   COOPERATIVE CORPORATION (COOPERATIVE) (Continued):

Related Parties (continued):

During the years ended December 31, 2011 and 2010, the Cooperative incurred charges for services provided by or paid by MMWEC on behalf of the Cooperative.  As of December 31, 2011 and 2010, the Cooperative had an outstanding balance due to MMWEC of $1,097,759 and $621,209, respectively.

Occasionally, PMLD will incur costs related to the Princeton Facilities and then invoice the Cooperative for these costs.  During the years ended December 31, 2011 and 2010, the Cooperative incurred charges of $97,413 and $441,211 which were paid by PMLD, respectively, for costs related to the Princeton Facilities.  The current year costs incurred are not considered an advance as they were recorded through the billing process. As of December 31, 2011 and 2010, the Cooperative has an outstanding balance due to PMLD of $691,211. 

As disclosed in Commitment and Contingencies, the Cooperative entered into a lease agreement with the PMLD and is required to make annual rental payments under this agreement.

 

Debt:

In January 2009, the Cooperative converted a Line of Credit and Letter of Credit to a commercial term loan (Term Loan) which the bank granted the Cooperative in the amount of up to $7,300,000 to be used as permanent financing to support the preparation and site work on the property located in Princeton, Massachusetts, for two 273-foot wind towers and turbines, to pay the remaining costs of the project and to pay off the existing Line of Credit with the bank.  The Term Loan has a fixed interest rate of 5.5% per annum.  Principal is payable over 15 years in annual payments of $486,667 commencing on April 15, 2010, and then on April 15 of each year thereafter.  Interest is payable in semi-annual installments commencing on April 15, 2009 and October 15, 2009, and on April 15 and October 15 of each year thereafter.  All principal and accrued interest thereon shall be due and payable on demand on April 15, 2024.  The Term Loan is subject to a prepayment penalty of 1.0% of the principal prepaid if paid during the first five years of the term. The Term Loan is collateralized by the equipment and the purchase power agreement (PPA) with the Princeton Municipal Light Department.  As of December 31, 2011 and 2010, the Cooperative had $6,326,666 and $6,813,332, respectively, outstanding on the Term Loan.

The Cooperative incurred $35,947 of financing costs in connection with the issuance of the Term Loan, which were capitalized and will be amortized over the life of the debt instrument.  Amortization expense related to these financing costs was $2,696 and $2,508 for the years ended December 31, 2011 and 2010, respectively.  The remaining deferred costs balance related to the Term Loan of $25,865 is included in deferred financing costs.

Note 19 continues on page 27 with charts which do not convert well.