4.6. ERMUSR 05-11-2010Elk River
Municipal Utilities
13069 Drano Parkway ~ P.O. Bax 430
Elk River, MN 55330.0430
April 3~, 2a10
To: Elk River Municipal Utilities Commission
John Dietz
Jerry Gumphrey
Daryl Thompson
From: Troy Adams
Subject: Review ~Uholesale Power Supply options Update}
_---_--
Phone; 763.441.ZQZ0
Fax: 763,441.8099
At the April Utilities Cormission meeting, the Commission authorized staff to enter into a
resource planning study in a Power Coalition which includes Central Minnesota Municipal
Power Agency ~CMIVIPA~ as a participant. On April 29t~, staff participated in a conference call
with Central Minnesota Municipal Power Agency ~CMMPA} and other potential Power
Coalition participants, All the original members of interest have received approval from their
governing bodies to participate in the resource planning study "Phase 1" of the Power Coalition,
During this call, consensus was reached by the participants regarding a Participation Agreement,
direction for a Confidentiality Agreement, scope of Phase 1, cost allocations, and Power
Coalition "off ramps". The costs associated with Phase 1 for ER.MU will be less than $1 Ole. The
Commission had approved participation ~in Phase 1 for costs up to ~20k,
The Utilities Commission will need to designate a representative and an alternate for the Power
Coalition Committee. After the previously mentioned documents are finalized and then signed
by all the participants, a committee chair will be elected out of the participants representatives.
This election will take place during a conference call on May 21st
CENTRAL 9NNES~TA MUNICIPAL POWIE AGENCY
469 youth drove Strut Blue Earth, Minnesota 56013 50'7-S~6-Z193
To: Troy Adams
From; Steve Thompson
Date; 51~12g~ o
e; Renewal of ERMU's Associate Membership
Tray
As you are aware, EMU's CMMPA Associate Mer~bership ends May ~~, ~0~ g and requires a
3o day notice to cancel. The annual cast for the CMMPA Associate Mer~bership is ~3~,00~ per
year.
To avoid any duplication a~ charges far planning services, CMMPA would like to offer ERMU the
opportunity to e~ctend their CMMPA Associate Membership for an additional year with recognition
of ERMU's payments made for their associated costs of participating in the Power Supply
Coalition,
ERMU's currently projected allocation of cost of participating in the Power Supply Coalition is
$,~~3 for the Phase 1 ~ Planning Phase and ~~9,44~ for Phase ~ ~ RFP Phase. ERMU's total
projected cost of participating in the Power Supply Coalition then is projected at X27,777,
if ERMU renews its CMMPA Associate Membership, CMMPA wilt apply all payments which
ERMU makes to CMMPA for its participation in the Power Supply Coalition between May ~~,
~g~ 0 and May 25, ~g~ ~ towards ERMU's amount due for their CMMPA Assooiate Membership.
Assuming the actual Power Supply Coalition costs come in at the projected X27,777, ~RMI~
would still owe a truepup payment of ~~,~~~ at the end of their ~ year extension of their CMMPA
Associate Membership, if the actual cost of the Power Supply Coalition effort comes in under
budget, for if ERMU elects to not proceed to Phase ~}, the true up would be increased
appropriately such that the amount paid toward the Power Supply Coalition plus the true up
amount equaled ~~o,odo.
If ERMU elects to participate in Phase ~, then CMMPA would propose to invoice ERMU for ~ true
up payment in May of next year. If ERMU elected to not participate in Phase 2, CMMPA would
invoice the true up amount aver the remaining months of ERMU's associate membership.
if ERMU's allocation of the actual cast of the Power Supply Coalition ware to coma in over budget
and exceed ~3o,aod, then the total cast of ERMU's associate membership will be the total
allocated cost of the Power Supply Coalition effort.
Because this Power Supply Coalition effort represents a planning effort that is som®what above
the typical planning effort which the agency typically er~barks open, and because the coalition
participants as a whole really control the scope and the budget ~witb CMMPA not having total
control of the budget or the scope}, it is CMMPA's view that ERMU's Associate membership dose
should be adjusted to include any Power Supply Coalition costs over ~3Q,000 that incur between
May ~~, 20~ d and May 25, 20~ ~ ,
And as a last item, CMf~PA is willing to modify the CMMPA Associate Membership Agreement to
a#Iow ~RM~J to give their 3g days' notice to cancel a~ any time Current#y, the CMII~PA Associate
Membership Agreement only allows ~RNiU to provide its 3D day native to cancel ante a year and
failure to provide notice resulfis ire an au~on~atic ~ year renewal, ~'he ~o day out does not relieve
~RMU o~ paying for any of their allocated costa associated with the dower Supply Coalition which
have been incurred to date or entitle them to a refund a~ any nonprefundable costs identified to
be paid upfront per fibs terms o~ the Power supply Coalition participation Agreement,
if you have any questions regarding this proposal feel free to call me,
Steve Thompson, P~
Deputy CEO
Central Minnesota Municipal Power Agency
urce tannin litio rticitin A rent
a ,
Central Minnesota Municipal Power Agency ~"CMMPA"~, Upper Midwest Municipal Power
Agency ~"UMMPA"~, Nashwauk Public Utilities Commission ~"Nashwauk"~, Elk River Municipal
Utilities ~"ERMU"~, Willmar Municipal Utilities ~"Willmar"} and Dahlberg Light ~ Power,
N®rthwestern Wisconsin Electric Company and North Central Power together, "Dahlberg
Companies"~, hereinafter referred to as "Party" or "Participant" individually, or "Parties" or
"Participants" collectively, hereby enter into this Resource Planning Coalition Agreement.
1.0 Purpose. The Parties wish to work together to develop electric generation and
transmission res®urce planning information and project or transaction options for ;heir
individual and mutual benefit and to achieve economies of scale in such activities. They wish to
form a Resource Planning Coalition ~"Coalition"~ to accomplish this goal.
2.0 Participati®n. Participation in the Coalition is voluntary. Each Party shall individually
decide whether they will participate in any particular Coalition activity. The Parties
acknowledge that each Party has its own internal governance structure that will need t® review
and approve that Party's participation in any and all Coalition activities.
3.0 No liability, No Partyshall be responsible forthe costs or liabilities of any other Party in
the Coalition.
4.0 Governance.
a. Coordinating C®nnmittee. Coalition activities will be governed by a Coordinating
Committee. Each Participant shall have one official representative and one official
alternate on the Coordinating Committee. Each Participant shall formally designate
their official representative to the Project Manager. In the interest of maximizing
Coalition usefulness to the largest number of participants and thereby achieving
economies of scale, the Coordinating Committee's goal will be to achieve and act
based on a consensus of the participants. The Coordinating Committee shall establish
its own rules for operation.
b, Coordinating Comr~ittee Chairnan. The Coordinating Committee will app®int a
Chairman from among its members. The Chairman will conduct and facilitate
meetings and activities ®f the Participants.
c. Project Manager. CMMPA will act as Coalition Project Manager, reporting to the
Coordinating C®rnmittee for all Coalition activities. in addition to its own internal
resources, the Project Manager shall contract with additional third~party suppliers as
ray be necessary to conduct the business of the Coalition, subject to the concurrence
Page 1 of 11
es®urce tannin olitin rtOCiti®n Agree nt dated ay 1,
of the Caordinatin~ Committee on the need for and selection of such third~party
suppliers.
5.D Process and Timing. The Parties contemplate that the planning process will consist of
multiple phases.
a. Initial Phases. The Parties envision two Initial Phases of work to be performed
1} An Initial Planning Phase ~"Phase 1"~, which will entail development of resource
planning needs for each Participant with regard to lon~wterm ~5 to 3~ years}
baseload, intermediate res®urce, and peaking options, starting in the 2C14~ to
2®16 time period.
~} Request for Proposal RFP} Phase ~"Phase 2"},which will entail development and
release of an RFP for needed reS®urce options identified in Phase 1, and analysis
of the RFP responses. The RFP will be issued for the a~~re~ated total baseload,
intermediate and peaking needs of the Participants as a gaup.
3} Planning analyses for the Initial Phases will be accor~plished for each of the
Participants. where a Participant represents a group of Smaller entities or
members within the Participant ~e.~., a power agency, Dahlberg Companies},the
Coalition effort will develop results for the Participant in total; not individual
entities or members within the Participant. The Participants' goal is to complete
both Initial Phases during calendar year 2®14.
b. Additional Phases, The Parties may mutually determine the need for additional
phases of work in the future, based on the results of the Initial Phases.
6.0 ~ptionS and Cost Allocations.
a. Participant options. Individual Coalition participants will each have the option tv
participate in each Phase and progress from one Phase to the next, based on their
needs and interests. Although each Participant has the option to pa~icipate or not
in any Phase, for the sake of economies of scale the Parties as a group prefer that
each Party participate in all Phases of the effort, if possible,
b. Cost estimates far work to be performed for the Coalition and allocations of such
costs among the participants shall be developed and proposed by the Project
Manager for review, modification as may be necessary, and approval by the
Coordinating Committee.
c. The common costs of each Phase will be borne by the Participants in that Phase.
Each Participant shall be responsible to payfor its allocated share of common costs.
Page 2 of 11
surc lnin l~tin rtici tion rennent aced y , 1
1~ Attachment 1 provides an estimate of the common costs for the Initial Phases,
and a proposed allocation of such costs amon~the Participants.
2~ Additional future phases of effort by the Coalition, if any, will have their own
cost estimates and cost allocationsto be agreed to bythe Parties.
d. If a participant wants additional analyses or breakdown in resource options to its
individual members ~companies~ or further detail or analysis f®r it's particular
situation example: ~overnin~ body approval requests, then it shall first obtain the
approval of the Coordinating Committee and the Project i~ana~er and its
subcontractors, who must be able to meet the request. All additional costs incurred
shall bathe sole responsibility of the Participant.
e. Each Participant will be responsible for their own costs for participation ~i.e., travel
expenses for meetings, their own time, etch.
f. With regard to the initial Phases, individual Participants may elect to participate in
Phase 1 and/ar Phase 2 based on definition of the Phase including estimated costs
and cost allocations.
7.4 Resources.
a. No ~bli~ation to Share, Coalition Participants will not be obligated or expected t®
share with or offer to other Coalition Participants resources that the Participant has
developed or secured for their own purposes outside of the Coaliti®n process. This
would include:
1~ Resources for which they have signed a Letter of Intent ~l®I~ or purchase
agreement with another party prior to the execution date of this Agreement; or
2~ Resources the Participant identifies through its own individual efforts either
before, durin~or subsequenttothe Coalition's Initial Phases.
3~ Should a question arise re~ardin~ a Participant's supplier options, the Participant
shall, upon the Coordinating Committees request, provide d®cumentation of
~®Is ®r purchase agreements adopted prior to release of the Coalition RFP
related to the supplier options in question, or other applicable documentation
supporting the Participant's compliance with the intent of this subparagraph ~a~.
b. Non-Compete. Notwithstanding the provisions of subparagraph ~a~ above,
Participants shall not ~o around or circumvent the others to deal directly with a
supplier for resources identified and offered by a supplier to the Coalition in the
Pale 3 of 11
surce lnnin Coalition articitin reeent dated ay 1, 1
Phase Z RFP process. The intent of this provision is ~® prevent withdrawal from the
Coalition as a back door means of increasing the Participant's share of a "limited
resource" as described in subparagraph ~c} below. However, this prevision is not
intended to preclude a Participant from contracting directly with the supplier after
the Coalition determines the pro rata shares of available resources.
c. Allocation of Limited Resources. The Coordinating Committee shall determine in
advance of receiving Phase 2 responses from suppliers how Phase 2 RFP results will
be allocated among the Phase 2 Participants in the event the results of the RFP
process offer total resources in quantities smaller than the total identified a~~re~ate
need of the Coalition for such resources.
d. Allocation of Surplus Resources.
1} In the event where a Participant in the RFP withdraws from the RFP or otherwise
declines to accept its share of resource available offered bythe selected supplier
for exannple, per subparagraph fie} below, and such withdrawal results in a
surplus of resource offered compared to the remaining Participants' total
expressed need, then the Coordinating Committee shall make the surplus
available to the ren~ainin~ Participants in accordance with their pro rata shares
of their total need as expressed in the RFP. If one or more of the remaining
Participants decline to increase their take from the resource offered in this
manner, the process will continue until either the offered resource is fully
subscribed, or a porn®n of the resource remains unsubscribed.
Z~ In the event that desired resources are affered by a selected supplier via the RFP
in quantities in excess of the Participants' needs after all Participants have had
the opportunity to select them per subparagraph ~1}, above, the Coalition
Committee nay decide to offer that surplus to third parties outside the Coalition
if that would be in the Coalition's best interest.
e. No Qbli~ation to Select Resources. No Participant shaii be compelled to select and
participate in any of the resources offered by suppliers as a result of the planning
and request for proposal processes performed by the Coalition. Each Participant
retainstheir own sole and exclusive rightto select or sotto select resources f®r their
own system and customers.
~.o Confidentiality, The Participants will complete a mutual confidentiality ortrade secret
agreement to protect the Confidential or Trade Secret Information of each Participant with
regard to Coalition activities,
a. The Participants may also need to enter into additional confidentiality or trade
secret agreements with future RFP vendors as required.
Pale 4 of 11
surc lnnin Coalition artici tin reeent dated ay , 1
9.® Accounting and Invoicing. The Project iVlana~er will manage the activities and costs o~
the Coalition.
a. Acc®untin~. The Project Manager shall keep c®mplete accounting records of all
Coaliti®n activities incfudin~ costs and payments. Participants ray request an
accounting o~ all Coalition activities from the Project Manager.
b, Invoices. The Project Manager will invoice each Participant for their respective
allocated share o~ Coalition costs on a monthly basis. Payment shaft be due within
3o days ®~ invoice. late payments shall incur a one and one-haft percent ~1.5%~ per
month service charge.
10.o Signature in Counterparts. This Agreement may be executed in counterparts, each of
which shat! be deemed to be an ori~ina! and al! o~ which steal! constitute one and the same
document.
a
Pale 5 0~ 11
s®urce ~nn~n al~~~n r~ici~in reeen~ dated ay 1, X01®
Res®urce Planning Coalition Par~icipan~ si~na~ure approvin~~he Par~icipan~ A~reemen~,
Elk River Municipal U~ili~ies ~ERMU~
~~: °°~--- Dade: 5 11 210
Name: Troy Adarns, P.E.
Tile: Director o~~pera~ions
Pa~e6o~11
ttcn~ent
t the esource Planning olitin Participation reeent dated y , 241®
Phase
Pros c, Time schedule, simt ®sts and
r se IIti f sts n the articiants
Phase ~ ~ rli inr Planning Phase
-_ or sc
-- -
The scope Phase 1 will consist of the following tvuo major ~-ork activities:
Task 1 Determine the individual needs of C®alition participants.
A. Determine general economic assumptions inflation, cost of debt, discount
rate and etch.
~. Fuel and ennission cost forecast.
C. Cost assumptions for each alternative resource.
D. Market price forecast.
E. Sensitivity assumptions.
Deliverables: Documentation of underlying assumptions.
Task 2 Develop basic modeling assumptions.
A. Review Ioad forecast and hourly I®ad shape.
~. Review and itemise participant owned ~eneratin~ resources and Resource
Planning contracts.
C. Incorporate participant projections of conservation and renewables.
D. Prepare a Ioad and resource balance for each participant and the a~~re~ate
forthe coalition.
E. Identify the preliminary need for base Ioad, intermediate and peaking
resources which represents the economic mix for each participant and for
the a~~re~ate of the coalition.
Deliverables: Projections of the load and Resource balance for economically
meeting capacity and enemy requirements; Will be provided for both the
individual participant and forthe a~~re~ate of the Coalition.
Pale 1 of 9
Attachment to the Resource Planning Coalition Participation Agreement dated ay 1, 1
The Task 2 analysis will also include some high level sensitivity analysis illustrating howfuture
gas price and carbon prices assumptions can p®tentially impact each participant's portfolio mix.
Time Schedule ~ r letlon f Phase 3;
Assuming a day 1, ~o1O start date completion of Phase 1 is estimated to be June 3D.
sti ate Cs~
Total cast including both RW Reck's and CMMPA's labor is estimated to be $75,®®®.
Cost llcti n tho:
Participants in Phase ~. agree to allocate costs as follows:
Allocation Participant Dollars $
1/9 th Elk River $x,333.33
1/9 th Dahlberg Companies $x,333.33
1/9 th Willmar $x,333.33
2f9ths UMMPA $16,666.66
2/9 the CMMPA $16,666.66
2/9 the Nashwauk $16,666.66
TOTAL $75,000.00
Note: Even though the Dahlberg Companies consists of three separate and distinct companies,
they are treated as 1 group for the purpose of this Coalition.
Cher lscellne us o ents:
The firstoff ramp for Phase 1 participants isafterthe completion ofPhase 1. Phase 1
participants are obligated for the entire Phase 1 cyst estimate and the costs are non-refundable
in the event the participant chooses to exit Phase 1 prior t®the completion or prior to the first
exit ramp, Each Paicipant shall pay one-half of their allocated Phase 1 cost upfr®nt and the
remainderof the costswill be billed out asthey are incurred.
eia!
m 6R6®.
Elk River bas a~1sa regues~ed ~beir resulting p®r~~olia cans inden~l~r'ed in Abe Pbase 1 analysis also
be compare ~D a ~u~ure projection of Abe ~beir current pavuer supplier's (GR~/Connexus j f u~ure
wb®lesale cash. To accomn7oda~e ibis CI~MPA/RVU deck are proposing ~v use a prier wb®!e
coast prajec~ion developed f or ~1k River lash year by Rl~l deck. !t is an~icipa~e that ibis pri®r
analysis can be updated to re~'lec~ gore marked c®ndi~ians.l'be addi~iona! cash assacia~ed wi~b
Page 2 of 9
tch nt 1 tthe source innin alitin articiati reeent dated ay , 2~
this special request will be rrrinimal and airy such additions! cost associated with Elk River`s
special request wr'll be dr'rect assigned to Elk River.
tease ~ F Phase
At this time the coalition participants are only formally approvin~to proceed with the above
Phases effort. However, it is envisioned that most participants are proceeding with Phase ~
with the intent of possibly proceeding with the optsonal Phase 2 later. Therefore, the tentative
terms of the Phase ~ effort are summarised below for reference only and their inclusion does
not mean that they are part of this agreement. The final terms of Phase 2 will be documented
after the completion of Phase 1 prior to proceeding with Phase 2 in the future at which time an
Attachment ~ ~ Phase 2 Terms will be developed and executed.
After the completion of Phase 1, any additional worl~ on the development of the RFP document
shall not commence until the coalition has determined which participants are c®mrnittin~ to
proceed to Phase 2. So by definition the be~innin~ of Phase 2 will start with Task 3
preparation of the RFP document.
The tentative schedule for completing Phase 2 will be duly 1, 2010 to January 3~, 2D11, however
the exact completion date could change with a consensus of the coalition.
The scope of the Phase 2 will likely be as presented in the Power Point presented at the April 6t~
kick off meeting. 0efare proceedin~to Phase 2 the final scope will have to be approved by the
Coafiti®n participants.
A preliminary cost estimate for Phase 2 is $175,000. This cost estimate could possibly be subject
to change if adjustments are made to the initial scope, However, any changes in the cost
estimate mill have to be approved by the Coalition participants before proceeding with Phase 2.
Thetentatively the group envisions allocatingthe cost similar to how it did in Phase 1. Any
change in the cost allocation for Phase 2 would require a consensus by the group. The tentative
allocation is shown below.
Allocation Participant Dollars $
1/9 th . Elk River $19,444.44
1/9 th Dahlberg Companies $19,444.44
1/9 th Willmar $19,444.44
2/9 the UMMPA $3,R~.~
2/9 the CMiUIPA $3~,E~.~~
2/9 the Nashwauk $3~,~~.~~
TOTAL $175,000.00
Pale 3 of 9
chn~ ~~e esurce lnnin ®al~~an ar~iciain Areeen~ dated ay 1~ 1
Res®urce Planning Coalition Par~icipan~ si~na~ure approving the Phase 1 berms iden~i~ied in
A~~achmen~ 1.
Elk River Municipal U~iii~ies ~ERMU}
~y. Dade: ~,~~~~~~,~mm5111201®
Name: Troy Adams, P. .
Tile: Direct®r o~~pera~i®ns
Pale 4 0~ 9