3.4. ERMUSR 04-10-2012Elk River~~
Municipal Utiliries
13069 Orono Parkway • P.O. Box 430
Elk River, MN 55330-0430
UTILITIES COMMISSION MEETING
Phone: 763.441.2020
Fax: 763.441.8099
www. elkrive rtilities. com
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. -Utilities Director
John Dietz -Chair
Daryl Thompson -Vice Chair
AI Nadeau -Trustee
MEETING DATE: AGENDA ITEM NUMBER:
A ril 10, 2012 3.4
SUBJECT:
Capacity Credit Agreement Notice of Termination Extension
BACKGROUND:
Included in our current interconnection agreement with United Power Association (UPA), now
Great River Energy (GRE), is a power transaction agreement to purchase the generating capacity
from the ERMU's Diesel Power Plant. This power transaction agreement has been modified
since the original agreement, most recently in 2003. The revisions to the agreement occurred on
October 31, 2003. These revisions established the agreement to be on an "evergreen" basis with
an October 31 termination date and an April 1 termination notice date. The agreement
established the capacity credit at $2.75/kW month. Typically our agreement with GRE results in
capacity credit payments of approximately $350,000 annually.
DISCUSSION:
On March 28, ERMU received notice that GRE wanted to reevaluate the current agreement's
fixed capacity credit. Because of the April 1 termination notice deadline, a 60 day extension to
the deadline was agreed upon by both parties. The extension will allow ERMU and GRE to
renegotiate the terms of the agreement within the 60 day extension without either party losing
their ability to provide notice of termination for next year. A 60 day extension in the termination
date was also agreed upon. This extension guazantees the payments through the calendar year
regardless of the results of the agreement negotiation. On March 29, ERMU and GRE executive
officials executed the Capacity Credit Agreement Notice of Termination Extension letter.
ACTION REQUESTED:
Staff recommends the Commission receive the executed Capacity Credit Agreement Notice of
Termination Extension letter.
ATTACHMENTS:
Capacity Credit Agreement Notice of Termination Extension Letter
PONEREB BI
~A~`Ut~E
P OWFRE~ TO $E0.VE
GREAT RIVER
ENERGY®
12300 Elm Creek Boulevard Maple Grove, Minnesota 55369-4716 763-445-5000 Fax 763-445-5050 • www.GreatRiverEnergy.com
March 29, 2012
Mr. Troy Adams
Utilities Director
Elk River Municipal Utilities
13069 Orono Parkway, P.O. Box 430
Elk River, MN 55330-0430
Dear Troy:
The purpose of this letter is to extend both the notice provision for termination and the termination
date in the current contract under which Great River Energy (GRE) purchases the capacity and
energy available from the diesel generation units owned by Elk River Municipal Utilities (ERMU).
Our goal is to provide a short additional period of time to work together towards mutually agreeable
pricing terms for the next contract term beginning on January 1, 2013.
The current contract, as amended on October 30, 2003, is in effect on an "evergreen" basis.
Annually, each party has the right to terminate by providing written notice to the other no later than
April 1 of a given year to terminate the agreement on October 31 of the same year. The goal of this
letter is to provide for a one time extension of both the 2012 notice date and 2012 termination date.
By returning one copy of this letter, signed by you and Jon Brekke, the following amendment to the
existing agreement will take effect immediately.
1. Section 1 of the amendment to the contract dated October 30, 2003 is amended to provide
that for 2012, the termination date will change to December 31 and the notice of termination
date is extended until June 1. Either ERMU or GRE may provide the other party notice, no
later than June 1, 2012, terminating the contract effective on December 31, 2012.
2. All other terms and conditions of the contract, as amended, will remain in effect as currently
written.
Sincerely,
GREAT RIVER ENERGY
Jon ~ rekke
Vice President, Member Services
ELK RIVER MUNICIPAL UTILITIES
Troy Rdams
Utilities Director
A Touchsrone Energy Coopera[ive ~(.~
Contains 100 % post consumer waste