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5.1. ERMUSR 04-10-2012Elk River: Municipal U 13069 Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 UTILITIES COMMISSION MEETING Phone: 763.441.2020 Fax: 763.441.5099 www. elkriverutili Gies. 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 1Q 2012 5.1 SUBJECT: 2011 ERMU Annual Report to the Utilities Commission DISCUSSION: Attached for Commission review is the 2011 ERMU Annual Report. ACTION REQUESTED: No Action requested. PONwwEREO BI ~A~~~~ P OWE 0.E 0 T O S E R V E • Elk River --~-~ Municip al Utilitie s 13069 Orono Parkway ~ P.O. Box 430 Elk River, MN 55330-0430 ~\ Phone: 763.441.2020 Fax: 763.441.8099 www.elkriverutilities.com UTILITIES COMMISSION MEETING • TO: FROM: Elk River Municipal Utilities Commission Troy Adams, P.E. -Utilities Director John Dietz -Chair Daryl Thompson -Vice Chair Al Nadeau -Trustee MEETING DATE: AGENDA ITEM NUMBER: A ril 10, 2012 5.1 SUBJECT: 2011 ERMU Annual Report to the Utilities Commission DISCUSSION: Attached for Commission review is the 2011 ERMU Annual Report. ACTION REQUESTED: No Action requested. P O N E R E D D Y ~~~~ P O W E R E D T O S E R V E • • Elk Rive Municipal Utilities ~ozz ~ww~a~ rzepo~t PowEREO e~ P O W E R E D T O S E R V E • • I am very proud of what we have accomplished during 201 I for all of our customers and the residents of Elk River. We have great employees who care about our great customers in our great community. We have continued to explore and implement ways to reduce expenses and control rates. We are committed to provide excellent customer service. And we are committed to operate in the spirit of our mission statement: To provi~~e orrr cus.~orrrers with safe, relicr~rleY cost ~~fl~e~~~ i~~~~ ray~cl qu~rlity long terra electric ar~cl water utility service. Tn comnaunicate vnd edr.rccrte Derr customers in the use o f utility .services, programs, policies, and fcrt:ure plans. These prodwacts crud services will be provided in can environmentally and f nancially responsible rrranner. ~J In the following pages are some of the 201 I highlights, accomplishments, and key statistics by departments as well as our goals for 2012. . ~ ~,,,,,...~,..~...~r.,... Troy Adams, P.E. Utilities Director • ~4t ~4 c~,~a v~,ce _ ___ We are PUBLIC POWER with LOCAL CONTROL and Vllhere Does My Dollar Go? ACCOUNTABILITY. Elk River Municipal Utilities (ERMU) is one Purchased Power Production of 125 municipally owned electric Distribution Depreciation and Interest utilities in Minnesota and one of only a few that serves customers Customer Accounts z General & Administrative beyond their city's corporate 9~ 2% 8% boundary. ERMU is the 9t" largest 4~ _;;,: by number of customers and the ~ 3% 12t" largest by energy sales -and ~~ ~~~ ~~~~~ ~~~"~~~ we continue to grow. In 201 I, our energy sales increased by 4.6%. The Utilities realized a 3% _. _ __ - -- increase in resi ential electric sales, a 13% increase in small commercial customer energy sales, and a 13% increase in larger commercial /industrial customer energy sales over last year. The electric utility also ended the year with expenses under budget by 2.3%. Purchased power makes up 74% of our operating costs. 74%© ~. • ~,J + Elk River Municipal Utilities continues to provide very reliable electrical service. In the electric utility industry, there are a number of indexes used to gauge reliability. One of the most important of these is the Average Service Availability Index (ASAI). This is a measure of the average availability of sub-transmission and distribution systems to serve customers; or in other words, what percent of the time you have power. With along-term focus on system planning, scheduled system maintenance, and a proactive tree trimming program, ERMU continues to score excellent numbers in this index as well as the other indexes. Our ASAI for 201 I was 99.994%. This is again exceptional especially when taking into account the damaging weather during 20 I I . Elk River experienced two major storm related outage events in 201 I. The first happened in June when one of our substations was struck by lightning. The second occurred in August when an early morning wind storm knocked out an overhead feeder that serves the landfill gas-to-electric power plant. Overall, the weather related outages for ERMU were actually minimal in comparison to other utilities throughout Minnesota. Because ERMU's electric distribution system is over 70% underground, our system is able to better withstand much of the damaging weather. After ERMU restored power to our customers affected by these storms, ERMU was then able to provide mutual aid labor and equipment assisting Connexus Energy and Princeton Public Utilities restore ower to their customers. , P • • 2011 City of Elk River General & Equipment Replacement Funds Sources (Reflecting avoided cost of ERMU donated electricity and labor) Because ERMU is tax exempt, the Utilities provides a fixed percentage of the revenue from Elk River customer's electric sales to the City of '° Elk River. This amount is a Payment in Lieu of Taxes (PILOT). In addition to this percentage of revenue, ERMU provides donated electricity for non-enterprise City facilities as well as (`~ii 7 A4~~ donated labor. In total, ERMU provided approximately $1,186,000 in 201 I . This was up - -- - -_- 7.8% over the 2010 PILOT and up 16.8% over 2009. The ERMU PILOT is a significant contribution to the City which indirectly helps to offset both property taxes and debt issuance. Of this PILOT, the cash transfer was over $71 1,500. This trend in our PILOT is directly related to the growth of the ERMU. The City of Elk River directly benefits from the growth of ERMU and ERMU grows when the City grows. This is one of the reasons why ERMU has focused on collaborating with the City to promote economic development. The Utilities looks to also promote economic development in the other cities we serve. ERMU Payment in Lieu of Taxes Other Sources 4~ • Electrical transmission related costs are forecasted to significantly increase in the coming decades. This raised concerns for municipal utilities for their ability to remain cost competitive. In 2006, the Utilities Commission authorized joining Midwest Municipal Transmission Group (MMTG) to explore the potential to obtain ownership in the transmission system. In 2007, ERMU entered into a development agreement with Central Minnesota Municipal Power Agency (CMMPA) to participate in the CAPX2020 Brookings-Twin Cities Transmission Project. This represents ERMU's direction to own instead of rent. This investment of approximately $6 million will provide revenue to mitigate transmission costs and help to lower ERMU electric rates. In March 201 I, the Utilities Commission and the City Council approved resolutions to execute the project agreement for participation and also established the contractual framework for possible future transmission investments. Courtesy of CapX2020 ERMU also provides the water services within the City of Elk River. We are very fortunate to have access to an aquifer with pure /high quality water. This is not the case for many cities. Because our water requires less water treatment, we are able to keep water rates lower. The Utilities is committed to conserve and protect our excellent water source so we can continue to provide high quality water at competitive rates. In 20 I I this meant working with the League of Minnesota Cities and Minnesota Municipal Utilities Association to protect our precious water resource at a legislative level, and we will continue to do that. For the second year in a row, ERMU had a decrease in water usage although the number of customers has remained constant. The usage is down 4.3% from 2010 and down 15.3% from 2009 usage. Water sales ended the year under budget by 6.8% despite a conservative budget forecast. This negative trend is primarily due to weather and perhaps partially due to the economy. During the last two years, ERMU has also held our water rates constant and also did not increase water rates for 2012. Even with the reduction in water usage and rate freeze in 20 I I ,water revenue ended the year ahead of budget. The water utility ended the year with expenses under budget by 7.6%. The water utilities also filled a vacant water operator position in 201 I to return to proper staffing levels. This has significantly helped the water utility push to complete their meter change-out program in 201 I . ~oz-~ cowtpa~ed to... • water ~tsa~e v? In 2010 the Technical Services Department and Administrative Department underwent the complex and challenging project of bringing the meter reading services in-house. By bringing these services in-house, ERMU recognized significant savings in meter reading costs and improved efficiencies through control and staff accountability for the meter reading processes. This transition was partnered with the implementation of new meter reading technology. The transition continued in 201 I with additional new meter reading technology and increased efforts to change out old mechanical meters for new electronic meters that can be read remotely. What previously took 4 meter readers 3 weeks, now takes I meter reader just over I week. The result was a 65% savings in cost over the previous year. • Mew ~os~tLUv~, ~~~~er~ By nature, electric and water utilities are dangerous industries. Our employees and customers live, work, and play in our community containing our utility infrastructure. ERMU takes our responsibility to provide safe utility services seriously. From water quality to electrical hazard safety, we are committed to design, build, and maintain safe utility services. This also includes educating our customers and maintaining a "safety culture" for our employees. In 20 I I , Elk River Municipal Utilities had zero days of lost work time due to work related injuries! ERMU added and filled a new position, Conservation and Key Accounts Manager. The essential functions of this position include: overseeing the Conservation Improvement Program, steward ERMU's leadership position on water conservation and the protection of our water resources, provide information and assistance as our key accounts representative, assist with marketing and promotional materials, and assist in promoting economic development with the City of Elk River. The addition of this position will allow for ERMU to provide additional customer service and support especially for commercial and industrial customers. Elk River Municipal Utilities ~~ depavtwt,ewt, Flh river Mu.v~,~c~pa~ ~ti,~~t~es' accov~.~~~sl~w~ewts, l~ ~~ l~ ~~c~ lets, a v~,cl I~e~ statistics... ~4~M (N (~STTZ4T-(D N CONSERV~4TIDN .4NA FC~Y.4CCDI.tNTS ~~CI--t-N (C~4 L ~ ~T~.V (C~<S W~4~~T~. ~ ~~~4R.~Nt ~ N ~ ~ (_._~C~f~'2.(C~4 C_ ~ ~~~4TZ.~M ~ N~ • • ~ / r 3. Successfully manage customer needs, monthly billing and collections. Customer monthly billing included approximately 9,227 electric, 4,5 I I water, 4,471 sewer and 6,829 garbage/organics accounts. Continued focus on providing excellent customer service. 2. Provide administrative support for 37 employees including 5 managers and their respective departments. ERMU Services ~ .i..... _.._ ... __ r C ntinued focus on minimizin write-offs a Electric W ter ~ ~~"`~`~ Implemented measures to utilize a platform i administered by the State of Minnesota, which is called Revenue Recapture. This allows the Utilities to collect past due balances from State tax refunds and/or renter's credits prior to the State issuing the refund. o g a Sewer 4. In 201 I , Elk River Municipal Utilities worked towards increasing our customer service online options. Because of these efforts, in 2012, the Utilities will be able to provide account information and bills online. Additionally, customers will be able to schedule payments online with a credit card or bank account. 5. Ongoing review and participation in the Resource Planning Coalition, a group of utilities coordinating efforts through a joint power planning and request for proposal process. Continued efforts in research and analysis of our power supply options in search of lower cost energy. 6. Actively supported and participated in Minnesota Municipal Utilities Association (MMUA) and American Public Power Association (APPA) with industry, energy, and water policy issues. 7. Previously, our quarterly newsletters and marketing materials were outsourced. In 201 I, we were able to bring that in-house and utilize our staff talent to produce these items. Garbage :.. • Cov~s~wat~,ow r~v~,ol K,2~ ,4cco~cwts I . Remained active in Energy City activities including Project Conserve. Project Conserve Phase 2, consisting of 119 participants, was completed in 201 I .The participants saved an aggregated total of 72, 148 kWh in energy, which was approximately a 6% reduction from the previous years' consumption. The 70 participants connected to the Utilities water system saved an aggregated total of 514,000 gallons. Natural gas savings amounted to a decrease in consumption of 2% from the previous year. 2. Administered rebates for 2,661 residential customers for a total of $49,000. These rebates were associated with energy efficiency improvement resulting in additional customer energy savings of $44,727. 3. Administered rebates for 38 commercial customers for a total of $ 132,248. These rebates were associated with energy efficiency improvements resulting in additional customer energy and capacity savings of $233,296. 4. ERMU sold over 535,000 kWh of energy from wind generators in 201 I through our Wind Power Program. 5. The third party wind generator, which is used by Energy City as a demonstration site, produced approximately 855,828 kWh in 201 I .The annual capacity factor is 14.8%. This is low in comparison to other wind generators; however, this is due to the lack of sufficient wind resource available in this part of the State. r ~~~ ~„ ~, 6. ERMU's landfill gas electric generating plant produced 25.17 million kWh with a capacity factor of 94.5%. This is down from 25.7 million kWh in 2010. This plant produced enough energy from a local renewable fuel source to provide for 9. I % of Elk River Municipal Utilities' customer's needs. • • • Increased security system accounts by 91 systems totaling 905 security systems. This is a 25% growth, up from an 8.7% growth in 2010. 2. • 5. Added 57 new or upgraded radio controllers for Off-Peak and Cycled AC customers. ERMU remotely controlled 1,500 customer loads to help reduce wholesale power costs and customer utility bills. They consist of approximately 185 energy storage water heaters, 74 dual fuel heating systems and I, I4I cycled air ~ ~ _~ conditioners. 3. Continued meter conversion with the installation of approximately I , 172 electronic radio read meters for a total of I I ,577 meters changed out to date. 4. Continued electric and water mapping. ERMU published our own maps in-house producing updated electric and water system distribution maps. Staff has begun work towards producing web based GIS mapping and have completed taking GPS coordinates of all the water hydrants. Completed approximately 2,598 locates. Once again, locates were completed without damage claims resulting from workmanship or mismarked underground facilities. ~- ,; ~~;; 6. Maintained and operated the diesel Power Plant. This facility has the ability to start from compressed air (in the case of a transmission outage) and is rated to generate approximately I/6 of ERMU's peak electric demand. We developed a flowchart for black-start operation. 7. Collaborated with the City in providing energy audits to participants of Project Conserve Phases 2 and 3. In 201 I, there were 50 energy audits conducted. +~ • W~te~ I. Produced approximately 600 million gallons of water, down 4.3% from 2010. Peak day usage was 3.14 million gallons, down from 4.59 million gallons in 2010. 2. Continued the Smart Irrigation System rebate program. In 201 I the water utility issued four rebates. 3. Continued working on wellhead protection plan. Your community relies on groundwater for use in homes, businesses and industries. Wellhead protection is a means by which your community can actively and efficiently protect its drinking water resources. Much can be done to prevent pollution, such as the wise use of land and chemicals. Public health is protected and the expense of treating polluted water or drilling new wells is avoided through wellhead protection efforts. 4. In 201 I there was I additional communication company that leased space on one of our water towers and installed an antenna. The resulting revenue from these types of leases generated over $84,000 for the water utility. This revenue is supplemental to water sales and helps reduce the amount of revenue required from water sales for the operation of the water utility. 5. Continued work on installation of remote read water meters. The water meter change-out program is nearing completion with approximately 50 meters left to change out in 2012! 6. Conducted ongoing water tower and well maintenance. Throughout the course of the year, all 4 water towers and all 8 wells are taken out of service as part of a scheduled rotation for their annual maintenance. 7. As part of scheduled maintenance, Gary Street Water Tower located near City Hall was repainted. 8. The water system had 2,600 feet of truck water main added in 201 I in the vicinity of Twin Lakes Road and Twin Lakes Parkway. This was part of a project to improve the functionality of our Wetl #9. This project has been completed and allows for improved peak system capacity going forward. 9. With the City's Evans Avenue and 2nd Street 201 I Rehabilitation Project, the water distribution system was upgraded. ~LeGtrLC I . Purchased approximately 276.0 million kWh of energy, an increase of 4.6% from 2010. The system peak day was 57.7 MW. 2. ERMU's 201 I reliability indexes are: Average Service Availability (ASAI) = 99.994%, Customer Average Interruption Duration Index (CAIDI) = 105 min, System Average Interruption Duration Index (SAIDI) = 31.1 min, System Average Interruption Frequency Index (SAIFI) = 0.2966. These excellent reliability index numbers reflect the condition of our robust electrical system as well as our superb response time. 3. Continued system maintenance and fuse coordination through a systematic program to change failing cutout and resize system fusing. Changed out rusted electrical equipment, J-boxes, and switchgear. 4. Performed major service work changing gaskets on 35 electric switchgear cabinets due to a manufacture's material specification compliance issue for components of the switchgear. 5. Completed work on a voltage upgrading project changing from 2400 volt to 7200 volt along County Road 30 west of Waco Street. Began work on another voltage upgrade project changing from 2400 volt to 7200 volt along Meadowvale Road and Islandview Drive. 6. Continued work on rebuilding Irving, 4th, 5th, 6th, and 7th Street removing rear lot line overhead and replacing with underground electrical distribution in the front easements/ROW. 7. Purchased a directional bore rig and brought a significant amount of underground electric cable placement in-house. Initial forecast is a 2 year return on investment. A typical directional bore right has a 5 year life expectancy. 8. Miscellaneous projects: Rebuilt Baldwin Ave.; Relocated overhead electric feeders to facilitate City Public Works Building construction; Added 3-Phase service for Guardian Angels expansion, ERX snow cross track, Aggregate Industries, Barton Sand and Gravel, Spectrum School, Pizza Ranch, and others. • Elk Rive Municip al Utilities - 202 c,oa~s - B1~'l issior~ Staterr~ente To provide our cu.storners with safe, reliable, cost ~ f f~c~iv~ and quality t®n~ terra electric and water utility serer°ce. ~® comrryunicate and educate cur custorners in the use o f utility services, pr®~rarr~sy ~~licies, and future Mans. These ;products and services wil! be provided in an enviranr~7enta!!y and ~nancia!!y responsible manner. I . Satisfy 2012 budget requirements: Continue to investigate and solve long-term physical and financial growth needs while maintaining existing systems. Explore wholesale power supplier options in an effort to lower the costs for our customers in the future. 2. Commitment of excellent customer service: Continue to provide excellent customer service through respect, education, innovation, knowledge, and communication. 3. Invest in the future: Update our systems and technology to operate efficiently and effectively. Continue emphasis on maintenance and system upgrades to provide safe and reliable utilities services. 4. Promote economic development in our community: Assist with the recruiting and retention of businesses for our community. Coordinate, collaborate, and cooperate with the cities and the county we serve to improve efficiencies and control costs. 5. Grow with our City: As urban services are expanded within our city limits, seek to expand our electric utilities services to the same residents. Allowing the Utilities to grow with the City provides benefits and economies of scale advantages to all of our customers and the residents of the City of Elk River. 6. Be an advocate for our customers at the State and Federal legislative levels: Protect our system investments and natural resources through proactively informing our elected leadership industry issues and how they affect our community. • • • • ~~~~`~~~`~~~~~I~s~~ ~~~~~'~i~~~r`r~da~~~~`~~~~~~~~~J ~~~J~~~~~s~~~ ~~~~~~~~~~~l~l~~~rti~~~~~r~l'~~~~ii~ ~. a a ~.~ ~~ ' a ~_ ` ~a ~ 4 ~ S~ ~J E ~ ~ ~ a ~ } °. ~~ ~~ 7 ) .... ~ .... , § 3 ~~ .a ' - i .. I t + w.. /> L ~ S ~ L _.,. s ~ ~»- > r g 4, .. ' ~ . x ~ ~ J J 4 C '° ~ _ -~ ~ ~ i ~ w q ~ ~ . % ~ a~ NNEXU~ ~ ~ L ~ , . { w _ ~ y.. m i ~a -^~1 _ ~~ t ~ ~\ ~ ~ ^~ ~ ~ .4 }, 9 SSSEEE EEE T s. ~g } S L T i ~ z 1 ~ -~ ~ -., .- ~ ~ ~ .. > ~ t.Ia- I L v. .... a f L ~_ ~ ~. ~ ,~ I ~-s -1• t -! ~. .. t. { it( ~ F4 k ...-..e...-... ... i~ _ j ~z a ~~ .~~ + c , ~f x{ ~ d ,.. ~ 7 tS ' ~ L ,.. ~a I ~ ~4 ~@ . ~ ~%~ ~~El ~ { ~~ a° E ~ g'~ 1 ~.i i ~ ~ ~~ L ~f ' ~ caNNExu~ -- ~ ~~ ~ ~,~ ~~~ .~ .~ . v ~~ Mo ~cA~ ;i ~ . ' ~~-`~ 13069 Orono Parkway ELECTRICAL D I ST R I B U T I a N ti.. j °_ ~~ I Rd. Box 430 Elkl~.ivea~~ = 1 Elk River, MN 5533fl-{f430 TERRITORY MAP x~EL Phone: 763.441e2020 MUIl1C1~11 UtiliCieS' Fax: 73.441.8099 REVISED: MAY 11. 2010 • •