5.2. ERMUSR 07-17-2012 .4 --
Elk River �,
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager
John Dietz—Chair
Daryl Thompson—Vice Chair
Al Nadeau—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
July 17, 2012 5.2
SUBJECT:
Diesel Power Plant Capacity Credit Agreement
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.
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 guarantees 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.
Due to continuing and progressive discussions, on May 30 both parties agreed to an additional 60
days extension. This additional extension changes the notice of termination date to August 1,
2012.
DISCUSSION:
Great River Energy is drafting a revised capacity credit agreement for review and consideration.
The revisions include: lowering the payment to reflect the market and GRE's capacity needs;
shifting the agreement coverage period to reflect the Midwest Independent Transmission System
Operator (MISO) planning year; exceptions for ERMU's emergency operation of the facility;
ENATUREJ Page 1 of 2
Reliable Public®
Power Provider P O W E R E D T O S E R V E
exceptions protecting GRE for changes to the capacity and energy markets; and termination
exceptions to protect ERMU from unforeseen environment regulations. This new agreement,
once shifted to the MISO planning year, would then be an evergreen year-to-year agreement
automatically renewing annual.
At the time of printing, the draft revisions to the capacity agreement were not yet received from
GRE. However, it is important for the Commission to have a discussion on topic to determine
ERMU's direction.
[POWERED BI
Page 2 of 2 NATURE
Reliable Public
Power Provider P O W E R E D T O S E R V E