2.8. ERMUSR 06-12-2012 Elk River
Municipal Utilities
13069 Orono Parkway
P.O. Box 430
Elk River,MN 55330
(763) 441-2020
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:
June 12, 2012 2.8
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.
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.
DISCUSSION:
Due to continuing and progressive discussions with GRE, both parties agreed to an additional 60
days extension to the extension executed on March 29.
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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
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12300 Elm Creek Boulevard • Maple Grove, Minnesota 55369-4718 • 763-445-5000 • Fax 763-445-5050 • www.GreatRiverEnergy.com
May 30, 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 the notice provision for termination 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 and March 29, 2012, is in effect on an
"evergreen" basis. The amendment dated March 29, 2012 provided that for 2012 only, the
termination date for the current term was changed to December 31 and the notice of termination
date was extended until June 1. The goal of this letter is to provide for an additional extension of
only the notice of 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 March 29, 2012 is amended to provide
that for 2012 only, the notice of termination date is extended until August 1. Either ERMU or
GRE may provide the other party notice, no later than August 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 ELK RIVER MUNICIPAL UTILITIES
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Jon B� rekke Troy Ada s
Vice President, Member Services Utilities Director
A Touchstone Energy Cooperative KlirA tai Contains 100%post consumer waste