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4.1. SR 09-21-1998-'ity of River TO: FROM: DATE: SUBJECT: Item # MEMORANDUM Mayor and City Council Pat Klaers, City Administrator September 21, 1998 Utilities Commission Update 4.1. Councilmember John Dietz is the city representative on the Elk River Municipal Utilties Commission. At the September 21, 1998, City Council meeting, John is scheduled to provide the Council with an update on August and September utilities activities. Attached for your review are the draft minutes and agenda from the September 15, 1998, Utilities Commission meeting. Included with the September 15th Utilities Commission packet was the attached news release regarding the Elk River Landfill project. This project is being promoted as an energy city demonstration project, whereby landfill gas is turned into energy. This project and news release offers some very positive publicity regarding the city, utilities and the Energy City program. Also included in the September 15th Utilities packet was the attached MMUA comments on electric deregulation and restructuring. This is a very concise and informative summary of some of the issues associated with restructuring. The Council should note that on September 15th, the Commission received an update on the LED traffic signal lights proposal and also appears to be moving forward with the $15 million Utilities/UPA gas turbine project. The next regular Commission date is scheduled for Tuesday, October 13, 1998, at 4:00 p.m. at the Utilities office. 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION AGENDA SEPTEMBER 15, 1998 Elk River Utilities Offices ITEM NUMBER 1. Call meeting to order at 4:00 September 15, 1998 2. Consider Utilities Agenda 3. *Approval of previous meeting minutes 4. *Check Register OLD BUSINESS ACTION TAKEN 5.1 Presentation by Joe Pallansch 5.2 Review & Award Contract to build Well #6 Filter Facility 5.3 Up-date proposed Gas Turbine Project (verbal) 5.4 Up-date AEC/UPA Power Contract Negotiations (verbal) NEW BUSINESS 6.1 Review & Award Contract to De-Water Power Plant Basement 6.2 Review proposals for new Office & Power Plant Telephone System 6.3 Review Progress on 1999 Budget 6.4 Consider Project to inst~ll LED lights on Traffic Signals *Financials Other Business *Consent Agenda items are considered to be routine and will be approved by one motion. 1-612-441-20~0 ELK RIVER UTILITIES 8?4 P02 SEP 16 '98 10:47 ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE ELK RIVER UTILITIES COMMISSION HELD AT THE ELK RIVER MUNICIPAL UTILITIES OFFICE September 15, 1998 Members Present: President, George Zabee; Vice Chair, James Tralle; Trustee, John Dietz Staff Present: Bryan Adams, General Manager; Glenn Sundeen, Line Superintendent; Robert McCartney, Water Superintendent; Patricia Hemza, Office M~ager Others Present: Joseph Pallansch 1. Call m.~eflng to or0er at 4:00 P.M.. Septeraber 15. 199.8 2. Consider Utilities A~enda John Dietz and Bryan Adams each have an additional item to be discussed under Other Business. James Tralle moved to approve the Utilities Agenda, with the additions to Other Business. John Dietz seconded the motion. Motion carried 3-0. 3. Consider Consent Agenda James Tralle moved to approve the Consent Agenda as follows: 8-11-98 Minutes August Check Register Financials ~'ohn Dietz seconded the motion. Motion carried 3-0. 5.1 presentation by Joseph Pallanseh Joseph Pallansch, who acts as a Contractual Engineering Consultant to the Elk River Municipal Utilities, appeared before the Commission to present a summary of accomplishments and talks he has implemented for the Utilities. Mr. Pallansch requests that his rate for Electrical Consulting services be increased. Mr. Pallansch further requests a written response to his proposal. Commission will review the presented file, and respond at a future date. 1-612-441-2828 ELK RIVER UTILITIES 8?4 P03 SEP lB '98 18:47 Page 2 Regular Meeting of the Elk River Municipal Utilities Commission September 15, 1998 5.2 Review and Award Contract to build Well #6 Filter Facility Bids were received at 2:00 P.M. September I0, 1998 for the Well #6 Filter Facility. The bid tabulation was presented, with recommendations from Bryan Adams and Howard R. Green Company, to award the contract to Eh-Corem Midwest, as lowest bidder. James Tralle moved to award the bid for Well g6 Filter Facility to En-Comm Midwest. John Dietz seconded the motion. Motion carried 3-0. 5.3 U?date proposed Gas Turbine Project Bryan Adams reviewed the progress and opportunities involved with the Gas Turbine project. Exploration of the proposed project must continue before a joint meeting with City Council can be scheduled. 5.4 Up-date AEC/UPA Power Contract Ne_~o~iaflon! Bryan Adams reported on the negotiation status. UPA has indicated the Generation Credit will be raised from $1.65 to $2.50, and further, that the rate will be based on Urge Tests. AEC does not appear to be amenable to a rate decrease at this time. At some point in time, indications point to the Utilities falling away from AEC in the future. 6.1 Review and Award Contract to De-Water Power Plant Basement Quotes from two companies were presented regarding the De-Watering of the Power Plant basement. It was noted that verbal approval was given previously for the lowest bid. John Dietz moved to award the contract to De-Water the Power Plant Basement to Brenteson Construction. James Tralle seconded the motion. Motion carried 3-0. 6.2 Review pro0osals for new Office and Power Plant Telephone System Staff presented a history of the telephone systems presently used. Reasons for an immediate up-grade were discussed, with regard to the status of the system we now have. Concern with the need to communicate with the plant, voice mail, a reliable UPS system and Y2K are needs to be addressed at this time. 1-612-441-2020 ELK RIUER UTILITIES 8?4 P04 SEP 16 '98 10:47 Page 3 Regular meeting of the Elk River Municipal Utilities Commission September 15, 1998 James Tralle moved to award the contract for a new telephone system to Lucent Technologies. George Zabee seconded the motion. Motion carried 3-0. John Dietz instructed Staff to find out what kind of maintenance agreement will be available after the one-year warranty has expired. 6.3 Review Pro[ress on 1999 Budget Budget items presented and discussed are as follows: 1. 10 Year Personnel Projections 2. Purchase Power Cost Projections 3. Electric Sales Revenue Projections 4. Preliminary 10 Year Capital Project Projections Staff indicated the reports are preliminary. James Tralle indicated that he is interested in the possibility of bonding for Capital items, since interest rates axe presently low. 6.4 Consider Pro_iect to install LED rights on Traffic Signa~_ The Elk River Municipal Utilities maintain the signal lights for the City of Elk River along with providing the electrical energy to operate them. Energy City has asked the Utilities to investigate and install Light Emitting Diode (LED) lights instead of the standard incandescent Iight bulbs in the Street Lights. They use less electricity and last longer. The City of Elk River has developed a Cooperative Agreement with the Minnesota Department of Transportation (MN DOT). MN DOT is willing to cost share in such a project at a rate of approximately 44%. Recommendations for study of the project, and inclusion into the 1999 budget for the purpose of noting the effect were concurred with. Commissioner Dietz reviewed the information concerning health insurance benefits to employes. He requests the Utility contribution to employee health insurance be discussed during the 1999 wage negotiations. Bryan Adams advised the Commission of discussion of WAC fees in conjunction with the new jail being constructed. Discussion followed. 1-612-441-2020 ELK RIVER UTILITIES 8?4 P05 SEP 16 '98 10:48 Page 4 Regular meeting of the Elk River Municipal Utilities Commission September 15, 1998 With no other business to discuss, John Dietz moved to adjourn the September 15, 1998 meeting of the Elk River Utilities Commission. James Tralle seconded the motion. Motion carried 3-0. The September 15, 1998 meeting of the Elk River Utilities Commission adjourned at 5:45 P.M. The next scheduled meeting of the Elk River Municipal Utilities Commission will be October 13, 1998. Respectfully submitted, Patricia Hemza Office Manager SEP-04-98 FRI 16:03 FR× NO. 0 P. O1 Minnesota Environmental Initiative 2420 Rand Tower 527 Marquette Avenue South Mh~neapolis MN 55402-1324 Phone: 612/3~-3388 Fax: 612/334-3093 www.mn-ei.org r'ut~ ~MMEDIATE RELEASE - FRIDAY, SEPTEMBER 04, 1998 City, Utility, Private Enterprises and Nonprofit Unite to Turn Landfill Gas Into Energy September 10 groundbreaking at Elk River landfill begins installation of newest Energy City demonstration MINNEAPOLIS- A unique public-private coalition has come together to facilitate the installation of equipment that converts landfill gas into electricity at the Elk River Landfill. The latest Energy City energy- efficiency/renewable-energy demonstration will use methane gas produced by the natural decomposition of solid waste in the Elk River Landfill as fuel for an on-site electricity-generation system. Virtually all landfills produce methane gas; most often it is collected and burned by a flare. "By using the g~ to generate power, this system will make use of an otherwise wasted resource," says Bryan Adams, general manager of Elk River Municipal Utilities. He notes that the new technology at the EJk River Landfill will provide power for approximately 250 homes in the area. Groundbreaking for the installation of the gas-fueled engine and generator- both of which come from Houston, Texas-based Power Strategies LLC - will take place Thursday, Seplember 10, 1998, at 10 am. The landfill is located at 22460 Highway 169 North (,lust north of the city of Elk River). All parties involved have contributed to the success of this project: Anoka Electric Cooperative and United Power Association have the exclusive contract to supply Elk River Municipal Utilities with electricity; they had to grant an exemption for ERMU to purchase power from the landfill gas-recovery project. Waste Management, which owns and maintains the landfill, had to work with ERMU and Power Strategies to facilitate tl~e installation of the generating equipment. The project is being funded through grants from various government agencies, including the city of Elk River, and a long-term power purchase agreement between ERMU and Power Strategies. · 'Everybody involved has gone beyond the call of duty to make this project happen," says ERMU's Adams. "It's exciting to see all the planning and logistics that went into this project come to fruition." The power- generation system is expected to be operational in the first half of October. Energy City will host a grand opening at the facility when the system is tuned and up and running. Energy City is a partnership between the city of Elk River and Energy Altey, which promotes the growing 'and vibrant energy-efficiency and renewable-energy industry in Minnesota. The Energy City project has concent~-ated demonstrations of efficient mid renewable technologies and services for residential, industrial, commercial and agricultural buildings in and around Elk River. According to Sarah Coppoek, program coordinator for Energy Alley, "This is a perfect example of what the Energy City project was developed to do. The gas-recovery system will add wonderfully to the range of demonstrations Energy City offers." Energy Alley is a program of the Minnesota Environmental Initiative, a 501(3)(c) nonprofit organization that works with business, government and advocacy organizations to promote environmental excellence in policy, industrial management, land use and energy generation and use. Contact: Michael Welch, MEI communications, 612/334-3388 Comments of the Minnesota Municipal Utilities Association On Bulk Power System Reliability And Distribution System Reliability For The Legislative Electric Energy Task Force July 31, 1998 by Mary Jo Murray Director of Policy Analysis Attorney at Law MMUA 12805 Highway 55 · Suite 212 · Plymouth, MN 55441-3859 · 612.551.1230 · 800.422.0119 JMN) · Fax 612.551.0459 Executive Summary In order to properly address restructuring, it is necessary to know how power systems work, the relationships between generation, transmission and distribution and how those elements work together to create a reliable system, and the economics associated with power systems. The task will be to restructure the electric industry so that it can be operated on a national basis and so that competition will serve a useful purpose for end-use customers in terms of choice, price and reliability. In reality, it will be a complex process which may never be entirely successful. The transmission system, as it now exists, was not designed to support major wholesale transactions, which in turn are needed to support retail competition. The system was designed first to transmit power from generation to l°ad centers; second, to provide backup and reliability for the individual utility, and third, and most recently, to support reliability of the regional grid. Bulk transfers to other parts of the country were not considered in the design of the regional system. The bulk power system is now at or near its capacity in supporting the current level of wholesale transactions. In its current configuration and condition, the bulk power system is likely not capable of supporting substantial increases in wholesale competition or of supporting full retail competition. The market infrastructure, currently operating on a local/regional basis, will have to change to accommodate competition on a national level. Retail competition will significantly increase the number of transactions and the complexity of managing the generation and transmission system. In light of the fact that each Regional Reliability Council has its unique regional system for transmission access, it is impossible at this time to ensure that there is fair, nondiscriminatory access on a national basis. The current market infrastructure must be modified at a national level before fair and open access can occur at the wholesale or retail level. The Independent System Operator (ISO) is the preferred for ensuring that the transmission system is operated in a fair and nondiscriminatory manner. The ISO must be a strong organization, with the ability to order member utilities to generate, transmit and build as necessary. The Independent Transmission Company (ITC) recently proposed by NSP has the potential to create systemwide problems (in particular, the abuse of market power as it relates to transmission access); it is designed to maximize profits and is not necessarily in the best interests of consumers. In any case, because not all entities could transfer assets to an ITC (even a truly independent one), ITCs would still require an ISO for appropriate operation of the system. The current scheme of regulation will change dramatically as restructuring occurs at the state and federal level. The ability of state regulators to govern rates paid by end- users may devolve to minimal levels of review. For the time being, state regulators will continue to have authority over local distribution, service and quality of service questions', but the protections afforded ratepayers in the past will change and diminish with retail competition on a national level. Furthermore, with respect to utility mergers and acquisitions, active FERC regulation will be necessary 'to prevent a resurgence of the large-scale, non-regulated monopolies which existed in the early part of this century. Electricity, now a basic necessity,' must be kept available and affordable to everyone. Ultimately, regulators must.decide how that goal is to be accomplished. With respect to distribution reliability, it will be impossible to predict the problems that will arise with distribution under a customer choice environment. In a profit-oriented, market-driven, competitive environment, privately-owned utilities will be tempted to cut operations and maintenance costs. Costs are often cut by eliminating such routine maintenance as tree-trimming, which increases the risk of power outages and downed lines - service reliability and safety issues. Other cost-cutting methods include closing service centers, or failing to bring in repair crews outside of regular hours in order to restore electric service. The state must ensure that deregulation and restructuring will not provide utility companies the opportunity to renege on basic customer service and. safety obligations. In conclusion, there are no simple answers to any of these questions. The costs, benefits and alternatives are numerous and are evolving as restructuring changes take place in various parts of the country. In the end, the most important aspect of restructuring will be to ensure high quality, affordable service to all customers.