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2.4. ERMUSR 09-08-2015 Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Troy Adams, P.E.—General Manager John Dietz—Chair Al Nadeau—Vice Chair Daryl Thompson—Trustee MEETING DATE: AGENDA ITEM NUMBER: September 8, 2015 2.4 SUBJECT: Connexus Electric Service Territory Transfer Agreement DISCUSSION: The documentation for the March 20, 2015, Electric Service Territory Agreement with Connexus Energy has been compiled. The terms of the agreement also outlined plans to develop an Interconnection Plan. This plan lays out the physical system modifications required and schedule for the interconnection which postpones the need for a reintegration feeder from Station 14 to the Connexus system near the intersection of County Roads 40 and 12. Formal notice for the acquisition of Area 1 was given to Connexus Energy on June 18, 2015. ACTION REQUESTED: Staff recommends the Commission receive the letter of formal notice, Electric Service Territory Agreement, and the Interconnection Plan. ATTACHMENTS: • ERMU Formal Notice to Connexus for the Acquisition of Area 1 —June 18,2015 • ERMU/Connexus Electric Service Territory Agreement—March 20, 2015 • ERMU/Connexus Interconnection Plan for Area 1 —June 4, 2015 UN POWERED D1 Page 1 of 1 NATURE Reliable Public. Power Provider P O W E R E D T o S E R V E 48 Elk River Municipal Utilities a century of rcrvlce 140 a future of growth YEARS June 18, 2015 Connexus Energy Attn: Mike Rajala President & Chief Executive Officer 14601 Ramsey Blvd NW Ramsey, MN 55303 Re: Notice of Electric Service Territory Areas la and lb Transfer Dates Dear Mr. Rajala: Per the provisions of our Electric Service Territory Agreement dated March 20, 2015, the transfer date for Area 1 shall occur in the year 2015 on a date mutually agreed upon by the parties. Through a series of meetings between Connexus Energy and Elk River Municipal Utilities this year, agreement has been reached to divide Area 1 into Area la and Area lb. And agreement has been reached that these areas would have separate transfer dates: Area 1 a on Tuesday, September 22, 2015; and Area lb on Tuesday, October 13, 2015. This letter is to serve as formal notice of Elk River Municipal Utilities' agreement to establish these transfer dates for Area la and lb. Also per the provisions of our agreement, enclosed are three executed copies of the mutually developed Area 1 Interconnection Plan. Best regards, A-- Troy Adams, P.E. General Manager riwtRED ar 13069 Orono Parkway • P.O. Box 430 • Elk River, MN 55330-0430 � � 1 " I ; Phone: 763.441.2020 • Fax: 763-441-8099 • www.elkriverutilities.corn Reliable Public P O W E R E D T O S a E Power Provider 49 ELECTRIC SERVICE TERRITORY AGREEMENT This agreement ("Agreement"), made and entered into the °6day of frigte/A , 2015 by and between Elk River Municipal Utilities, a municipal utility duly organized and existing under the laws of the State of Minnesota ("Municipal") and Connexus Energy, a rural electric cooperative organized and existing under the laws of the State of Minnesota ("Cooperative"), individually or collectively referred to as a "Party" or the "Parties." WHEREAS, the laws of the State of Minnesota, namely Minnesota Statutes §§ 216B.37-216B.47, provide the terms and conditions under which a municipal utility may extend retail electric service throughout the corporate limits of the city, as well as authorize and permit electric utilities to define and revise their electric service territories by their written consent and agreement; WHEREAS, the City of Elk River, working with the Municipal, has extended sewer and water service, at considerable public expense, to certain areas within the city limits, and the Municipal and the City Council have passed resolutions seeking to provide electric service to all residents and businesses in the city limits; and WHEREAS, the Parties have a long history of reaching amicable agreements to transition electric service territory to the Municipal; and WHEREAS, the Parties desire to provide stability and reliability of service to the Parties' respective customers and members, and to support long-term planning for resources, power supply, and customer service; and WHEREAS, the Parties have negotiated a mutual settlement and wish to avoid litigation regarding compensation for such electric service territory matters, and acknowledge that this mutual agreement will not necessarily reflect the position of the 50 Municipal or Cooperative as to the appropriate application of the law determining the rights and obligations of the parties or compensation and service territory matters and shall not be offered by the Municipal or Cooperative as evidence in any other proceeding related to service territory matters; and WHEREAS, by entering this Agreement the Parties desire to continue the successful and cooperative relationship between the utilities, to conduct prudent utility planning and practices, to focus on areas of mutual interest, and to better serve and benefit the Parties' customers and the region in general. NOW, THEREFORE in consideration of the premises and of the mutual covenants contained herein, the Parties agree as follows: Article I: Transfer of Electric Service Territory Rights 1.1 The Municipal, working with the City, has determined to extend electric service to areas within the city limits that are currently located within the assigned electric service territory of the Cooperative. The Municipal and the Cooperative have participated in a series of meetings to discuss technical requirements and prudent utility planning for such a transition, and divided the total potential territory involved into eight specific areas. The map and description of these eight areas is attached as Exhibit A (each, a numbered Area or an "Affected Area," and collectively, the "Affected Areas"). 1.2 The exclusive right and obligation to provide electric service to the Affected Areas ("Transfer Date") shall be determined as follows. For Area 1, the Transfer Date shall occur in the year 2015, on a date mutually agreed upon by the Parties. For Area 2, Transfer Date shall occur in 2016, on a date mutually agreed upon by the Parties. For the remaining Affected Areas, the Municipal shall provide at least 5 months advance written notice to the Cooperative of the Transfer Date for the 2 51 applicable Area(s). To coordinate these transfers and other utility issues, technical and management representatives of the Parties will meet at least once per year to discuss electric service territory issues, including transfers and timing, as well as broader issues of mutual interest, such as coordinated planning of system improvements in the Affected Areas, utility interconnection, equipment sharing, and mutual aid. 1.3 The Parties agree to cooperate fully in notifying affected customers as to the transfer of electric service and in arranging the transfer of service to be as convenient and seamless as possible for the affected customers 1.4 To avoid duplication of facilities and to consider the impact on affected customers, the Parties may mutually agree in writing to a service-by-exception or arrangement other than the service transfer specified in Section 1.2. Article II: Settlement Payments As settlement payment and in consideration of the covenants, releases, and representations made by the Cooperative herein, the Municipal agrees to make certain payments to the Cooperative, as provided in this Article 2. 2.1 Facilities Costs. If the Cooperative has electric distribution facilities in the Affected Areas, the Municipal shall pay the original cost of such facilities, less depreciation through the applicable Transfer Date, based on generally accepted accounting principles. The Parties shall follow the payment process in Section 2.7. 2.1.1 The Cooperative hereby sells, conveys, transfers, assigns, and sets over to the Municipal, its successors and assigns, all of the right, title, and interest of the Cooperative in and to the facilities transferred under Section 2.1 upon payment as described in section 2.7. The Municipal hereby accepts the assignment of all of the right, title, and interest of Cooperative in and to such facilities. Any facilities that the 3 52 Municipal acquires from the Cooperative under this Agreement shall be acquired on an AS IS basis and without warranty or representation relating to their condition, design, or compliance with the NESC (National Electrical Safety Code). The Municipal shall indemnify and hold the Cooperative harmless against all claims for loss, injury, or damages of any kind, including reasonable attorneys' fees, that may arise from the condition, maintenance, or operation of the transferred facilities, including any abandoned cable. 2.2 Integration Expenses. If the Municipal acquires Cooperative electric distribution facilities under Section 2.1, the Municipal shall pay the Cooperative for reasonable, identifiable, actual expenses of facilities to integrate the Cooperative's pre- existing distribution facilities into the Cooperative's remaining distribution system, considering system reliability and continuity. 2.2.1 The Parties have jointly prepared an integration study that analyzes the major tie-lines to be added as a result of the transfer of the Affected Areas ("Integration Study"), attached as Exhibit B. The Parties acknowledge and agree that the Integration Study will serve as the framework for integration expenses under the Agreement, although the Parties recognize that the Integration Study may need to be updated if conditions materially change. The Parties contemplate that integration expenses include field inventories, final meter readings, PCB transformer testing, and other incidental labor and materials to complete the transfer, to the extent that such costs have not been covered as part of the Integration Study, and to the extent they reflect reasonable and actual costs incurred consistent with the terms of this Agreement. The Parties shall follow the payment process in Section 2.7. 4 53 2.3 Loss-of-Revenue Payments. Subject to Sections 2.4, 2.5, 2.6, and 2.7, the Municipal shall annually pay the Cooperative the amounts described in this Section as loss-of-revenue compensation. (a) For each Affected Area except for Area 1, an amount equal to the result of multiplying twenty-one mills ($0.021) times each kilowatt hour of electric energy sold by the Municipal to each third party to whom the Municipal provides retail electric service in the Affected Area for the period of ten (10) years commencing on the first full year ending in December 31 that the Municipal provides service after the Transfer Date. (b) For Area 1, an amount equal to the result of multiplying twenty-two mills ($0.022) times each kilowatt hour of electric energy sold by the Municipal to each third party to whom the Municipal provides retail electric service in Area 1 for the period of ten (10) years commencing on the Transfer Date. The Parties acknowledge and agree that the additional compensation for Area 1 is contingent upon the deferral of the Municipal constructing a tie line, anticipated from the City boundary on County Road 12 near the intersection with County Road 40 to the Elk River Station 14 Bank 4, and the Parties entering a separate interconnection agreement, as described in Section 2.8. In the event that the Municipal must construct a tie line in Area 1 within the ten-year period commencing with the Transfer Date, the loss-of-revenue compensation for Area 1 for the years remaining in the this ten-year period shall be the amount stated in Section 2.3(a). 2.4 Indexing. The Parties will annually establish an indexed mill rate for the loss-of-revenue specified in Section 2.3. The index will be established as follows: (a) The Parties will use the Gross Domestic Product — Implicit Price Deflator prepared by the Bureau of Economic Analysis of the United States Department of 5 54 Commerce, published periodically as the Gross Domestic Product: 4th Quarter Final Press Release on or about March, and reflecting the percentage of change for the immediately preceding year for Gross Domestic Product (the "Index"), as published in the table entitled Price Indexes for Gross Domestic Product and Related Measures: Percent Change from the Preceding period, or in such other publication as the Bureau of Economic Analysis may establish in the future for the Index. (b) To establish the indexed loss-of-revenue rate for a particular year, the Parties will multiply the loss-of-revenue rate of compensation as stated in Section 2.3 (a) or (b) times the index for the particular year, divided by the index for year 2014. The indexed loss-of-revenue rate thus established will apply to any Affected Area transferred during the period January 1st through December 31st of that year. (c) If the Index produces an increase or a decrease in the rate of compensation greater than two percent for any year, the amount of the increase or decrease shall be capped at two percent. (d) For each Affected Area transferred, the indexed loss-of-revenue rate shall be recalculated for each year throughout the ten-year compensation period. (e) Notwithstanding any other provision in this Agreement, the loss-of- revenue rate of compensation shall not exceed three cents ($0.03) per kilowatt hour. 2.5 Municipal Development. Consistent with Sections 1.1 and 1.2, and notwithstanding Section 2.3, for any Affected Area or portion thereof that the Municipal or the City owns or acquires at its cost or risk and develops by installing or replacing trunk utility facilities or streets, without requiring a property owner to pay the costs of such trunk installation or replacement, the loss-of-revenue rate shall be one cent ($0.01) times each kilowatt hour of electric energy sold by the Municipal to each third-party 6 55 customer to whom the Municipal provides retail electric service, provided that the Municipal's payments shall not exceed a total of two hundred fifty thousand (250,000) kilowatt hours of usage per customer over a 10 year period after the Transfer Date. The loss-of-revenue rate shall be indexed as set forth in Section 2.4, except that such rate shall not exceed two cents ($0.02) per kilowatt hour. 2.6 Municipal Facilities. The loss-of-revenue payments under this Article 2 shall not apply to facilities owned by the Municipal for providing municipal services, including, but not limited to, streetlights and pumping stations. 2.7 Payment. For each Affected Area to be transferred, the Cooperative shall prepare (a) a listing of the facilities to be transferred under Section 2.1, as well as the original cost less depreciation of such facilities though the applicable Transfer Date, and (b) a good faith estimate for the reasonable integration expenses under Section 2.2. A current listing of facilities to be transferred to the Municipal in Area 1 is attached as Exhibit C, which listing will be updated as of the Transfer Date. Upon the completion of a transfer of an Affected Area, the Cooperative will provide a statement reflecting actual costs for integration expenses under Section 2.2. The Municipal shall make payments under Sections 2.1 and 2.2 within 60 days after receiving a final statement from the Cooperative for such costs. 2.7.1 The calculation of loss of revenue under this Article 2 shall be made for the period concluding on December 31st of each year under consideration and payment of the annual amount so determined will be made by the Municipal by February 15th of the following year. The Municipal's sales shall be calculated on the basis of its meter readings, as made in the ordinary course of its utility business. With its annual payment, the Municipal shall provide a written report to the Cooperative, certified as true 7 56 and correct by the General Manager of the Municipal, summarizing for each Affected Area, the kilowatt hours sold by the Municipal and the basis for the calculation of the compensation due the Cooperative. 2.7.2 The Municipal shall also provide the Cooperative copies of such additional supporting data as the Cooperative may reasonably request, at the Cooperative's expense, including metering data that reflects kilowatt hours sold but, pursuant to Minn. Stat. § 13.685, may not contain any data that could identify any customer (e.g., by name, address, phone, or social security number). Except as specifically provided in this Article 2, no other payments shall be due for the transfer of the Affected Areas under the terms of this Agreement. Any dispute concerning amounts due under this Article 2 shall be governed by Article 7 of this Agreement. 2.8 Area 1 Tie Line. The Parties acknowledge and agree that they will separately negotiate in good faith and enter an interconnection agreement, to address (a) the Cooperative's interconnection with the Municipal's system due to the deferral of the tie line in Area 1, (b) the interconnection required to serve as backup for Area 2 until the Transfer Date for Area 2, and (c) emergency interconnections. The Parties anticipate that the interconnection agreement will also address metering, SCADA, coordination with each Party's power supplier, the conditions to initiate construction of the deferred tie line, mutual operating guidelines, and such other topics as the Parties deem prudent or advisable. Prior to the Transfer Date of Area 1, an agreement needs to be in place to cover as a minimum, (a) the Cooperative's interconnection with the Municipal's system due to the deferral of the tie line in Area 1, and (b) the conditions under which the Cooperative may give notice to the Municipal to initiate construction of the deferred tie line. 8 57 Article 3: Filinos 3.1 In connectio with the transfer of electric service rights for an Affected Area pursuant to Article 1, the Cooperative consents and authorizes and the Municipal agrees that the Municipa I shall file the Parties' joint request, under Minn. Stat. § 216B.39, subd. 3, legally d-scribing and depicting the Affected Area(s), and requesting that the Minnesota Public Utilities Commission ("MPUC") modify the service territory boundary and recognize the service territory transfer. Notice and a copy thereof shall be provided by the Municip:l to the Cooperative not less than ten (10) days before filing with the MPUC. Unless r-quired more often by law, the Municipal may make such filings on an annual basi . If the service territory boundary modification procedure described in this Section materially changes in the law, the Parties will follow the process provided by law. 3.3 If the MPUC, Department of Commerce, the Office of Energy Security, or any other person raises an question or challenges any provision of this Agreement, a service territory transfer •ntemplated under this Agreement, or the due performance thereof, the Parties shall a-ch, at their own expense, exercise any and all lawful efforts reasonable and necessary to respond to said questions and to assure the transfer of service territory. If for any reason the MPUC refuses to recognize any service territory transfer described in Articl: 1, the Cooperative shall return any payments made by the Municipal pursuant to Articl 2, upon demand by the Municipal. 3.4 The Parties .gree that Cooperative indebtedness to the Rural Utilities Services or any other Cooperative lender or party (collectively "RUS") shall not prevent the Parties' performing and-r this Agreement. To the extent that approval of RUS may be necessary for complet ng the transfer of service rights under this Agreement, 9 58 including release of any lien or interest in physical facilities to be transferred to the Municipal, the Cooperative shall promptly seek such approval, exercising all reasonable efforts and due diligence. To the extent that RUS delays, denies, or objects to the Parties' performing under this Agreement, the Cooperative will use its best efforts to resolve any such issues. Article 4: Representations and Warranties 4.1 The Municipal and the Cooperative hereby mutually represent and warrant, each to the other, as follows: (a) Each is duly organized and existing in good standing under the laws of the State of Minnesota and each has all requisite power and authority to own, lease and operate its electric service facilities; (b) Each has the power and authority to execute, deliver and carry out the terms and provisions of this Agreement and has taken all the necessary corporate action to authorize the execution, delivery and performance of this Agreement; and (c) This Agreement constitutes a valid and binding obligation of each Party enforceable in accordance with its terms. Article 5: Mutual Waiver and Release of Claims 5.1 The Parties do hereby each unconditionally release and waive any and all claims, known or unknown, which they may now have or have in the future arising from any action or omission of the Parties or any fact or circumstance first occurring prior to the date hereof, whether or not continuing in nature, which relate to or arise from the right of either Party to provide electric service to any particular third party, area, facility or site by reason of the electric service territory laws of the State of Minnesota, now or hereafter in effect, or any prior agreement of the parties, oral or written. Provided, 10 59 however, the foregoing provisions of this Article 5 do not waive or release any claim either party may have for any breach of any covenants or any misrepresentations contained in this Agreement. 5.2 The Municipal does hereby agree to indemnify and hold harmless the Cooperative from all costs and damages arising from each and every claim made by any third party against the Cooperative arising from or related to the transactions described or contemplated by this Agreement, including the reasonable costs and fees of legal counsel incurred in the defense thereof. 5.3 The Cooperative does hereby agree to indemnify and hold harmless the Municipal from all costs and damages arising from each and every claim made by any third party against the Municipal arising from or related to the transactions described or contemplated by this Agreement, including the reasonable costs and fees of legal counsel incurred in the defense thereof. Article 6: Term and Scope of Agreement 6.1 The effective date of this Agreement is the date upon which the Agreement has been signed by both of the Parties. Unless mutually agreed otherwise by the Parties in writing, the term of this Agreement shall be a period of ten (10) years from the effective date of the Agreement, provided, however, that the terms of compensation in Article II shall only apply to any Affected Area transferred within five (5) years after the Transfer Date of Area 1, and thereafter the Parties may renegotiate compensation terms. 6.2 This Agreement (including recitals and exhibits hereto) constitutes the entire Agreement and, with respect to the Affected Areas, supersedes all prior agreements and understandings, oral and written, between the Parties hereto. In the 11 60 event of a conflict between an exhibit and the terms of this Agreement, the Agreement shall govern. 6.4 The Parties acknowledge that this Agreement is the result of arms length negotiations between the Parties, each taking into consideration the costs and risks of litigation otherwise required to resolve the matters addressed in this Agreement. This Agreement does not reflect the position of either the Party as to the appropriate application of the law determining electric service territory rights or compensation in such matters. For any electric service territory matters between the Parties not governed by this Agreement, the Agreement shall not act as precedent in the determination of compensation, if any be due. Article 7: Alternative Dispute Resolution 7.1 In the event that a dispute arises between the Parties as to the interpretation or performance of this Agreement, then upon written request of either Party, representatives with settlement authority for each Party shall meet in person and confer in good faith to resolve the dispute. If the Parties are unable to resolve the dispute, they shall make every effort to settle the dispute through mediation or other alternative dispute resolution methods. If the Parties are unable to resolve the dispute through these methods, either Party may commence an action either in the District Court of the county in which the service territory is located or in the Public Utilities Commission. The Transfer Date is not affected by any dispute or action to determine compensation. Article 8: General Terms and Conditions 8.1 Any notice permitted or required by this Agreement shall be made in writing by letter, electronic mail, personal service, facsimile, or other documentary form 12 61 and shall be deemed given upon actual receipt by the Party to which such notice is given. The address for notice to each Party is as follows (as may be later changed by a Party by proper notice): If to the Municipal: If to the Cooperative: Elk River Municipal Utilities Connexus Energy Attn: General Manager Attn: President& Chief Executive Officer 13069 Orono Parkway 14601 Ramsey Boulevard P.O. Box 430 Ramsey, Minnesota 55303 Elk River, MN 55330 Phone:763.323.2600 Phone: 763.441.2020 Fax: Fax: 763.441.8099 8.2 This Agreement will inure to the benefit of the Parties hereto and shall be binding on them and their respective legal representatives, successors and assigns. Provided, however, neither Party hereto may assign any of its rights herein to any person without the prior written consent of the other Party. 8.3 Each of the Parties acknowledges that the adjustment of electric service territory boundaries provided for herein is unique in that neither Party will have an adequate remedy at law if the other Party fails to perform any of its obligations hereunder. In such event, either Party shall have the right, in addition to any other rights it may have, to petition for and obtain specific performance of this Agreement in the District Court for the county in which the service territory is located. 8.4 This Agreement may be amended only in writing, signed by each of the Parties. 8.5 The Parties agree that they participated equally in, and are jointly responsible for, the drafting of this Agreement. In the event of any dispute, any ambiguity in this Agreement shall not be construed against either Party. Headings are for convenience and are not a part of this Agreement. 13 62 , 8.6 This Agreement may be executed in counterpart copies by the Parties and each counterpart, when taken together with the other, shall be deemed one and the same executed Agreement. 8.7 By executing this Agreement, the Parties acknowledge that they: (a) enter into this Agreement knowingly, voluntarily and freely; (b) have had an opportunity to consult an attorney before signing this Agreement; and (c) have not relied upon any representation or statement not set forth herein. IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written. 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O f.^O v si a U . r .0 p u v c�-4 N 1 C O y ct - � ti0 v c,. • v v n. v .� A» 0 Q V Q (n Q U H F < A V Iv U 3-i . O 4 u O A � N Y v C v v v w a0 H 2 , I. t a a t !tcl, I LGI� i - , - , i� 'p w y I j i I • -',... . . ,- '-'~--A- ''..,.:::) -----71– �,j` ' H.: t t l� / ; �r' t "frtl,_ftlii:;:it . _ —-.......---,..-1 f 1 T 1- f-Z- 4-1-k-0 ' y ai a a W co m o - W cu 6 .W 6 v I c •8q W I a El ,t . O cd 'd Q bQ E d G LD a Q Q w o ca 0 v w o N .-- V Q • Q Area #1 Interconnection Plan Overview This document will cover distribution interconnections that are needed to accommodate Elk River Municipal Utility's (ERMU) acquisition of Connexus Energy (CE) territory and plant in Area#1. This document also fulfills the requirements of Section 2.8 of the Electric Service Territory Agreement dated March 20, 2015. Two interconnections are needed as part of the Area #1 acquisition: 1. An interconnection along U.S. Highway 10, which is referred as the "Credit Union Interconnection". 2. An interconnection to Anoka circuit 5 located which is referred as the "County Road 12 Interconnection". Details for each interconnection are outlined on the attached pages. CE and/ RMU agree to this Area #1 Interconnection Plan. Mike Rajala, EO Tr oy Adams, General Manager Connexus Energy Elk River Municipal Utility 47,27po 6 /1-tizepl5-- Date Date 76 Credit Union Interconnection 1) Purpose —This will serve as an emergency backup tie to Area #2. 2) Timing /Term — a) The installation needs to be completed as part of the Area#1 acquisition in the fall of 2015. b) Term —This installation will remain in place until ERMU acquires Area #2. The preliminary date for ERMU's acquisition of Area #2 is the fall of 2016. 3) Design a) The interconnection will use an existing air break switch. 4) Construction a) Construction will be done by CE crews 5) Equipment and labor Cost - ERMU will reimburse CE for loaded labor and material. 6) Metering & SCADA a) Due to the temporary nature of this interconnection and the low probability of it being used, no metering or SCADA will be installed. b) CE and ERMU will follow best utility practices to estimate or measure the tie line flow if this interconnection is used. 7) Wholesale Power billing adjustments a) ERMU power supplier: GRE/CE (up to October 1, 2018) — In the event this interconnection is used, CE will work with ERMU and Great River Energy to adjust the power bill. b) ERMU power supplier: MMPA (beginning October 1, 2018) — It is not anticipated that this interconnection will still be in use after 10/1/18. 77 County Road 12 Interconnection 1) Purpose and background a) This will serve as a backup tie for CE's Anoka circuit 5. b) As part of the territory settlement, this construction of a new feeder out of Elk River Station 14 was deferred in exchange for a higher loss of revenue mill rate. c) The deferral buys time in that a lower cost or better options for a replacement tie line may develop in the future. d) Electric Service Territory Agreement references: Sections 2.2, 2.3 b, and Section 2.8 2) Timing /Term — a) The installation needs to be completed as part of the Area #1 acquisition in the fall of 2015. b) Term —This installation will remain in place until new backup feeder is constructed to either an existing or future substation. 3) Design a) Use of a recloser was the preferred option at the interconnection point. Recloser features: i) Bi-directional. Could feed back to ERMU. ii) Connexus would have exclusive operational control iii) Would have SCADA remote. iv) SCADA data to be ported back to ERMU's SCADA system. v) SCADA— ERMU will make available station 14 transformer data to CE. 4) Construction a) Construction will be done by CE crews. 5) Equipment and labor Cost a) CE will install and own the interconnection equipment. b) The installation cost including labor is estimated to be approximately $25,000. c) ERMU shall pay CE an annual fee based on the actual installation cost times an annual carrying charge of 15%. This annual fee may be prorated for the first and also the last year of operation in the event there are less than 12 calendar months of operation in those years. 6) Metering a) Metering will be required since this interconnection will be in place for several years and the tie line flow may reach 3 MW. b) Due to the infrequent use of the interconnection, the recloser will be used to measure tie line current flow in lieu of conventional current transformers. 7) Use a) Planned outages — CE will give ERMU staff reasonable notice of CE's need to use the interconnections. 78 b) Unplanned outages — ERMU will provide 3 MW of firm capacity for CE's use. ERMU shall notify CE of any situation in which the emergency tie functionality is restricted. c) CE will inform ERMU, GRE, and MMPA (as appropriate) of anytime it has used the interconnection to ensure proper billing adjustments are made. 8) Wholesale Power billing adjustments a) ERMU power supplier: GRE/CE (up to October 1, 2018) — In the event this interconnection is used, CE will work with ERMU and Great River Energy to adjust the power bill. b) ERMU power supplier: MMPA (beginning October 1, 2018) — It is expected that this interconnection will likely still be in use after 10/1/18. Therefore, prior to October 1, 2018, ERMU and CE will work with GRE and MMPA to develop processes and procedures to accommodate use of the emergency interconnections. 9) Replacement of the County Road 12 Interconnection with a new distribution feeder a) At some future time, the County Road 12 Interconnection will be replaced with a new distribution feeder whose source may be an existing or future substation. b) Any of the following principles may initiate construction of a new distribution feeder: i) If ERMU's capability to feed CE loads drops below or fails to meet CE's requirements. ii) If the ERMU tie point is unavailable based on past performance (excluding unavailability due to acts of nature such as severe storms), then a new feeder would be required. iii) Other situations using good utility practice that influence timing for construction of a new feeder. This would include factors such as road moves, opportunities to put underbuild on new transmission lines, or tieing into new substations at time of the substation construction. c) CE will grant ERMU 1 year notice to budget for the line. If another solution rather than a feeder to Elk River Station 14 becomes preferable to CE, CE reserves the right to construct another solution. ERMU is only responsible for the lesser of the cost of this alternate solution or the originally-identified Elk River Station 14 feeder 79