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6.1a. 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 6.1a SUBJECT: Staff Updates—General Manager DISCUSSION: • The Board of Directors of the Minnesota Municipal Power Agency(MMPA)met on August 25, 2015 in Shakopee,Minnesota. At the meeting, the Board approved the execution of a 10 MW power purchase agreement for a solar facility to be located in Buffalo, Minnesota. The Board also approved the expansion of the Agency's energy education program to include grants for solar installations at educational facilities in member communities and selected the member communities of Arlington, Brownton, Olivia, and Winthrop to be grant recipients for the 2015-2016 academic year. The Board also approved the redemption of the Agency's outstanding Electric Revenue Bonds, Series 2005 on October 1, 2015. MMPA has approximately$14 million of Series 2005 bonds outstanding at a 5%coupon rate. Redeeming these bonds will save the Agency$700,000 in annual interest expense for the next 20 years. • The Shakopee Valley News published an article on MMPA's proposed distributed power generation facility to be located near Canterbury Park. The article is attached. • Attached is a letter of thanks from the Elk River Police Department for ERMU's participation in Night to Unite. • The tentative date of October 7, 2015,has been set for the Midwest Municipal Transmission Group (MMTG)Annual Meeting. This meeting will be held in Iowa this year,potentially in Masson City. • The Field Engineer position included in the 2015 budget had been put on hold until the Technical Services Supervisor position and been filled. Now that we've filled the Supervisor position,we are doing a needs analysis to build the position description for the Field Engineer. We will look to post the position later in September. Page 1 of 2 IiII ReliablePublicF D1 Power Provider POWERED TO SERVE 177 • Following the Environment Protection Agency's August release of the final Clean Power Plan, Great River Energy has issued a position statement. Their press release and position statement are attached. ATTACHMENTS: • Shakopee Valley News—"Power generator proposed near Canterbury"—August 23, 2015 • Night to Unite Thank You from ERPD—August 18, 2015 • Great River Energy—Environmental Pollution Agency Clean Power Plan Press Room Release • Great River Energy—Environmental Pollution Agency Clean Power Position Statement— August 24, 2015 11 Page 2 of 2 IPOIERED NATURE Reliable Public Power Provider P OWE 0.E D T O S E R V E 178 8/26/2015 Power generator proposed near Canterbury-Shakopee Valley News:Local Power generator proposed near Canterbury By Cristeta Boarini cboarini @swpub.com I Posted: Sunday, August 23, 2015 12:00 pm Avant Energy, through the Minnesota Municipal N sow Power Agency, is looking to build a power generator near Canterbury Park that would supply about 50 PIP percent of the energy load for the city of Shakopee. i 1 The proposed 45-megawatt natural gas power generator would be housed inside a two-story building f1-1_1 on the corner of Vierling Drive and Eagle Creek Parkway. The generator would be made up of five reciprocating natural gas engines. It would be the first in a series of new distributed power generators MMPA is looking to build in the Avant Energy Power Generator metro area. The MMPA is a wholesale supplier of Exterior Concept power to its 12 member agencies, which includes Concept design for the exterior for a Shakopee Public Utilities. proposed power generator plant on the This distributed power generator would use well- corner of Vierling Drive and Eagle Creek established technology and be compliant with all Parkway. noise, emissions and other regulations," said Avant Energy's director of project development Jay Regnier. Regnier said the generator would greatly improve the power reliability in the community. The plans were previewed at a Shakopee Planning Commission meeting on Aug. 6, when city planning staff recommended an amendment to city code that would allow power generation facilities as a conditional use in areas zoned for major recreation, such as the proposed site. City Planner Alex Sharpe said city staff and Avant Energy looked at numerous sites across the city to find a suitable place for the power generator. With the city's dwindling stock of developable land, the Vierling Drive and Eagle Creek Parkway location was the best bet, Sharpe said. Designs from Avant Energy show that the generator would be housed within a building that echoes the architecture and color scheme of Canterbury Park, with a similar cream-colored facade and red roof, along with tall windows. Regnier said the Shakopee facility would share aesthetic similarities to MMPA's gas turbine plant on Interstate Highway 35 near Faribault, but will be significantly smaller. There also would be 75-foot exhaust stacks on the Shakopee site. Regnier said that since the fuel http://www.swnewsmedia.com/shakopee valley_news/news/local/power-generatmoposed-near-Canterbury/article c3af3f 60-8f7f-5f77-9aa1-6055ae425035.h... 1/2 8/26/2015 Power generator proposed near Canterbury-Shakopee Valley News:Local would be "clean-burn natural gas," any plumes visible at the site would be odorless carbon dioxide and water vapor. The generator would be controlled remotely, so there wouldn't be staff on site at all times, Regnier said. But before groundbreaking can begin, Avant Energy and the MMPA have a long road of permitting and planning ahead. Regnier said his company is working on an Environmental Assessment Worksheet and air-emissions permit through the Minnesota Pollution Control Agency. No timeline has been set yet, but the outlook for the project is good. "We are diligently working on planning," Regnier said. "Preliminary discussions with staff at the city, SPUC [Shakopee Public Utilities Commission] and the MPCA have all been positive conversations so far." http://www.swnewsmedia.com/shakopee valley_news/newsAocal/power-generatitirosed-near-Canterbury/article c3af3f 60-8t7f-5t77-9aa1-6055ae425035.h... 2/2 ELK RIVER POLICE August 18,2015 Elk River Utilities Attention:Troy Adams 13069 Orono Parkway NW Elk River,MN 55330 Re: Night to Unite Dear Mr. Adams, On behalf of the Elk River Police Department and the citizens we serve, I would like to thank you for your donation of flashlights to the 2015 Night to Unite event. This year's event included 38 different neighborhood parties throughout the city,with several thousand residents in attendance. The support we receive from businesses and organizations such as Elk River Utilities, play an important role in making this a successful event. Please know that your willingness to support this annual event plays a significant role in keeping Elk River a safe and desirable community to live. Sincerely, 2,w\ 1 Ron Nierenhausen Chief of Police 13077 Orono Parkway Elk River,MN 55330 �..® / E I E I 1 1 763.635.1200 NATURE www.ElkRiverMN.gov 181 Great River Energy :: AboutUs :: Press Room Page 1 of 1 GREAT RIVER ENERGY*C EPA announces final Clean Power Plan On Aug.3,the Environmental Protection Agency released its Clean Power Plan,which regulates carbon dioxide(CO2)emissions from existing power plants. Although Great River Energy staff are still studying the Clean Power Plan and analyzing its impact,it is clear the rule imposes stringent requirements on power plants across the 4 nation,including Great River Energy's coal plants in North Dakota—Coal Creek, i Stanton and Spiritwood stations. Ickfl a■t - r ''4;, Il;, III z Due to its combined heat and power design,Great River Energy's Spiritwood Station power plant has a CO2 intensity below limits the Clean Power Plan sets for North Dakota. "Great River Energy has long recognized that impending carbon regulation is a business issue of the first magnitude.For that reason we have taken steps to prepare for regulation,such as accelerating the depreciation of our two largest coal plants,and actively engaged in the debate.Our view has been that we will be better able to create value for our members if we engage in the process,"said Great River Energy Vice President and General Counsel Eric Olsen."We believe engagement is more important than ever now that the final Clean Power Plan has been issued." Regardless of whether the new EPA rule survives court challenges,CO2 emissions from power plants will be regulated.After the U.S.Supreme Court ruled in 2007 that greenhouse gases are pollutants under the Clean Air Act,the EPA became obligated to begin the process of regulating CO2."If the Clean Power Plan is overturned,another regulation will take its place.Although the Clean Power Plan is stringent,it will at least provide the utility industry with needed clarity,"Olsen said. The Clean Power Plan sets North Dakota's CO2 intensity goal at 1,305 lbs/MWh,which is tied for the least stringent in the United States,but still substantially below current levels in the state.The Clean Power Plan's preferred method of achieving the substantial CO2 emissions reductions is by either trading emissions rate credits or CO2 allowances.Because Great River Energy's plants are among the most efficient,the organization will have to purchase fewer credits or allowances.As a result,Great River Energy's plants would have a cost advantage in the market. "We have long believed that a market-based approach to CO2 regulations,rather than requiring each plant to individually meet the requirements,is the most efficient way to reduce emissions,"Olsen said. The Clean Power Plan also promotes renewable energy as a way to reduce CO2 intensity or to replace some power from coal plants.The Upper Midwest has some of the best potential wind resource in the country."We will study the impact of taking advantage of wind as a way to comply with the new rule," Olsen said. The path to compliance Although the Clean Power Plan will be challenged in the courts,Great River Energy will continue to work with North Dakota and Minnesota government officials and utilities on the states'implementation plans.According to Olsen,"It is extremely important to be at the table as state offices work on their plans, especially in North Dakota,where our coal plants are located.In Minnesota,where we have no power plants covered by the rule,our focus will be to encourage the state to participate in multi-state trading to implement the Clean Power Plan." Great River Energy's members are the sole focus of the organization's engagement in the carbon regulation debate."We believe the approach we have laid out is the best way to ensure Great River Energy continues to provide reliable,affordable wholesale power to our members,"Olsen added.For more information about Great River Energy's position on the Clean Power Plan,visit greatriverenergv.com/cpp. http://www.greatriverenergy.com/aboutus/pressroornllead 082415_cpp_announced.html 9/1/2015 RI ENERGVER Clean Power Plan Position GREAT Y,M 12300 Elm Creek Boulevard Maple Grove, Minnesota 553694718 • 763 445-5000 • greatriverenergy,com On August 3,2015,the U.S. Environmental Protection Agency(EPA) issued its final Clean Power Plan (CPP) regulating carbon dioxide (CO2)emissions from existing power plants.Although Great River Energy staff are still studying the CPP and analyzing its impact, it is clear the rule imposes stringent requirements on power plants across the nation, including our Coal Creek,Stanton and Spiritwood Stations. Great River Energy's approach to the business issue of climate change and carbon regulation Great River Energy has long recognized that impending carbon regulation is a business issue of the first magnitude. For that reason we have taken steps to prepare for regulation and have actively engaged in the debate. Our view has been that we will be better able to create value for our members if we engage in the process.We want to help ensure CO2 regulation is implemented in a way that best preserves reliability and affordability for our members. Now that the final CPP has been issued,we believe engagement is more important than ever. Regardless of whether the CPP survives court challenges,CO2 emissions from power plants will be regulated.After the U.S.Supreme Court ruled in 2007 that greenhouse gases are pollutants under the Clean Air Act,the EPA became obligated to begin the process of regulating CO2. If the CPP is overturned,another regulation will take its place. Although the CPP is stringent, it will at least provide our industry with needed clarity. In the absence of any certainty,we have implemented approaches we believe are effective in any scenario,such as accelerating depreciation on Coal Creek and Stanton Stations. In addition,without CO2 regulation at the federal level, states like Minnesota have filled the void with a patchwork of laws to address climate change.We believe federal guidance and a consistent approach regarding CO2 regulation are preferable to state-by-state approaches.Today,we are faced with many decisions, such as the strategic evolution of our portfolio,which will be more clear once we see how the states implement the CPP. For all of these reasons,we believe the wisest course is to continue to engage in the process.Therefore,we are devoting our resources to understanding the CPP and finding opportunities to minimize its cost impacts. Great River Energy is well positioned to thrive in a carbon constrained environment The CPP sets North Dakota's CO2 intensity goal at 1,305 lbs/MWh,which is tied for the least stringent in the United States, but still substantially below current state levels. Great River Energy owns three of the most efficient power plants in North Dakota, positioning us well to comply with the CPP. • Coal Creek Station emitted CO2 at a rate of 2,276 lbs/MWh in 2014, due in part to the DryFining TM coal refining technology. • Stanton Station emitted 2,154 lbs/MWh of CO2 in 2014. Its lower rate is due in part to the use of Powder River Basin coal. • Spiritwood Station is the most efficient plant of all. Due to its combined heat and power(CHP) design,and based on EPA's own methodology for determining the CO2 efficiency of CHP plants,we project Spiritwood will emit CO2 in a range of 1,100 to 1,300 lbs/MWh,which is below the goal the CPP sets for North Dakota. The final CPP recognizes the importance of baseload coal to reliability.As stringent as the CPP is, most of the nation's coal plants would still be operating after full compliance with the CPP in 2030.Those plants that survive—the last ' plants standing—will be the most efficient. 183 The CPP identifies trading as a preferred method of achieving the substantial CO2 emissions reductions required by the rule. In the case of CO2 intensity,or rate-based State Implementation Plans(SIPs),the commodity traded would be something EPA is calling emissions rate credits(ERCs). In the case of mass-based SIPs that regulate total CO2 emissions,CO2 allowances would be traded. Because Great River Energy's plants are among the most CO2 efficient, we will have to purchase fewer ERCs or CO2 allowances,thus giving our plants a cost advantage in the market.Great River Energy has long believed an approach to CO2 regulation that relies on markets, rather than a command and control structure, is the most economically efficient way to implement CO2 regulation. The CPP also promotes renewable energy as a way to reduce CO2 intensity or to replace some power from coal plants.The Upper Midwest has some of the best wind resource opportunities in the country.We will study the impact of taking advantage of wind opportunities as a potential CPP compliance mechanism. Great River Energy has been preparing for CO2 regulation,and the CPP did not catch us by surprise.The Great River Energy board adopted a resolution in 2013 that called for: • Acceleration of depreciation on Coal Creek and Stanton Stations to keep our options open • Substantial reduction in our reliance on coal • Meeting our growth requirements with conservation,energy efficiency, renewables, natural gas and the energy market. We have made progress on all three objectives, including reducing the use of coal-based energy in our portfolio. Litigation The CPP will be challenged in court by a host of parties. It is very likely the U.S.Supreme Court will ultimately determine the validity of the CPP. EPA's authority to regulate CO2 emitted by existing power plants is derived from Section 111(d)of the Clean Air Act.Section 111(d)is a poor vehicle for CO2 regulation.The question of whether EPA exceeded the legislative authority granted in the Clean Air Act is a legitimate one for the courts to answer. Nevertheless, until and unless the CPP is stayed or overturned by the courts, our primary effort will be devoted to complying with the CPP and working with North Dakota officials and others to shape the state's SIP in a way that promotes reliability and affordability for our members. Great River Energy's plan going forward We continue to digest the 1,560 pages of the CPP and analyze its impact on Great River Energy.We are also learning more about the CPP through the National Rural Electric Cooperative Association,the Coalition for Innovative Climate Solutions(an electric utility industry group of which we are a member),the Midwestern Power Sector Collaborative (a group facilitated by Great Plains Institute that includes utilities,government officials and non-governmental organizations),the Lignite Energy Council and others. We will continue our work with North Dakota and Minnesota government officials and utilities on the states'SIPs. The structure of the Clean Air Act states that EPA creates a guideline(the CPP),each state proposes a SIP to implement the CPP,and EPA reviews the SIP and replaces it with a Federal Implementation Plan (FIP) if EPA determines the SIP does not satisfactorily implement the CPP.As a result,the states will be focusing on their SIPs. It is extremely important to be at the table as that occurs to help shape the SIP,especially in North Dakota,where our resources covered by the CPP are located. In Minnesota,where we have no power plants covered by the CPP,our focus will be to encourage the state to participate in multi-state trading to implement the CPP. Conclusion Our members are the sole focus of our engagement in the CO2 regulation debate.We believe the approach we have laid out is the best way to ensure Great River Energy continues to provide reliable,affordable wholesale power to our members in an environmentally sound manner. August 24,2015 184 A Touchstone Energy'Cooperative K.