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09-08-2015 ERMU MIN ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMIVIISSION HELD AT UTILITIES CONFERENCE ROOM September 8,2015 Members Present: John Dietz,Chair;Al Nadeau,Vice Chair;and Daryl Thompson,Trustee ERMU Staff Present: Troy Adams, General Manager; Theresa Slominski,Finance and Office Manager; Mark Fuchs,Electric Superintendent; Eric Volk,Water Superintendent; Mike O'Neill,Technical Services Superintendent; Tom Sagstetter,Conservation&Key Accounts Manager; Michelle Canterbury,Executive Administrative Assistant, Tom Geiser,Assistant Electric Superintendent Others Present: Cal Portner,City Administrator;Peter Beck,Attorney 1.0 CALL MEETING TO ORDER John Dietz called the September 8,2015 meeting to order at 3:30 p.m. 1,1 Pledge of Allegiance The Pledge of Allegiance was recited. 1.2 Consider Utilities Agenda Troy Adams requested to move up agenda item 4.2,Vision Committee 10&Anniversary Recap to immediately follow 1.2,Consider Utilities Agenda. Al Nadeau moved to approve the amended September 8,2015 Utilities agenda. John Dietz seconded the motion.Motion carried 2-0. 4.2 Vision Committee-100th Anniversary Recap Tom Sagstetter gave a recap on the 10&anniversary celebration.Tom started by thanking the Commission for allowing the office to close an hour early for the event. The event had great participation;there were approximately 1,300 people who attended. We received many positive comments that focused on the quality of food,the great band,and one person even said they were looking forward to the 200 year celebration! The vendor booths were well attended,kid zone was packed,the tours were full,and the safety demonstrations and heavy equipment areas were also well attended.Michelle Canterbury thanked the members of the vision committee Page 1 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015 that went over and above the call of duty to help make the event such a success;Jolene Fenn- Jansen,Mike Thiry,Angela Hauge,Geri Fournier,Wade Lovelette,Mike O'Neill,Daryl Thompson,and Tom Sagstetter. Individual recognition and thanks were given to each of the contributors for the event. Representatives were present from Waste Management,Coborn's, the Elk River Lions,and the Sherburne County Fair Board. Other contributors included Elk River Travel and ISD 728 Community Education. John Dietz thanked Michelle Canterbury for the outstanding job she did with coordinating the event. He added that it was a great community event,everything he heard was positive,and we received a tremendous amount of publicity from our local newspaper.The event was an opportunity to showcase what we offer to our citizens.John extended his thanks to everyone and what they did to help make the event such a success. 1.3 Introduction of New Employee Theresa Slominski introduced Kathy Greenberg the new Accounts Payable and Payroll Specialist. The Commission welcomed the new employee. 1.4 Recognition of Employee Achievements Troy Adams announced that Jennie Nelson recently received the American Public Power Association(APPA) Rising Star Award.Jennie was recognized for her achievement at the APPA National Conference held in Minneapolis,MN. Eric Volk announced that Lead Water Operator Mike Langer received the Minnesota Municipal Utilities Association(MMUA)Rising Star Award. Mike was recognized for his achievement at the MMUA Annual Summer Conference held in Pequot Lakes,MN.John Dietz shared that Troy Adams was elected as the 2015-2016 MMUA Board of Directors President at the MMUA Summer Conference. The Commission congratulated the employees on their achievements. 2.0 CONSENT AGENDA(Approved By One Motion) John Dietz had a few questions on the financials,staff responded. Al Nadeau moved to approve the Consent Agenda as follows: 2.1 August Check Register 2.2 August 11,2015 Previous Meeting Minutes 23 Financial Statements 2.4 Connexus Electric Service Territory Transfer Agreement 2.5 Public Power Week Resolution 2.6 Customer Service Week Resolution 2.7 Minnesota Municipal Utilities Association 2015-2016 Safety Program Contract Page 2 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015 John Dietz seconded the motion. Motion carried 2-0. 3.0 OPEN FORUM Alex Bodnar was at the meeting to follow-up on the Petition for Water Main Looping and Extension Variance that was on the August 11,2015 commission agenda. Alex distributed a copy of the Recommended Standards for Water Works—Section 8.2.4 Dead ends.He also provided a quote from Brenteson Companies for installation of sanitary sewer and water main, and services.Alex was looking for Commission support for a variance to the city council stating that water can't be provided to the area in a cost effective manner. As action can't be taken in open forum,the Commission requested Alex Bodnar write up a formal request of exactly what he is asking for,and submit his request to ERMU staff by October 1,2015 to allow them the time to review and include it on the October 13,2015 agenda for Commission decision. 4.0 OLD BUSINESS 4.1 Electric Service Territory As staff prepares for the acquisition of Connexus customers this fall,there are numerous areas that will be discussed with the Commission.At this point of time,the key points of discussion are: electric rates, integration of electric utility infrastructure,and customer data migration. Electric rates—Tom Sagstetter shared that we haven't received many calls on the electric rates. We have provided one commercial customer with a rate analysis.Tom also shared that we're scheduled to meet with Dave Berg from Dave Berg Consulting, LLC (DBC)this week to begin a rate analysis and come up with some possible options to help mitigate increased costs going from a Connexus program to ours. Integration of the utility infrastructure—We have 299 accounts that we'll be transferring over to our system on September 22,2015. After they're transferred over,we'll begin to change the meters out to ours.Torn shared that we're working closely with the one three phase commercial customer that will be transferred over on September 22nd to help ensure a smooth transition. Included in the packet were examples of the load management and final system transfer letter that will be going out to customers. John Dietz had a question on whether we were going to make an attempt to contact all the commercial customers to inform them of the changeover time and how it may affect them. Staff responded.There was further discussion. 5.0 NEW BUSINESS 5.1 2016 Bud et: 10 Year Capital Improvement Projections; 2016 Capital Pro"eets and Equipment Purchases• and 2016 Conservation Im rovement Plan Page 3 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015 Troy Adams presented the 2016 Capital Projections, Capital Projects and Equipment Purchases and the Conservation improvement Plan. Notable items for the Electric Department are Territory Acquisition costs, a new feeder to the Natures Edge Business Park, replacing dump truck#16, a potential new substation and feeder for data center growth, and construction/renovation of the field services building. Troy explained that a few of these projects could be financed through reserves or bonds; so as not to have a direct effect on our rate design. There was further discussion on the projects,the priority,and the manpower required. Notable items for the Water Department are the construction of a new filter plant for well #9 and construction/renovation of the field services facilities. We would plan to pay for the well project with reserves and trunk funds and the field services project through bonds. John Dietz had a question on the money budgeted for the Jackson Street Water Tower restoration project. Staff responded. A notable item for the Administration and Technical Services Department is a new in house server for NISC. Theresa Slominski shared that when we converted over to NISC we had the option to go with a Cloud based Application Service Provider(ASP) or to have our own server in house; at that time we decided to go with the less expensive cloud based service. Theresa shared the challenges we've experience since we switched over to the ASP and what it would take to bring it back in house. There would be numerous advantages to having it in house and we may have the option of using the city's existing server. Theresa also provided costs for purchasing our own designated hardware. There was further discussion. John Dietz had a question on the $10,000 line item for City Hall/Utility Fitness Room. Staff responded. There was discussion on the $240,000 budgeted for the Landfill expansion project. Tom Sagstetter went over the Conservation Improvement Program (CIP) Budget. He shared that our energy savings goal mandated by the state was increased to 2.3 million kW hours, so the rebate budget is about$85,000 higher.As we would normally have a hard time spending the rebate dollars, we're pleased to have some of those funds available for our newly acquired Connexus customers that meet the rebate requirements. 5.2 Minnesota Municipal Utilities Association Annual Summer Conference Update The Minnesota Municipal Utilities Associations (MMUA)Annual Summer Conference was held in Pequot Lakes, MN. An MMUA board meeting was held prior to the conference and a business meeting of the membership was held in conjunction with the conference. Troy Adams provided a memo recapping the conference highlights and important topics. He also shared that a 1.5%MMUA dues revenue increase and modified dues structure was approved. The changes result in a 0.37%dues increase for ERMU in 2016. Troy stressed the value added benefits of our membership with MMUA. Page 4 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015 5.3 Environmental Pollution Agency Rules affectin ERMU's Diesel Generation Facility Mike O'Neill explained that in the original Reciprocating Internal Combustion Engine Rules, also known as the RICE Rules, it stipulated that an entity could run their engines up to 100 hours for testing and maintenance. This exception was later deleted by a court's decision. Another Petition for Review was submitted and a stay of the earlier ruling was granted until a final decision could be reached. This stay of issuance of the mandate will be in place through May 1, 2016. A final decision should be forthcoming prior to the expiration of the stay. ERMU must decide whether to upgrade the exhaust systems on our generators to bring them into compliance, at a cost of approximately$400,000, or forgo placing them on the Midcontinent Independent System Operator(MISO)market with GRE and keep the engines to be used for emergency purposes only. The two other factors that come into play are our 201+6 contract with Great River Energy (GRE) and our 2018 contract with Minnesota Municipal Power Agency(MMPA). At this point we don't know what MMPA will want to do with these engines. Troy Adams and Mike O'Neill will be in discussions with MMPA to see what their interest is. In addition, Mike will be working with vendors to assess the need and cost of retrofitting and upgrading the exhaust systems for the two engines to bring them into compliance with the new EPA regulations. Staff will bring back some firmer dollar amounts for the retrofit project should the Commission choose to move forward with it. 5.4 Payment in Lieu of Taxes and other Donations to the City of Elk River On March 20, 2015, an electric service territory transfer agreement was executed between ERMU and Connexus. The terms of the agreement provide for loss of revenue (LOR) payments for 10 years. Now that the negotiations have been completed and terms finalized,the payment in lieu of taxes (PILOT) provisions should be revised to reflect an exemption for customers that are subject to LOR payment. As these LOR payments complete their 10 year term,the revenue associated with these customers would then become subject to a PILOT per the policy. Troy Adams presented the proposed PILOT and Other Donations to the City of Elk River policy that would reflect these changes. John Dietz pointed out that the way the proposed policy was worded may cause some confusion as it doesn't identify which electric service customers would be subject to the LOR. John suggested that modifications be made to the proposed policy,to include the clause"per the March 20, 2015 service territory agreement", and brought back to the Commission for consideration and approval. 5.5 Wa a and Benefits Committee Update—Health & Dental Insurance On September 8, 2015 the Wage and Benefits Committee (W&BC)met to review dental, Page 5 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015 ancillary, and health insurance renewals; and HSA employer contributions. Theresa Slominski gave a verbal update on the insurance renewals that were discussed. Theresa Slominski explained that we currently have both our ancillary and dental insurance coverage through Principal who we've been using for the past three years. After going out for bids for 2016, we've identified that we would recognize a significant savings if we were to switch over to a three year contract with Assurant; who has very similar coverage, and who we were with prior to switching over to Principal. There was further discussion. Theresa Slominski presented the health insurance renewal, which had an 8.3% increase for our plan. She explained that we participate in an insurance pool with Resource Training & Solutions, and the range of renewals for their clients came in between -3%to 19.9%. Based on this reasonable renewal rate, staff would recommend staying with our current plan. Theresa Slominski went over the 2016 HSA limits and deductibles. Currently the employer is contributing$1,985 a year towards the family plans and $650 a year towards the individual plans. John Dietz added that we currently have 13 people on the co-pay plan and 20 people that have migrated over to the HSA plan. He was in favor of keeping the company contribution to the HSA plan, and reevaluating it on a year to year basis. There was further discussion on our current co-pay insurance plan that could potentially be subject to a"Cadillac Tax". Daryl Thompson made a motion to switch our 2016 ancillary services and dental insurance from Principal to Assurant; to approve the 2016 ancillary services and dental insurance from Assurant; to approve the 2016 HSA insurance plan employer contribution of$1,985 for family and $650 for single; and to approve the Blue Cross Blue Shield Health insurance Plan with the 8.3% increase. Al Nadeau seconded the motion. Motion carried 3-0. 5.6 Expansion of the Elk River Municipal Utilities Board of Commissioners Troy Adams shared that when the territory acquisition discussions began a few years ago, there was discussion on expanding the commission to provide better representation of the growing customer base, and based on the newly acquired territory and normal growth, ERMU will likely experience a 20%growth over the next five years. Troy explained the steps involved to expand the utility commission from 3 to 5 members. There was further discussion.The Commission was in favor of expanding the commission membership.John Dietz suggested that before we request council action, we should bring it to a city council workshop for discussion to help determine if we have council support and to get their opinion on two city council members serving on the commission board versus one city council member. The commission directed staff to prepare a memo on the expansion and submit it to the city for discussion at an upcoming workshop. Page 6 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015 6.0 OTHER BUSINESS 6.1 Staff Updates Troy Adams' staff report included a bullet point on the MMPA Board of Directors meeting held on August 25,2015 in Shakopee,MN. At the meeting,the Board approved the execution of a 10 MW power purchase agreement for a solar facility to be located in Buffalo, MN.John Dietz had some questions on the solar facility. Staff responded. Theresa Slominski had previously shared that with our health insurance we have through Resource Training&Solutions(RT&S),we participate in a co-op to receive reduced insurance rates.RT&S has a very advanced wellness program that we participate in. We were recently selected to receive their Well Workplace Award in the fall of 2015 for the work we did in 2014. Theresa extended an invitation to the Commission to the Customer Appreciation Event and Awards Banquet being held on October 7,2015. Efforts of Michelle Martindale and Angela Hauge,who serve as our representatives on the committee,will be recognized at the awards banquet. 6.2 Set Date for Next Meeting The next regularly scheduled Commission meeting will be held on October 13,2015. 6.3 Adiourn Regular Meeting Daryl Thompson moved to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 4:59 p.m. Al Nadeau seconded the motion. Motion carried 3-0. Minutes prepared by Michelle Canterbury. hn ,Dietz Chair,E U ss' n Tina Allard City Clerk Page 7 Regular meeting of the Elk River Municipal Utilities Commission September 8,2015