11-17-2015 ERMU MIN ELK RIVER MUNICIPAL UTILITIES
SPECIAL MEETING OF THE
UTILITIES COMMISSION
HELD AT UTILITIES CONFERENCE ROOM
November 17,2015
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
Jennie Nelson,Customer Service Manager
Others Present: Cal Portner,City Administrator;Peter Beck,Attorney
1.0 CALL MEETING TO ORDER
John Dietz called the November 17,2015 meeting to order at 3:30 p.m.
1.1 Pledge of Allegiance
The Pledge of Allegiance was recited.
1.2 Consider Utilities Agenda
There were no additions or corrections to the agenda.
Daryl Thompson moved to approve the November 17,2015 Utilities agenda. Al Nadeau
seconded the motion.Motion carried 3-0.
1.3 Introduction of New Employee
Mark Fuchs introduced Jared Rolstad the new Apprentice Lineworker. The Commission
welcomed the new employee.
2.0 CONSENT AGENDA(Approved By One Motion)
John Dietz recommended that the language of the motion for agenda item 4.1 on the October 13,
2015 previous meeting minutes be changed to include a unit of measurement(per kW)for the
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temporary demand rate reduction.John Dietz had a few questions on the financials,staff
responded.
Al Nadeau moved to approve the Consent Agenda as follows,including the recommended
change to the previous meeting minutes:
2.1 October Check Register
2.2 October 13,2015 Previous Meeting Minutes
2.3 Financial Statements
2.4 Grant of Easement Agreement
2.5 Employee Handbook Annual Updates
Daryl Thompson seconded the motion. Motion carried 3-0.
3.0 OPEN FORUM
No one appeared for open forum.
4.0 OLD BUSINESS
4.1 Petition for Water Main Looping and Extension Variance
Alex Bodnar,with Bodnar Builders,submitted a formal written request that the Elk River
Utilities Commission direct the Water Department to install six inch HDPE water main from the
western edge of 13296 Mississippi Road to the existing twelve inch water main on Joplin Street;
both Alex Bodnar and Mike Bodnar were present. Eric Volk informed the Commission that in
the past ERMU has not paid for any installation of new water main in a development. We have
multiple policies in place requiring the installation of loops and who should pay for them. Eric
gave some examples of the most recent cases where developers have paid for 100%of their
water main installation costs,including the City of Elk River.Based on our policy,staff
recommended the Commission deny Bodnar Builders request. After discussion the
Commission was in consensus to deny Bodnar Builders request.
Daryl Thompson made a motion to deny Bodnar Builders request to pay for the
installation of six inch HDPE water main from 13296 Mississippi Road to twelve inch
water main on Joplin Street.Al Nadeau seconded the motion. Motion carried 3-0.
4.2 Environmental Protection A2encv Rules Affecting ERMU's Diesel Generation Facility
In preparation for the 2016 power contact with Great River Energy(GRE)in regards to the
Diesel Engine Power Plant,Mike O'Neill has been working with vendors to assess the need and
cost of retrofitting and upgrading the exhaust systems for our two engines to bring them into
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Special meeting of the Elk River Municipal Utilities Commission
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compliance with the new Environmental Protection Agency(EPA)regulations.Mike shared
that we haven't had a chance to sit down with Minnesota Municipal Power Agency(MMPA)to
determine what their interest is in having our assets on the Midcontinent Independent System
Operator(MISO)market,but based on the current rate we have contracted with GRE,and the
$300,000 investment associated with the emission upgrades,staff is leaning towards using the
engines for emergency use only. There was further discussion.Staff will bring back a
recommendation at December commission meeting.
Daryl Thompson mentioned that in the news we've been hearing a lot about the power grids,
and what the effects would be if those grids were to go down.He inquired as to whether we
have some type of backup plan if the central grid were to be hit. Staff responded on how our
diesel generation facility could be used for an emergency situation such as that.
5.0 NEW BUSINESS
5.1 2016 Budget: Rates and Review
Troy Adams presented the 2016 electric and water rates. The 2016 wholesale power rates
have been approved by the GRE board which results in a projected 2%impact to ERMU.
The increase in wholesale power costs are passed through in ERMU's retail rates. As a
result,the proposed ERMU budget reflects a projected 1.25%rate increase in retail electric
rates. There was further discussion.Notable items in the electric budget included: An
estimate of 1.0%growth in usage, higher growth for data centers;NISC software and
implementation costs; and electric service territory acquisition costs. There was further
discussion on the NISC software and implementation costs. Staff gave some example of the
problems we've had with using a third party cloud server. ERMU staff has enlisted the help
of Bob Pearson from the IT Department to help research all of our options with switching
over to an in-house server. Daryl Thompson asked if we could partner with the city on the
in-house server that would be required. Staff responded.
Now that the water rates have been adjusted to meet the long term water capital project
projections, ERMU is in a positon to pass through smaller but more regular rate increases.
The blended result for a typical residential customer is a 2.0%rate increase for 2016.
Notable items for the water budget included: maintenance of facilities;NISC software and
implementation costs; and the construction of a new filter to be located at the Well#7 Filter
Plant.John Dietz wanted to know if we have many customers that fall in the 2"d and 3rd tier
rates. Staff responded. There was further discussion on water conservation and the
Department of Natural Resources (DNR)mandates.
After presenting the proposed 2016 budgets and the highlighted changes, staff reached out
to the Commission to see if they had any questions. For the electric revenue and expense
budget,John Dietz asked for further clarification on disconnect&reconnect charges and
the consulting fees. Staff responded. The Commission had a few questions and there was
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further discussion on Capital Construction Projects.
Due to the fact that airline tickets to the APPA Legislative Rally held in Washington,D.C.
are currently very inexpensive, Troy Adams asked if the Commission would be in support
of sending one or two people to the rally, and if they could make that decision now so that
staff could capitalize on the airfare savings. After further discussion,the Commission was
in consensus to send both Troy Adams and Tom Sagstetter to the rally next year, and that
in moving forward we would most likely send just one person.
5.2 Wage& Benefits Committee Update: Cost of Living Adjustment and Other
On November 2,the Wage and Benefit Committee (W&BC)met and reviewed:
commissioner compensation,ERMU's electrical contractor license, cost of living
adjustment(COLA), and organizational structure and personnel projections.
Commission Compensation—The current Commission compensation is $150/month. Troy
Adams shared that after conducting a survey of other municipal utilities,the Committee
found that a majority of them pay no monthly compensation, and of the ones that do
compensate their commissioners,the most common monthly compensation amount was
$150. Separate from the mont ly Commissioner compensation,the Commissioners may
also be reimbursed for expense due to travel or representation of the utilities for work that
falls outside of the regular com ission and committee meetings with an additional stipend
of$50/day. Based on survey i formation,the W&BC recommended maintaining the
current level of compensation r regular utilities commission meetings at a rate of
$150/month, and based on the 1 ss of wages for a Commissioner to take from work to
represent ERMU at additional meetings/conferences, increasing the additional stipend to
$75/day.
Electrical Contractor License—As an electrician's license is required for electrical work
performed on the load side of the electric meter, ERMU registered as a licensed electrical
contractor a few years ago. This was made possible as one of ERMU's electrical
technicians,who is a master electrician, allowed ERMU to become registered through the
use of his personal master electrician's license. Troy Adams explained that currently the
employee whose master electrician's license we're using, is not being compensated to
maintain his license,nor is the master electrician's license a minimum requirement of a
position. In order to address both of these issues,the W&BC recommended replacing one
of the current Electrical Technician positions with an Electrician/Electrical Technician
position which would include as a minimum requirement a master electrician's license.
There was further discussion.
2016 Cost of Living Adjustment, Market Adjustment and Total Compensation—On
September 8 the W&BC reviewed preliminary 2016 COLA survey numbers from the
lineworker market. The preliminary numbers indicated a need for ERMU to have a COLA
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Special meeting of the Elk River Municipal Utilities Commission
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for the lineworkers in the range of 3%to 4%just to maintain the metro average. As this
range appeared to be higher for the lineworkers than would be appropriate across the board,
the committee benchmarked additional positons. Troy shared that after reviewing the
benchmarking information,the data lead the committee to support a recommendation for a
2.75%COLA for all pay groups,with an additional 1%market adjustment for the
lineworker group.
Another factor of the total compensation is the compensation from ERMU's Performance
Metrics Incentive Policy. Troy gave some background on the policy and why it was
developed. He explained that even with the recommended COLA,market adjustment, and
the anticipated Performance Metrics Incentive;the journeyman lineworker wage will still
be lower than Xcel in 2016. However,this has still been a valuable tool to narrow the gap.
An additional challenge that has arisen from market adjustments for the lineworker group is
that members of this group will potentially make more than managers who supervise them.
This situation will make it very difficult to develop future leadership from within and
proactively succession plan for retirements and growth. There was further discussion. A
few options for addressing this issue would be an additional performance metrics incentive
for the manager group or a standalone incentive plan. Troy Adams shared that the ERPD
developed a wage incentive program in 1993 that may provide valuable information and
lessons for consideration in addressing ERMU's issues.
Organizational Structure—Troy Adams shared that the W&BC will be working to develop
an annual practice to review, identify,and develop options for solutions for areas of
staffing concern. In the review of the organizational structure it was determined that the
Credit and Collections Specialist should be reassigned from being a direct report to the
Finance and Office Manager to being a direct report to the Customer Service Manager.
Troy explained that due to workflow and interoffice procedures this would be more
efficient.
John Dietz added that it was a good idea that we went to the four pay plan groups and felt
that the only area we have a retention problem with is the lineworkers group. In order to
deal with this issue, John thought that at some point we should revisit the idea of longevity
pay to help incentivize the lineworkers to stay longer.John also referenced the narrative in
the memo that compared our linerworkers wages to Xcel, and felt as a municipal it doesn't
need to be our goal to match their base hourly rate. John shared that he initially felt good
with the 2.75%COLA across the board with the 1%market adjustment for the linerworkers
group,but upon further consideration is not feeling comfortable with it. He explained that
because the Performance Metrics Incentive is averaging an extra 2%it should be factored
in as part of the overall wage. That being the said,maybe the COLA and market adjustment
should be a little less. John reached out to the other Commissioner's to see how they felt
about it. There was further discussion. Troy Adams recommended that at least with the
lineworkers position that we get to the 3.75%,with the idea of bringing back another
vehicle to help bridge the wage gap for the following year. Troy charted the long term
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Special meeting of the Elk River Municipal Utilities Commission
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effects of small increases to the base pay and how the factoring in of the bonus pay with
that will have.Daryl Thompson inquired as to what the COLA was for last year and if there
was a market adjustment for any of the groups. Staff responded that it was a 2.75%across
the board.After further discussion,the Commission was in consensus of a COLA of 2.75%
for all pay groups,with a market adjustment of 1%for the lineworkers group.
Al Nadeau made a motion to approve an increase of the commissioner stipend from
$50/day to$75/day. Daryl Thompson seconded the motion. Motion carried 3-0.
Al Nadeau made a motion to approve the replacement of one of the current Electrical
Technician positions with a new Electrician/Electrical Technician position effective
January 1,2016. Daryl Thompson seconded the motion. Motion carried 3-0.
Al Nadeau made a motion to approve 2016 COLA at 2.75% for all pay groups,and
approve 2016 market adjustment of 1% for the lineworkers group. Daryl Thompson
seconded the motion. Motion carried 3-0.
Al Nadeau made a motion to approve the reassignment of the Credit and Collections
Specialist from being a direct report to the Finance and Office Manager to being a
direct report of the Customer Service Manager. Daryl Thompson seconded the
motion. Motion carried 3-0.
5.3 2015 Assessments
Theresa Slominski presented a listing of proposed assessments totaling$28,687.95, for
customers with outstanding balances that still remain unpaid for water, sewer,trash,
qualifying electric services, and storm water. The City Council would need to approve the
list of assessments and take them to the county for the actual assessment on the property
taxes. Due to timing,the City Council received the listing to approve at their November
16th meeting,pending the Commission's approval.
Daryl Thompson made a motion to approve the attached list of assessments totaling
$28,687.95 to take to the City Council for assessment on property taxes. Al Nadeau
seconded the motion. Motion carried 3-0.
5.4 Third Quarter Delinquent Items
Theresa Slominski presented the delinquent items for the third quarter which included a
delinquent amounts listing report. Theresa also presented a color-coded recap comparison
with last year, identifying the various categories and running totals. The Commission had a
few questions. Staff responded.
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Special meeting of the Elk River Municipal Utilities Commission
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Al Nadeau made a motion to approve the Third Quarter Delinquent Amounts Listing.
Daryl Thompson seconded the motion. Motion carried 3-0.
5.5 Review of Security Deposit Policy and Credit Card Procedures
Before discussion began, Peter Beck reminded the Commission and staff that due to data
privacy they should refrain from using a customer's name. Jennie Nelson shared that a
recent commercial customer experience has led staff to look into the Security Deposit
Policy and our credit card procedures. Jennie gave some background on our current
security deposit procedure for commercial customers and how we estimate and bill for that
deposit. Jennie elaborated on an experience with a commercial customer from Otsego, and
explained the challenges we have in estimating a deposit for a new business and in
collecting that deposit. In addition,we have no way of increasing deposits after a few
months have billed and a history is established. Another struggle with commercial
buildings is we don't have a lot of leverage to disconnect without shutting off other
businesses in that strip mall if a customer gets behind in payments. There was further
discussion. Peter Beck inquired if we have the option of installing something on the front
end for large commercial users that would allow us to externally disconnect them. Staff
responded and shared the challenges in being able to do something like that. Daryl
Thompson wanted to know if we could require the commercial customers to pre-pay their
deposit. Jennie shared that one of things we're looking into is requiring them to prepay
their deposit or sign a personal guarantee to help limit our bad debt risk. Peter Beck added
that the challenge is in balancing our risk with chasing commercial businesses away;the
pre-paid deposit that would have been required for the commercial customer in question
would have been approximately$16,000. There was further discussion on the option of
requiring a personal guarantee or a letter of credit and also on the duration of time we keep
deposits.
John Dietz was concerned with the timeframe of when a new commercial business gets set
up until we can disconnect them for non-payment,and the amount of bad debt that can
occur during that time period.He recommended we establish some type of criteria for these
new customers;possibly reading their meters weekly and requiring weekly payments
versus monthly. There was further discussion.
Jennie Nelson shared that we've also had some difficult experiences recently with credit
card chargebacks due to several commercial fraud claims. This past month staff disputed a
$10,500 chargeback and eventually the money was returned to the utilities' bank account,
but this doesn't rid ERMU of the risk. Jennie explained the extensive process to dispute
the chargebacks. There was further discussion on taking commercial credit card payments
and how ERMU could help protect themselves from these chargebacks in the future.
The Commission suggested that staff and the attorney come back with some options on
how to strengthen the Security Deposit Policy to help limit our commercial bad debt. Peter
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Special meeting of the Elk River Municipal Utilities Commission
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Beck inquired as to how sensitive the Commission wants to be in protecting the rate payers
and still participating in the cities overall efforts to attract new businesses to the city. The
Commission agreed that there is a sensitive balance but a commercial business with no
track record should have a specific set of rules. It's difficult because with the nature of our
business ERMU's customers get to use the product before they pay for it. One suggestion
Peter Beck had was that they produce a letter of authorization to the landlord that would
allow ERMU to access the meter. There Was further discussion. Based on Commission
direction staff will come back with some options to strengthen the policy.
6.0 OTHER BUSINESS
6.1 Staff Updates
In his staff report,Troy Adams shared that the award winning Minnesota Municipal Power
Agency's(MIVIPA)Hometown BioEnergy facility was the subject of a critical Star Tribune
article.The article cites facility run statistics suggesting that the facility is a failure because it
runs well below capacity. John Dietz inquired as to whether MMPA was able to mitigate some
of negative publicity the article created. Troy shared that MMPA made a conscious decision to
not respond as the stats are completely irrelevant because the facility was designed to be
dispatchable,meaning that it runs when economic conditions are favorable. It is true,however,
that MMPA is working on resolving odor issues related to the plant.
Theresa Slominski and Troy Adams met with our auditors,at their request,on November 10th.
The auditors wanted feedback on their services and our satisfaction,which were all positive.
John Dietz asked Cal Portner what the time frame was on the cities agreement with their auditor.
Cal said that the cities policy is to go out for bids every four to five years on all of their
contracts.
Tom Sagstetter gave the Commissioners a hard copy of the Energy Guide that was developed to
help ERMU staff and customers determine the cause of high electric bills. Tom also shared
some of the additional ways we're promoting the LED holiday lighting contest. Interest has
been very high and we already have six registered participants.
6.2 Set Date for Next Meeting
The next regularly scheduled Commission meeting will be held on December 8,2015.
The Commission recessed the regular meeting at 5.52 p.m.
6.3 Closing of Meeting: "Meeting to be Closed pursuant to MN Statute 13D.05, Subd.
3(c)(3)to develop or consider offers or counteroffers for the purchase or sale of real
or personal property."
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Special meeting of the Elk River Municipal Utilities Commission
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a. Call Closed Session to Order
b. Discussion
c. Adiourn Closed Session
6.4 Adjourn Regular Meeting
There being no further business,John Dietz closed the special meeting of the Elk River
Municipal Utilities Commission at 6:08 p.m.
Minutes prepared by Michelle Canterbury.
FA**
1%
J,1 J. I ietz •
'hair,ERMU C• ission
Tina Allard
City Clerk
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Special meeting of the Elk River Municipal Utilities Commission
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