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02-09-2016 ERMU MINELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM February 9, 2016 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 February 9, 2016 meeting to order at 3:30 p.m. 1.1 Pledge of Allegiance The Pledge of Allegiance was recited. 1.2 Consider Utilities Agenda John Dietz had two items to add to Other Business. Daryl Thompson moved to approve the amended February 9, 2016 Utilities agenda. Al Nadeau seconded the motion. Motion carried 3-0. 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 January Check Register 2.2 January 12, 2016 Previous Meeting Minutes 2.3 Financial Statements 2.4 2015 Department of Natural Resources Water Use Report Page 1 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016 2.5 Elk River Municipal Utilities / Connexus Energy — Joint Request for Minnesota Public Utilities Commission Modification of the Parties' Electric Service Territory Boundary 2.6 Notice to Connexus Energy of Electric Service Territory Area 2 Transfer Date 2.7 Tri -County Action Program Service Agreement 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 Customer Deposit Policy Tom Sagstetter explained that the goal of the revised customer deposit policy is to minimize the risk to all ratepayers, yet still provide an environment that encourages businesses to locate within the ERMU service territory. The policy also has to be executable and administratively manageable for staff in order for it to be successful. Tom noted that in previous commission meetings and memorandums the title of the policy was referred to as the Security Deposit Policy; in all cases the policy should have been titled and referred to as the Customer Deposit Policy. The incorrect reference also carried through to the first paragraph on page one of the attached draft of the proposed revision. The paragraph should have read "In order to protect all customers from those customers who default on their accounts, customer accounts may be subject to this deposit with Elk River Municipal Utilities." Tom presented the revised Customer Deposit Policy and highlighted the improvements that will be achieved with the revisions. Tom also touched on the new service agreement, commercial service application and the risk assessment matrix. Those attachments were included in the packet for reference and to provide a broader picture of the process ERMU staff will be utilizing to help calculate and collect a more appropriate customer deposit from commercial customers. John Dietz asked if we allowed for the option of a letter of credit to be used as a form of payment for the deposit. Staff responded that there was a provision to allow for that. There was further discussion. Daryl Thompson made a motion to approve the revised Customer Deposit Policy with the change to the first paragraph. Al Nadeau seconded the motion. Motion carried 3-0. 5.0 NEW BUSINESS Page 2 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016 5.1 2015 Annual Safety Report Minnesota Rules Chapter 7826 Public Utilities Commission Electric Utility Standards cover safety, reliability, service, and reporting requirements. Per 7826.0100(A), municipal utilities are exempt from these requirements. However, the Elk River Municipal Utilities (ERMU) Commission adopted a number of parts of this chapter as a Distribution Reliability Standard policy. This policy includes an Annual Safety Report requirement. The policy requires ERMU to "file an annual safety performance report with its local governing body. The report will include summaries of all reports filed with OSHA and the Occupational Safety and Health Division of the Minnesota Department of Labor and Industry during the calendar year." In 2015, ERMU only submitted one report that qualifies under this reporting requirement; the OSHA Form 300A, which is a summary of work related first report of injuries and illnesses. Troy Adams presented the OSHA Form 300A that had been filed. There were only three recorded incidents and two days lost from work. Troy added that these are impressive figures considering a majority of our workers are in the construction industry and working out in the field on a daily basis. It goes to the credit of our employees and the safety culture the employees embrace. Al Nadeau made a motion to receive and file the 2015 Annual Safety Report. Daryl Thompson seconded the motion. Motion carried 3-0. 5.2 2015 Electric Reliability Report Minnesota Rules Chapter 7826 Public Utilities Commission Electric Utility Standards cover safety, reliability, service, and reporting requirements. Per 7826.0100(A), municipal utilities are exempt from these requirements. However, the ERMU Commission adopted a number of parts of this chapter as a Distribution Reliability Standard policy requiring annual reporting on system reliability. Mike O'Neill presented the 2015 Electric Reliability Report. In 2015, our reliability numbers remained excellent and reflected an improvement in two of the four reliability indexes used for tracking. Mike went over the reliability indexes which included a comparison of ERMU's 2014 and 2015 statistics. John Dietz had a question on why the System Average Interruption Frequency Index (SAIFI) percentage went from .1428% in 2014 to .3% in 2015. Mike explained that in 2015 there were two outages on the same sub- station which affected a large amount of people, and even though the outages were a short duration, because of the amount of people it affected, it results in a higher SAIFI percentage. During the presentation, it was discovered that the 2015 CAIDI of 71.157 minutes, was labeled 2014. Staff will make that correction to the report being received and filed. Daryl Thompson made a motion to receive and file the 2015 Electric Reliability Page 3 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016 Report. Al Nadeau seconded the motion. Motion carried 3-0. 5.3 2015 Fourth Quarter Delinquent Items Theresa Slominski presented the delinquent items for the fourth 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. Theresa shared that when comparing the totals for 2014 and 2015, that we have a larger amount for 2015. The difference is in the amounts for Revenue Recapture, because the prior year amount is reduced by amounts collected and we are only showing amounts submitted for the current year, so the comparative numbers are skewed. We also had a large write-off this year from an individual company that closed and left us with a substantial bill of $42,219.73. Theresa noted that occasionally we have a business customer that leaves us with a balance of some magnitude that skews the average bad debt numbers. While this incident is unfortunate, it shouldn't reflect poorly on the steady, successful collection efforts from our staff and third party resources. Even with the large customer write-off, our totals, excluding Revenue Recapture and Assessments, are still below of the .18% to .37% national average at .15%. The Commission had a few questions. Staff responded. Al Nadeau made a motion to approve the Fourth Quarter Delinquent Amounts Listing. Daryl Thompson seconded the motion. Motion carried 3-0. 5.4 Commission Attendance Policy On January 19, 2016, the City Council passed a revised attendance policy for boards and commissions. ERMU's board of commissioners is subject to the terms of the policy. The policy established new attendance requirements as well as new reporting requirements for staff. Troy Adams presented the commission attendance policy. The new attendance requirement limits commissioner absences to three in a rolling twelve month time period. It also establishes a requirement to attend a minimum of two-thirds of a meeting, including regular and special, in a rolling twelve month period. John Dietz shared the purpose behind revising the policy and the changes in reporting absences. An appeal mechanism has also been included in the revised policy. 5.5 Use and Disposal of Utility Property Policy Troy Adams shared that we had a recent experience where we were looking to sell a very specific piece of electrical equipment we were no longer using. One of the requirements in the current Use and Disposal of Utility Property Policy requires us to publish any item for sale by the utility in the official newspaper. He explained that there are times when the Page 4 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016 cost to run the ad may exceed the value of the item for sale. There are also items which have no market in the demographic of the typical circulation of the official newspaper. After review and recommendation of legal counsel, staff is recommending an option for posting those items on the Utilities' website and that a threshold be established for a negotiated sale that is consistent with the established spending of the department heads. Peter Beck added that his recommended changes allow a little more flexibility with the policy while still maintaining the transparency to the public. There was further discussion. Al Nadeau made a motion to approve the revised Use and Disposal of Utility Property Policy. Daryl Thompson seconded the motion. Motion carried 3-0. 5.6 Bids for the Water Treatment Plant #7 Expansion for Well #9 The Water Treatment Plant #7 Expansion has been designed and noticed for formal bids. Eric Volk shared that the bid opening was on January 28, 2016, and that we received eight sealed bids for the project. The low bidder was Municipal Builders, Inc., with a total bid of $1,450,753.00. The commission inquired as to what the estimated cost of the project was. Eric Volk responded that the Engineer's Estimate came in at $1,599,015.00. Staff is recommending the commission award the Water Treatment Plant #7 Expansion bid to Municipal Builders, Inc. Daryl Thompson made a motion to award the Water Treatment Plant #7 Expansion bid to Municipal Builders, Inc. Al Nadeau seconded the motion. Motion carried 3-0. 5.7 Bids for Electric Wire The underground electric cable required for the 2016 capital construction projects and maintenance has been determined and was noticed for formal bids. The bid opening was on February 8, 2016. The bid tabulation was distributed at the meeting. Troy Adams went over the bid tabulation in detail. He noted that the items hi -lighted in yellow didn't meet our specs or was incorrectly bid. Based on Border States having the lowest package bid with the product we like to use, staff is recommending the commission award the package bid to Border States with their escalated pricing of $332,903.20. The commission had a few questions. Staff responded. There was further discussion on firm pricing versus escalated pricing. In the past, staff has typically recommended awarding the bid with firm pricing, but based on the current less volatile copper market, staff is recommending the bid with escalated pricing this year. As the escalated price may fluctuate, John Dietz requested that once all the wire is purchased, staff report back to the commission on what the total actual cost was. Daryl Thompson made a motion to award the package cable bid to Border States for their escalated price of 332,903.20. Al Nadeau seconded the motion. Motion carried 3-0. Page 5 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016 6.1 Staff Updates Troy Adams thanked the Commission for the wonderful holiday lunch they provided for staff last month. He shared that the employees were very appreciative and thoroughly enjoyed the food. And as usual, Al Nadeau did an awesome job cooking everything. Theresa Slominski had indicated in her staff report that the Minnesota Deferred Compensation Plan and the Wenzel & Associates Plan that we currently utilize for employee 457b investments, also offer to have a Roth 457b investment included. Staff has been receptive to this and so we would like to expand the offering to include a Roth investment option. The commission had no objection to the offering and in Theresa moving forward with having the Roth option included. John Dietz commented on the security department's revenue being down nearly 50% from the prior year. Theresa Slominski shared that one of things that might be playing a factor is the way our new billing software reflects the annual billing of security system monitoring. With our previous software, the revenue would be recognized in its entirety the month it was billed, and with our new billing software it's being allocated for the entire year. Next year we should have a better monthly comparison as it will reflect the same type of billing and allocation process. Other possible contributing factors are a lower amount of break-ins and a general down market for security systems. John Dietz wanted to know if most of our revenue came from monitoring versus new system installations. Staff responded. After further discussion, the commission requested that staff put together a cost analysis of the revenue gained from just the monitoring versus installation, upgrades, and maintenance on complete security systems. Eric Volk shared that as part of their routine maintenance they pulled Well #3 and discovered that the motor was not running properly. Eric gave some estimates on the cost to repair or replace the motor. Through this process, staff is evaluating whether it would be in the best interest to convert from a submersible motor back to a vertical line shaft motor which was previously used at the well. Eric also gave a quick recap on the water crisis in Flint, Michigan. He informed the Commission that we test our water for lead, and if they receive any calls from concerned residents about the lead levels in our water, they can refer those calls to him. There was further discussion. 6.0 OTHER BUSINESS CAER (Community Aid Elk River) Food Shelf — John Dietz asked if there was anything ERMU could do to help CAER out. Troy Adams said that Tom Sagstetter, our Conservation and Key Accounts Manager, would be in contact with CAER to see if there were some opportunities for them to reduce their usage to save money. We'll also be looking at rebates that may be available to help them out. Troy noted that last year ERMU was able to provide a $12,000 rebate to CAER to help offset the cost of a new high efficiency freezer they installed. Page 6 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016 Flag Hanging Assistance — John Dietz wanted to know if ERMU staff installs and removes American Flags for special events along Highway 10. Mark Fuchs responded that we do help hang the ones at Veteran's Park. John shared that volunteers from the American Legion put up American Flags on Main Street and Jackson Street. They typically put them up right before Memorial Day and leave them up until after Veterans Day. John asked if ERMU could help install and remove the flags if the American Legion supplied the brackets and flags to us. Peter Beck brought up the liability issue of a third party climbing a ladder to hang something on our light poles. He strongly suggested ERMU not authorize a third party to do so. As our current Banner and Flag Policy allows us to donate our labor to install banners and flags for the city, Troy Adams recommended the Legion donate the brackets and flags to the city so we could assist in that manner. There was further discussion. ERMU staff will work with city staff to come up with a game plan to help assist with this request. 6.2 Set Date for Next Meeting The next regularly scheduled Commission meeting will be cancelled due to a scheduling conflict, and a special meeting will be held on March 15, 2016. The Commission recessed the regular meeting at 4:43 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." a. Call Closed Session to Order b. Discussion c. Adiourn Closed Session 6.4 Adiourn Regular Meeting Al Nadeau moved to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 4:55 p.m. Daryl Thompson seconded the motion. Motion carried 3-0. Minutes prepared by Michelle Canterbury. Tina Allard City Clerk Page 7 Regular meeting of the Elk River Municipal Utilities Commission February 9, 2016