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6.1.a. ERMUSR 06-14-2016 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: June 14, 2016 6.1 a SUBJECT: Staff Updates—General Manager DISCUSSION: The Board of Directors of the Minnesota Municipal Power Agency(MMPA)met on May 24, 2016 in Shakopee,Minnesota. Construction is moving ahead on MMPA's 46 MW Shakopee Energy Park project. The project is on schedule for a Q2 2017 in-service date. Sempra(the project developer)reports that construction is also progressing on the Black Oak Wind project. The facility is projected to be operational in Q4 2016. MMPA has a contract for 100%of the project's output,which is projected to be 300,000 MWh per year—approximately 20%of MMPA's annual energy needs. The MMPA Annual Meeting is scheduled for July 26 and will be held in Anoka,MN. Invitations will be sent to the Commission closer to the meeting. The unaudited first quarter MMPA financials are also attached. • The Minnesota Municipal Utilities Association(MMUA)Board of Directors met on May 25-26 for the annual strategic planning session followed by a board meeting. The planning session included discussion on: MMUA owning vs renting, cybersecurity, scope and funding for advocacy,and starting a MN lineworker rodeo. Last year the MMUA board created the MMUA Executive Leadership Development Program Committee to do the ground work for the creation of an executive leadership development program. I am one of four members on this committee. The committee has held four focus group meetings located in the four quadrants of the state to gather information regarding leadership from existing and past public power leaders. That data has been analysis and was then used for the development of a two-year eight-course curriculum. The Committee met on Friday June 2 at MMUA for a discussion with the lone action step of developing a Request For Proposal for contracted program manager. The intention is to present a program overview to the membership at the MMUA Summer Conference and have an inaugural class in early 2017. The MMUA Summer Conference is scheduled for August 15-17 and will be held at Cragun's Resort in Brainerd,MN. POWEHE0 DY ® Page 1 of 2 NATURE Reliable Public Power Provider POWERED TO SERVE 313 • On May 11,Tom Sagstetter and I met with City staff to discuss potential areas for city growth and economic development. This meeting helped establish coordination between ERMU and the City in growth planning. • Dave Berg met with Tom Sagstetter,Theresa Slominski,and me on May 13 to review data collected for the cost of service study. This project is moving forward as scheduled and should provide very useful data for our upcoming 2017 budgeting process. • Mark Fuchs and I met with Connexus staff on May 27 regarding the transfer of Area 2 of our service territory transfer agreement. Generally speaking,this area is the southeast corner of Elk River south of 65th Ave. The transfer date for this area has been established as September 20, 2016.In this area there are approximately 200 customers. The general operational and system considerations for this transfer were reviewed. • On May 18,Tom Sagstetter and I were interviewed by Kimberley Mullins,Ph.D.,and Marta Monti of the Humphrey School of Public Affairs of the University of Minnesota.We had been recommended to the U of M for this interview by Bob Jagusch of MMUA.The interview was part of a data collection effort to understand how municipal utilities address the"unique opportunities and challenges"associated with the interconnection of distributed energy resources. We will be provided with a copy of the report when it is completed later this year. • Great River Energy held their annual meeting at their Maple Grove offices on June 1. I was able to attend this meeting again this year. Overview of current financials,projections for rates,and an indication of direction were topics covered for the membership. • One of the strategic themes of focus for ERMU is growth.The Management Team has established a number of initiatives within this theme of growth including facilities and system growth.During this last month the Management Team has also established some project teams to analysis growth rates and growth projections. In addition to being used in our bond rating call, this data will be used during budgeting particularly in improving the accuracy and understanding the sensitivity of our 10 year capital projects projections. • Michelle Canterbury attended the Minnesota Municipal Clerks Institute May 2-6 in Plymouth, MN. Her education report is attached. ATTACHMENT: • Minnesota Municipal Power Agency Unaudited 1Q Financials—March 31,2016 • Minnesota Municipal Utilities Association Capitol Letter—May 6,2016 • Minnesota Municipal Utilities Association Capitol Letter—May 13,2016 • Minnesota Municipal Utilities Association Capitol Letter—May 24,2016 • Michelle Canterbury Education Report I E. Page 2 of 2 IHEB[NATURE Reliable Public Power Provider POWERED T o SERVE 314 Minnesota Municipal Power Agency Statement of Net Position As of March 31,2016-Unaudited Assets Current assets: Cash and cash equivalents $ 18,305,270 Restricted cash and cash equivalents 9,711,156 Short-term investments 1,000,000 Accrued interest receivable 261,761 Power sales receivables 7,903,489 Other receivable — Fuel inventory 1,262,134 Plant inventory-spares 2,129,755 Prepaid expenses 956,295 Total current assets 41,529,860 Noncurrent assets: Capital assets: Equipment 1,192,857 Capital lease asset 29,080,531 Land 6,125,643 Electric plant 311,964,412 Rotable combustion turbine parts 9,844,205 Less accumulated depreciation (90,429,437) Property and equipment,net 267,778,211 Construction in progress 10,953,741 Total capital assets,net 278,731,952 Investments 1,000,000 Restricted cash and cash equivalents 386,961 Restricted investments 20,357,047 Prepaid expenses 522,862 Future recoverable costs 37,606,627 Total noncurrent assets 338,605,449 Total assets 380,135,309 Deferred Outflows Deferred outflows of resources 2,833,022 Total assets and deferred outflows of resources $ 382,968,331 Liabilities Liabilities: Current liabilities: Accounts payable and accrued liabilities $ 6,936,653 Retainage payable Accrued interest payable 5,630,152 Long-term debt due within one yeas 8,713,333 Capital lease liability due within one year 878,200 Derivative instruments-futures 1,238,640 Total current liabilities 23,396,978 Long-term debt,net 242,571,386 Capital lease liability 19,686,149 Total noncurrent liabilities 262,257,535 Total liabilities 285,654,513 i Deferred Inflows Deferred inflows of resources-rate stabilization 31,760,500 Deferred inflows of resources-other 7,614,871 Total liabilities and deferred inflows of resources 325,029,884 Net Position Net position: Net investment in capital assets 34,437,003 Restricted for debt service 9,711,156 Unrestricted 13,790,288 Total net position 57,938,447 Total liabilities and deferred inflows of resources and net position $ 382,968,331 315 Minnesota Municipal Power Agency Statements of Revenues, Expenses and Changes in Net Position YTD March 31, 2016- Unaudited Operating revenues—power sales to members $ 24,578,536 Operating revenues—power sales to non-members 194,514 Total operating revenues 24,773,050 Operating expenses: Power acquisition expense 10,539,597 Transmission 4,297,534 Other operating expenses 5,303,634 Depreciation 2,983,078 Total operating expenses 23,123,843 Operating income(loss) 1,649,207 Nonoperating revenues(expenses): Amortization of premium on long-term debt,net 191,656 Interest expense (3,138,499) Investment income 220,169 Net change in the fair value of investments 542,552 Total nonoperating revenues(expenses),net (2,184,122) Change in net position before future recoverable costs (534,915) Future recoverable costs 363,983 Change in net position (170,932) Total net position,beginning of year 58,109,379 Total net position,March 31,2016 $ 57,938,447 316 j 74e • e « ,4,, , 4',,,, __,,,,,r estifue,,eiM #4.higal ., _ __ _ . ,. _ 4.. Vol. 15, No. 9 May 6, 2016 Senate Passes Regulatory Certainty Bill, House Vote Next Week On Monday, the "regulatory certainty" bill (S.F. 3272) passed off the Minnesota Senate floor with a 61-0 vote. Under the bill, if a city chose to voluntarily install biological nutrient removal systems to treat for nitrogen while also treating for phosphorus, the MPCA would agree not to increase the facilities' nitrogen and phosphorus limits for the useful life of the equipment (up to 20 years). The bill is scheduled for debate on the House floor next Monday. While expected to pass, it is unlikely that a unanimous vote will occur in the House. Several environmental-leaning House Democrats have been very critical of the bill(even though it is a proposal of the Dayton administration). If the option for "regulatory certainty" would be helpful as your city considers upgrades to its wastewater treatment facilities, you may want to consider contacting your State Representative and asking them to support the bill. Supplemental Budget Conference Committee in Place The Legislature has figured out the process to work out the differences in the House and Senate supplemental budget bills. Although the House passed three separate budget mini- omnibus bills and the Senate only one all-encompassing omnibus bill, a singular conference committee has been appointed to negotiate the supplemental budget provisions. Serving for the House: Ways and Means Chair Jim Knoblach, Education Chair Jenifer Loon, Jobs/Energy Chair Pat Garofalo, Health and Human Services Chair Matt Dean, and Environment Chair Denny McNamara. Serving for the Senate are: Finance Chair Dick Cohen, Education Chair Chuck Wiger, Health and Human Services Chair Tony Lourey, State Government Finance Chair Tom Saxhaug, and Sen. Michelle Fischbach. The supplemental budget conference committee will hold its first meeting on Monday. Negotiations Continue on Railroad Crossing Fees Bill Together with MREA and telecommunications partners, MMUA continues to advocate for the passage of standardized railroad crossing fees legislation(SF 877/HF 963). However, the railroads have brought up additional issues and counterproductive proposals in what seems to be an attempt to stall the bill. Due to this lack of progress, bill proponents have been informed that the crossing fees issue will be rolled into a larger negotiation effort with the railroads in the Transportation Conference Committee. This committee is attempting to get the railroads to fund several at-grade crossings and safety measures. House Transportation Chair Tim Kelly (R-Red Wing) will be convening a meeting of the railroads and utilities next week to continue to work on a resolution. 317 .,,,,, li evitect 4 , 7 4e " l, jib Vol. 15, No. 10 May 13, 2016 House Passes Regulatory Certainty Bill On Monday, the House passed the "regulatory certainty" bill (S.F. 3272) on a 105-23 vote. The bill now awaits the Governor's signature. Since it is an initiative of his administration, it is fully anticipated the bill will be signed into law. The proposal will allow the MPCA to provide a municipal or industrial wastewater facility with"regulatory certainty" if they agree to voluntarily treat for nitrogen while also treating for phosphorus. This means the MPCA would not increase the facility's nitrogen or phosphorus limit for the useful life of the equipment, up to 20 years. MMUA worked with the League of Minnesota Cities and MPCA to support this bill's passage. Thanks to all the members who contacted their legislators about the bill! Rail Crossing Fees Bill Hearing Next Monday The railroad crossing fees bill (HF 963) has been scheduled for a hearing in the House Ways and Means Committee on Monday, May 16. MMUA, together with MREA and the Minnesota Telecom Alliance has been actively working with House bill author Rep. Deb Kiel (R-Crookston) and Transportation Chair Tim Kelly(R- Red Wing)to move this bill forward. Several meetings with the railroads have also occurred. While a number of the railroads'technical concerns will be addressed in an amendment,there is a fundamental disagreement over the level of the one-time fee and their ability to charge annual fees. Rep. Kiel will offer an amendment to slightly increase the bill's proposed $750 crossing fee (likely to $1,250) but has stated she will remain opposed to allowing any annual fees. The amendment will also provide a 35-day timeline for railroads to approve or reject a crossing request before the utility can move forward with the project. (The bill as introduced provided 30 days.) If your utility has been charged unreasonable crossing fees by railroads and/or experienced project delays due to crossing fee negotiations, please share these experiences with legislators. Please contact your State Representative and members of the Ways and Means Committee and ask them to support the passage of HF 963. Emphasize the need for a reasonable one-time fee and reasonable timeframe to secure approval for the crossing! Still No Progress on Bonding, Taxes, or Transportation With just over a week left to go in the 2016 Legislative Session, a "global" agreement on transportation funding, bonding, or tax bill has not yet been reached. These issues are seen as key to finalizing the session. Leadership has identified transportation as the first area where agreement must be reached. 318 Without those pieces in place, the supplemental budget conference committee has not made any serious effort to work out the differences in the omnibus budget bills. The conference committee has met several times, but has only identified what is contained in each body's bill. The Governor and legislative leaders met several times this week to try to work out this agreement. On Thursday, they announced that the Transportation Committee chairs would spend the weekend attempting to broker a transportation compromise by next Monday. The Governor and legislative leaders will reconvene Monday in hopes of reviewing a compromise. If and when the transportation compromise is reached and the log jam is broken, there will likely be a rushed, last-minute effort to assemble all of the Session's major pieces of legislation. Buckle up and stay tuned! 319 li eveord. old • , 7 4 , ____ , ii, ifilal 1 , -4 . allot Vol. 15, No. 11 May 24, 2016 Rail Crossing Fees Bill Passes House and Senate The railroad crossing fees legislation advanced this year by MMUA, MREA, and the Minnesota Telecom Alliance passed off the floor of both the House and Senate on the last day of the 2016 Legislative Session. As finalized, SF 877 establishes a one-time $1,250 fee for utilities crossing railroad right-of-way and a 35-day timeframe for railroads to approve or deny a utilities' application before a project can move forward. Despite intense lobbying efforts from the regional railroads to create carve outs to allow them to continue to collect annual fees for crossings, utility stakeholders cemented the preferred one-time-only fee requirement and were able to pass clean bills with nearly unanimous support (126-1 in the House and 65-0 in the Senate). The Governor's office has indicated that Dayton will sign the bill into law this week. A big thank you to all of the MMUA members who reached out to their legislators and asked them to support this bill! Legislators Direct DER to Improve CIP for Municipals MMUA promoted legislation this year to make the Conservation Improvement Program more workable for municipal gas and electric utilities. In a contentious election-year session with House and Senate energy committee chairs with differing priorities, the effort resulted in significant advancement of the problem issues identified by MMUA members. Agreement was reached between the DER and those leaders that CIP will better recognize municipal utility infrastructure projects. Staff will confirm details of that agreement in the near future. In addition, leading legislators are in the process of directing DER to enter discussions with MMUA and the Center for Energy and the Environment to make administrative changes or develop a legislative proposal to make CIP goals more adaptive to individual municipal utilities. More to come from MMUA on these developing advancements. Special Session TBD In what can only be described as procedural and political chaos, the 2016 Session ended without the passage of a bonding bill. In the last hour of the session, the House quickly unveiled and passed a $990 million bonding package. When the Senate received the bonding bill, it added an amendment related to Southwest LRT funding. Rather than accept the bill with the Senate amendment in the final five minutes of session, the House adjourned for the year. 320 Senate Majority Leader Tom Bakk (DFL-Cook) and House Speaker Kurt Daudt (R-Crown) have differing accounts as to whether there was an agreement on this amendment. With the session ending without a bonding bill, however, both leaders have asked Governor Dayton to consider calling a special session to allow one to be passed. In a press conference on May 23, the Governor stated that he has not decided whether or not to call a special session and wants to meet with legislative leadership before he makes any decisions. He did express disappointment that many important projects wouldn't be moving forward and identified a bonding bill as a priority. He specifically mentioned funding for municipal water infrastructure projects as important. MMUA Government Relations staff will continue to follow the special session discussions and keep members informed. No Refundable Sales Tax, Utility Property Tax Reform in Final Tax Package The final tax bill agreed upon by the House and Senate on the last day of session did not contain either of the provisions of interest to MMUA. Unfortunately, the provision to make the sales tax for local government construction materials refundable was not included in the bill. The total tax bill provided only $259 million in tax cuts, significantly less than the tax packages that originally passed either the House or Senate. Though a common-sense and low-cost tax proposal,the provision was one of many that fell by the wayside in end-of-session negotiations. The final tax bill also did not include reforms to the taxation of electric generation, transmission, or distribution property. Having not been discussed in the House this biennium, it lacked the support to move forward. However, both chairs (Sen. Skoe and Rep. Davids) indicated that this proposal may receive more attention in 2017. Supplemental Budget Bill Highlights The $182 million supplemental budget finalized on the last day of the session contained a few policy items and appropriations of interest to MMUA members. Highlights include: • $35 million for the Border-to-Border Broadband Program, with a $5 million set-aside for underserved areas • Several policy provisions related to the broadband program, including the speed goals recommended by the Governor's Broadband Taskforce, increased mapping, and allowing incumbent providers to challenge an application if they are planning to expand broadband service in the area. • $832,000/year appropriation increase from the General Fund to the Division of Energy Resources for increased staffing. (This replaces their original request to decouple their utility assessments from the General Fund.) • Combined heat and power (CHP) and cogeneration facilities of all sizes in investor- owned utilities' service territories would be exempt from the state's greenhouse gas emission offset requirement. (In the final days of session, MMUA had to fight off efforts by Flint Hills Resources to move language without the muni/co-op carve out from several pieces of legislation) 321 Wipes Bill will Not Become Law During the last week of session the Minnesota Senate passed SF 2525, the legislation supported by MMUA, the League of Minnesota Cities, the Coalition of Greater Minnesota Cities, and MPCA to require the proper-labeling of non-flushable wipes. Though the bill received bipartisan Senate support, passing 49-9, the House never took action on the bill. Several Senators and stakeholders were attempting to find ways to move the language forward in the House in amendment form, however, the opportunity never presented itself in the Legislature's mad rush to finish the session. This issue continues to be a high priority for the MPCA and other stakeholders, so it's possible the effort could be resurrected in the 2017 Session. Minnesota's action has also added pressure to the national, industry-level negotiations surrounding the labeling of these products, so it's possible that positive related action could be coming. 322 ELK RIVER MUNICIPAL UTILITIES EDUCATION / SEMINAR REPORT DATE Mitti17 aolc. EMPLOYEE NAME f j j > (74nkerloi TITLE OF EDUCATION/SEMINAR PlAkrI:G;pa L CR¢/K� D-►��4Fu -- ORGANIZATION SPONSORING EDUCATION SEMINAR He apa.(i &Ar 4 4y-zs-va + ,t. DATES ATTENDED ��`uot On:of -� rQDI6, LOCATION Pixy-Lots/I) M,J WHY DID EMPLOYEE CHOOSE TO ATTEND ,. ,,, ,, 44 • R 4 r __ c 04II__e- b' ant) iaNcy,L) c.( Av') cc s 49 (Ram ,,„_c- or, trhv- -i'1`nv.itce- c.co.:c.�inr/ ii,cratof C. WHAT INFORMATION WAS LEARNED BY ATTENDING 7T-1- ►ile e AI jb coot ALL., lcviu� . 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