4.2. ERMUSR 08-09-2016 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Tom Sagstetter—Conservation and Key Accounts
John Dietz—Chair Manager
Al Nadeau—Vice Chair
Daryl Thompson—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
August 9th, 2016 4.2
SUBJECT:
Landfill Gas Plant Engine Repair and Operational Cost Update
BACKGROUND:
As part of the ongoing evaluation of the Elk River Landfill Gas Plant(LFGP)generating facility,ERMU
met with Waste Management and Sherburne County representatives on July 21'to discuss current and
future operations of the facility and followed-up on the nine action items identified at the May 23rd
meeting.
DISCUSSION:
The action items and a summary of the discussion are listed below.
1. Waste Management(WM)will facilitate an in person or conference call with a representative
within the WM organization that has experience in marketing energy production in the MISO
market.
• WM confirmed that the current contract that is in place is the best option for electric
production sales in the current market. WM will continue to monitor the MISO market
and the sale of electric production from other similar landfill gas plants in MISO.
2. WM will research the operational costs of output from similar plants that operate on 100%natural
gas. This will be the baseline to determine the feasibility of blending landfill gas with natural gas
to determine if efficiencies and/or production can be increased.
• At this time the WM facility operating on 100%natural gas does not have enough data to
do an analysis. The plant has only been operating for a couple of months using 100%
natural gas.
3. Sherburne County will review the bonus structure.
• Based on the contracts and past practices,the bonus will continue to be paid if the
operational costs permit. If the facility does not meet the goals there will be no bonus
paid to Sherburne County.
4. ERMU will continue to research the potential for MN Sales tax refund.
• ERMU has reviewed all invoices going back to 2013 and has worked with WM staff to
determine which invoices are eligible for a sales tax refund. Going forward processes
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have been established to allow ERMU staff to file for refunds for replacement equipment
purchases.
5. ERMU will provide an update on the insurance claim in process with the League of MN Cities.
• ERMU has received a letter from Motion Dynamics. The letter has been passed along to
the League of MN Cities. The engine failure was a result of a main bearing that supports
the crank shaft rotating in place which caused an oil port blockage. The blocked oil port
restricted lubricant from getting to the crank shaft and connecting rods. This caused the
engine to fail. ERMU is working with WM staff to determine costs associated with the
failure and what was done as part of routine maintenance.
6. ERMU and WM will explore the options on the sale/assignment of the LFGP.
• This is a complex discussion based on the number of agreements involved in the
partnership. There are five documents that need to be considered; Operation and
Maintenance Agreement,Electric Purchase Power Agreement,Landfill Gas Purchase
Agreement, Sherburne County Financing and Promissory Note, and the easement with
Waste Management for the land the facility is sited on.
7. ERMU will provide a new summary of financials incorporating actual costs for Engine#4 repair
and landfill gas (MMBtu)cost relief.
• The financials are positive by a small margin at this point,but not all costs for the Engine
#4 rebuild have been determined. The insurance claim has not been determined but
Motion Dynamics has provided a letter that has been passed along to the MN League of
Cities. There will be further discussion about the claim in the months to come.
8. WM will research quality control and quality of Cat/Zeigler replacement parts.
• WM is working with their supplier to find more information on quality control and
testing of replacement parts.
9. WM will work on warranty or good faith compensation for the failure of Engine#4.
• Engine#4 failed at approximately 19,000 hours of operation. Based on the time from
service there is no warranty on the parts.The warranty with Motion Dynamics is 6
months(4,380 hours).
ACTION REQUESTED:
No action is required at this time. ERMU staff will provide updates as information is gathered and
different options are considered.
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