03-13-2017 ERMU MIN ELK RIVER MUNICIPAL UTILITIES
SPECIAL MEETING OF THE
UTILITIES COMMISSION
HELD AT UTILITIES CONFERENCE ROOM
March 13,2017
Members Present: John Dietz,Chair;Daryl Thompson,Trustee;Mary Stewart,Trustee;and
Matt Westgaard,Trustee
Members Absent: Al Nadeau,Vice Chair
ERMU Staff Present: Troy Adams,General Manager;
Mark Fuchs,Electric Superintendent;
Eric Volk, Water Superintendent;
Tom Sagstetter,Conservation&Key Accounts Manager;
Michelle Canterbury,Executive Administrative Assistant;
Jennie Nelson,Customer Service Manager
Others Present: None
1.0 CALL MEETING TO ORDER
The special meeting of the Utilities Commission was called to order at 3:30 p.m.by Chair Dietz.
1.1 Pledge of Allegiance
The Pledge of Allegiance was recited.
1.2 Commissioner Oath of Office
Michelle Canterbury administered the oath of office for Utilities Commissioners Mary Stewart
and Matt Westgaard.
1.3 2017 Election of Officers
When a new Commissioner starts or an existing Commissioner starts a new term,the officer and
committee positions can change by election. The four Commissioners discussed the different
office positions.
Moved by Commissioner Thompson and seconded by Commissioner Westgaard to
reappoint John Dietz as Chair.Motion carried 4-0.
Moved by Commissioner Westgaard and seconded by Commissioner Stewart to appoint
Daryl Thompson as the Vice-Chair. Motion carried 4-0.
Page 1
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
1.4 2017 Committee Appointments
There are currently two committees;the Wage and Benefits Committee and the Financial
Reserves and Investment Committee. After discussion the following appointments were made.
Moved by Chair Dietz and seconded by Commissioner Stewart to reappoint Chair Dietz,
and appoint Commissioner Stewart to the Wage and Benefits Committee. Motion carried
4-0.
Moved by Chair Dietz and seconded by Commissioner Stewart to appoint Commissioner
Thompson and Commissioner Westgaard to the Financial Reserves and Investment
Committee. Motion carried 4-0.
1.5 Consider Utilities Agenda
There were no additions or corrections to the agenda.
Moved by Commissioner Westgaard and seconded by Commissioner Thompson to
approve the March 13,2017,agenda. Motion carried 4-0.
1.6 Introduction of New Employee
Mr. Fuchs introduced Jon McLean the new Locator. The Commission welcomed the new
employee.
2.0 CONSENT AGENDA(Approved By One Motion)
Chair Dietz had a few questions on the financials. As Ms. Slominski was not present,the
questions will be forwarded onto her for her response. Chair Dietz asked if there could be some
type of adjusting entry each month to offset the difference between the month the wholesale
power bill is reflected to the actual month the revenue is recorded? Chair Dietz also requested
further clarification on how the loss of revenue(LOR)will be recorded;as an asset or expense?
Both Commissioner Stewart and Westgaard expressed interest in a financial overview/training
at a later date. Commissioner Stewart had a few questions on the Grant. Staff responded.
Moved by Commissioner Thompson and seconded by Commissioner Stewart to approve
the Consent Agenda as follows:
2.1 February Check Register
2.2 February 14,2017 Regular Meeting Minutes
2.3 Financial Statements
2.4 Grant of Easement Agreement
Page 2
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
2.5 Demonstration of Energy&Efficiency Developments Grant Agreement and
Resolution—American Public Power Association
Motion carried 4-0.
3.0 OPEN FORUM
No one appeared for open forum.
4.0 OLD BUSINESS
4.1 Load Management Program Moratorium
At the February 14, 2017 Commission meeting,the Commission approved a moratorium
on all of the load management programs; with the exception of the electric vehicle
charging. Staff was tasked to determine the feasibility and costs associated with upgrading
and maintaining the load management programs that require direct load control. Mr.
Sagstetter went over the estimated costs to continue supporting the programs. He concluded
that based on the estimated costs, and the current wholesale power market, staff is
recommending closing the existing load management programs to be effective September
30, 2018. In the interim, staff will conduct research and perform analysis to determine
transition options for the customers that are currently participating in these programs. The
goal would be to offer alternative programs not focused around load control. There was
discussion on the exit strategy and how we would communicate that to our customers.
There was also discussion on alternative options.
Moved by Commissioner Thompson and seconded by Commissioner Westgaard to
approve the revised Energy Management Electric Service Tariff reflecting the 2017
rates and reduction to the cycled air conditioning credit. Motion passed 4-0.
Moved by Commissioner Thompson and seconded by Commissioner Stewart to
approve a termination date of September 30,2018 for the following load management
programs: Dual Fuel,Electric Thermal Water Heat Storage, Electric Thermal Space
Heat Storage, and Cycled Air Conditioning. Motion passed 4-0.
4.2 PCA Credits
At the February 14, 2017 Commission meeting, it was proposed that we reconsider the
direction given at the November 15, 2016 Commission Meeting for giving the PCA credit
on the first bill reflecting the rate increase, which would have been the February bill. It was
decided to bring it back as an agenda item for discussion this month. Mr. Adams explained
what PCA credits were and stated that historically we have passed them through to the
Page 3
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
customers as either a charge or a credit. Currently we have a substantial amount
accumulated; approximately $486,000. Mr. Adams shared that although we had
communicated to our customers that a PCA credit would be given on the February bill,
given that we have two known future bondings, it may be reason to reconsider giving the
entire amount back to customers. There was discussion on the pros and cons of retaining
some of the PCA credits. It was noted that a con would be that the bonding is for a future
use, and the accumulated PCAs are for past/current use. Chair Dietz shared that ERMU has
allocated a buffer to help offset the PCA charges; essentially, ERMU will absorb $500,000
before passing along any PCA charges to their customers. After discussion, Commission
consensus was to distribute half of the accumulated PCA credits back to the customers, and
to retain the other half to be used towards funding the $500,000 buffer for future PCA
charges. Commissioner Westgaard suggested drafting a policy relating to PCA credits to
include guidelines on the percentage we keep, what it will be used for, and what the ceiling
would be on those funds.
Moved by Commissioner Westgaard and seconded by Commissioner Stewart to rebate
50%of the accumulated PCAs to customers on the next billing,and to retain the other
50%as an offset to the$500,000 buffer for future PCA charges.Motion carried 4-0.
4.3 Governance Policy Manual
Mr.Adams shared that with the exception of the by-laws and legal counsel review,the work
associated with Phase 1 has been completed. The policies included in Phase 1 were
approved by the Commission during the February 2017 Commission meeting. Mr. Adams
presented the Phase 2 scope of work from Collaboration Unlimited which included the
development of the delegation to management policies. He explained that after evaluating
the work associated with Phase 2, staff has determined that this is something that would be
difficult to complete in house. Mr.Adams recommended contracting with Collaboration
Unlimited to complete Phase 2 of the governance manual for a fixed fee of$14,500.
Commissioner Thompson shared that his understanding was that the whole project was
going to be completed for the $25,000. Staff responded that the project was divided into
two phases and that the $25,000 only covered Phase 1. The Commission had a few
questions on where they money would come from to cover the fee associated with Phase 2
of the project. Mr. Adams responded. After discussion, Commission consensus was to
proceed forward with contracting with Collaboration Unlimited to complete the project.
Moved by Commissioner Thompson and second by Commissioner Stewart to approve
contracting with Collaboration Unlimited to complete Phase 2 of the governance
manual for a fixed fee of$14,500. Motion carried 4-0.
5.0 NEW BUSINESS
Page 4
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
5.1 Organizational Growth
On February 23, 2017,the ERMU leadership team held an introductory meeting with the
two new Commissioners. During that meeting, it became apparent that there were some
frustrations among the leadership team regarding the Technical Services Superintendent
vacancy, anticipated retirements, and current staffing levels. Mr. Adams shared that he
wanted to let the other Commissioners know about these issues that came to the surface so
that we can address them with short term actions as well as long term strategic planning.
There was lengthy discussion on the open Technical Services Superintendent position,
current staffing levels, and succession planning. The Commission offered some suggestions
on how to work through some of the more immediate challenges. Commissioner
Westgaard shared the importance of determining the right sizing; for a utility of this size,
how many people should you have? He suggested trying to benchmark this against one of
our peer groups. There was further discussion. Chair Dietz didn't want staff to panic, and
suggested waiting for further analyzation until after the interviews were held. He felt that
at that point we'd have a better understanding of what we have to work with and what else
we may need. Chair Dietz also noted that there were a lot of unknowns with the territory
acquisition and if staff underestimated the amount of work involved, and the manpower it
would require,than that should be discussed with the Wage&Benefits Committee.
(At 4:55 p.m. Commissioner Thompson excused himself from the remainder of the
meeting.)
5.2 Landfill Gas Plant to Electric Generation Facility Performance for 2016
At their discretion, Elk River Municipal Utilities can provide bonus payments to Sherburne
County and Waste Management/Elk River Landfill on an annual basis provided the
financial means and plant capacity factors are met. The bonus payments are not guaranteed
and can change or be eliminated based on certain factors. Mr. Sagstetter shared that 2016
was a challenging year; production was down, expenses were up,therefore no bonus
payments were made to Waste Management or Sherburne County.
5.3 2016 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.
Mr. Fuchs presented the APPA eReliability Tracker Annual Report for Elk River
Municipal Utilities. In 2016, our reliability numbers remained excellent. Mr.Fuchs went
over the reliability indexes and explained how those results tie into our Performance
Page 5
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
Metrics. He noted that the only index that didn't meet our goal was our Customer Average
Duration Index (CADI). There was discussion.
Moved by Commissioner Westgaard and seconded by Commissioner Stewart to
receive and file the APPA eReliability Tracker 2016 Annual Report for Elk River
Municipal Utilities. Motion carried 3-0.
5.4 Bids for 69kV Substation Transformer
Approved with the 2017 budget was the addition of a new electric substation to be located
adjacent to our existing Waco Substation. One of the larger components of the substation
addition is a 69kV transformer. As the cost of the transformer exceeds the threshold
amount and is subject to competitive bidding law, it was noticed for formal bids. The bid
opening was March 6, 2017.
Mr. Adams presented the 69kV substation transformer bid tabulation and noted that
although the two lowest responsive bidders are effectively the same price,there is a
significant difference in delivery time. Due to the difference in delivery time and the
indirect costs association with extending the construction schedule,the GRE engineers
have recommended choosing the Waukesha transformer. The engineers also recommended
forgoing the short circuit testing that was bid on as the cost greatly exceeds the value. Mr.
Adams informed the Commission that after conferring with legal counsel it would be
acceptable to award the bid to the second lowest bidder based on best value. Staff
recommended awarding the bid for the 69kV substation transformer to MC Sales for the
Waukesha transformer with a 22-26 week delivery window for the amount $543,883.
Moved by Commissioner Westgaard and seconded by Commissioner Stewart to
award the bid for the 69kV substation transformer per the bid package specifications
to MC Sales,Inc. for the Waukesha transformer. Motion carried 3-0.
5.5 Bids for Electric Wire
The underground electric cable required for the 2017 capital construction projects and
maintenance was determined and had been noticed for formal bids. The bid opening was
on March 13, 2017 at 9:00 a.m. The bid tabulation was distributed at the meeting. Mr.
Adams went over the bid tabulation and explained the difference between firm and
escalated pricing. He also noted that there was only a$150 difference between the two
lowest bids. However, the delivery lead time varied significantly from 4-7 weeks with
Dakota Supply, to 10-12 weeks with Resco. Taking into consideration price, product, and
availability, staff recommended awarding the bid to Dakota Supply with firm pricing.
Moved by Commissioner Stewart and seconded by Commissioner Westgaard to
Page 6
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
award the electric cable bid to Dakota Supply with firm pricing of$373,745. Motion
carried 3-0.
5.6 Seasonal Employee for Water Department
Mr. Volk shared that we typically hire a seasonal employee for the Water Department to
assist with a variety of duties including hydrant painting and well maintenance. For 2017,
Mr. Volk budgeted for hiring seasonal help but failed to have it specifically noted as a line
item in the budget. For the sake of transparency, staff wanted to bring this to the
Commission for approval before moving forward with the hiring process. The Commission
had a few questions on the duration and cost of employing a seasonal worker. Staff
responded.
Moved by Commissioner Stewart and seconded by Commissioner Westgaard to
approve the hiring of a seasonal employee for the Water Department. Motion carried
3-0.
5.7 Employee Handbook Annual Updates
Annually, staff and legal counsel review the existing personnel policies incorporated into
the ERMU Employee Handbook for compliance with changing labor laws. Mr. Adams
presented the revised handbook which included the following changes: removal of
language related to the security department as the business line was sold in 2016, updated
language regarding meal time breaks, insertion of a Fair Pay Policy per counsel
recommendation, clarification on Lead Pay differential calculation, clarification on
vacation accrual, and insertion of additional vacation pay for two management positions.
Commissioner Stewart suggested the following corrections/changes:
• Page 142—first paragraph, last sentence—should be: evening at 11:59 p.m.
• Page 148—#31 —removal of point f. Security System purchase/time payments.
• Pages 150-151 —#36—on the middle column of the chart please add quantifier
"days"after each accrual rate per year.
• Page 151 —third paragraph—update Example: If an employee's start date was
July 1, 2016,the new accrual rate would start, July 1, 2019.
• Page 36—#40, point 1 c.—change 20 yeast of service to 20 years of service.
Moved by Commissioner Westgaard and second by Commissioner Stewart to adopt
the revised ERMU Employee Handbook,to include the additional revisions identified
by Commissioner Stewart. Motion carried 3-0.
Page 7
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
6.0 OTHER BUSINESS
6.1 Staff Updates
Mr.Adams stated in his staff report that he had attended the American Public Power Legislative
Rally held in Washington D.C.February 27—March 2,2017. Mr.Adams stated that they had
the opportunity to get some one-on-one time with our Senators and Congressmen and that the
trip had been very worthwhile. There was discussion.
Chair Dietz pointed out that Ms. Slominski had noted in her staff report that April 15 will mark
the end of the cold weather rule and staff anticipates high numbers for shutoffs once this comes
to an end. It was also noted that occasionally disgruntled customers that have been shut off will
reach out to the commissioners. There was discussion.
Mr.Fuchs added that we had very few outages due to the storm and tornado activity last week.
He shared that as part of our mutual aid agreement with Connexus,we sent two crews up to the
Zimmerman area to help out with the outages and the work associated with it.
Mr. Volk added that we recently experienced a PLC(Programmable Logic Controller)failure.
He explained the alarm notification process and stated that in this case we received notification
of the failure from our regular backup dialer and a second notification from an additional alarm
we recently added. Based on some of the catastrophic alarm failures we've seen in the news
recently,Mr.Volk shared that it adds some peace of mind knowing that our alarm systems are
doing what they need to do. There was discussion on our requirements for Coliform Bacteria
testing.
Mr. Sagstetter had nothing additional to add. Chair Dietz asked if Tom had the opportunity to
meet the new Environmental Technician at the city. Mr. Sagstetter stated that he had. There was
discussion on the cancellation of the 2017 Business Expo.
6.2 Set Date for Next Meeting
The next regularly scheduled Commission meeting will be held on April 11,2017.
6.3 Adjourn Special Meeting
Moved by Commissioner Westgaard and seconded by Commission Stewart to adjourn the
special meeting of the Elk River Municipal Utilities Commission at 5:45 p.m. Motion
carried 3-0.
Minutes prepared by Michelle Canterbury.
Page 8
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017
✓SRl)
Jolit J.Dietz
Chair,ERMU Co ► is.ion
Tina Allam — -'
City Clerk
Page 9
Special Meeting of the Elk River Municipal Utilities Commission
March 13,2017