6.1a ERMUSR 08-08-2017 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
ERMU Commission Troy Adams, P.E.—General Manager
MEETING DATE: AGENDA ITEM NUMBER:
August 8, 2017 6.1a
SUBJECT:
Staff Updates—General Manager
ACTION REQUESTED:
None
DISCUSSION:
• The Board of Directors of the Minnesota Municipal Power Agency(MMPA)met on July
25, 2017 at the offices of Shakopee Public Utilities in Shakopee,Minnesota.
It was reported that customer penetration of MMPA's Clean Energy Choice program for
residential customers is at 2.1%,with a range by member of 5.5%to 0.7%.
The Board discussed the rollout of Clean Energy Choice for Business, which is scheduled
for the third quarter.
The status of renewable projects that the Agency is pursuing was updated.
The Board approved the redemption of MMPA's Series 2007 bonds, in the amount of
$21.6 million. This redemption will save the Agency more than $13 million in interest
expense over twenty years.
Brian Frandle was elected as MMPA's Secretary.
The grand opening for Shakopee Energy Park was discussed.
The MMPA annual report for 2016 was released. It can be found on MMPA's website,
www.mmpa.org. The annual report is also attached.
The MMPA 2Q2017 unaudited financials are attached.
• MMPA held their Annual Meeting on July 25 at Canterbury Park in Shakopee. Tours of
the Shakopee Energy Park were available.
• Again in July, Michelle Canterbury and I have spent considerable time working on draft
governance policies with John Miner and Peter Beck. We will continue to bring these
polices back a few at a time for the Commission's consideration with the goal of
completion yet this year.
Page 1 of 2
78
• I met with East Central Energy's CEO on July 19. We discussed lineworker issues,
performance evaluation and feedback process,the results of the legislative session, the
State Conservation Improvement Program (CEP),NISC, and other current issues.
• On July 27, the Midwest Municipal Transmission Group (MMTG)board met by
conference call. The agenda included approving formal support for a MISO intervention,
auditor presentation of the draft 2016 financial report and IRS form 990, review of
financials, and establishing consensus on a date for the 2017 MMTG Annual Meeting.
The annual meeting will be held in Austin, MN, on October 19, 2017.
• On August 7, Mark Fuchs,Mike Tietz, and I performed the pre-tank inspection for our
new Waco 2 Substation transformer at the Waukesha SPX factory in Goldsboro,NC.
This is the same factory where our North Substation transformer was manufactured a few
years ago. This transformer is based on our standard substation transformer
specifications, 28MVA 69kV-13.2Y. The transformer bid was awarded earlier this year
through a formal bidding process with a purchase price of just under$550,000. The
transformer is scheduled for delivery before Labor Day. The new Waco 2 Substation is
well under construction and should be energized in late 2017.
ATTACHMENTS:
• MMPA 2016 Annual Report
• MMPA 2Q2017 Unaudited Financial Report
Page 2 of 2
79
Minnesota Municipal Power Agency I Annual Report 2016
THE POWER OF YOUR HOMETOWN
Anoka I Arlington I Brownton I Buffalo I Chaska I East Grand Forks I Elk River I Le Sueur I North St. Paul I Olivia I Shakopee I Winthrop
MMPA's mission is to provide reliable, competitively-priced energy to
its members and to create value for both the Agency and its members.
THE POWER OF YOUR HOMETOWN
.0103.10 On behalf of everyone at the Minnesota Municipal Power Agency
(MMPA),we're excited to share our 2016 Annual Report with you.
1,7 - report highlights many of our successes during the past year
and outlines how we are well positioned for future success.
•"` r 3Y
°zr f ! First and foremost,we continued to deliver on our mission of
1 ' providing reliable,competitively-priced power to our members,
while also creating value for the Agency and our members.As in
prior years,our rates were lower than a comparable municipal
power agency,generation and transmission cooperative,and
investor owned utility in Minnesota.We've done this by being
forward-looking,strategic,and customer-focused.
We've made exciting new additions to both our renewable and
conventional resource portfolios over the past year.In December,we began taking power from the Black Oak Getty
Wind Farm-a 78 MW wind project located in Stearns County.MMPA has a twenty-year contract with Sempra U.S.
Gas&Power for all of the facility's output,which is projected to be approximately 300,000 MWh per year.During
the year,we also constructed Shakopee Energy Park(SEP)-a 46 MW generating facility located in our member
community of Shakopee.SEP is a highly efficient,quick-starting natural gas facility that is connected directly to
Shakopee Public Utilities distribution system.
MMPA also introduced a new Clean Energy Choice program to provide alternatives to retail customers in our member
communities.Our base power supply is currently 17%renewable.For a small fixed monthly additional fee,our
members'residential customers can elect to have 50%,75%,or 100%of their power supply from renewable resources.
We believe this program represents a simple and meaningful way for customers to support renewable energy and the
environment.This program has been received well by residential customers.We are also developing a Clean Energy
Choice program for businesses in our member communities.
We are committed to supporting the member communities we serve.One aspect of this commitment is MMPA's
Energy Education Program,which provides educational opportunities to fourth graders in our member communities
through tours of our Faribault Energy Park facility and in-school assemblies.This year,the program celebrated the
milestone of reaching more than 10,000 students.Also in 2016,the first Hometown Solar grant installations were
completed at educational and community facilities in Brownton,Olivia,and Winthrop.
As we look ahead,we recognize that the electric utility industry continues to be complex and dynamic,with changes
in regulation,commodity prices,technology,and customer preferences.We are confident that MMPA has assembled a
resource portfolio and management team that positions us well for continued success in the future.
Sincerely, eit
't
I" 'd 61.44
ohn Crooks Derick O.Dahlen
Chairman,MMPA Board of Directors Executive Manager,MMPA
President and CEO,Avant Energy,Inc.
82
WHO WE ARE
V \/ 3A's momocrs serve morc than
7OOOO resicential anc ousiness
customers throughout V i n ncsota
Our Mission Our Members
The Minnesota Municipal Power Agency's MMPA is comprised of 12 member municipal
mission is to provide reliable, competitively- utilities. Our communities include Anoka,
priced energy to its members and to create Arlington, Brownton, Buffalo, Chaska, East
value for both the Agency and its Minnesota Grand Forks, Elk River, Le Sueur, North St. Paul,
member municipal utilities. In 2016, the Agency Olivia, Shakopee, and Winthrop.
delivered on its mission by being strategic, MMPA provides electricity to its municipal
well-managed, and financially conservative. utility members who then deliver and sell that
MMPA is committed to supporting the electricity to customers in their communities.
communities we serve. Our members compete Our members are growing-MMPA member
to attract new customers and retain existing cities are seeing increases in both residential
customers based on price, reliability, and and business customers. The Agency's
customer service. MMPA's objective is to members have a combined population of
provide energy and other services to enable nearly 150,000 and provide power to 72,330
our members to compete successfully. homes and businesses across Minnesota.
Sales to Members Coincident Peak Load
in megawatt hours 350 — in megawatts
1,600,000 —
300 —
1,400,000 — 321.0
1,495,981 1,498,338 1,533,105 308.4
1,200,000 —
MWh MWh MWh 250 — MW 2972 MW
MW
1,000,000 — 200 —
800,000 — 150 —
600,000 —
*� 100 }
400,000 —
200,000
0 — 0 —
2014 2015 2016 2014 2015 2016
2 2016 MMPA Annual Report
83
East Grand Forks
■
VVDAmcmoer
n � ti
co rr �n u es
Buffalo
Brownton Elk River
Anoka
Winthrop
Shakopee
Olivia
North St. Paul
•
■
•
■ •
■ \ Chaska
Arlington
Le Sueur
1 / 7[12 72330
MMPA Member City Population Total Retail Customers Served
(2010,U.S.Census) (2016)
Member Rates Average MMPA Rate to Members
in dollars per megawatt hour
MMPA's core focus is delivering power to our 80 —
members at competitive and stable rates. Our average 70 —
power supply rate to members during 2016 was $71.46 60— 69.73 69.63 71.46
$/MWh $/Mwh $/MWh
per MWh-an increase of 2.6%from 2015's average 50 —
rate. Our rates are competitive with other regional 40—
utilities-as in prior years, our 2016 average power 30—
supply rate was lower than those of a comparable 20 —
municipal power agency, generation and transmission
10 —
cooperative, and investor owned utility in Minnesota. 0—
2014 2015 2016
2016 MMPA Annual Report 3
84
WHO WE ARE
MMPA Board of Directors
.,v erg .i.1 -.. n 2 i e if-..-t. .`'t'it .„�'a,IF'
-A lla .tisk ' 1'f f' £..;.rittle41ta
77tib, e '1 �,
a .tip s
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MMPA is governed by a Board of Directors. The Board provides our member
communities with a voice in decisions impacting their energy future.
The Board is responsible for setting policy, for approving investments in
new plants, and for overseeing management. Each MMPA member has a
representative and an alternate representative on MMPA's Board.
Anoka Buffalo Elk River Olivia
Ed Evans Merton Auger Troy Adams Bernard Johnson
Utility Advisory City Administrator MMPA Treasurer Council Member
Board Member Utilities General Manager
Joseph Steffel' Dan Coughlin'
Arlington Utilities Director Allan Nadeau' City Administrator
Utilities Commissioner
Liza Donabauer Chaska Shakopee
MMPA Secretary Matt Podhradsky Le Sueur John Crooks
City Administrator mann Newell Krogmann Vice Chairman g MMPA Chairman
Lisa Tesch' City Administrator Council Member Utilities Manager
Deputy Clerk Greg Boe` Jasper Kruggel' Joe Helkamp'
Brownton Council Member City Administrator Utilities Commissioner
Curt Carrigan East Grand Forks North St. Paul Winthrop
Council Member Keith Mykleseth Brian Frandle Peter Machaiek
Brian Dressel' Utilities General Manager Director of Alderman
Council Member Electric Utilities
Jeff Olson" Jenny Hazelton"
Distribution Superintendent Jason Ziemer" City Administrator
City Manager
"Alternate
4 2016 MMPA Annual Report
85
WHO WE ARE
Our Management Avant
Management
MMPA is managed by Avant Energy, Inc.,
a Minneapolis-based provider of energy
management and consulting services. In the ` *.,
late 1980s and early 1990s, Avant performed the
consulting studies that led to MMPA's formation. , ,
Since then, Avant has partnered with MMPA, .
transitioning from consultants to management
over the past twenty-plus years. Today, Avant
performs all of MMPA's management and
operations functions, including long-term Derick 0.Dahlen Oncu H.Er
power supply planning, daily energy market President and CEO Vice President,Planning
operations, development of new generation
facilities, accounting and finance, energy
trading, and regulatory services.
410
It. .. '.�
Avant's management team has a broad range \ * ..,
of skills, including management, planning, ,.
engineering, development, operations, energy , ;,}
regulation, and finance. Avant seeks innovative
approaches in complex and changing energy
ii .„ - , 4
markets to create value for MMPA.
David W.Niles Kelsey E.Dillon
AVANT Vice President Vice President,Consulting
and Development
ENERGY
CC
AllMMPA and Avant Energy . "
have a unique partnership that ; .
has spanned more than two
decades. Thanks to the leadership , .
and vision of Avant, the Agency
has consistently delivered on its Brian C. Meek Noah J. Hansen
Director,Plant Operations Director,Dispatch Operations
mission in the past and is well-
positioned to continue doing so
for many years to come. »
John Crooks,
Chairman,MMPA Board of Directors
2016 MMPA Annual Report 5 '..
86
SPECIAL RECOGNITION
V V A Honors 3oarc Vcm ocrs with
Years of Service Awarcs
Steve Schmidt / Anoka Dan Boyce / East Grand Forks
The MMPA Board honored The MMPA Board honored
outgoing Chairman outgoing East Grand Forks
Steve Schmidt with its - Board member Dan Boyce
"Years of Service" award, / with its "Years of Servicerecognizing Mr. Schmidt's award. In addition to his
*Akseven years as an MMPA �` role as East Grand Forks'
Board member from Board representative for
Anoka, including four twelve years, Mr. Boyce
years as Chairman. also served as the Agency's Secretary for
During his tenure as Chair, Mr. Schmidt led seven years.
MMPA through the completion of the Hometown The award recognized Mr. Boyce's
BioEnergy facility and the Agency's first "commitment and dedication to MMPA,"
investment in transmission.The Agency also noting that, while having the longest
expanded its renewable portfolio. In addition, commute by far of any Board member,
he supported the expansion of the Agency's Mr. Boyce also consistently had one of the
energy education program to include on-site best Board meeting attendance records.
generation and solar grants that helped connect It also recognized that Mr. Boyce "brought
MMPA more closely to its communities and the a unique perspective to Board meetings
next generation of electricity consumers. because of East Grand Forks' combination
The award recognized Mr. Schmidt's of location, transmission interconnection,
"dedication, thoughtfulness, and leadership" to and large industrial customer presence."
the Board, while recognizing the important role
he played in shaping the Agency and guiding
its development as an organization.
CCSteve and Dan provided many years of leadership and invaluable
insight as MMPA Board members and officers. They will be missed. »
Derick 0.Dahlen,
Executive Manager,MMPA
6 2016 MMPA Annual Report
87
BUSINESS ENVIRONMENT
V \/ PAiswell oositionec
for the future
The business environment in the electric utility industry is dynamic and
complex. MMPA has assembled a resource portfolio that gives the Agency
flexibility to respond to changes in this environment while positioning it to
be successful in the future.
Regulatory Uncertainties Increased Renewable Requirements
The electric utility industry is currently facing In 2016, the State of Minnesota's renewable
significant uncertainty regarding energy policy energy standard increased. Now, 17%of all
and regulation. The Midcontinent Independent energy provided to customers in Minnesota
System Operator (MISO)-the entity responsible must come from renewable sources-up from
for wholesale electric markets in Minnesota-is 12% in prior years. This requirement steps up in
frequently revising and changing its rules and future years-to 20% in 2020 and 25% in 2025.
market constructs. Utilities such as MMPA must Recently, legislation has been proposed to
constantly stay on top of regulatory and market increase the renewable energy standard as
changes to ensure that good decisions are high as 50% in 2030.
being made to position the Agency well for
MMPA's investments in renewable energy
the future.
go beyond what is required for compliance
Low Natural Gas Prices purposes. We've added renewable resources
After setting record highs last decade, natural to reduce our exposure to commodity price
gas prices have remained low for the last fluctuations and help provide stable electric
few years. MMPA has benefited from these rates to our members.
low natural gas prices, as our conventional
Agency Load Growth
generation resources are natural gas-fired. In
In a business environment where many utilities
addition to being economic and efficient, our
are experiencing flat or declining loads, MMPA's
natural gas generation portfolio positions the
load is growing. Our member cities are seeing
Agency well compared to coal should future
increases in both residential and business
regulation seek to place a direct cost on
customers-including new data centers
carbon dioxide production.
and distribution facilities for large national
corporations. MMPA supports its member
communities by providing competitive power
rates, which helps our members attract new
business customers.
2016 MMPA Annual Report 7
88
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POWER SUPPLY
MMPA
COMMITTED TO PROVIDING OUR MEMBERS
WITH CLEAN, EFFICIENT ENERGY
MMPA takes a long-term approach to power supply planning that includes
assembling a diversified portfolio of owned and purchased generation
containing both conventional and renewable resources. This approach allows
the Agency to maintain flexibility in the rapidly-changing electric utility
industry and positions the Agency well for the future.
Shakopee Energy Park
MMPA's Shakopee Energy Park (SEP) entered generators supports vaporizing the LNG to
commercial operation in February 2017. The natural gas, heating incoming natural gas, and
46-megawatt facility, located in Shakopee, heating basic building systems. In addition,
Minnesota, uses fast-start, fuel-efficient recovered heat can be supplied to local
reciprocating engines to generate local, businesses, further supporting our members'
reliable power from clean-burning natural gas. economic and sustainability goals.
Built on a model of innovation, SEP uses Like other MMPA facilities, SEP goes beyond
liquefied natural gas (LNG) as its back-up fuel power generation. Located in the heart of
source.This unique approach allows the Agency the Shakopee community, significant effort
more flexibility in its operations strategy. was put forth into designing an attractive
As part of MMPA's commitment to sustainable facility that will be a long-term asset for many
energy practices, the SEP facility utilizes years to come. In addition to power supply,
efficient heat recovery technology. Waste SEP supports the Agency's Energy Education
heat captured from the facility's five electric program for students and area residents.
CC The facility is a great addition to our growing community. Shakopee
Energy Park provides our residents and businesses with long-term efficient,
competitive, and reliable electrical supply,which is delivered by Shakopee
Public Utilities. In turn, our community's future economic development and
sustainability goals are supported. " Bill Mars,
Shakopee Mayor
10 2016 MMPA Annual Report
91
x i
.+s
i
�.a '
Faribault Energy Park �:-
•*� r
Faribault Energy Park (FEP) is the flagship of = ' °� '°�
�, a. ' .: � . � .,�,. - ain't'. .',%'
"
MMPA's power generation resource portfolio.
The 300 MW combined-cycle facility, located in ..
Faribault, Minnesota, provides clean, efficient
_.,_„,gym
power for the Agency. " `
"
The facility produces electricity primarily from < --- ' • t
natural gas but also uses fuel oil as backup = — :
fuel. FEP is a peaking facility and provides u .d �, w '
approximately 70% of the Agency's capacity - " - Y �,.R* ` -'
requirements. y fir, ��
FEP is a community asset that in addition to11, ; Nr ,
power supply, provides education, recreation, ' ` ' ,}7y-
and aesthetic beauty. Students and area "ti-l--,1
vii thefacility's .7; � ''r�
residents are welcomed to visit #_
35 acres of park-like wetlands and walking _ "
trails. While on site, guests are able to view the �'� ff
�
control room and the steam turbine from an �
observation area. In addition, visitors can also say — _,
view educational displays, a wind turbine, and
a solar array, and can even drop a fishing line
into one of the ponds.
Minnesota River Station
The Minnesota River Station is a 49 MW power
plant that provides local, reliable, peaking
power for the Agency. The simple-cycle facility
entered service in 2001. The plant is located FEP won a 2016 Best Practices t'
in, and owned by, the member community of Award from Combined Cycle
Journal. The award recognized the
Chaska. The Agency has a long-term lease with plant's man-made ponds' unique
the City of Chaska for the facility through 2031. ability to reclaim storm water and
help build community relations.
ir e
20,6 MMPA Annual Report 11
9
4
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1
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POWER SUPPLY
V V PA ac C S 78 MW of w i n s power-
continuing
ower-
continuing our commitment to
renewaole energy
Black Oak Getty Wind Farm
In 2016, MMPA expanded its portfolio of and has consistently performed at a high
renewable resources to include power from the level of reliability. The wind farm produces
Black Oak Getty Wind Farm. The 78-megawatt approximately 150,000 MWh of renewable
(MW) wind farm, located in Stearns County energy annually.
Minnesota, further demonstrates the Agency's
Hometown WindPower
commitment to renewable energy.
In 2010, MMPA placed a 160 kW wind turbine
MMPA signed a long-term contract with in each member community, as well as at our
Sempra U.S. Gas & Power for the output of Faribault Energy Park facility. This innovative
the Black Oak Getty Wind Farm. The wind Hometown Wind Power program made MMPA
farm, comprised of 39 wind turbines, entered the first municipal power agency in the country
commercial operation in December 2016. to have a wind turbine in each member
Oak Glen Wind Farm community. These turbines are a resource
Oak Glen Wind Farm (OGWF) is a 44 MW to help community members learn about the
wind project located near Blooming Prairie, benefits and operating characteristics of wind
Minnesota. OGWF is comprised of 24 power, while also demonstrating the Agency's
turbines that produce renewable energy for commitment to renewable energy.
the Agency. OGWF entered service in 2011
RENEWABLE ENERGY HIGHLIGHTS
2007 2010 2011 2012
Minnesota legislation MMPA Places Oak Glen Wind Farm Minnesota
creates Renewable Hometown completed—adding Renewable Energy
Energy Standard, WindPower Turbines 44 MW of wind Standard requires
requiring utilities to in each member energy to MMPA's 12% of energy to be
supply 25% of energy community and FEP portfolio from renewables
from renewables
by 2025
14 2016 MMPA Annual Report
•
Hometown BioEnergy
Hometown BioEnergy (HTBE) is an 8 MW
biomass facility located in the MMPA member
community of Le Sueur. The facility provides
the Agency with local, dispatchable, on-peak, •
renewable energy.
HTBE uses anaerobic digestion technology .411
to produce biogas from agricultural and food r -
processing sources from local suppliers. The
biogas serves as fuel for the reciprocating
9
engines, which produce electricity. Unique
•,
compared to other forms of renewable 41011111111.1"-
generation, the plant has significant gas
storage, allowing the Agency to generate •�';'v "
electricity during on-peak hours when energy •".r.:;
is more valuable. The facility also creates _ ■•' l
valuable by-products, including a liquid by-
‘‘.
product used as fertilizer by local farmers. ti
k� t
Renewable Energy Credits
MMPA purchases renewable energy credits
(RECs) from a variety of renewable facilities
in Minnesota and throughout the Midwest.
These RECs are sourced from a variety of
renewable technologies and supplement the
Agency's owned renewable generation. REC
purchases support the Agency's commitment
to renewables and meeting the State of
Minnesota's Renewable Energy Standard
requirements.
Hometown Agency completes Black Oak Getty Minnesota
BioEnergy enters first Hometown Solar Wind Farm enters Renewable Energy
, service—adding 8 installation at FEP commercial _' Standard increases
MW of dispatchable, to support Energy operation—adding 78 to 17%
renewable energy `. Education Program MW of wind energy
to MMPAs portfolio to MMPA's portfolio
2016 MMPA Annual Report 15
POWER SUPPLY
V V PA's future oower suooly olans are for
a mix of clean, efficient natural gas
goneraton cornoinec with a growinc
oortfolio of renewaole resourccs
Our Future Plans Resource Hedging
We plan to continue to invest in both In addition to our shorter-term hedging
renewable energy projects and clean, efficient, activities, MMPA's wind and bioenergy assets
quick-starting natural gas generation projects provide long-term energy price hedges for
to meet our future energy and capacity needs. the Agency. These resources lock in energy
We believe that this approach positions MMPA costs for many years and reduce the Agency's
well under a variety of potential commodity exposure to commodity price volatility.
price and energy regulation scenarios.
Energy Price Cap
Forward Market Purchases Our conventional natural gas resources
MMPA makes forward purchases of both represent a cap on energy market prices for
natural gas and electricity to reduce our the Agency. If energy market prices exceed
exposure to energy market volatility. This our cost of generation, we run the units to help
activity supports our goal of providing stable offset energy acquisition costs.
rates to members. We also purchase capacity
on a forward basis from other utilities. This
helps us make new resource additions in an
economic manner.
« MMPA's approach to power supply planning is to assemble a portfolio
of renewable and conventional resources that positions the Agency to
perform well under a wide range of future scenarios. »
Oncu Er,Vice President
Planning—Avant Energy
16 2016 MMPA Annual Report
97
CLEAN ENERGY CHOICE
PROVIDING OUR MEMBERS' CUSTOMERS WITH A SIMPLE, AFFORDABLE
WAY TO SUPPORT RENEWABLE ENERGY AND THE ENVIRONMENT
A
CLEAN ENERGY
CHOICE
MMPA introduced the Clean Energy Choice Clean Energy Choice is available to all our
program in 2016 to provide our members' members' residential customers-whether they
residential customers with more choices own a home or rent. It also provides a way to
regarding their electricity supply. The program support renewable power for customers whose
gives residential customers a simple and homes may not be suited for solar power or
affordable way to support renewable energy who can't afford the upfront cost of a solar
and the environment. installation.
Our base energy supply to members includes The program is simple-customers can
17% renewable energy from sources such as sign up online or by contacting their local
wind, solar, bioenergy, and hydropower. For utility. It's also flexible-participants can
a small monthly additional cost ($1, $2, or cancel at any time-no minimum commitment
$3), residential customers can elect to have is required. The program website-
50%, 75%, or 100% of their electricity from www.cleanenergychoice.com-also has a
environmentally friendly, renewable sources. frequently asked questions page to help
The Clean Energy Choice program provides customers better understand the program.
residential customers with four choices about We're currently developing a Clean Energy
their electricity mix. Choice for Business program to give our
BIO- HYDRO- members' commercial and industrial customers
WIND SOLAR ENERGY POWER
a renewable power supply option as well.
.- ...**-'.........]""- ..... —
Today, 17% of your 100/° Residential customers now have a
home's electricity comes 75°% choice of increasing their renewable
from renewable energy, 50% energy mix to 50, 75 or 100% from
17% as required by the State renewable energy sources for only a
of Minnesota. few extra dollars per month.
2016 MMPA Annual Report 17
98
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MMPA
SUPPORTING THE COMMUNITIES WE SERVE
MMPA'S HOMETOWN SOLAR PROGRAM I BOLD HIGH SCHOOL, OLIVIA, MN
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SUPPORTING OUR MEMBER COMMUNITIES
Ecucatona I soararraysl
energzec in V V PA communities
MMPA supports the communities we serve. Our Hometown Solar Grant
Program offers our members a unique, local learning opportunity to
educate and familiarize members' customers with solar power.
Hometown Solar
Hometown Solar is an extension of MMPA's Brownton, Olivia, and Winthrop. Brownton City
Energy Education Program. The purpose of Offices, Bird Island-Olivia-Lake Lillian (BOLD)
the grant program is to provide an educational High School, and Gibbon-Fairfax-Winthrop
asset to our member communities and to help (GFW) High School are the first to receive
teach local youth first-hand how sunlight is installations under the Agency's program.
converted into electricity, as well as the unique Sibley East Middle/High School in Arlington was
characteristics of solar power. Hometown also awarded a grant in 2016. The installation in
Solar provides schools and other educational Arlington is expected to be complete in 2018.
facilities in our member communities MMPA completed its first Hometown Solar
the opportunity to apply for a 5 kW solar installation at Faribault Energy Park (FEP) in
installation. spring 2015. The FEP installation supports
In 2016, MMPA completed Hometown Solar educational tours at the Faribault facility and
installations in its member communities of our Energy Education Program.
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Gibbon-Fairfax-Winthrop(GFW)High School,Winthrop,MN Brownton City Offices, Brownton, MN
20 2016 MMPA Annual Report
101
SUPPORTING OUR MEMBER COMMUNITIES
IV V PA works with mom oer communities
to orovice energy y e1HicionC anc
Conservation programs to customers
Conservation
MMPA offers a Conservation Improvement In a continuing effort to educate customers
Program (CIP) to our member communities. on the benefits of LED lighting, some of our
The program provides a variety of rebates members offered free conservation kits and
and other conservation measures for both light bulbs to residential customers. For
residential and business customers. Seven example, Brownton partnered with a local
MMPA communities currently participate in the hardware store to offer coupons for free LED
Agency's program. light bulbs. The program was so successful, it
Our 2016 program met its 1.5% CIP spending is being offered again in 2017.
requirement and achieved energy savings Another 2016 program highlight involved
of over 1.4% average kWh sales. We seek to Winthrop partnering with GFW High School
provide conservation program offerings to to provide the school a lighting rebate that
customers that provide the highest level of totaled over $22,000, achieving energy savings
energy savings per dollar spent. Lighting at a cost of$0.07 per kilowatt-hour.
rebates continue to be one of the most cost-
effective ways for our members' customers to
save energy cost effectively.
« We are glad that the City of Winthrop was able to support the lighting
project at GFW High School. In addition to providing a rebate to GFW,we
see long-term value in being able to support reducing the school's overall
Jenny Hazelton
energy usage going forward. "
Winthrop City Administrator&MMPA Board Member
2016 MMPA Annual Report 21
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SUPPORTING OUR MEMBER COMMUNITIES
V v DA's Fnergy Pcucatbn Program
roachcs more than 10,000 stucents
MMPA's Energy Education Program demonstrates the Agency's commitment
to provide value to our members' customers. Through this unique educational
experience, students learn about the power of their hometown.
Energy Education
In 2016, MMPA achieved a major milestone- energy park's three power sources generate
reaching more than 10,000 fourth grade electricity. From the observation room, they
students through our Energy Education learn how the combined-cycle turbines
Program since the program's inception in 2010. generate electricity from clean burning natural
The Energy Education program is part of gas and steam. From there, students travel to
MMPA's commitment to support our member educational stations in the wetlands park to
communities and project host communities. The learn how FEP's wind turbine and solar array
program aligns with Minnesota's fourth grade produce renewable power. In addition, students
science standards and teaches students about learn how electricity is transmitted over power
power generation, energy conservation, and lines and delivered to their homes. The 2016
their local utility. tours expanded to include hands-on activities
and tips for conserving energy from the
Spring tours to Faribault Energy Park helped
Science Museum of Minnesota.
meet the milestone. In addition to the Faribault
tours, we host in-school assemblies for
communities not within convenient reach of Energy Education
the power plant. These educational events help
bring interactive energy learning opportunities
to more students throughout our member
communities.
Tours at Faribault Energy Park offer a unique _ t��» t.'
learning opportunity for students from our ' f 1 -` f 4
member and project host communities. While 4. r,� ' ',`
touring the facility, students learn how the " '
2016 MMPA Annual Report 25
106
FINANCIAL HIGHLIGHTS
VVPAs financial strengtn
su000rts the Agency's aoility to orovice
stao e Gnc COT oetitive rates
Rating Outlook Improved Energy Adjustment Clause
MMPA issued bonds in 2016 to finance the MMPA uses a forward-looking energy
Shakopee Energy Park project. The bonds were adjustment clause (EAC) to help match the
issued at a time of low interest rates-the yield timing of revenues and expenses. At the start
to maturity for the 31-year bonds was 3.37%. of each month, MMPA reviews projected costs
Both Moody's and Standard & Poor's affirmed and sets rates accordingly.
our A2 bond rating while improving the rating
Debt Service Coverage
outlook from "Stable" to "Positive."
Our Board of Directors has a policy of
Rate Stabilization Fund approving an annual budget with debt service
MMPA maintains a rate stabilization fund to coverage of at least 1.20 times debt service.
promote our goal of providing competitive and This coverage policy is higher than the 1.15
stable rates to members based on long-term times debt service required by our bond
energy price expectations-not short-term indenture. The policy results in stronger
commodity price movements. As of the end of financial performance for the Agency and gives
2016, our rate stabilization fund balance was us flexibility to adjust to unexpected events. In
$33.1 million. 2016, thanks to exceptionally strong financial
performance, MMPA exceeded its debt service
coverage target with a coverage ratio of 1.41
times debt service.
Year-Ending Rate Debt Service Coverage Ratio
Stabilization Balance
in thousands of dollars 1.45—
35,000 _
1.40_
30,000 — $33,071 1.41
1.35—
$30,450 $30,450
25,000— 1.30—
20,000— 1.25—
1.27 1.27
1.20 —
15,000 —
1.15—
10,000 _ u t
1� 1.10, i ,tt. �A flt'
5,000 — 1.05—
0_ 1.00-
2014 2015 2016 2014 2015 2016
26 2016 MMPA Annual Report
107
FINANCIAL HIGHLIGHTS
Minnesota Municipal Power Agency
Statements of Net Position
December 31 December 31
Assets 2016 2015
Current assets:
Cash and cash equivalents $ 43,761,074 21,329,356
Restricted cash and cash equivalents 6,595,034 5,363,890
Short-term investments 1,000,000 1,000,000
Accrued interest receivable 170,527 169,253
Power sales and other receivables 8,918,683 8,409,122
Fuel inventory 1,507,433 1,354,777
Plant inventory—spares 2,226,958 1,981,104
Prepaid expenses 1,309,331 1,005,845
Derivative instruments—futures 392,240 —
Total current assets 65,881,280 40,613,347
Noncurrent assets:
Capital assets:
Electric generation assets 352,628,784 352,063,732
Land 7,066,719 6,116,062
Less accumulated depreciation (99,384,108) (87,446,358)
Property and equipment, net 260,311,395 270,733,436
Construction in progress 62,298,194 6,741,563
Total capital assets, net 322,609,589 277,474,999
Investments — 1,000,000
Restricted cash, cash equivalents, and investments 45,253,790 20,083,836
Prepaid expenses 613,279 530,538
Future recoverable costs 40,928,273 37,242,644
Total noncurrent assets 409,404,931 336,332,017
Total assets 475,286,211 376,945,364
Deferred Outflows
Deferred outflows of resources 1,134,529 2,359,009
Total assets and deferred outflows of resources $476,420,740 379,304,373
Liabilities
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities $ 17,259,457 7,389,957
Accrued interest payable 3,710,198 2,815,077
Long-term debt due within one year 9,113,333 8,713,333
Capital lease liability due within one year 917,235 865,561
Derivative instruments—futures — 742,090
Total current liabilities 31,000,223 20,526,018
Long-term debt, net 307,361,707 242,763,042
Capital lease liability 18,993,261 19,910,496
Total noncurrent liabilities 326,354,968 262,673,538
Total liabilities 357,355,191 283,199,556
Deferred Inflows
Deferred inflows of resources—rate stabilization 33,071,000 30,450,000
Deferred inflows of resources—other 16,199,020 7,545,438
Total liabilities and deferred inflows of resources 406,625,211 321,194,994
Net Position
Net position:
Net investment in capital assets 38,487,165 32,099,907
Restricted for debt service 6,595,034 5,363,890
Unrestricted 24,713,330 20,645,582
Total net position 69,795,529 58,109,379
Total liabilities and deferred inflows of resources
and net position $476,420,740 379,304,373
2016 MMPA Annual Report 27
108
FINANCIAL HIGHLIGHTS
Minnesota Municipal Power Agency
Statements of Revenues, Expenses,
and Changes in Net Position Year ended Year ended
December 31 December 31
2016 2015
Operating revenues:
Power sales to members $110,109,926 104,806,467
Power sales to nonmembers 1,175,519 577,120
Total operating revenues 111,285,445 105,383,587
Operating expenses:
Power acquisition expense 37,571,000 42,466,770
Transmission 19,104,903 11,125,853
Other operating expenses 23,843,957 23,597,219
Depreciation 11,937,749 11,834,346
Total operating expenses 92,457,609 89,024,188
Operating income 18,827,836 16,359,399
Nonoperating revenues(expenses):
Amortization of premium on long-term debt, net 887,638 782,146
Interest expense (12,434,525) (13,403,391)
Investment income 816,422 1,402,545
Net (decrease) increase in fair value of investments 73,150 (680,102)
Gain on extinguishment of debt — 378,022
Total nonoperating revenues(expenses), net (10,657,315) (11,520,780)
Change in net position before
future recoverable costs 8,170,521 4,838,619
Future recoverable costs 3,515,629 4,626,165
Change in net position 11,686,150 9,464,784
Total net position, beginning of year 58,109,379 48,644,595
Total net position,end of year $ 69,795,529 58,109,379
Visit www.mmpa.org to view comslete aucitec
financial statements anc learn more Scout MMA.
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28 2016 MMPA Annual Report
109
MMPA
Minnesota Municipal Power Agency
220 South Sixth Street,Suite 1300 I Minneapolis, MN 55402
612.349.6868 I www.mmpa.org
Minnesota Municipal Power Agency
Statement of Net Position
As of June 30,2017-Unaudited
Assets
Current assets:
Cash and cash equivalents $ 47,541,354
Restricted cash and cash equivalents 10,875,082
Short-term investments 1,000,000
Accrued interest receivable 172,651
Power sales and other receivables 11,368,900
Fuel inventory 1,229,417
Plant inventory-spares 2,454,248
Prepaid expenses 1,312,136
Derivative instruments-futures —
Total current assets 75,953,788
Noncurrent assets:
Capital assets:
Electric generation assets 423,519,460
Land 7,066,719
Less accumulated depreciation (106,131,592)
Property and equipment,net 324,454,587
Construction in progress 3,010,674
Total capital assets,net 327,465,261
Investments —
Restricted cash,cash equivalents,and investments 25,580,173
Prepaid expenses 610,759
Future recoverable costs 42,793,038
Total noncurrent assets 396,449,231
Total assets 472,403,019
Deferred Outflows
Deferred outflows of resources 2,054,684
Total assets and deferred outflows of resources $ 474,457,703
Liabilities
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities $• 12,470,329
Accrued interest payable 3,440,485
Long-term debt due within one year 9,113,333
Capital lease liability due within one year 944,218
Derivative instruments-futures 340,020
Total current liabilities 26,308,385
Long-term debt,net 306,796,873
Capital lease liability 18,514,308
Derivative instruments-futures 232,970
Total noncurrent liabilities 325,544,151
Total liabilities 351,852,536
Deferred Inflows
Deferred inflows of resources-rate stabilization 33,071,000
Deferred inflows of resources-other 18,262,172
Total liabilities and deferred inflows of resources 403,185,708
Net Position
Net position:
Net investment in capital assets 24,687,950
Restricted for debt service 10,875,082
Unrestricted 35,708,963
Total net position 71,271,995
Total liabilities and deferred inflows of resources and net position $ 474,457,703
112
Minnesota Municipal Power Agency
Statements of Revenues, Expenses and Changes in Net Position
YTD June 30, 2017-Unaudited
Operating revenues—power sales to members $ 51,303,118
Operating revenues—power sales to non-members 566,714
Total operating revenues 51,869,832
Operating expenses:
Power acquisition expense 20,313,142
Transmission 7,919,293
Other operating expenses 11,510,013
Depreciation 6,747,484
Total operating expenses 46,489,932
Operating income(loss) 5,379,900
Nonoperating revenues(expenses):
Amortization of premium on long-term debt,net 564,834
Interest expense (7,022,077)
Investment income 567,787
Net change in the fair value of investments 121,257
Total nonoperating revenues(expenses),net (5,768,199)
Change in net position before future recoverable costs (388,299)
Future recoverable costs 1,864,765
Change in net position 1,476,466
Total net position,beginning of year 69,795,529
Total net position,June 30, 2017 $ 71,271,995
113