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04-09-2019 ERMU MIN ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM April 9,2019 Members Present: Chair John Dietz,Vice Chair Al Nadeau, Commissioners Paul Bell, Mary Stewart,and Matt Westgaard ERMU Staff Present: Troy Adams,General Manager; Theresa Slominski, Finance &Office Manager; Tom Geiser,Assistant Electric Superintendent; Mike Tietz,Technical Services Superintendent Dave Ninow,Water Superintendent; Tom Sagstetter, Conservation & Key Accounts Manager; Michelle Canterbury, Executive Administrative Manager; Tony Mauren,Communications&Administrative Coordinator Others Present: Peter Beck,Attorney;Andrew Berg, CPA with Abdo, Eick& Meyers; Aiden Pederson;and Diane Pederson 1.0 GOVERNANCE 1.1 Call Meeting to Order The regular meeting of the Utilities Commission was called to order at 3:30 p.m. by Chair Dietz. 1.2 Pledge of Allegiance The Pledge of Allegiance was recited. 1.3 Consider the Agenda There were no additions or corrections to the agenda. Moved by Commissioner Bell and seconded by Commissioner Westgaard to approve the April 9,2019,agenda. Motion carried 5-0. 1.4 Resolution Recognizing 2019 Drinking Water Week Mr. Ninow provided some background on Drinking Water Week and the importance of safe, reliable drinking water. A resolution designating May 5-11, 2019 as Drinking Water Week was presented. Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 1 Moved by Commissioner Nadeau and seconded by Commissioner Stewart to adopt Resolution No. 19-2 recognizing Drinking Water Week, May 5-11,2019. Motion carried 5-0. 1.5 Resolution Recognizing 2019 Lineworker Appreciation Day Mr. Adams shared that annually we like to take the time to recognize our lineworkers, and this year we are designating April 18, 2019 as Lineworker Appreciation Day. Moved by Commissioner Westgaard and seconded by Commissioner Bell to adopt Resolution No. 19-1 recognizing lineworkers and designating April 18,2019 as Lineworker Appreciation Day. Motion carried 5-0. 1.6 Recognition of 2019 APPA Lineworker Rodeo Team This year the American Public Power Association (APPA) Lineworkers Rodeo was held March 29-30 in Colorado Springs,Colorado. Mr. Geiser introduced and recognized the lineworkers who participated in the event. ERMU had one team of lineworkers that competed;the team consisted of Zac Johnson, Matt Schwartz, and Jake Koehler. Mr.Johnson began by thanking the Commission for their support and the opportunity to attend the event. He also shared that their team had made huge improvements from the prior year,which were evident by their impressive stats.The team commented that the rodeo also allows for an excellent opportunity for networking and learning about the newest techniques that are being used in the field.There was discussion.The Commission gave the lineworkers a round of applause and congratulated them on a job well done. Mr. Schwartz announced that next year's rodeo will be held in Kansas City, Missouri. 1.7 Recognition of APPA 2018 Certificate of Excellence in Reliability Mr.Tietz was pleased to announce that ERMU recently received national recognition from the American Public Power Association (APPA)for achieving exceptional electric reliability in 2018. He shared that we were one of 147 public power utilities to receive this honor.According to the numbers for 2018, ERMU's System Average Interruption Duration Index(SAIDI)was only 10 minutes, compared to the industry average of 129 minutes. Moved by Commissioner Bell and seconded by Commissioner Stewart to receive and file the APPA 2018 Certificate of Excellence in Reliability Award. Motion carried 5-0. 1.8 Recognition of APPA 2018 Safety Award of Excellence Mr.Tietz announced that the American Public Power Association (APPA) recently honored ERMU with a 3rd place Safety Award of Excellence for demonstrating safe operating practices in 2018.The association recognized ERMU during their annual Engineering& Operations Conference that was held in Colorado Springs, Colorado.Staff talked a little bit about the Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 2 criteria that were used to determine the recipients of the award. Moved by Commissioner Stewart and seconded by Commissioner Nadeau to receive and file the 2018 APPA Safety Award of Excellence. Motion carried 5-0. 1.9 Recognition of ERMU's Tom Bovitz Memorial Scholarship Award Winner Ms. Canterbury provided some background on the scholarship program and introduced high school senior Aiden Pederson who had been chosen as the recipient of ERMU's Tom Bovitz Memorial Scholarship. Mr. Pederson read his essay and shared what his future plans for college were.The Commission congratulated him on the essay he wrote. 2.0 CONSENT AGENDA(Approved By One Motion) Moved by Commissioner Westgaard and seconded by Commissioner Nadeau to approve the Consent Agenda as follows: 2.1 March 2019 Check Register 2.2 March 12,2019 Regular Meeting Minutes 2.3 Capital Asset Sales Agreement—Great River Energy 2.4 Resolution Electing Not to Waive Statutory Tort Limits for Liability Insurance 2.5 2018 Annual Distributed Generation&Cogeneration Report Motion carried 5-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY&COMPLIANCE 4.1 2018 Financial Audit Ms. Slominski recognized the accounting staff for their hard work throughout the year leading to a successful audit completion and thanked them for a job well done. She also acknowledged everyone in the organization for their collective efforts that also helped contribute to a successful audit. Mr. Berg was present from the auditing company, Abdo, Eick & Meyers, to present the 2018 Financial Audit and Management Letter. He stated that the auditors issued a clean opinion on the financials and that there were no findings to report. Mr. Berg walked through the financial statement audit presentation. Chair Dietz had a few questions for Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 3 Mr. Berg and staff. Both responded. There was discussion on the debt obligations and the possibility of paying off some of the bonds before their maturity to allow for an earlier timeframe to bond for our field services building expansion. Chair Dietz suggested that we discuss this option further at a future meeting. Mr. Berg reached out to the Commission to see if they had any additional questions on the management letter or the annual financial report. Commissioner Stewart had some questions on the Governmental Accounting Standards Board (GASB) Statements that were issued, in particular Statement No. 83 Certain Asset Retirement Obligations, and how those may have an impact on ERMU's future financial statements. Mr. Berg responded. Moved by Commissioner Nadeau and seconded by Commissioner Stewart to receive and file the Financial Audit for the year ending December 31, 2018. Motion carried 5-0. 4.2 2018 Year End Reserve Balance Ms. Slominski presented the year-end electric reserve balance and calculations. Staff recommended that the unrestricted balance above the target level for the Electric Utility fund be designated toward electric service territory transfer costs, future capital infrastructure costs, and energy adjustment clause (EAC) to be capped at$500,000. Chair Dietz suggested the Financial Reserves and Investment Committee discuss the option of setting aside a portion of the reserves for the field services facility expansion project. There was discussion. Ms. Slominski presented the year-end water reserve balance and calculations. Staff recommended that the unrestricted balance above the target level for the Water Utility fund be designated for future capital infrastructure costs. Moved by Commissioner Bell and seconded by Commissioner Westgaard to receive and file the year-end electric and water reserve balance and calculations. Motion carried 5-0. Mr. Adams stated that we also need a motion to designate what the unrestricted reserve balances above the target levels for the electric and water funds will be used for. Moved by Commissioner Bell and seconded by Commissioner Nadeau that$500,000 of the unrestricted reserve balance for the Electric Utility fund be designated for the Energy Adjustment Clause (EAC), and the remaining amount be designated towards electric service territory transfer costs and future capital infrastructure costs; and the unrestricted reserve balance for the Water Utility fund be designated for future capital infrastructure costs. Motion carried 5-0. 4.3 2018 Utilities Performance Incentive Compensation Distribution Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 4 Ms. Slominski presented the 2018 Utilities Performance Metrics and Incentive Compensation (UPMIC) score card on which the employees had successfully achieved all of the company performance metrics targets except for two: the Customer Satisfaction, and the Employee Turnover metrics. She shared that per the policy, qualifying employees would be eligible for a 1.70% distribution. Chair Dietz commented on the Customer Satisfaction metric that hadn't been met and inquired if this was the one that we were having issues getting good feedback on. Mr. Adams responded that it was, and elaborated on the contributing factors. He also stated that if we can't come up with a way to get useful feedback on this metric, the Commission may want to consider eliminating that sub-category from the UPMIC scorecard for next year. Mr. Adams stated that without question, we did not meet the metric due to being rated on things that were beyond our control. He also noted that the Commission has the authority to nullify the Customer Satisfaction metric from the 2018 score card which would change the distribution to 1.80%. There was discussion. Commissioner Bell stated that he would not be in favor of increasing the distribution to 1.80% because the standard that had been set had not been met, and it was his opinion that it should not be changed at this point. He stated that moving forward we could further evaluate this metric and whether it should be included. Moved by Commissioner Nadeau and seconded by Commissioner Stewart to award the Performance Metrics Incentive Compensation distribution of 1.80%to qualifying employees per the terms of the policy. Motion carried 3-2. Commissioner Bell and Chair Dietz opposed. 5.0 BUSINESS ACTION 5.1 Financial Report— February 2019 Ms. Slominski presented the February 2019 financial report as outlined in her memo. Chair Dietz had a few questions. Staff responded. Moved by Commissioner Stewart and seconded by Commissioner Westgaard to receive the February 2019 Financial Report. Motion carried 5-0. 6.0 BUSINESS DISCUSSION 6.1 Staff Updates Mr.Adams highlighted from his staff report that his annual performance evaluation will be conducted during a closed session at the May 14 Commission meeting. He shared that Ms. Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 5 Canterbury would be sending out an email invitation with the link to the 2019 Performance Evaluation sometime next week. Ms.Slominski had noted in her staff report that we are in the process of testing a revision to the presentation of the monthly bills to better separate City and ERMU services. Chair Dietz asked how that was coming along. Ms.Slominski responded that it's still in the test mode with National Information Solutions Cooperative (NISC.) Mr.Tietz had noted in his staff report that there were recently two incidents where ERMU customers that were fed from the Otsego substation experienced a service interruption due to some issues with the Great River Energy(GRE)transmission line. Commissioner Stewart inquired as to whether these outages have an impact on ERMU's reliability statistics. Mr.Tietz explained that they are reportable and do affect our statistics. Mr.Tietz had also reported that there had been a 32%increase in the volume of locate tickets from the previous month.There was discussion. Prior to the Commission meeting a Special Commission meeting was held to conduct the Annual Commissioner Orientation.At the meeting,the Commission discussed their role in relation to the City Council and the way in which they interact with the City Council.They also discussed meeting jointly with the City Council at least once every three years.At the regular Commission meeting Attorney Beck reiterated the importance of good consistent communication between the Commission and the City Council. He noted that the relationship between the Utilities and the City is the best it's been in a long time. He also shared some background on how it hadn't always been that way.There was discussion. 6.2 American Public Power Association Engineering&Operations Conference Update The American Public Power Association (APPA) held their 2019 Engineering&Operations Conference March 31—April 3 in Colorado Springs, CO. Mr.Adams and Mr.Tietz shared some highlights from the conference and thanked the Commission for allowing them to attend. 6.3 Future Planning Chair Dietz announced the following: a. Regular Commission Meeting—May 14, 2019 b. 2019 Governance Agenda 6.4 Other Business There was no other business. 7.0 ADJOURN REGULAR MEETING Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 6 Moved by Commission Bell and seconded by Commissioner Nadeau to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 4:53 p.m. Motion carried 5-0. Minutes prepared by Michelle Canterbury. N %sip "hn ietz,ErU Commission Chair 2 Tina Allard, - Clerk Elk River Municipal Utilities Commission Meeting Minutes April 9, 2019 Page 7