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2.2. ERMUSR 10-8-2019 ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM September 10,2019 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,Administrations Director Mark Fuchs, Operations Director Mike Tietz,Technical Services Superintendent Dave Ninow, Water Superintendent Tom Sagstetter, Conservation & Key Accounts Manager Michelle Canterbury, Executive Administrative Manager Tom Geiser, Electric Superintendent Jennie Nelson, Customer Service Manager Tony Mauren, Communications&Administrative Coordinator Others Present: Cal Portner, City Administrator; and Peter Beck,Attorney 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 Westgaard and seconded by Commissioner Nadeau to approve the September 10,2019,agenda. Motion carried 5-0. 1.4 Resolution Recognizing 2019 Public Power Week A resolution recognizing 2019 Public Power Week was presented. Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 1 33 Moved by Commissioner Nadeau and seconded by Commissioner Stewart to adopt Resolution 19-6 Recognizing 2019 Public Power Week. Motion carried 5-0. 1.5 Resolution Recognizing 2019 Customer Service Week A resolution recognizing 2019 Customer Service Week was presented. Moved by Commissioner Stewart and seconded by Commissioner Bell to adopt Resolution 19-7 Recognizing 2019 Customer Service Week. Motion carried 5-0. 1.6 Recognition of Awards Ms. Canterbury announced that Mr.Adams recently received the Minnesota Municipal Utilities Association (MMUA) President's Award.The award, chosen by the association President, is MMUA's highest individual achievement award.The Commission congratulated Mr.Adams on his award. 2.0 CONSENT AGENDA(Approved By One Motion) Mr. Sagstetter stated that since the publication of the packet,two typos have been identified in the American Public Power Association's (APPA) Demonstration of Energy& Efficiency Development(DEED)Grant Final Report. Mr. Sagstetter pointed out the two errors and noted that a revised copy of the report would be added to the commission packet on file, and that a revised copy had already been filed with APPA. Moved by Commissioner Nadeau and seconded by Commissioner Westgaard to approve the Consent Agenda as follows,along with the two changes that had been identified for the APPA Deed Grant Final Report: 2.1 August 2019 Check Register 2.2 August 13,2019 Regular Meeting Minutes 2.3 American Public Power Association's Demonstration of Energy& Efficiency Development Grant Final Report Motion carried 5-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY&COMPLIANCE Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 2 34 4.1 Policy Manual Initiative Mr. Adams presented the tentative schedule for the first phase of the policy manual initiative. Per the proposed initiative schedule, the items for consideration in September are the Rates, Fees, and Programs section, and the Service Agreements & Requirements section. The Rates, Fees, and Programs section includes 19 items. Mr. Adams explained that these items are updated annually during the budget process and then approved by the Commission in December as part of the annual business plan, therefore their inclusion in the policy manual is redundant. The Service Agreements & Requirements section consists of 16 documents that are used for various services provided to customers. These documents reflect requirements that are either covered in the formal rate sheets approved by the commission annually, or covered in the service policies, electric department rules, or water department rules. Because of the nature of these two sections, staff recommended the removal of both sections from the policy book. Moved by Commissioner Bell and seconded by Commissioner Westgaard to approve the removal of the Rates, Fees, and Programs section from the ERMU Policy Manual. Motion carried 5-0. Moved by Commissioner Nadeau and seconded by Commissioner Stewart to approve the removal of the Service Agreements & Requirements section from the ERMU Policy Manual. Motion carried 5-0. 4.2 Payment in Lieu of Taxes and Other Donations to the City of Elk River Recently the subject of increasing the overall Payment in Lieu of Taxes (PILOT) donation level to the city has been discussed by the City Council, and subsequently some inaccurate information has also been printed in the Star News. Mr. Adams stated that this topic has been included on the agenda so that the Commission has the opportunity to review the current PILOT policy, the philosophy behind the policy, how the policy fits in with ERMU's mission/vision/values, and the greater good to the community. Mr. Adams presented his report as outlined in his memo. He shared that the philosophy behind the transfer is to contribute an amount to the city government consistent with industry standards. He spoke to the data used for benchmarking those standards, and the variety of methodologies used for calculating the amount. Mr. Adams shared that there is an option to increase the transfer amount to the city while being consistent with the benchmarking data, and maintaining consistency with the national benchmarking and ERMU's mission/vision/values. The solution is to increase the Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 3 35 denominator in the calculation for PILOT. Specifically, for the immediate issue of the city's budget gap, there is an option to transfer additional money to the city through releasing PILOT from electric service territory transfer areas eight years sooner than agreed upon. Details were provided on the estimated financial impact this would have to the annual PILOT transfer to the city. Commissioner Westgaard provided an overview on the City Council discussions that had taken place regarding the PILOT. Commissioner Westgaard also spoke to the inaccuracies that had been published in the newspaper relating to the PILOT and overall budget, and offered clarification on what had actually been discussed. Those discussions included what an increased contribution from 4%to 4.5%would look like, and the impact it may have on rate payers. There was discussion on the other donations ERMU contributes to the city including the donated labor to facilitate projects funded by the local option sales tax (LOST). It was noted that with donations such as this, the avoided cost to the city and value of donation is not always recognized. There was discussion on whether ERMU should be donating their labor for LOST designated projects, or whether the city should be paying for the cost of labor from the LOST funds. Chair Dietz directed Attorney Beck to look into this further. Chair Dietz explained that an increase to PILOT is just one of the options the City Council is looking at to meet the preliminary tax levy that has been passed. Chair Dietz shared the challenges of representing both the city and the utilities on this issue. Chair Dietz stated that he is in support of releasing PILOT from the electric service territory transfer sooner than what was initially agreed upon, and encouraged the Commission to strongly consider it.There was discussion on how this may affect rates. Commissioner Bell was receptive to releasing the PILOT on the acquired electric service territory sooner than agreed upon versus increasing the percentage of the PILOT itself. Commissioner Nadeau concurred. Commissioner Stewart was not against the suggestion of releasing the PILOT earlier than planned, however she had some reservations. Commissioner Stewart expressed her concerns and stressed the importance of the City Council considering all of the other options, and not just an increase to PILOT. Commissioner Bell stated that he agreed with Commissioner Stewart's concerns and hopes the city understands how this decision will affect the utilities and will take that into consideration when looking at other ways to increase revenue and reduce costs. There was discussion on the preliminary levy. As there were some misconceptions on the preliminary levy and the levy that is approved in the final budget, Mr. Portner provided clarification on the process and stated that the final levy has always been lower than the preliminary one in his eight years with the city. Mr. Portner also touched on the goals of the City Council regarding sustainable funding. Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 4 36 Chair Dietz stated that we should have the opportunity to talk more about the PILOT next month and directed staff to add it to the October 8 agenda. He encouraged the Commissioners to reflect on what had been discussed today, and come prepared to make a decision at the next meeting. 5.0 BUSINESS ACTION 5.1 Financial Report—July 2019 Ms. Slominski presented the July 2019 financial report as outlined in her memo. Chair Dietz had a few questions. Staff responded. There was discussion on the Electric Department financials relating to the monthly net loss, and the actual year-to-date (YTD) net profit falling short of the budgeted YTD net profit. There was also discussion on power cost adjustments (PCA's). Staff noted that ERMU has not passed along any PCA's and that we are currently reflecting a credit balance. Moved by Commissioner Westgaard and seconded by Commissioner Stewart to receive the July 2019 Financial Report. Motion carried 5-0. 5.2 2020 Annual Business Plan: 20 Year Capital Projections, Capital Projects and Equipment Purchases, and Conservation Improvement Program The preliminary 2020 Capital Projections, Capital Projects and Equipment Purchases, and Conservation Improvement Program were presented. Ms. Slominski noted that per Commission request, the timeline projections have been increased to include 20 years. Electric Department Capital Budget—Mr. Fuchs walked through the capital budget and elaborated on each of the projects. Notable items for 2020 are preparations to facilitate the future construction of a new field services facility (relocation of power plant substation, feeders, and forced sewer main), electric service territory transfer costs, replacing bucket truck#21, and Landfill Gas engine rebuilds. The Commission had a few questions. Staff responded. The Electric Department 20 Year Capital Projections were also presented. Commissioner Stewart commented that she liked the new 20 year forecast and suggested that the cost of the projects be increased by a certain percentage each year. Water Department Capital Budget—The capital budget was presented. Notable items for 2020 are the Gary Street Water Tower internal paint and external wash, and SCADA equipment upgrades. The Water Department 20 Year Capital Projections was also presented. There was discussion on how the dollar amounts were arrived at for the Highway 169 Redefine line item included in both the water and electric capital projections. Administration and Technical Services Capital Budgets—The capital budgets were presented. Notable items for 2020 are IT system improvements for Administration; and for Technical Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 5 37 Services the retrofit of three Landfill Gas (LFG) engines. The Administration and Technical Services Departments 20 Year Capital Projections were also presented. For the Administration capital budget,there was discussion on how the IT system improvement project that involves shared costs with the city may be on hold. Staff stated they would need to confirm the status of the project, and would make an adjustment to the budget if necessary. For the Technical Services capital budget there was discussion on whether we continue to put money into the replacement of the LFG engines as the contract will be ending in 2022. Conservation Improvement Project (CIP) Budget— Mr. Sagstetter presented the CIP budget which included detailed information about the cost of the specific programs as well as the historic participation numbers; also included was a CIP summary sheet for reference. Mr. Sagstetter noted that the 2020 forecast for CIP includes approximately$290,000 for rebates to meet our energy savings goal mandate. The Commission had a few questions. Staff responded. 5.3 Minnesota Municipal Power Agency Hometown Wind Power Program Mr. Adams provided some background on the Minnesota Municipal Power Agency (MMPA) Hometown WindPower Program. As part of the program MMPA is looking to site a demonstration wind turbine in Elk River.The MMPA wind turbine towers in other member cities are typically located near schools, city halls, utility offices, and other areas of visibility. Mr. Adams shared that ERMU and the city will have the opportunity to choose the site location for the tower to be located in Elk River. Commissioner Westgaard stated he would include this topic in his council update. It was noted that a workshop discussion and/or joint meeting with the city council would be a viable option to include both parties in the site selection process. 6.0 BUSINESS DISCUSSION 6.1 Staff Updates Ms.Slominski highlighted from her staff report that our health insurance renewal was very favorable with a 7.5%increase.She added that she had just received numbers on our dental insurance which reflect a 15%increase. Mr. Fuchs provided an update on the ERMU line crew that had been sent to Kissimmee Florida for mutual aid support. Mr.Adams added that the Minnesota crews were released and sent home as Hurricane Dorian moved past the area where they were stationed, and there being sufficient mutual aid crews staged up the east coast where the storm was headed.There was discussion on the bucket truck tire issues that occurred on the drive down to Florida. Mr.Tietz had nothing additional to add to his staff report. Chair Dietz asked what the vast amount of locates were for at the corner of Joplin Street and Business Center Drive.Staff responded that they thought it may be for fiber installation. Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 6 38 Mr.Sagstetter highlighted from his staff report that ERMU and City of Elk River staff will be hosting a booth at the Farmers Market on September 19 from 3:00 to 7:00 p.m.to commemorate National Drive Electric Week. Ms. Canterbury had shared in her staff report that our Communications Coordinator had produced a video featuring the electric vehicle driving experience to further promote National Drive Electric Week. Commissioner Stewart commented that the video was excellent, and stated that Mr. Mauren had done a great job putting it together. 6.2 Minnesota Municipal Utilities Association Summer Conference Discussion This year the Minnesota Municipal Utilities Association (MMUA)summer conference was held August 19-21 at Breezy Point Resort, in Breezy Point, Minnesota.The conference offered a variety of seminars with top-notch speakers. Mr. Adams reached out to those who attended for feedback on their conference experience. There was discussion on the highlights of the conference and things that could be changed or improved upon.Several key speakers and relevant topics were at the top of the list for all that attended, included were: Dave Berg, Dave Berg Consulting,who presented on Electric Vehicle Rate Considerations and AMI—Things We're Learning;Vern Dosch, National Information Solutions Cooperative, who presented on the Utility of the Future: Giving the Consumers What They Want Before They Know They Want It; and Joe Schmidt,Author and Broadcaster, KSTP- TV,who presented on Silent Impact: Influence Through Purpose, Persistence and Passion. 6.3 Future Planning Chair Dietz announced the following: a. Regular Commission Meeting—October 8, 2019 b. 2019 Governance Agenda Commissioner Nadeau announced that after serving as an alternate on the Minnesota Municipal Power Agency Board since we joined the agency, he is choosing to step down at the end of this year to allow for an opportunity for another Commissioner to serve on the board. 7.0 ADJOURN REGULAR MEETING Moved by Commissioner Westgaard and seconded by Commissioner Bell to adjourn the regular meeting of the Elk River Municipal Utilities Commission at 5:27 p.m. Motion carried 5-0. Minutes prepared by Michelle Canterbury. Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 7 39 John J. Dietz, ERMU Commission Chair Tina Allard,City Clerk Elk River Municipal Utilities Commission Meeting Minutes September 10, 2019 Page 8 40