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2.2 ERMUSR 12-13-2022ELK RIVER MUNICIPAL UTILITIES SPECIAL MEETING OF THE UTILITIES COMMISSION ELK RIVER MUNICIPAL UTILITIES CONFERENCE ROOM November 8, 2022 Members Present: Chair John Dietz, Vice Chair Al Nadeau, Mary Stewart, Paul Bell, and Matt Westgaard ERMU Staff Present: Theresa Slominski, General Manager Mark Hanson, Deputy General Manager Melissa Karpinski, Finance Manager Sara Youngs, Customer Service Manager Tom Sagstetter, Conservation & Key Accounts Manager Tom Geiser, Operations Director Chris Sumstad, Electric Superintendent Mike Tietz, Technical Services Superintendent Dave Ninow, Water Superintendent Chris Kerzman, Engineering Manager Tony Mauren, Executive Administrative Manager Jenny Foss, Communications & Administrative Coordinator Others Present: Peter Beck, Attorney; Jared Shepherd, Attorney; Cal Portner, City Administrator 1.0 GOVERNANCE 1.1 Call Meeting to Order The special meeting of the Utilities Commission was called to order at 3:35 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 Bell to approve the November 8, 2022, agenda. Motion carried 5-0 Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 1 m 1.4 Resolution Acknowledging Waste Management & Don Yurecko's 20 Years of Service Mr. Sagstetter presented the resolution acknowledging the twenty years of service by Waste Management and Don Yurecko to operate the landfill gas to electric facility. Mr. Sagstetter added that their contribution benefited the community, rate payers, and the environment. Mr. Sagstetter added that he would be reporting the highlights of the project to the Commission in early 2023. Chair Dietz asked if a letter of thanks would be sent to Mr. Yurecko. Mr. Sagstetter stated that he would send a letter. Moved by Commissioner Stewart and seconded by Commissioner Nadeau to adopt Resolution 22-12 Acknowledging Waste Management and Don Yurecko's 20 Years of Service. Motion carried 5-0. 2.0 CONSENT AGENDA (Approved By One Motion) Chair Dietz asked if the scorecard in item 2.3 2022 Third Quarter Utilities Performance Metrics Scorecard Statistics was showing ERMU to be on target for margins. Ms. Karpinski explained that it did and that the calculation factors electric and water budgets together. Moved by Commissioner Nadeau and seconded by Commissioner Westgaard to approve the Consent Agenda as follows: 2.1 Check Register — October 2022 2.2 Regular Meeting Minutes —October 11, 2022 2.3 2022 Third Quarter Utilities Performance Metrics Scorecard Statistics Motion carried 5-0. 3.0 OPEN FORUM No one appeared for open forum. 4.0 POLICY & COMPLIANCE Nothing was presented for policy & compliance. Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 2 29 5.0 BUSINESS ACTION 5.1 Financial Report —September 2022 Ms. Karpinski presented the September 2022 financial report highlighting electric usage was up 1% while YTD it is down 1.5%. She added water usage was down 1% for the month and 10% YTD. Ms. Karpinski added that forecasts show electric budgets in a net positive position in October and a $700,000 net profit position by the end of the year. Ms. Karpinski went on to highlight that the YTD variance for the Energy Adjustment Clause was $3.4 million and that $500,000 was absorbed by ERMU. She added that removing the EAC charges would put Purchased Power in line with budget. Ms. Karpinski informed the Commission that the rates Minnesota Municipal Power Agency (MMPA) had presented to its member communities were initially incorrect but that the actual numbers had been received. Chair Dietz asked why the water connection fees revenues are up for the year. Mr. Ninow explained there had been multiple large buildings connected to the system this year noting two large apartment buildings at Highways 10 and 169. Moved by Commissioner Bell and seconded by Commissioner Stewart to receive the September 2022 Financial Report. Motion carried 5-0. 5.2 2023 Annual Business Plan: Rates and Review, Stakeholder Communication Plan Ms. Karpinski presented her memo and shared that MMPA was planning to implement a 5% rate increase with a 1.6% increase in the actual 2022 EAC. Ms. Karpinski shared that staff is proposing a 5% rate increase for electric customers in 2023 with Power Cost Adjustments (PCA) throughout the year. She continued that for water, staff is proposing a 2% increase. There was discussion about potential rate increases for comparable/neighboring utilities. Ms. Karpinski proposed that the Commission consider absorbing $500,000 in PCA charges later in the year and base the decision to do so on the financial standing at that time. She noted that this threshold has been met the last two years, meaning that ERMU absorbed $1,000,000. Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 3 30 Chair Dietz asked for the Commission to discuss how the practice of absorbing $500,000 in EAC would continue considering the high dollar impact. Commissioner Bell noted that the practice creates challenges in the budgeting and tracking costs throughout the year. He stated he was inclined to review finances at the end of the year to decide if ERMU is in a position to offer a credit to customers. There was agreement by the Commission to take that approach. Upon inquiry if this would be an acceptable course of action, Attorney Beck asked if it would be inconsistent with the current Reserves policy. Ms. Slominski stated that she believed the policy did not require ERMU to allot $500,000 to absorb EACs but that it could. She stated she would review the policy to be sure. There was discussion about how the new approach would look on the budget sheet. Chair Dietz asked how ERMU planned to communicate the rates increases and PCAs throughout 2023. Mr. Mauren shared the communication initiatives that had been used in 2022, including newsletters and a website alert bar, all of which would be available in the coming year. Ms. Slominski recommended communicating that customers should expect a PCA in 2023 similar to the level in late 2022. Ms. Karpinski also highlighted the plan to bond for the electric portion of the Advanced Metering Infrastructure (AMI) project next year. 5.3 2022 Third Quarter Delinquent Items Ms. Karpinski presented the 2022 Third Quarter Delinquent Items and asked the Commission to approve items submitted. Ms. Karpinski commended the collections department for its efforts in minimizing the impact of delinquent items. Commissioner Bell asked for an update on individuals who were delinquent under COVID-19 protocols, which limited utilities ability to disconnect service for nonpayment. Ms. Karpinski responded that if it was an option, those accounts were sent in for assessments and if not they were sent to collections and revenue recapture. Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 4 31 Ms. Youngs added that ERMU had applied for funds available from the government to cover costs and had received around $3,000. Staff confirmed that as of February 2022 ERMU is operating under pre-COVID-19 rules with regards to disconnection for non-payment. There was discussion. Moved by Commissioner Westgaard and seconded by Commissioner Bell to approve the 2022 third quarter delinquent items submitted. Motion carried 5-0 5.4 2022 Assessments Ms. Youngs asked the Commission to approve 2022 Assessments totaling $9,042.25 from 49 accounts which will then be sent to the City Council for approval at the November 21, 2022 meeting. Ms. Youngs noted that this year's amount is about $4,000 less than last year. Moved by Commissioner Stewart and seconded by Commissioner Nadeau to approve 2022 Assessments Listing totaling $9,042.25 to take to the City Council for assessment on property taxes. Motion carried 5-0. 5.5 Field Services Facility Expansion Project Update Mr. Kerzman informed the Commission that crews are completing the punch list items for the interior of the building and that ERMU staff is going to wait to move into the offices until most of the list is complete. There was discussion. Chair Dietz asked about the state of the lawsuit filed by RJM Construction against the initial structural steel contractor who did not perform the work. Mr. Kerzman responded that RJM had recently been awarded summary judgement and have served a deposition to understand finances of the company. Attorney Beck added that based on the update from RJM and legal counsel assisting with the project there is question about collectability. Attorney Beck also noted that the company's attorney filed notice with the court to withdraw from the case. Finally, he stated that legal counsel working on the project feels confident that RJM is doing excellent work to reach a resolution. Chair Dietz asked about the status of the project's contingency fund. Mr. Kerzman responded that the amount depends on the result of the legal proceedings but there is a little bit left in the fund. Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 5 32 Mr. Kerzman informed the Commission that RJM had completed floor coring in the garage for analysis and that he is confident the samples line up well with what the scan shows regarding depth and rebar placement. He added some concrete will be replaced and that ERMU will pursue a warranty and/or credit on the floor. Mr. Hanson added the driving lane is the worst portion and the goal is to get this replaced. There was further discussion 5.6 Health Insurance Update Ms. Slominski presented the Health Insurance Update noting ERMU had received a slight increase of 1.5% for health insurance but had received large increases in the ancillary and dental insurances so ERMU's broker sought options on the market for those services with large increases. Ms. Slominski reported that the broker had found savings of 27.9% in dental insurance and 29% in ancillary coverage by switching providers. The broker also reported that ERMU could add employer -paid short term disability through ancillary coverage while still saving $4,000. Chair Dietz asked what the cost of the short term disability was to the utilities. Ms. Slominski responded it was about $9,000 for the year. Chair Dietz stated that for future reference he would like short term disability added to the list of items provided to employees as it is beyond the requests they made to the Wage & Benefit Committee. Staff said it would be noted. Ms. Slominski then asked the Commission to consider the level of funding for the deductibles. She noted that there was no change in the deductible amounts and the Commission agreed to maintain the 85% funding level for 2023. Moved by Commissioner Bell and seconded by Commissioner Stewart to approve the 2023 ERMU employee benefits offering including continuing the employer contribution to health savings account (HSA) deductible funding amounts, switching dental and ancillary providers, and the addition of employer paid short term disability (STD) insurance. Motion carried 5-0. 5.7 Financial Reserves & Investment Committee Update Commissioner Westgaard provided an update from the Financial Reserves & Investment Committee which had met immediately prior to the commission meeting. He reminded the Commission that the balances had been reviewed by the Commission in April. He went on to explain that the unrestricted reserves for the electric department showed a total of $12.66 million but that $7 million of that was dedicated to the field services building project. For water there are unrestricted reserves of $9.4 million with $1 million Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 6 33 for the field services building. Mr. Westgaard added that the recommendation the Committee had for the Commission was to keep the balances at the levels and accounts they are currently at given the upcoming capital projects. Chair Dietz asked when payments for AMI would need to be made. Mr. Tietz explained the project would be paid for in steps beginning in 2023 with the initial deployment stage. Chair Dietz suggested that if interest rates for bonds remain high the utilities could use funds from an internal source and then bond to replace those funds when rates go down. Ms. Slominski said she would confirm with ERMU's financial advisors and bond councils whether ERMU would be able to do that. Mr. Westgaard went on to inform the Commission that with regards to cash liquidity and investments the advisor believes ERMU's positions are good with 20% of the portfolio coming due in 2023 and 14% in 2024. Chair Dietz wanted to know how many bonds ERMU had. Staff responded there are two bonds, one related to joining Minnesota Municipal Power Agency and one for the field services building. Chair Dietz asked if there was a maximum amount of time that ERMU could hold investments. Staff explained that investments are built in a ladder structure. 5.8 Customer Satisfaction Survey Mr. Mauren provided background on the Customer Satisfaction Survey initiative and presented his memo on the results from the distribution that occurred in quarter 3 of 2022. In addition to locating the areas contacted and the response rate, he shared that ERMU's scores had improved in almost every category including the Net Promoter Score which moved into the excellent range. Mr. Mauren went on to explain that staff was planning to increase outreach over the next two years to reach all customers prior to the implementation of AMI. Commissioner Stewart had a question about the response rate based on demographics. Staff responded. Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 7 34 6.0 BUSINESS DISCUSSION 6.1 Staff Updates There was discussion about projections for the urban services expansion project referred to in Mr. Hanson's memo. Chair Dietz requested Mr. Hanson be a part of the City Council's discussion on the project. Mr. Hanson said he would be happy to. Ms. Karpinski requested that Chair Dietz return to the utilities office in the future to sign the renewal paperwork for ERMU's letter of credit with First National Bank of Elk River. Chair Dietz thanked Attorney Beck forjoining the utilities commission meeting for the last time prior to his retirement. Mr. Dietz commended Attorney Beck's service and shared that it has been beneficial to have his guidance. Chair Dietz wished him a healthy retirement and there was a round of applause. 6.2 City Council Update Commissioner Westgaard provided a City Council Update covering topics including home occupation requests, a planned unit development for the next phases of Jackson Hills apartments, residential development plan, and Energy City Commission appointments. 6.3 Future Planning Chair Dietz requested that the December meeting occur at the new field services building so the Commission can tour the facility. Chair Dietz announced the following: a. Regular Commission Meeting— December 13, 2022 b. 2022 Governance Agenda 6.5 Other Business There was no other business. 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 4:29 p.m. Motion carried 5-0. Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 8 35 Minutes prepared by Tony Mauren. John J. Dietz, ERMU Commission Chair Tina Allard, City Clerk Elk River Municipal Utilities Commission Meeting Minutes November 8, 2022 Page 9 36