5.2. ERMUSR 01-13-2009Ji
Elk River -~
Municipal Utilities
13069 Orono Parkway • PO. Box 430
Elk River, MN 55330-0430
Phone: 763.441.2020
Fax: 763.441.8099
Elk River Municipal Utilities strives to provide our customers with reliable, safe electric
and water services in an environmentally responsible manner at competitive rates. Those
rates, however, continue to go up. Our power supplier has advised us recently that they
will increase their rate to us by 15% in 2009 and another 10% in 2010. They cite a
number of factors including a decline in electric use due to a slowing economy, soaring
fuel prices used to generate electricity, and additional investment in plant due to
increased emphasis on environmental controls. Since wholesale power accounts for 70%
of our costs, we are forced to pass on most of this increase to you. The average 2009
electric rate increase is 10%. By contrast, some utilities in the area are increasing their
rates by as much as 15%.
While the news isn't good, there are ways you can control costs. Consider using more
efficient lighting such as CFLs and when you purchase new electric appliances, specify
those that are energy star compliant. Keep the cooling coils on your refrigerators and air
conditioners clean, and turn stuff off when not in use. Maybe you can even eliminate one
of those refrigerators! Learn about phantom loads. These are electronic loads that
continue to consume electricity when you think you have turned the device off. The U.S.
Department of Energy states that 26% of the electricity consumed in homes today is used
by computers, TVs, sound systems, DVD and VCR players, battery chargers, and
electronic displays on devices that are not even in use but still consume electricity
because they are plugged in. Google phantom loads, and you may be surprised how
much you can save. If you don't have access to the Internet, contact us and we will send
you the info.
Watch for money saving offers included with your utility bills. They include coupons for
purchasing CFLs, AC Tune-up reimbursement, energy star rebates and air conditioning
rebates as well as other tips on how to save electricity and water.
Thanks for your understanding and for getting serious about conserving our dwindling
natural resources -let's save some for our kids!
Sincerely,
Vance Zehringer
General Manager, Elk River Municipal Utilities
~j
Elk River -==
Municipal Utilities
13069 Orono Parkway • P.O. Box 430
Elk River, MN 55330-0430
January 8, 2009
TO: Elk River Municipal Utilities Commission
Jerry Takle
Jerry Gumphrey
John Dietz
FR: Vance Zehringer
SUBJ: Farm Field Irrigation System Seasonal Disconnect !Reconnect Policy
Phone: 763.441.2020
Fax: 763.441.8099
Expenses incurred by ERMU for disconnecting farm field irrigation system transformers
in the fall and reconnecting them in the spring is an expense that can be avoided by both
ERMU and the customer by implementing the attached policy. This policy also
eliminates the basic monthly charge for six months annually. This is a policy similar to
what Connexus Energy offers to their irrigation customers.
ELECTRIC RULES
FARM FIELD IRRIGATION SYSTEM --SEASONAL DISCONNECT/RECONNECT FEES
Expenses incurred by Elk River Municipal Utilities (ERMU) for disconnecting farm field irrigation
system transformers in the fall and reconnecting same in the spring is an expense that the
irrigation customer currently reimburses ERMU for. The irrigation customer also pays the basic
monthly charge for all 12 months of the year. In an effort to save both parties unnecessary
expense, ERMU will offer the following options:
1. If the irrigation customer prefers to have the farm field irrigation system disconnected
and/or reconnected, ERMU will provide that service at a rate of $150 per visit. In addition,
ERMU will limit the $50 basic monthly charge the irrigation customer pays to six months
annually including April through September. If the irrigation customer needs to water
additional months, the $50 basic monthly charge will be extended to include those
months as well.
2. If the irrigation customer prefers to leave the farm field irrigation system connected, and
consequently, requires no intervention by ERMU personnel, no disconnect/reconnect fees
will be imposed. If the system is left connected, the irrigation customer assumes all risk
associated with unintentional or intentional equipment startup. The irrigation customer
will be charged the $50 basic monthly fee for six months annually including April through
September. If the irrigation customer needs to water additional months, the $50 basic
monthly fee will be extended to include those months as well.
Minnesota Municipal Utilities Association
Memorandum
TO: MMUA Boazd of Directors
Gary Gleisner, New Ulm; Leslie Hisken, Mazshall; Jim Keinath, Circle
Pines; Mike Kumm, Hutchinson; Terry Leoni, Virginia; Leland Lunos,
Roseau; Dennis Rykken, Sauk Centre; Steve Shurts, Owatonna; Joe
Steffel, Buffalo; Jerry Takle, Elk River
FROM: Jack Kegel, Executive Director
RE: Update on various activities
DATE: January 5, 2009
Best wishes to everyone for a Happy New Year!
This memo is intended to provide you with an overview of the primary issues and
activities we aze currently working on here at MMUA. As always, if you have any
questions or concerns, please give me a call.
Board Vacancy. Board member Mark Petsche of Wells has relocated to Wyoming, so
we have a vacancy on the MMUA board. Our past practice in the case of mid-yeaz
vacancies has been for the President to appoint a new board member with the
concurrence of the board. The appointed boazd member would then be eligible for
election by the membership to serve the remainder of Mazk's term of office, which
expires in 2010.
Gas Prepay. For a bit more than two yeazs now, we have been working on a prepaid gas
project to enable our municipal gas utilities to purchase a portion of their requirements at
a significant discount. Gas prepays have become relatively common in recent years and
this structure has been used successfully in other parts of the country. The concept
involves having a municipal purchaser issue tax exempt bonds to fund the purchase of a
long-term supply of natural gas. The purchaser's tax exempt cost of money is lower than
the seller's taxable discount rate, and this is the primary driver of the savings. A pair of
mirrored commodity swaps converts the fixed-price gas to a discount from index
structure, so the parkicipating municipal gas utilities receive a known discount from the
index price regazdless of whether gas prices move up or down.
The transaction is structured so that the Midwest Consortium of Municipal Utilities
(MCMU), our finance authority, would issue the bonds and be the purchaser of the gas.
The newly established Minnesota Municipal Gas Association would take the gas from
MCMU and distribute it to the municipal utilities.
About a year ago, at just about the time our transaction was ready to go, the subprime
mortgage meltdown seriously disrupted the tax exempt bond market, and that market has
not yet recovered sufficiently to proceed with a prepay transaction. Conditions were
improving last summer to the point that we anticipated closing on the prepay after Labor
Day. Unfortunately, markets quickly went the other way in September, slipping into the
most serious fmancial crisis our country has seen since the Great Depression. It's
anyone's guess how long it will take for the financial markets to recover, but I think it's
safe to assume that we will likely not be closing on a prepay deal during the current
MMUA fiscal year, which ends September 30, 2009.
Budget Revisions. Since the MMUA staff provides support for MCMU and MMGA, we
had included some revenue and expenses from the prepay in the current MMUA budget.
We have been working on reconfiguring the budget to exclude prepay revenue and
expenses. We have also been working on developing some additional revenue to cover
any potential shortfall. I anticipate that we will have a package of budget revisions to
show you at the Winter Meeting.
Nashwauk Steel Plant. An Indian company known as Essar is working to develop a
new direct reduction steel plant on the edge of Nashwauk. This would be the first plant
in the history of the Iron Range to produce finished steel in addition to mining and
pelletizing taconite. The $1.7 billion project will be a tremendous boon for the area, but
it is putting a significant strain on the resources of a small town with a population of 944
and an electric utility with 523 customers. Essar Steel Minnesota is expected to have an
electric load in excess of 300 MW, which could make Nashwauk the largest municipal
electric utility in Minnesota and surrounding states. MMUA is working closely with city
and utility personnel to help them accomplish the many tasks that will be necessary to see
the project through to completion. Bryan Adams, formerly General Manager of Elk
River Municipal Utilities, is now serving as Nashwauk's director of utilities on a contract
basis.
Excelsior Energy. A local independent power producer known as Excelsior Energy has
been working for some years to develop The Mesaba Project, an integrated gasification
combined cycle (IGCC) 600 MW power plant on the Iron Range between Nashwauk and
Grand Rapids. Excelsior has made a lot of progress on the legislative and regulatory
front. The plant is exempt from Minnesota's certificate of need process as well as the
moratorium on new coal plants. The project has attracted significant grant money to fund
preliminary development, and is eligible for a federal loan guarantee that is expected to
fund approximately 72% of project costs.
Excelsior is looking for potential takers of the output of the project and there is some
level of interest among various members of the municipal utility industry in Minnesota.
The Minnesota Power wholesale customers in Northeast Minnesota have expressed an
interest in considering Excelsior. They recently settled an MP wholesale rate case in
which they were successful in lining up all their contract end dates so that they can
consider joint participation in a generation project as an alternative to remaining as full
requirements customers of MP. If the entire MP group including Nashwauk decided to
2
participate in Excelsior they could account for as much as 75% of the plant's capacity. A
variety of other public power entities have also expressed some level of interest in
Excelsior. It is possible, although by no means assured, that public power could take
most or even all of the output of the project.
MCMU has signed a nonbinding agreement with Excelsior to work with them to explore
the municipals' level of interest in participating in the project. Excelsior will be
compensating MCMU for its efforts, and since MMUA staff also provide staffing to
MCMU, MMUA will be receiving some revenue through the MCMU-Excelsior
agreement.
We anticipate that the process will begin with a pair of informational meetings in
January. One will be held in Grand Rapids and will be geared toward the Minnesota
Power customer group. The other will be held in the Metro azea and will be geazed
toward other potentially interested participants.
Service Territory Negotiations. For many years the right of municipal utilities to grow
with their cities has been a source of tension between municipals and co-ops. In the last 5
years or so the stakes have become higher for municipal utilities because of a series of
decisions by the Minnesota Public Utilities Commission providing much higher
compensation awards to the co-ops than had been seen in previous yeazs. In recent yeazs
the tide has begun to turn back toward the municipals as our systems began taking service
territory cases through the eminent domain process rather than proceeding to the MPUC.
Decisions by the eminent domain commissioners have been much more reasonable and
more in line with earlier awards.
About a year ago Mark Glaess of the Minnesota Rural Electric Association approached
Greg Oxley at a meeting and suggested that it might be time for the two sides to sit down
at see if we could find a mutually acceptable solution to the service territory issue. After
some further discussions it was agreed that we would sit down with the co-ops and
attempt to resolve the issue. Each side appointed a seven member team for the
negotiations, I and staff also participated.
The two teams met several times over the course of several months. I think it's fair to
say that both teams were committed to finding a solution and the meetings generally went
well. At the conclusion of our last meeting on July 21, we had established a framework
for a comprehensive service territory agreement that could be enacted into law. Only a
few outstanding issues remained. MMUA staff began preparing a bill draft that would
incorporate the agreement into iaw. Unfortunately, that turned out to be the last time the
two sides would meet.
' MMUA's team consisted of Arlo Rude, Thief River Falls; Brad Roos, Marshall; Gary Gleisner, New
Ulm; Steve Shurts, Owatonna; Al Crowser, Alexandria; Bill Schwandt, Moorhead; and Walt Lorber,
Rochester. Scott Hain of Worthington was added to the group shortly after the process began, and several
other municipal personnel participated in various discussions and meetings.
Not long after the July 21 meeting MREA informed us that they wanted to put the process
on hold while they consulted with their membership. Our sources tell us that a small but
vocal group of co-ops preferred the status quo to a negotiated deal. There were also some
members of the MREA board, which is composed of local co-op board members rather
than system managers, who were not favorably disposed toward a negotiated settlement.
We anticipated that MREA would tell us they wanted to re-open some items that had
previously been agreed upon. Instead, on December 17 Norm Krause, chair of the
MREA board, sent a letter to Gary Gleisner to inform us that they were terminating the
process. The letter is included with this memo as Attachment A.
Needless to say, this is a very disappointing end to a process that at one point appeared
very promising. We anticipate that the MMUA service territory negotiating team will
reconvene soon to consider an appropriate response.
At this point there aze several observations we can make about the negotiation effort:
• Our side was better prepazed than they were through every step of the process, a
fact that was obvious to both sides.
• Some players on the co-op side were probably surprised by our willingness to
engage in the hard work of finding a comprehensive solution to a difficult
problem, and to make the concessions necessary to enable the two sides to find
common ground.
• We will want to be ready in case the co-ops decide to launch a surprise attack on
our right to use the eminent domain process in service territory cases. (But we
think they will be cautious about picking a fight with us, having seen how well
prepared we were in the service temtory negotiations.}
Conservation and CIP. At the 2007 MMUA annual meeting the membership approved
a resolution authorizing an assessment on electric utilities of a small percentage of their
CIP requirements in order to fund an MMUA position dedicated to working on
conservation and related issues. 2008 was the first year of the assessment. Bob Jagusch,
formerly the Superintendent at Mora, began his employment with MMUA as Director of
Energy Services on Mazch 24.
Bob's first few months at MMUA were largely devoted to helping MMUA members
prepare their biannual CIP reports, which were due in June. Bob worked very closely
with the Office of Energy Security on preparing the filings, and as a result of his work,
OES greatly simplified the reporting form.
Aside from the CIP reporting process, Bob's efforts over the year break down into these
broad categories:
• Working with members. Bob has continued to work with MMUA members on
developing and implementing programs that will enable them to make a strong
effort at meeting the 1.5% savings mandate for the next reporting cycle.
• Working with regulators. Bob continues to work closely with OES, to make sure
that they understand what we are doing and what kinds of challenges we face.
One of his current projects with OES is the development of a turnkey commercial
lighting program. This program should provide most of our members with the
biggest bang for their buck toward meeting their savings goals, both in terms of
dollars expended and staff time.
• Working with industry. Bob has spent a lot of his time representing the municipal
utility sector of the industry at various conferences, meetings, and other industry
events. As a result of these efforts vendors, trade allies, other utilities, and
regulators aze learning a lot about what the municipals are doing and what they
need. One impact of this effort has been to dispel the widely-held notion that the
municipals are not really doing much in the area of conservation and renewables.
We believe that these activities will pay dividends over time.
• Working with the legislature. Bob's work in previous years with the Minnesota
Climate Change Advisory Group has made him awell-known and highly
respected voice on energy issues. Last yeaz we were fortunate to be able to draw
on his expertise at several key junctures in the legislative session. We expect that
we will rely on Bob's expertise once again in the 2009 session. In regards to this
activity, I think it's important to note that we don't view Bob as another
government relations person. We view him as a staff member with specific
expertise and credibility that we can draw upon when necessary.
Policy analysis. Over the past year various state, regional and federal agencies
and organizations have been issuing a steady stream of papers and proposals
regarding conservation, climate change (which could have a huge impact on
conservation) and related issues, Bob's strong technical skills enable him to look
deeply into these documents, evaluate their technical underpinnings, and provide
our state and federal lobbyists with solid analysis that they can rely on in their
work.
2009 and beyond. Looking back on the first year of the program, we got off the ground
with a burst of activity that never really slowed down. Bob was on the road a great deal
and often found himself scheduled out several weeks in advance. In short, we were so
busy doing the job that we probably didn't do as good a job as we might of letting the
membership know what we were doing.
In the short term we are planning several things to help get the word out about what we
have been have been doing and what we have accomplished in 2008. Bob and Steve
Downer will be working on a program report that will be distributed to the membership
in January. This effort will also provide the basis for a major piece in the January
Resource on the program and what we have accomplished. We also plan to have Bob
make a presentation on his efforts at the MMUA winter meeting in March.
Looking ahead, we see some relatively simple things we can do to increase member
awareness of what we are doing on their behalf.
• Energy Services Committee. This MMUA committee has been dormant for
several years. We plan to reactivate it to serve, among other things, as an
advisory committee for Bob's project. The committee can help set program goals
and priorities, serve as a sounding board and test bed for new ideas, and serve as a
collective knowledge base regarding MMUA's efforts. We envision at this point
that the committee would meet several times each year.
• Periodic newsletter or reports. We could send out a periodic or as-needed a-mail
newsletter or briefing on CIP and related issues. This would keep the
membership much more aware and informed regarding our activities and provide
them with timely information.
Safety Management. Our safety management program is MMUA's largest program in
terms of staff and budget, and it continues to grow. We've recently added the city
employees of Shakopee and Owatonna. (We were already serving the utilities.) We have
also added Little Falls, and Willmar has added a day per month to its contract. We have a
proposal out to Monticello and they appear to be very interested in working with us. We
also just learned that the City of Glencoe wants to join our program. (We already serve
the utility.) On the negative side we just received word that the City of Elk River will be
dropping our program, but we expect to continue to work with the utility.
We are concerned that reductions in local government aid could put pressure on city
budgets and cause some members to consider reducing or cancelling our services. Thus
far, however, we haven't seen much of that. The Elk River situation seems to be more
due to local politics than finances. It helps that the League of Minnesota Cities is
encouraging its members to work with us. The League's endorsement carries a Iot of
weight with city officials.
League of Minnesota Cities Insurance Trust Program. Our partnership with the
League of Minnesota Cities Insurance Trust continues to strengthen. We are now serving
a number of "mini" safety groups, comprised of small cities that receive aslimmed-down
version of our safety management program. The cost is very reasonable and it enables
these small towns to have a basic safety program, which is a huge improvement over the
status quo. LMCIT anticipates continued significant growth in this program.
LMCIT Generation O&M Manual Project. We are well along in the planning process
for another joint project with the League of Minnesota Cities Insurance Trust. LMCIT,
which insures most municipal utility generating plants in the state, wants MMUA to play
a major role in developing O&M manuals for the municipal plants. We would likely
begin with about three utilities as a pilot project in 2009, then gradually work our way
6
around the state over a period of perhaps four or five years. We anticipate that Jeff
Becthold will take the lead on this project. We had originally anticipated about $50,000
in revenue from this project for 2009, but Mike now thinks that our first year revenue
could be significantly higher than that. We should have a good idea of how this project
will look for 2009 within a few weeks.
Contract Line Crew. On January 7 Mike Willetts and Jeff Becthold will meet with the
City of Mora to discuss having MMUA provide line crew service to Mora on a contract
basis. We understand that Mora is also considering other providers, including the local
co-op, so there is no assurance at this point that we would get the contract. Mora
currently has two lineworkers, a journeyman and an apprentice. If we are chosen to
provide the service, we expect that the two Mora lineworkers would become MMUA
employees, and a third would be hired to provide athree-person crew. We may be able
to share line crew services with some other municipals in the area to help keep Mora's
costs down.
Oi~ice Space. As we discussed at the summer boazd meeting, we have been working
with the developer of an office condo project on Highway 55 a few miles west of the
current office. We have been through a couple of iterations of a space plan, which still
needs some work but is starting to come together. Unfortunately, with no guarantee that
we will have any gas prepay revenue to help support the operation, it would likely be a
stretch to find enough revenue to support the debt service and operating costs.
Our existing lease expires at the end of September 2009. After the holidays, we may
want to sit down with the landlord and discuss extending our current lease for a year or
two to give us some time to assess our revenue situation and staffing needs going
forward.
Personnel Manual. One of the things our auditors noted this year was that our personnel
manual is somewhat out of date. Associated Financial Group, which serves as our
insurance agent and operates our health savings account program, has a human relations
consulting group which has given us a very good price for doing a complete rewrite of
our personnel manual.
On December 8 we had our initial meeting with David Flotten, the attorney who will be
preparing the draft of our new manual. The meeting lasted 3 %2 hours and we covered a
lot of ground. We were impressed with Mr. Flotten's knowledge of the subject matter.
The next step will be preparation of a draft manual that we can review and comment on.
When we have a draft that is ready for your consideration, Mr. Flotten will be available to
present the new manual to the boazd.
Tattler and Web Site. For the past 10 yeazs or so we have done a weekly legislative
newsletter during the legislative session. The Capitol Tattler was a significant
improvement in information flow when we implemented it, but in this era of instant
information access it is beginning to seem dated.
7
This year we hope to transition the Tattler into something more like a government
relations blog on the MMUA web site that can be updated by our staff whenever there is
important news to convey. It could be updated several times a week if necessary. We
can provide a-mail notices when new entries are posted. We think that this will be more
effective in providing the membership with timely information.
Government Relations. This area is and always has been one of MMUA's major
activities and highest priorities. I have saved it for last only because we cover state and
federal issues in two separate attachments. Greg Oxley and Bill Black have prepared a
summary of the issues that we are likely to face in the 2009 Minnesota legislative session
at Attachment B. Michael Nolan, our Washington Representative, has prepared a
preview of the 11 l~' Congress at Attachment C. I hope that these two documents will
provide you with a good overview of the kinds of issues we are likely to confront on both
the state and federal level in the coming year.
Attachment A
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Attachment B
Likely Issues - 2009 Minnesota Legislative Session
The 2009 Minnesota Legislature will convene Jan. 6. As a result of November elections, the
DFL party increased its majority in the House of Representatives by two seats (87-47) and in the
Senate by one seat (46-21). The state's budget deficit, and how to deal with it, is expected to
dominate this session.
The state faces a projected deficit of $4.8 billion for the FY2010-11 budget period beginning
July 1, 2009. For the current fiscal year, a $426 million budget deficit exists. That amount will
decrease to $271 million after Governor Pawlenty applies the $155 million saved in budget
reserves. The Governor and legislative leaders have identified three funds with remaining
FY2009 money that will be tapped to alleviate this year's shortfall. They are: K-12 education,
higher education and local government assistance, or "LGA."
The aid to cities and counties is part of the property tax aids and credits (along with aid to
homeowners and renters) that make up a little more than 9 percent of the state budget. The state
in late December is scheduled to distribute $242 million in city LGA and counties are scheduled
to receive $102 million in county program aid.
Gov. Pawlenty may use a process known as unallotment, where he is free to act without
legislative approval, for the short-term budget fix if he and the legislative majority leaders cannot
find agreement on cuts together.
The Governor and minority leaders (Representative Seifert and Senator Senjem) have repeatedly
called the budget problem an opportunity to shrink government that comes only once every fifty
years or so. DFL leaders (Speaker Kelliher and Senator Pogemiller) say the shortfall should
focus the state on creating jobs for Minnesotans using, particularly, federal stimulus dollars. The
Governor has explained his philosophy toward using stimulus money to address the national
economy, saying "don't use a credit card to pay off credit card. debt." Thus he has refused to
lobby Congress for economic stimulus money for individual projects as some cities and counties
have done. Some Republicans are calling for privatizing government functions and selling state
assets instead.
Key issues that MMUA may have to confront in the 2009 legislative session are summarized
below.
Cap and Trade. Many environmental groups and a number of legislators been supportive of the
development of aMinnesota-specific Greenhouse Gas Cap and Trade program. In 2008, the
legislature delayed work toward aMinnesota-specific cap and trade program and instead
commissioned economic impact and governance studies to be based upon a report by the
Midwest Governors Association (MGA) that will describe a regional cap and trade scheme
design. The MGA report was expected this year but has been delayed until early to mid 2009.
Attachment C
Federal Legislative Update
A Preview of the 111th Congress
The numbers
House of Representatives: Democrats 256/Republicans 176
• IL-4 open seat, special election - Rahm Emanuel
Senate: Dems 58(includes 2 Independents)/GOP 41
• MN race still outstanding but Dems with 58 seats effectively can govern with 60+ votes
with GOP moderates
Calendar
• 111 ~' Congress convenes January 6, swearing in day
• Congress will remain in session through Inauguration Day and until Presidents Day
recess in mid-February
Leadership
No major changes: Speaker Pelosi/Majority Leader Reid; GOP House leader
Boehner/Senate Minority Leader McConnell
Most changes in ranks of House Republicans (spots 2-5)
California clout -- Speaker Pelosi remains ambitious and aggressive, and has solidified
her power: helped orchestrate the ouster of longtime Energy Committee Chairman John
Dingell in favor of Californian Henry Waxman
The committees - energylenvironment and taz
• Biggest change is in House Energy and Commerce Committee and takeover of new chair
Waxman: smart, aggressive, environmentally-driven, but seen as divisive and partisan;
knows public power through LADWP (Southern CA district)
• Believes in subcommittee structure but wields a heavy gavel
• Subcommittee chairs still not named: possible restructuring of panels; Rick Boucher
(VA) may lose energy and air quality chair to Ed Markey (MA)
• Committee has named 8 new Dem members and current ratio of 31-26 could change to
36 Dems - 23 GOP seats
• Markey remains chairman of Select Committee on Energy Independence and Global
Warming (reappointed by Speaker)
• Senate Energy and Natural Resources Committee chair remains Jeff Bingaman (NM) -
aims for major energy legislation in early 2009; new ranking GOP Lisa Murkowski of
AK
• Senate Environment and Public Works chair remains Barbara Boxer (CA)
• House Ways and Means -chairman still Charles Rangel (N~ but facing ethics scrutiny;
new ranking Republican Dave Camp of MI
• Senate Finance Committee Chairman Max Baucus (MT) remains
White House: uossible new enemy team (not official)
• Energy czar: possible new position for Carol Browner, former EPA under President
Clinton; may come with National Energy Council portfolio based in the White House
• DOE -Steven Chu, Nobel Peace Prize winner for physics and current director of
Lawrence Berkeley Lab
• EPA -Lisa Jackson, former EPA and director of NJ Department of Environment
• CEQ -Nancy Sutley, current deputy mayor of Los Angeles for energy/environment
• FERC - TBA; appointments expected mid-2009; current Chairman Kelliher will be out;
possibilities include current commissioners Jon Wellinghoff of NV (renewables,
efficiency) or Suedeen Kelly of NM (transmission, organized markets) or could go
outside of FERC
Issues -short term
• Economic stimulus package: massive bill in the range of $500 billion, to be developed by
Democratic leadership over the new few weeks
• Expect massive infrastructure spending (highway, water projects)
• Huge tax title, possibly larger than spending side
• Energy title includes "energy, clean energy, energy efficiency, and renewables"
• Possible "green package": spending on green buildings and green schools as "down
payment" for new investments in efficiency programs; weatherization programs; mass
transit; low-carbon technologies
• Possible $75 billion for federal loan guarantee program to encourage private investments
in renewables
• Possible $10 billion in new federal trust fund to develop smart grid and other
transmission projects
Issues -long term
• Energy bill; health care reform; tax reform; climate change
• Energy bill starts in Senate Energy Committee with chairman Jeff Bingaman
• Priorities include renewable portfolio standard (RPS or RES), green programs, energy
efficiency (buildings), electricity grid and transmission, smart grid
• RPS coming - Bingaman claims Senate has votes to approve RPS
• RPS could change -15-25 percent renewable by 2020-2025; public power expected to be
included in any RPS (large public power systems only)
• RPS and 3 major issues: applies to whom; what happens to existing state programs; what
counts as efficiency
• Energy bill not a climate bill
• House takes lead on climate change -and has votes to approve bill, but when: how does
current economic situation affect climate debate?
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Supporters of the concept have indicated that they may be content for now with forcing utilities
to participate in a climate registry similar to the one being proposed on the federal level by
Minnesota Senator Amy Klobuchaz.
Feed-In Tariff. The Feed-In Tariff concept would require all electric utilities to purchase
locally generated renewable energy at premium rates to support the development of emerging
technologies. Until recently, it appeared likely that legislation imposing aFeed-In Tariff would
be seriously considered during the 2009 session. However, support for this concept has also
diminished, partly because lazge wind generators would not be included in the program and
partly because of concerns about the cost of the tariff to consumers. The concept will likely
receive considerable attention and discussion even if no action is taken. Energy lobbyists,
including MMUA's, have agreed to watch carefully for any action on the issue and work
together to oppose such artificially raised costs to utilities for renewable energy.
Solar Carve Out. A proposal that would require generating utilities to meet a portion of their
renewable energy standard from electricity generated by solaz energy was rejected in the Senate
Energy Committee in 2008. The Committee Chair, State Senator Yvonne Prettner-Solon (D-
Duluth), may be willing to consider the bill this year, and Xcel Energy's opposition to the
concept is softening, so the proposal could again become an issue in 2009. Most electric
utilities consider the proposal a very poor idea.
Conservation Improvement Program. The only known effort to change the state conservation
improvement program (CIP) may come from Xcel Energy, which would like to receive credit
toward their CIP requirement for some (as yet, undetermined) portion of the energy generated by
new solar resources.
Off Site Renewable Distributed Generation. We have received reports that counties, school
districts and even the University of Minnesota would like the right to wheel power generated by
renewable energy facilities over the existing transmission and distribution system to their
facilities across the state. These entities either do not recognize or are unconcerned about the
similarity of this proposal to retail competition. Our task will be to communicate our concerns
about this proposal to them and, if they choose to pursue legislation, oppose it.
Service Territories. After several months of meetings between representatives of the Minnesota
Rural Electric Association (MREA) and the Minnesota Municipal Utilities Association
(MMUA), which very nearly resulted in an agreement on new legislation concerning service
territory compensation, the MREA Board decided to suspend the negotiations. MMUA had been
preparing to lead the effort to introduce new compromise legislation on compensation during the
20091egislative session or a subsequent one, as appropriate. MMUA staff has been working on
draft legislation that would modify the service temtory law to incorporate the tentative
agreement, so that we will be ready to proceed on short notice if necessary. We will also be
ready to resist any attempt by the co-ops to limit our access to the eminent domain process in
service territory cases.
Nuclear Energy. The Minnesota Legislature enacted a moratorium on the construction of new
nuclear power plants in 1994. The growing support for nuclear power as an important base-load
2
generating option that will meet the State's electric needs while complying with stricter
environmental standards for carbon has led to an interest in rescinding the nuclear moratorium.
The Minnesota Chamber and Great River Energy are known to be actively pursuing an end to the
moratorium, and other utilities would support such a move. Unfortunately, it appears that there
will be little support for this effort among the Democratic leadership in both houses until a
permanent federal radioactive waste storage facility is in operation, which could be a decade or
more away. There may be hearings on the issue during the upcoming session, which will offer
an opportunity to begin what could be a multi-year effort to end the moratorium.
Certificate of Need. The uneven performance of the Minnesota Public Utilities Commission
(PUC) and various elements of State Government in considering a certificate of need (CON) for
Big Stone II transmission has led to unnecessary and costly delays in the project. It is apparent
that other certificate of need proposals for important future transmission projects could face the
same fate unless the process is streamlined and the timeline for CON consideration is strictly
limited. Unfortunately, there is little appetite among the investor owned utilities, some of which
have rate increase requests before the PUC, for supporting legislative action to secure these
goals. Consumer owned electric utilities would likely have to take the lead in any effort to
pursue certificate of need reform.
Generation Performance Standards. Some time ago, the environmental community
announced its support for a generation performance standard (GPS}, one of the more
controversial proposals to come out of the Minnesota Climate Change Advisory Group
(MCCAG), the committee appointed by the Governor to develop strategies for Minnesota's
effort to deal with climate change issues. The GPS would prevent the construction of new fossil
fuel generation unless it met prohibitively stringent green house gas (ghg) emission
requirements. The GPS would effectively impose another severe restriction for new coal
generation facilities in addition to the current legislative moratorium on coal until a regional ghg
cap and trade program is operational. Recently, however, we have received word that the
environmentalists' support for this idea has waned, at least for the upcoming legislative session.
Salary Limits. It is becoming increasingly apparent that the Governor's salary cap is affecting
the ability of some municipal utilities to provide competitive compensation for their executives.
Conditions permitting, MMUA will support the effort of larger municipals utilities to remove the
cap.
3
• House passage possible by end of 2009 but most expect climate legislation to be in 2010
(does White House want legislation before Copenhagen conference in Dec 2010?)
Issues -public power priorities
• CREBs -increased funding and lift cap for tax credits (currently capped at $800 million
for mums, coops, and other entities)
• REPI -seek increase funding for DOE renewable program
• Climate change - at what price a cap and trade program?
• Key climate issues include comparable financial incentives for public power; allocations
and auction; early action and credits
• Wholesale electricity markets -continued problems with RTOs and ISOs
• Railroad -look for passage of STB reform bill and rail antitrust legislation
• Nuclear -continued and visible support for new nuclear, including changes to the tax
code, working with NEI, and making nuclear viable option under climate change regime
• Tax reform -seek possible repeal of 1986 tax reform private use provisions
• Service territory -unlikely hostile attempts at federal legislation but remain vigilant
through regulatory process at USDA, agency responsible for implementing farm bill