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3.0 ERMUSR 08-14-2007ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION July 9, 2007 Members Present: Jerry Trkle, President; Jerry Gumphrey, Vice Chair; James Tralle, Trustee Staff Present: Bryan Adams, General Manager; Glenn Sundeen, Line Superintendent; Theresa Slominski, Finance Director/Office Manager; Troy Adams, Engineering Manager; Judy McSpadden, Recording Clerk Staff Absent: David Berg, Water Superintendent 1. Call meeting to order June 12, 2007 President Jerry Takle called the July 9, 2007, meeting to order. 2. Consider Utilities Agenda James Tralle added an item regarding the Water Survey to be discussed under Other Business. Jerry Gumphrey moved to approve the July 9, 2007, Utilities Agenda. James Tralle seconded the motion. Motion carried 3-0. 3. Consider Consent Agenda Jerry Takle questioned the extra payment to Connexus and staff responded it was from the recent territory acquisition. Jerry Gumphrey moved to approve the Consent Agenda as follows: June Check Register June 12, 2007, Minutes Financial Reports James Tralle seconded the motion. Motion carried 3-0. 5.1 Staff Up-dates Bryan Adams said the Well #9 building will be going to the planning commission for approval. The water department recently had a 7 million gallon pumping day. James Tralle asked if it was time to contact the paper to do an article regarding the high water use and water conservation. Bryan said he will contact the paper. Glenn Sundeen reported the Waco feeder was near completion. Glenn also updated on the other current projects and difficulties with some areas of rebuilds. There was only one outage due to the storm on Sunday and that was caused by a tree limb on the wires. Troy Adams said the security sales were down to 11, however service calls were up due to the changeover of the Alarm Net C systems at the lift stations and wells being obsolete and having to be upgraded. The Virginia transformer is scheduled to ship this week. Jerry Takle reported a citizen had complained of water problems. Bryan Adams will have the water main flushed in the area to see if that will take care of the problem. Page 2 Regular meeting of the Elk River Municipal Utilities Commission July 9, 2007 Theresa Slominski updated the Bi1lFlash situation. Due to the absence of key staff at Bi1lFlash, she did not do a site visit at the last mailing, but will try to arrange a visit during this month's mailing providing the key staff members are present. The mandatory prepayment of sales tax was also discussed. 5.2 Review & Consider Bid Tabulation for Electric Line Truck At the June 2007 Elk River Municipal Utilities commission meeting, the vehicle replacement policy was discussed. Unit #8 is a 1998 Freightliner with a Holan 42 areial bucket that is used daily, is approaching 10 years old and should be replaced. The chassis is in fairly good shape but the aerial device is showing its age and is too short for the current and future tasks it will be performing. Bids were secured for the replacement line truck. Staff recommends awarding the lowest responsive bidder, Dueco for $143,495 with trade-in. James Tralle asked about selling the truck ourselves. Staff responded the truck would not be suitable for a lot of companies, would not be worth the time, and we are receiving a fair value for the trade-in. James Tralle moved to award the 2008 Electric Line Truck, Aerial Device and Body to Dueco, the lowest responsive bidder. Jerry Gumphrey seconded the motion. Motion carved 3-0. 5.3 Review & Consider PCB Shed The 2007 electric budget contained a $40,000 item to construct a PCB shed. Electric transformers that are removed from service are required by USEPA to be non PCB certified. These transformers must be stored in a contained area until the test results are back. Transformers that are high in PCB contaminants are held in the contained area until they are properly disposed of. The containment area at our 1705 Main Street power plant facility is too small and no longer adequate. Staff is proposing to construct a 20' x 20' enclosed storage facility at the West Substation facility at 19002 Elk Lake Road. This facility is directly north of the Elk River street department facility. The estimated cost of this project is $32,000. Pending the approval of the City of Elk River Planning department, staff recommends authorization be given to proceed with this project. Jerry Gumphrey moved to proceed with the PCB containment building. James Tralle seconded the motion. Motion carved 3-0. 5.4 Update LFG Capacity Addition At the June 2007 Elk River Municipal Utilities commission meeting, the possibility of expanding the LFG facility was discussed. Sherburne County was contacted regarding their financial support. Preliminary discussions with Sherburne County are very positive. Waste Management has indicated their desire to again allow us to be the lead on this project and draft Page 3 Regular meeting of the Elk River Municipal Utilities Commission July 9, 2007 the agreement to mirror the existing agreements. Project costs, funding, and paybacks were discussed. The issue will be to obtain a modified air permit from MPCA which could take over a year. James Tralle moved to proceed with the LFG expansion. Jerry Gumphrey seconded the motion. Motion carried 3-0. 5.5 Review Deposit Requirement Policv At the June 2007 Elk River Municipal Utilities Commission meeting, one of the agenda items was a Personal and/or Credit Use and Security Policy. During that discussion the need for a Customer Deposit Policy was introduced. A proposed deposit policy was reviewed. On Line Utility Exchange (OUE) will be utilized for assessing credit scores. The deposit is a standard two months estimated average utility bill (electric, water, sewer). After three years of good standing the deposit is returned with interest. For residential accounts with a credit score above 68%, no deposit is required. Failure to provide a social security number will result in the required deposit. For commercial accounts, the deposit can be in the form of a personal guarantee, 2 months deposit or an irrevocable letter of credit. The irrevocable letter of credit has to be renewed each year. If the letter of credit is not renewed, the utility will penalize the account the estimated average two months utility bill. In the case of customers that have been disconnected for non-payment, a two month deposit will need to be collected along with the past due funds. Municipal utility staff has always worked with the customer as long as they keep in contact, make arrangements, and follow through with them. Jerry Gumphrey moved to approve the customer deposit policy as amended and attached to these minutes. James Tralle seconded the motion. Motion carried 3-0. 5.6 Review Pole Replacement Policv At the June 2007 Elk River Municipal Utilities Commission meeting, staff was directed to draft a utility pole move policy. The 10 conditions were discussed and proposed policy was reviewed. Jerry Gumphrey commended staff on a good job. James Tralle moved to approve the Elk River Municipal Utilities Pole Move Policy. Jerry Gumphrey seconded the motion. Motion carried 3-0. 6.1 Review Property Insurance We maintain two different insurance policies for our power plants. They are boiler and machine insurance, and property insurance. The boiler and machine insurance through AIG/Hartford Steam Boiler covers repair costs due to major equipment failure with very high deductibles. Our substation transformers are also covered under this policy. The property insurance thru the League of Minnesota Cities Insurance Trust (LMCIT), covers all of our properties for property damage including vehicle and equipment. An issue that Page 4 Regular meeting of the Elk River Municipal Utilities Commission July 9, 2007 continues to be a problem is the replacement value of the old generation equipment at our power plant. If the building was destroyed and generation equipment damaged beyond repair, what is its value and how would it be replaced. Replacement parts for the old generation equipment are becoming very difficult to find. LMCIT is proposing using high speed caterpillar units as replacements if a catastrophe occurs. This will have to be reviewed annually to keep the values current. Jerry Gumphrey questioned if there would be future budgeting for engine replacement. Jerry Takle then commented about the decision to invest in power plants versus engines. Bryan Adams added that if the transmission system failed local generation could support sections of Elk River via the generation engines at the power plant. James Tralle questioned the cost of the engines. Bryan Adams replied, per the property insurance schedule, each engine/generator with auxiliary equipment would be $650,000. 6.2 Review Waco Substation Agreement with GRE The Interconnection Agreement with GRE was discussed. As additional substations are constructed, the interconnection agreement is amended to reflect an additional interconnect point and defines who owns what equipment. Supplement #5 to the Interconnection Agreement between Elk River Municipal Utilities and Great River Energy was reviewed. James Tralle asked if there were future plans of renegotiating for additional territory within the city limits. Bryan Adams responded possibly the East corridor along Hwy 10, and the western edge along old Meadowvale Road. Other Business James Tralle questioned why Elk River was on the low end of the Water survey results. Bryan Adams responded that the base usage they used was on the low end. The base for this survey was only 7,500 gallons per month. Based on this survey, the base rate for water could be raised. The next regularly scheduled meeting of the Elk River Municipal Utilities Commission will be Tuesday, August 14, 2007. President Jerry Takle adjourned the regular meeting of the Elk River Municipal Utilities Commission at 5:00 p.m. espectful ubm' d, Judy padd Recording Clerk Elk River Municipal Utilities Customer Deposit Policy In order to minimize the risk of collecting payments from customers who default on their accounts, the Elk River Municipal Utilities (ERMU) has adopted this Customer Deposit Policy. The amount of deposit required will depend on the risk identified with the customer. To assess this risk, the ERMU will utilize available known credit history through on -line resources and their applicable nationally recognized scoring methods (such as FICO or Beacon) and/or ERMU past experience with the customer. For residential customers, the risk of nonpayment will be assessed as follows: A: If credit score falls above 68% probability of non default and no negative history (disconnection for non- payment or late payment 2 times in 12 months) with the ERMU, no deposit is required. Failure to provide a social security number will result in the required deposit. B: For all others, a deposit of 2 times estimated average monthly utility bill (electric, water, sewer) will be required before utility service will be extended. With good credit history for a period of 3 years, the deposit will be credited to the customer's utility account. The appropriate interest will be applied to the monetary deposit per State statutes For commercial and industrial customers, a service agreement would need to be signed that identifies the guarantor of their business and the guarantor's social security number. A deposit of 2 times the estimated monthly bill will be required. The deposit shall be in the form of a cash deposit, personal payment guarantee, or an irrevocable letter of credit. The irrevocable letter of credit will be renewed as required and failure to do so will result in a charge equal to the amount of the letter of credit applied to the monthly utility bill. With good payment history for a period of 3 years, the deposit will be credited to the customer's account or personal guarantee/ letter of credit will be returned to customer. For residential, commercial or industrial customers who are disconnected for non-payment, a 2 month estimated utility bill deposit will be required before reconnection. Adopted 07/09/2007