06-15-2009 CCM JTCI L ICE TIIV THE ELK RIVER CITY UI IL
ELK IV IU ICIL UTILITI S
H L T ELK RIVER CITY H LL
', ~UIV 15, 24D9
Members Present; Mayor I~l.inzing, Councilmembers Zerwas, Motin, westgaard, and
Gumphrey X5:45 p.m.~, ERMU Commissioners Dazyl Thompson and John
Dien
Members Absent; None
Staff Present; City Administrator Lori Johnson, City Attorney Peter Beck, Finance
Director Tim Simon, and City Clerk Tina Allard
ERMU Staff; Director of Gperations Tray Adams, Office Manager/Finance Director
Theresa Slominsl~i, and Special Projects Consultant Vance Zehringer
Also Present; Central Minnesota Municipal Power Agency ~CMMPA} representatives
~nclud~ng: CEQ Bob Schulte, Director of Qperations Steve Thompson,
General Counsel Mile Gavin, and R.~1, Becl~ representatives Bob Davis
and Paul Arsuaga
~ . Call Me~ting,.To Order
_,
Pursuant to due call and nonce thereof, the joint meeting was called to order at 5:30 p.m. by
the Council and by Elk River Municipal Utilities ~ERMU~.
2, Electric Utiiit~Lo:~g`Ran~e Planning
Mr. Adams presented his staff report. He stated that ERMU has begun reviewing options
for power suppliers and that one opportunity came to the forefront that needed to be
addressed by Council due to a deadline for a letter of intent that must be signed by July 15,
2009, if the city had any interest ~n becoming a co-owner in the Big Stone Z~ power plant
project. He introduced Bob Schulte who would be providing the Council details on
CMMPA and the Big Stone IZ project.
Mr. Schulte discussed the following as outlined in his PowerPoint presentation;
what CMMPA is about
Me~nbersl~ip
History
Agency functions
~' Goals
Availability of coal and natural gas
Big Stone ~I project
o Megawatts
o Transmission lines
o Co-owners and ownership shares
o Permitting process
0 2007 MN Next Generation Energy Act
o Agreements
o T;inaelines
Special City Council and ERMU Commission Page 2
June 15, 2Q09
o Costs & Financing
~. Davis, with R.~J, Beck, provided an evaluation of projected power supply costs for
various power supply alternatives under multiple market condition scenarios. He reviewed
current power supply arrangements and resources. Four power supply alternatives were
discussed.
Mr. Davis was asked to outline some of tlae risks for the city to become a co~owner.
Those risks included;
~ Possible Cot charge
Loss of Load
~ Madelings ~scenarios~ were very conservative
Project becomes a "no-go" vote on September 11 by current co-owners
Possible ~3 million loss if there is no closing
interest rates and capital cost runs.
® Fuel costs
Performance at the plant
Project incompletion or delay
Financing
Ms. Johnson asked for an explanation o£ the financing for this project.
Mr. Schulte outlined the following casts to the city for the Big Stone Zl project with 30
megawatt ~ of a 500 Mw plant and a 2015 in-service date.
~ Total capital cost; 9G million
Estimated onetime catchup payment; X2.6 million
Estimated ongoing monthly payments; X51,000
Mr, Schulte stated by .fall 200 all co-owners must have their f nancing for the project in
place at the financial close. Ells River would need to finance ~9Q~110 million if they want 30
megawatts.
Two options were outlined;
Ells River could bring its own money to the table by marketing its own bonds.
CMMI'A could raise the money for the cit~r for its share based on a contract tlae city
would need to sign as collateral. CMMPA sells bonds in the marketplace to raise the
money.
Mr. Becl~ noted tl~e city would most likely have to use CMMPA and the bands would be
revenue bonds. The interest rate would only be valid until 2010 then ERMU would be
responsible for tlae X90-110 ix~illi.on debt.
M~~. Zerhinger stated this would equate to 2.7 cents per kilowatt hours.
It was noted that there would be no payments between the Financial close date and the in-
service date. Users of the facility would end up paying the interest and costs. Tlae benefit
goes to the user who is paying for it.
Special City Council and ERMU Commission
~une 15, 2009
Page 3
Mayor Z~linzing stated rates and the availability of electricity is the most ifnportant
consideration for residents. She stated the Council laas not had an opportunity to look at all
options for ERMU power and should analyze all options further,
The meeting was recessed at 6;50 p.m.
The joint meeting reconvened at $;25 p.m.
Ms. ~ohnson asked for the issues Cauncil would like staff to address.
Counciltnember Gutnphrey questioned tl~.e timeframe the debt would be spread over and
asked what would l~appen if ERMU needed additional megawatts in the future.
Mr. Becl~ stated the payoff on the bonds would be dependent upon wl~at they are selling for.
Mr. Steve Thompson stated CMMPA would act as an advisor and a resource planner for the
city in regards to additional power needs. He stand CMMPA makes recommendations to
each city and each city votes on whether they want to be in a project, He stated CMMPA is
always reviewing future load growth, needs, and alternative power resources, He noted the
city retains its autonomy.
Councilmember Gumphrey expressed concern with investing tl~e city's money into this
project. He questioned if all co~owner investors were in place at this tithe.
Mr. Schulte stated no. He noted 5 were in place and there were still two potential co~owners.
He stated all ca-owners would be in place before Ells River had to commit.
Mr. Beck stated the city would be committed if it sent the letter of intent and the vote on
September l1 was a "go~vote." Mr. Beck further noted the city wouldn't Have to become an
owner but could become a member at a later date, ~A member would be more like a renter
buying power from the plant. This would be similar to the city's current agreement with
Connexus.~
Councihnember Moon expressed concerns with having onl~j one option wit11 tlae Big Stone
Il protect He asked what would happen if the plant goes down, He stated there would be
other alternatives for power with Connexus.
A representar~ve noted that power companies do shaft swap agreements whereby they share
energy off eacl~ other in order to mitigate these "lass of power" concerns. Zt was also noted
that insurance could be purchased but this wouldn't assist the city in a major power loss
immediately.
Councilfnember Motin questioned if rates would be comparable with Connexus. He
questioned if the city would be better off selling ERMU and still get the same rate current
customers receive.
Mr. Zehringer stated this would be unlikely because the other cooperatives would have to
agree to the sell-off.
Commission Dietz stated costs would go up for Connexus and city residents added to the
system would be paying for the increase at that thee; Connexus users currently on the
system would not cover those additional costs.
Special City Council and ERMU Commission Page 4
June ~5, Zao9
Mr, Schulte stated existing members are not going to be happy with paying for the additional
load of any new members and it costs companies more to tape on new members.
Discussion took place on the differences between being a me~rnber and a co-owner.
A representative reviewed membership costs in case the city wanted to be a member father
than a co-owner. He stated it would cost about $2,00 a month for basic planning. CNM.'A
would then be obligated to look for the city's future power resource alternatives, Then the
procurement stage would begin where the city would decide on a project and enter into it.
The city would pay costs to CMMPA for managing the project and wlaen "~n-5erV1Ce" the
city would begin the scheduling phase. Scheduling fees are about ~2,?5 a megawatt hour.
Councilmember Zerwas asl~ed why CMMPA is bothering with wanting the City of Elk River
to participate in this project when there are many more much larger players out there.
Mr, Schulte stated CMMPA is in the business of serving cities, He stated Ells River is a big
fish in a small pond compared to many cities. ale further stated if CMMPA can spread out
its costs more ways, it benefits CMMPA in that their project share is larger, He stated he
would life the city to loin because they would be more of along-term inenaber than other
larger groups who aren't willing to commit because this wouldn't be their main power
resource.
Mayor Klinzing stated the city needs to loop at the whole picture far Elk River's power
needs. She stated the Council leas not been able to review all options in order to make an
informed decision. She stated residents need to l~.ow what the benefits are to having a
municipal utility and whether they outtiveigh other solutions,
MGVED BY COUNCILMEMBER MOTTN AND SECONDED BY
COUNCILMEMBER wESTGAA.RT) TO CALL A SPECIAL JOINT MEETING
OF THE CITY COUNCIL WITH THE ELT RIVER MUNICIPAL UTTLTTTES
COMMISSION ON MONDAY, JUNE Z9, Z009, AT 5:30 P.M., AT CITY HALL TO
CONTINUE DISCUSSION ON LANG RANGE ELECTRIC UTILITY
PLANNING. MOTION CARRIED 5-0.
MOVED BY COMMISSIONER THOMPSON AND SECONDED BY
COMMTSSTONER GUMPHREY TD CALL A SPECIAL JOINT MEETING OF
THE ELK RIVER MUNICIPAL UTTLTTTES COMMISSION wTTH THE CITY
COUNCIL ON MONDAY, JUNE Z9, 2009, AT 5:30 P,M,, AT CITY HALL TG
CONTINUE DISCUSSION ON LONG RANGE ELECTRIC UTILITY
PLANNING, MOTION CARRIED 3-0,
3. Adjournment
.., ., ~~
T ~ ere being no further business, Mayor l~linzing adjourned the meeting at 9:20 .m,
p
..~.~~~
Tina Allard, City Clerk
~~
.., r
Stepha 'e r~linzing, May