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04-24-2019 HUCMMINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, April 24, 2019 Call to order — 3:00 p.m. President Don Martinez called the meeting to order. Members present: President Don Martinez; Vice President Matt Cheney; Secretary Robert Wendorff; Commissioner Anthony Hanson; GM Jeremy Carter; Attorney Marc Sebora: Absent: Commissioner Monty Morrow Conflict of Interest Commissioner Wendorff declared conflict of interest in voting on agenda item 2b Ratify Payment of Bills; Mr. Wendorff is on this month's payment of bills. Mr. Wendorff will be abstaining. 2. Approve Consent Agenda a. Approve Minutes b. Ratify Payment of Bills Motion by Commissioner Hanson, second by Commissioner Cheney to approve the Consent Agenda. Motion carried unanimously. 3. Approve 2018 Financial Audit — Presentation by Justin McGraw Justin McGraw with Conway, Deuth & Schmiesing audit firm presented the 2018 Hutchinson Utilities Commission independent audit report. Mr. McGraw stated that the audit was conducted in accordance with the Generally Accepted Auditing Standards and Government Auditing Standards. The financial statements of the Commission are presented fairly in the firms' opinion. Mr. McGraw reviewed the Statement of Net Position. Assets did increase in 2018 with liabilities decreasing. Overall Net Position did increase in 2018. Mr. McGraw reviewed the Cash and Investment Balances. Electric Division Operating Revenues and Expenses both increased in 2018. Natural Gas Division Operating Revenues increased with Operating Expenses decreasing. Mr. McGraw summarized the Communications portion of the report and the general recommendations that consist of cross -training and capital asset accounting. Mr. McGraw added that management was very helpful. Motion by Commissioner Hanson, second by Commissioner Wendorff to approve the 2018 Financial Audit. Motion carried unanimously. 4. Approve Financial Statements GM Carter presented the financial statements. Everything is consistent from 2018. GM Carter noted the year to date 2018 numbers are all now updated audited numbers on the Cash -Designations Report. GM Carter added on the Natural Gas Division Graph, Large Industrial and Large Industrial Contracts are now separated out. Mr. Martig noted Natural Gas net income decreased by$121,410, mostly due to the credit on customer bills that was absent in 2018. Purchased Gas was up due to paying more on the spot market for swing gas over March 2018. Motion by Commissioner Cheney, second by Commissioner Wendorff to approve the financial statements. Motion carried unanimously. 5. Open Forum 6. Communication a. City Administrator— Matthew Jaunich — i. 5th Ave project to be starting in June ii. Will be replacing roof at Recreation Center, bids are starting to come in. b. Divisions i. Dan Lang, Engineering Services Manager— 1. Completed NERC audit, no violations were found. 2. Had bid opening for Unit 8 Control System Upgrade on April 2-will need to reject bids and re-advertise. ii. Dave Hunstad, Electric Transmission/Distribution Manager— 1. Finishing up work at plant 2. Starting hospital project next week 3. Season projects starting soon iii. Randy Blake, Production Manager— 1. Dale Sturges will be retiring in April. 2. Construction project; overall coming together. Fagen will be flushing all pipes on May 1 —will take about 5 days to complete. iv. John Webster, Natural Gas Division Manager- 1. Helping out at the plant v. Jared Martig, Financial Manager- 1. Will be meeting with BS&A next month on inventory and Capital Assets. c. Legal — Marc Sebora — Nothing to report d. Human Resources - Brenda Ewing — Nothing to report e. General Manager—Jeremy Carter i. Had first Union sub-committee meeting last week. ii. EDA meeting today iii. APPA webinars next week iv. Working through strategic planning topics v. HDR was here this week for a meeting and tour of the plant. Issues were addressed that HUC has had. vi. Air permitting closed on April 22, this has now shifted to EPA for 15 days. vii. Met with Nextera- exploring options for capacity and energy sales. 2 7. Policies a. Review Policies i. Section 4 of Exempt Handbook ii. Section 4 of Non-Exempt Handbook No changes recommended at this time. b. Approve Changes No changes made to the policies under review. 8. Unfinished Business 9. New Business a. Unit#8 Control System Upgrade— Reject Bids from the April 2 bid opening and Approve Re-Advertisement for Bids. GM Carter presented Unit#8 Control System Upgrade— Reject Bids from the April 2 bid opening and Approve Re-Advertisement for Bids. HUC received four bid submittals but all bids contained errors due to missing or incomplete information as required by the Advertisement for Bids and Bid Specifications. HUC legal recommends that all bid submittals be rescinded and to re-advertise for bids. This will not impact the timeframe. A motion by Commissioner Cheney, second by Commissioner Hanson to Reject Bids from the April 2 bid opening and Approve Re-Advertisement for Bids. Motion carried unanimously. b. Approve Requisition #7907, Unit 1 Steam Piping Repair Mr. Blake presented Requisition #7907, Unit 1 Steam Piping Repair. In July of 2018 staff attempted to operate Unit 1 in combined cycle mode. While bringing the steam turbine up to warming speed a leak was discovered on the superheat line between the boiler and steam turbine. Staff aborted the testing, removed insulation and found multiple leaks. HUC received three quotes for the repair. All quotes include welding of pipes and re-insulating the pipes when welding is completed. A motion by Commissioner Cheney, second by Commissioner Wendorff to Approve Requisition #7907, Unit 1 Steam Piping Repair. Motion carried unanimously. c. Approve Requisition #7908, Unit 1 Painting 3 Mr. Blake presented Requisition #7908, Unit 1 Painting. Unit 1 gas turbine/generator modules were installed in 1993 and are beginning to rust. There are several areas that have deteriorated and now need to be cleaned and repainted. HUC has received three quotes for Unit 1 painting. This work was budgeted for in 2019. A motion by Commissioner Hanson, second by Commissioner Cheney to Approve Requisition #7908, Unit 1 Painting. Motion carried unanimously. d. Approve Requisition #7920, Purchase of Breakers Mr. Hunstad presented Requisition #7920, Purchase of Breakers. On Wednesday April 17, Unit 1 generator breaker failed. While locating a replacement, HUC found Utility Transformer Brokers (UTB), a company that has three breakers that were purchased new in 2017 but never used. UTB opted to go to a different type of breaker and now has these to sell. The breakers were purchased new in 2017 for $47,000 each and UTB is selling them for$37,000 each. This would now be a good opportunity to replace two existing oil filled breakers at the Hutchinson Substation. These are the last two oil breakers left at the Hutchinson Substation and are currently 40 plus years old. A motion by Commissioner Cheney, second by Commissioner Wendorff to Approve Requisition #7920, Purchase of Breakers. Motion carried unanimously. e. Dissolve Current Distributed Generation Policies GM Carter presented dissolving the Current Distributed Generation Policies. GM Carter recapped discussion from the previous month's meeting. There are new law changes related to Distributed Energy Resources (DER)and different processes coming forward. Commission will need to adopt new policies and rules to comply with the new State laws. GM Carter noted with the new process, there are now separate tracks that can be followed to keep all companies moving forward without being slowed down. Discussions were held about the different tracks and what impact HUC may see. Mr. Hunstad added that this would be a positive for HUC as this would have uniformity. GM Carter added MMUA has put together a Resolution, Policy and Rules for all Minnesota Municipals to adopt. This would replace HUC's existing policies and create a more uniform process for DER. HUC recommends to dissolve its current Distributed Generation Policies. A motion by Commissioner Wendorff, second by Commissioner Cheney to Dissolve Current Distributed Generation Policies. Motion carried unanimously. f. Adopt Distributed Energy Resource (DER) Resolution, Policy and Rules GM Carter presented the policy regarding DER and Net Metering and Rules Governing the Interconnection of Co-generation and Small Power Production 4 Facilities. The policy and rules were created by MMUA for all Municipal Utilities to have a consistent process to establish the application procedure and qualification criteria for all customers for the delivery, interconnection, metering and purchase of electricity from distributed energy resource facilities and to comply with applicable laws and rules governing distributed energy resources. A motion by Commissioner Hanson, second by Commissioner Cheney to Adopt Distributed Energy Resource (DER) Resolution, Policy and Rules. Motion carried unanimously. g. Adopt Distributed Energy Resource Resolution Interconnection Process GM Carter noted this interconnection process document is designed to be customer-centric when explaining the steps and details to interconnect DER systems to the distribution grid. A motion by Commissioner Wendorff, second by Commissioner Cheney to Adopt Distributed Energy Resource Resolution Interconnection Process. Motion carried unanimously. h. Northern Natural Gas Capacity release to CenterPoint Energy Services Mr. Webster presented Northern Natural Gas Capacity release to CenterPoint Energy Services. Mr. Webster noted that HUC currently holds tow natural gas transportation contracts with Northern Natural Gas (NNG). HUC maintains the capacity on the NNG pipeline system in the event of a catastrophic failure on the Hutchinson natural gas pipeline. The annual expense for maintaining both contracts in place is $16K. HUC would like to propose to release this capacity to CenterPoint Energy Services from beginning May 1, 2019 for one year with immediate recall rights. A motion by Commissioner Hanson, second by Commissioner Cheney to Approve Northern Natural Gas Capacity release to CenterPoint Energy Services. Motion carried unanimously. At this time, President Don Martinez looked to GM Carter for an additional item to be added to the agenda. i. Approval of HDR Change Order 11 GM Carter presented HDR Change Order 11. GM Carter reminded the Commissioners that CAT had requested having an alternate bid for SCR work from the contractors on the Installation of Units 6 & 7. When the time came to complete the SCR work, CAT would then determine if the installation contractor would complete the work or if CAT would complete the SCR work. Now that CAT has completed the insulation and lagging for the SCR work, HUC needs to approve Fagen Inc's change order 11 to complete the installation of Unit 6 & 7 exhaust systems insulation and lagging including exhaust silencer, stack extension, 5 ductwork, rupture disks, expansion joints and all appurtenances from engine exhaust outlet to stack outlet. After discussion, a motion by Commissioner Hanson, second by Commissioner Cheney to Approve Change Order 11 as proposed. Motion carried unanimously. 10. Adjourn There being no further business, a motion by Commissioner Wendorff, second by Commissioner Cheney to adjourn the meeting at 3:56p.m. Motion carried unanimously. 61/ obert Wendorff cretary ATTEST Don Martinez, esident 6