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03-26-2025 HUCCPHUTCHINSON UTILITIES COMMISSION AGENDA REGULAR MEETING March 26, 2025 3:00 p.m. 1. CONFLICT OF INTEREST 2. APPROVE CONSENT AGENDA a. Approve Minutes b. Ratify Payment of Bills 3. APPROVE 2024 FINANCIAL AUDIT — PRESENTATION BY JUSTIN MCGRAW 4. APPROVE FINANCIAL STATEMENTS 5. OPEN FORUM 6. COMMUNICATION a. City Administrator b. Divisions C. Human Resources d. Legal e. General Manager 7. POLICIES a. Review Policies i. Section 3 of Exempt Handbook ii. Section 3 of Non -Exempt Handbook b. Approve Changes i. Flextime Program (Exempt) ii. Attendance/Tardiness (Exempt and Non -Exempt) iii. Rest Periods (Non -Exempt) iv. Use of Facilities During Off -Duty Hours (Non -Exempt) 8. UNFINISHED BUSINESS 9. NEW BUSINESS a. Approve HTI Substation Transformer Repair 10. ADJOURN MINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, February 26, 2025 Call to order — 3:00 p.m. President Matt Cheney called the meeting to order. Members present: President Matt Cheney; Vice President Troy Pullis; Secretary Don Martinez; GM Jeremy Carter; Attorney Marc Sebora Absent: Commissioner Kathy Silvernale and Commissioner Tom Lambert Conflict of Interest 2. Approve Consent Agenda a. Approve Minutes b. Ratify Payment of Bills Motion by Commissioner Martinez, second by Commissioner Pullis to Approve the Consent Agenda. Motion carried unanimously. 3. Approve Financial Statements Mr. Martig presented the Financial Statements. Electric Division net loss decreased by $210k over January 2024. Customer usage and revenues were up but offset by lower market sales. Industrial class usage shows a reduction in kwhr's due to usage being based on 32 days in 2025 versus 33 days in 2024. Overall Purchased Power increased by approximately $75k, which is made up of MRES purchases increasing by —$40k and market purchases/MISO costs increasing by —$35K. GM Carter reviewed the Power Cost Adjustment and how it relates to the Rate Stabilization fund. GM Carter spoke of the Cash Designation Reports and Investments which are being kept short for now. Motion by Commissioner Pullis, second by Commissioner Martinez to Approve the Financial Statements. Motion carried unanimously. 4. Open Forum 5. 6. Communication a. City Administrator —Matthew Jaunich i. Spring street projects ii. New development mostly on housing side b. Divisions i. Dan Lang, Engineering Services Manager — 1. Update on McLeod Sub capacitor bank circuit breaker failure in November. Sending remaining two breakers back to Siemens for inspection, per their request. Dave Hunstad, Electric Transmission/Distribution Manager — Nothing to report iii. Mike Gabrielson, Production Manager — Nothing to report iv. Jared Martig, Financial Manager- 1. Continuing to work on audit c. Human Resources — Angie Radke - i. Working on Natural Gas Manager position d. Legal — Marc Sebora — i. Nothing to report e. General Manager — Jeremy Carter i. Update on Prepaid deal ii. Starting general conversations regarding New Ulm Contract iii. APPA Public Power week is happening now in DC. One of the conversation points is Tax -Exempt financing iv. Working on a project related to Renewable Natural Gas. v. Following House Filing 845 vi. Will be meeting with CEO of McLeod Coop along with Mr. Hunstad tomorrow 7. Policies a. Review Policies i. Section 2 of Exempt Handbook ii. Section 2 of Non -Exempt Handbook No changes recommended at this time b. Approve Changes i. Hiring (Exempt and Non -Exempt) ii. Probationary Period Upon Hiring (Exempt and Non -Exempt) iii. Temporary Employees (Exempt and Non -Exempt) iv. Promotions and Transfers (Exempt and Non -Exempt) v. Complaint/Grievance Procedure (Non -Exempt) vi. Discipline (Exempt and Non -Exempt) vii. Conflict of Interest (Exempt and Non -Exempt) viii. Other Employment (Exempt and Non -Exempt) ix. License Requirements for Utility Vehicle Operation (Exempt and Non - Exempt) x. Violence in the Workplace (Exempt and Non -Exempt) xi. Offensive Behavior/Sexual Harassment (Exempt and Non -Exempt) xii. Flowers (Exempt and Non -Exempt) xiii. Petty Cash (Exempt and Non -Exempt) Ms. Radke spoke of the policy changes. There are no substance changes to the policies, all policies are still applicable. Changes are mostly to clean up language. Motion by Commissioner Pullis, second by Commissioner Martinez to Approve Policy Changes. Motion carried unanimously. 2 8. Unfinished Business 9. New Business a. Approval of 3M Natural Gas Transportation and Daily Swing Supply Agreement GM Carter presented Approval of 3M's Natural Gas Transportation and Daily Swing Supply Agreement. 3M's current agreement expires on March 1, 2025 at 9 A.M. This agreement provides transportation rights to 3M on Hutchinson's facilities from March 1, 2025 at 9.00 A.M. through March 1, 2026 at 9.00 A.M. This agreement is identical to the 2024 agreement except for date changes and increased monthly meter fee. All fees are in alignment with the rate realignment structure proposed by the Commission for this customer. Motion by Commissioner Martinez, second by Commissioner Pullis to Approve 3M Natural Gas Transportation and Daily Swing Supply Agreement. Motion carried unanimously. b. Approve Req#010128 —Generator Testing Units 5, 6, and 7 Mr. Gabrielson presented Approval of Req#010128 Generator Testing Units 5, 6, and 7. Every 5 years it is required to complete testing on the generators to ensure the generators are with manufacturing specs. The testing demonstrates proper performance and safeguards the insurability and premium discounts for maintaining HUC's fleet. A motion by Commissioner Pullis, second by Commissioner Martinez to Approve Req#010128 Generator Testing Units 5, 6, and 7. Motion carried unanimously. c. Approve Req#010157 — Modifications to Side Stream Filter Plant 1 Installation Mr. Gabrielson presented Approval of Req#010157 Modifications to Side Stream Filter Plant 1 Installation. Attached is a change order to the 2024 CAPX Side Stream Filter and Pump Replacement project at Plant 1. The change order is to fix how the side stream filter pot is tied to the system. The reconfiguration will enhance and ensure a more constant head PSI on the system to ensure it works as designed. A motion by Commissioner Pullis, second by Commissioner Martinez to Approve Req#010157 Modifications to Side Stream Filter Plant 1 Installation. Motion 3 carried unanimously. d. Approve Hutchinson Substation Construction Contract Mr. Lang presented Approval of Hutchinson Substation Construction Contract. Staff and DGR Engineering are recommending to enter into a purchase agreement with Hydaker-Wheatlake Co. for Hutchinson Substation construction improvements for a contracted price of $6,931,556.12. Construction is scheduled to start Spring 2025 through Fall of 2026. Mr. Sebora has reviewed the contract. A motion by Commissioner Martinez, second by Commissioner Pullis to Approve Hutchinson Substation Construction Contract. Motion carried unanimously. 10. Adjourn There being no further business, a motion by Commissioner Martinez, second by Commissioner Pullis to adjourn the meeting at 3:27p.m. Motion carried unanimously. 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Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 7, 2025. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Commission are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2024. We noted no transactions entered into by the Commission during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Management's estimate of the allowance for doubtful accounts is based on historical electric and natural gas revenues, historical loss levels, and an analysis of the collectability of individual accounts. We evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of depreciation and amortization is based on the number of years an asset is in service. We evaluated the key factors and assumptions used to develop the depreciation estimate in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of lease terms and discount rates on leases is based on information stated in the lease agreement and expectations of the lease. The lease terms and discount rates determine the amount of interest that will be recorded during each reporting period as well as the amount of right to use assets and lease liability that is reported at the end of a reporting period. Wittman Office 3311 Third at 5W, Ste 2 PO Box 570 "ppw'"yw,��`ryryilpyl'�pa"ynary, MIN 56201 5320) 235"..7311,,',.. (888) 388-1040 Litchfield Office 820 Sibley Ave N Litchfieicl, MN 55355 (320) 693.7975 SIrtett Office Ste 110 2351 CcnnectucuartAve S arte (1, MN 56377 4320) 252.7565 (800)862-1337 Members: American Institute of Certified PuNic Accountants„ Minnesota Society of C'ertufied Pubbc Accetuntarls Significant Audit Findings (Cont'd) Qualitative Aspects of Accounting Practices (Cont'd) Management's estimate of pension related items and other postemployment benefit related items are based on actuarial valuations performed by consultants specializing in those areas. We evaluated the key factors and assumptions used to develop those estimates in determining that it is reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated March 26, 2025. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Commission's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Commission's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. 2 Other Matters We applied certain limited procedures to Management's Discussion and Analysis, the Schedule of Proportionate Share of the Net Pension Liability, the Schedule of Employer Contributions, the Schedule of Changes in the Commission's Total OPEB Liability and the related notes, which is required supplementary information that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurances on the required supplementary information. We were engaged to report on the statements and schedules listed in the table of contents as supplementary information, which accompany the financial statements but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the Organizational Data section, which accompany the financial statements but are not required supplementary information. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the use of the Commission and management of Hutchinson Utilities Commission and is not intended to be and should not be used by anyone other than these specified parties. CONWAY, DEUTH & SCHMIESING, PLLP CPAS & ADVISORS LITCHFIELD, MINNESOTA March 26, 2025 3 This page intentionally left blank z O U U O U U W_ J_ H z O U z T- r N O N M N O N N N O N N O N O N O N I— — LO O I-- O L M r— CF) LO LO N N— M O M LO 00 (O r— O N q9t M 00 M qqt r— 00 N (0 N — M q9t (O I-- O (O O I— M Mq9t O N— N (O O N 00 M A N (O L O 00 LO O O .1 qqt (O (O .1 N Lf � (O (O � � M O M Lf 00 N qqt LOqqt N LO— L LO 00 M M co N N M 00 00 I— (O (O N 00 N O O (O — (O LO— (O O— — M LO LO N N I— O N LO 00 I— (0 O 00 M I— r— N (O O M N L N �i M N K} (A (A (A 00 Nt Nt 00 Nt 00 O I-- Nt LO O co co co O M O 00 I-- I-- N O N O I-- M 00 I-- M O Nt LO O M N 00 00 Nt I-- O O� LO Nt Nt 00 — CO O Nt I-- I-- LO O 00 Nt I-- co Nt co LO O I-- — O M N — N M N O .�i L L O O L (O N — I� O � O O 00 00 O— 00 L O L M (0 O M N LOI-t O O Nt Nt M O ---t 00 M I-- N O M — I-t O Nt O M O — O— N N— M Nt I— O CO — O CO I-- co Nt O LO M LO 00 00 LO 00 00 M co O M NLO CO I-- Nt N N N N — — N 613 1 1 1 1 61I I (f} 1 1 1 1 (f} M O I-- ��1-- O M O co co Nt I-- 00 LO LO 00 O I-- N co 00 co M I-t M N O M M I— M O N Nt LO — O O N O O I-- LO N LO O O N O 00 00 co LO LO N CO I-t O— D LO 00 O O O co O L O CO- (O — N M w O (O N W L 0 0-- (O —� O M N— O M I-t NI-t O (O LO— Nt O [-- I-- co N co 00 LO I-- N O LO O O— I-t M— I-t O ff— M I-t Nt N I-- LO 00 M M N co co (0 O 00 LO O O LO co N N CO LO M- LO O Nt co co M — — M (fi 1 1 1 1 61I I (f} 1 1 1 1 (f} I— M r— O LO N r— O M r— O 00 O —�— O M B O E M M M MLO M M O N I— LO M N N I— (O O N O N (O O r— O cc ccI� LQ cco C cc (Q W rn qq I� rn Oo (Q cc L � (fl M-qqt I-- - O (O (O M O B LO Nt O O�q9t N (O O I� M N M N N (O O M LO 00 qqt M M (O M (O O M N LO (O 00 O I— LO — N (O (O 00 O 00 M LO (O qqt M I— N 00 O 00 (O O O V O O VLf O V MLf M— Lf O V M N N N LO Oqqt O N O O O r— N O LO N M LO M O 00 O O M LO M — LO 0 — O M N r— (D LO N (O 00 N — N 00 I— (0 (0 00 O M N (0 O I— 00 00 (0 q9t N 00 LO (O N LO — (O 00 qqt N M O 00 N O N V (O V 00 M I— 0 0 0 0 00 O I� Lf 00 O (O O (O I-- qqt — qqt 00 (O O M O — N 00 (O LO L (O O O I— qqt — M LO (O LO (O LO LO 00 I— LO LO O S Lf 00 00 N � � M N M O H M O N N N N 61� 1 1 1 1 (111-II (1,- 1 1 1 1 (111-II a) a) c c a) CL a) C� X X W W to N () to N O N to N 0) 0) L 0) y) C C c 0) to N c C C z 0) 0) C 0) W 0) O 0) Co C (2) (2) O > a) W to a) W to 0 CO Q' U L W � � d O L W � � d a) �_ () 0) 0) c CO 0) O CO S cu � z z �>/ � c N CO 0) O (0 S CB z U L . () a) .- a) O U _ CO to O a) . a) a) CL C CO U _ c Q WOO 0) Q "'00 O c 0) 0) > c L _ �.�0 CB CL coo 0) Q � "'00 O c 0) I) = U 0) to 0) F L L u z CO 0 O N � L z (0 W fn C 0) to O O L O U U N E= O to O L O .. U wEC —aU—)E 0 0-O~ z 0a�0 s 0 0-O~ z HUTCHINSON UTILITIES COMMISSION ELECTRIC DIVISION Operating Revenues & Expenses and Net Nonoperating Revenues (Expenses) $35,000,000 $29, 696, 029 $32,116, 526 $30, 463, 813 $29,137, 647 $30 000 000 $29,884,530 $28,202,457 $29,349,429 $27,671,184 $26,460,616 $25,000,000 $26,516,829 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $1,644,875 $437,386 $ $0 334,474 $(345,928) $(842,544) -$5,000,000 2020 2021 2022 2023 2024 ®Total Operating Revenues ®Total Operating Expenses ®Net Nonoperating Revenues (Expenses) Change in Net Position $2,000,000 $1,500,000 $1,588,662 $1,000,000 $500,000 $0 -$500,000 000, 000 $ (534, 429) $ (709, 586) -$1 , $(1,131,989) -$1,500,000 -$2,000,000 -$2,500,000 $ (2, 495, 257) -$3,000,000 2020 2021 2022 2023 2024 ®Change in Net Position 5 HUTCHINSON UTILITIES COMMISSION ELECTRIC DIVISION Major Revenue by Source 11 000 000....................................................................................................................................................................................................................................................................................................................................................................................................................................................... $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2020 2021 2022 2023 2024 ■Residential ®General Service 0Industrial Purchased Power & Fuel Costs Compared to Total Sales $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 2020 2021 2022 2023 2024 ®Purchased Power - Electric ®Total Electric Sales HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS ELECTRIC DIVISION YEARS ENDED DECEMBER 31, 2024 AND 2023 The Statement of Revenues and Expenses set forth the results of the operations in detail for the years ended December 31, 2024 and 2023. Operating revenues, kilowatt hours (KWH) sold, and average revenue per kilowatt hour sold by class of service are as follows: Year Ended December 31, 2024 Revenue Per Amount KWH Sold KWH INWIN& Residential $ 5,797,023 52,253,044 $ 0.1109 All Electric 243,964 2,242,174 0.1088 Small General Service 1,841,287 17,334,013 0.1062 Large General Service 7,209,474 77,961,863 0.0925 Industrial 8,644,375 109,141,000 0.0792 Sale for Resale 3,656,427 18,020,000 0.2029 Street Lighting 124,399 31,446 3.9560 $ 27,516,949 276,983,540 $ 0.0993 Year Ended December 31, 2023 Revenue Per Amount KWH Sold KWH INWIN& Residential $ 5,660,328 53,848,241 $ 0.1051 All Electric 253,750 2,456,479 0.1033 Small General Service 1,851,979 18,394,997 0.1007 Large General Service 6,963,455 79,393,020 0.0877 Industrial 8,065,784 106,372,000 0.0758 Sale for Resale 5,120,534 46,626,000 0.1098 Street Lighting 139,778 61,008 2.2911 $ 28,055,608 307,151,745 $ 0.0913 7 HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS ELECTRIC DIVISION YEARS ENDED DECEMBER 31, 2024 AND 2023 KWH Sold 31,446 Street Lighting 61,008 18, 020, 000 Sale for Resale 46,626,000 109,141,000 Industrial 106,372,000 77, 1,863 7 Large General Service 79,393,020 17, 334, 013 Small General Service 18,394,997 2,242,174 All Electric 2,456,479 52,253,044 Residential 53,848,241 0 50,000,000 100,000,000 150,000,000 02024 KWH Sold ®2023 KWH Sold Street Lighting Sale for Resale Industrial Large General Service Small General Service All Electric Residential Average $/KWH I.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 02024 Revenue Per KWH 02023 Revenue Per KWH HUTCHINSON UTILITIES COMMISSION NATURAL GAS DIVISION Operating Revenues & Expenses and Net Nonoperating Revenues (Expenses) 971 2,893 Change in Net Position $4, 000, 000 $3, 500, 000 $3,724,565 $3, 000, 000 $2,500,000 $2,346,080 $2, 000, 000 $2,118, 476 $1,500,000 $1,000,000 $1,187,743 $1,153,613 $500,000 $0 2020 2021 2022 2023 2024 ®Change in Net Position I HUTCHINSON UTILITIES COMMISSION NATURAL GAS DIVISION Major Revenue by Source $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 2020 2021 2022 2023 2024 ®Residential ®Commercial 0Industrial 10 HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS NATURAL GAS DIVISION YEARS ENDED DECEMBER 31, 2024 AND 2023 The Statement of Revenues and Expenses set forth the results of the operations in detail for the years ended December 31, 2024 and 2023. Operating revenues, cubic feet sold, and average revenue per thousand cubic feet sold by class of service are as follows: CLASS Residential Commercial Large Industrial CLASS Residential Commercial Large Industrial Year Ended December 31, 2024 Revenue Per Thousand Amount CF Sold MCF $ 3,526,225 2,526,865 5,234,322 $ 11,287,412 Amount 367,176,151 $ 9.6036 282,949,225 8.9305 773,724,270 6.7651 1,423,849,646 $ 7.9274 Year Ended December 31, 2023 $ 3,949,946 2,888,770 5,138,193 $ 11,976,909 Revenue Per Thousand CF Sold MCF 397,209,731 $ 9.9442 309,694,761 9.3278 786,468,863 6.5332 1,493,373,355 $ 8.0200 11 HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS NATURAL GAS DIVISION YEARS ENDED DECEMBER 31, 2024 AND 2023 CF Sold Average $/MCF 12 This page intentionally left blank HUTCHINSON UTILITIES COMMISSION SCHEDULE OF FINDINGS ON ACCOUNTING ISSUES AND INTERNAL CONTROLS DECEMBER 31, 2024 We noted certain matters involving the internal control structure and its operation that we consider being deficiencies in internal control under standards established by the American Institute of Certified Public Accountants. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. INTERNAL CONTROL The objective of internal accounting control is to provide reasonable, but not absolute, assurance as to the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a system of internal accounting control should not exceed the benefits derived and also recognizes that the valuation of these factors necessarily requires estimates and judgments by management. It should be recognized that within the Commission, an inherent risk is present with certain positions. It is very common for entities such as Hutchinson Utilities Commission, to assign many major responsibilities to a few key individuals in an attempt to operate within limited budgets. The inherent risk is again addressed only to maintain the awareness of the internal control structure and to encourage the Commission's continual review of financial information at monthly meetings. GENERAL RECOMMENDATIONS Throughout the course of the audit, we spoke with management regarding certain items that we see as an opportunity to improve. None of these were considered significant within the scope of the audit. The items discussed requiring action have been resolved or are in the process of resolution. We would like to acknowledge the assistance and courtesies extended to us by the personnel of the Hutchinson Utilities Commission. 13 HUTCHINSON UTILITIES COMMISSION AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 CONWAY, DEUTH & SCHMIESING, PLLP CPAS & ADVISORS LITCHFIELD, MINNESOTA This page intentionally left blank HUTCHINSON UTILITIES COMMISSION TABLE OF CONTENTS DECEMBER 31, 2024 ORGANIZATIONAL DATA INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis BASIC FINANCIAL STATEMENTS Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of Net Pension Liability Schedule of Employer Contributions Schedule of Changes in the Commission's Total OPEB Liability Notes to Required Supplementary Information SUPPLEMENTARY INFORMATION Combining Statement of Net Position Combining Schedule of Revenues and Expenses Schedule of Division Cash Flows Statement of Net Position - Electric Division Detailed Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Electric Division Statement of Net Position - Natural Gas Division Detailed Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Natural Gas Division 1 2-4 5-9 10 11 12-13 14-37 38 39 40 41-47 48 49 50-51 52 53-55 56 57-59 HUTCHINSON UTILITIES COMMISSION TABLE OF CONTENTS DECEMBER 31, 2024 COMPLIANCE SECTION Independent Auditor's Report on Minnesota Legal Compliance Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Summary Schedule of Prior Audit Findings PAGE We 61-62 63 HUTCHINSON UTILITIES COMMISSION ORGANIZATIONAL DATA DECEMBER 31, 2024 A Light and Power Commission was formed under the provisions of an amendment to the Hutchinson City Charter in 1935; the Commission was charged with the operation of the Municipal Electric Plant. Charter amendments approved December 17, 1954 provided for a change in the name to Hutchinson Utilities Commission. Additional duties under that amendment provided for the control and management of a municipal gas distribution system. A revised city charter was adopted at a special election September 17, 1987. Some of the pertinent sections of this new charter are briefly summarized in the following paragraphs. The Commission shall have control and management of the Light Plant, the Light Plant distribution system, the Gas Plant and the Gas Plant distribution system. The Commission shall consist of five persons, who shall be appointed by the Council. A member shall be appointed every year for a term of five years, to fill the place of the member whose term has expired. No member shall be appointed to more than two successive terms. The members of the Commission shall receive compensation for their services as determined annually by the Council. The Commission's charter approves one person on the Commission may live outside the City of Hutchinson limits as long as they are a ratepayer. The Commission shall provide for its own organization and rules of procedure and annually shall elect a president and vice president from among its members. It shall also appoint a secretary who may or may not be a member of the Commission. The Commissioners and their official titles were as follows: Don Martinez Matt Cheney Kathy Silvernale Troy Pullis Anthony Hanson President Vice President Secretary Commissioner Commissioner This page intentionally left blank INDEPENDENT AUDITOR'S REPORT Members of the Hutchinson Utilities Commission Hutchinson, Minnesota Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2024 and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Commission, as of December 31, 2024, and the respective changes in financial position, and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Commission, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Report on Partial Comparative Information We have previously audited the Commission's 2023 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 27, 2024. In our opinion, the partial comparative information presented herein as of and for the year ended December 31, 2023 is consistent, in all material respects, with the audited financial statements from which it has been derived. Refer to Note 17 of the Notes to the Financial Statements for additional information regarding the prior year partial comparative information. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Wiit(mar Office 331 Third St SW, Ste 2 PO Box 5!0 Wilirrnar, MN 56201 (320) 235-3311 (888) 388.1040 Benson Office 1209 Pad fic: Ave, Ste 3 Benson, MN 56215 (320) 843-2302 Morris Office 401 Attanticw Ave Morris, MN! 56267 (320) 589.2602 ww maltya raxom Litchfield Office 820 Sibtey Ave N Utctmtie(d, MN 55355 (320) 693-7975 Sartetl Office Ste 110 235,1 t onnedic ut Ave Sartetl, MN 5377 (20) 252.7565 (800)862,1337 Members: Arrrcnricarr Gnsfitute of Certified Pu.ubtic Accountants, Minnesota "society of Certified d Prubhc AC¢:oun:anEs In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Commission's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Commission's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, the Schedule of Proportionate Share of Net Pension Liability, the Schedule of Employer Contributions, the Schedule of Changes in the Commission's Total OPEB Liability and the related notes as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Commission's basic financial statements. The statements and schedules listed in the table of contents as supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the organizational data section but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 26, 2025 on our consideration of the Commission's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Commission's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission's internal control over financial reporting and compliance. CONWAY, DEUTH & SCHMIESING, PLLP CPAS & ADVISORS LITCHFIELD, MINNESOTA March 26, 2025 4 This page intentionally left blank REQUIRED SUPPLEMENTARY INFORMATION This page intentionally left blank HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2024 Overview of the Financial Statements Hutchinson Utilities Commission is a fund of the City of Hutchinson, Minnesota, and is responsible for the full operation and management of the electric and natural gas systems of the City. The annual report of Hutchinson Utilities Commission includes the financial statements, the independent auditor's report, and notes detailing the financial statements and this management's discussion and analysis report. The report also includes supplementary informatior for each of Hutchinson Utilities Commission's divisions. Financial Statements Required The financial statements report information about Hutchinson Utilities Commission using accounting methods similar to those used by private sector companies. These statements offer short-term and long-term financial information about its activities. The Statement of Net Position includes all of the Commission's assets and deferred outflows of resources, liabilities and deferred inflows of resources, and net position and provides information regarding the nature and amount of investments in various assets and obligations to the Commission's creditors. They also provide the basis for computing rate of return, evaluating the capital structure, and determining the liquidity and financial flexibility of the Commission. The Statement of Revenues, Expenses and Changes in Net Position accounts for all the current year's revenues and expenses. This statement measures the success of operations over the past year and can be used to determine whether all costs are recovered through user fees and other charges. This statement measures the Commission's profitability and credit worthiness. The Statement of Cash Flows provides information about the Commission's cash receipts and cash payments during the reporting period. This statement reports cash receipts, cash payments, and net changes in cash resulting in cash balances during the reporting period. Financial Statement Analysis Total gross investment in capital and right to use assets decreased to $146,124,457 in 2024 from $163,584,490 in 2023 Capital and right to use assets decreased $17,460,033 due to generators in Plant 2 Unit 1 being disposed of in the current year. Operating revenues decreased and operating expenses decreased from 2023 by $258,887 and $428,200, respectively. Operating income increased from 2023 by $169,313. The primary decrease in operating revenues and operating expenses was due to a decrease in electric and natural gas sales, and a decrease in purchased power/gas expense in 2024, by $538,659 and $689,497, respectively, from 2023. The primary area of the increase in operating income was due to an increase in gas transportation contracts. 5 HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2024 Significant Transactions In 2024, the Commission transferred $2,195,248 per agreement to the City of Hutchinson. Condensed Financial Statements A summary of the Statement of Net Position is presented in Table 1. Table 1 Condensed Statement of Net Position Increase 2024 2023 (Decrease) Current Assets Restricted Assets Net Capital and Right to Use Assets Total Assets Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Current Liabilities Long -Term Liabilities Total Liabilities Deferred Inflows of Resources Net Position Net Investment in Capital Assets Unrestricted Total Net Position Total Liabilities, Deferred Inflows of Resources and Net Position $ 27,483,694 $ 31,333,890 $ (3,850,196) 3,255,256 3,255,656 (400) 75,641,274 71,936,753 3,704,521 106,380,224 106,526,299 (146,075) 457,012 988,741 (531,729) $ 106,837,236 $ 107,515,040 $ (677,804) $ 4,112,345 $ 3,703,719 $ 408,626 21,627,147 25,700,332 (4,073,185) 25,739,492 29,404,051 (3,664,559) 1,725,932 1,331,753 394,179 60,750,605 54,151,882 6,598,723 18,621,207 22,627,354 (4,006,147) 79,371,812 76,779,236 2,592,576 $ 106,837,236 $ 107,515,040 $ (677,804) A HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2024 Condensed Financial Statements (Cont'd) A summary of the Statement of Revenues, Expenses and Changes in Net Position is presented in Table 2. Table 2 Condensed Statement of Revenues, Expenses and Changes in Net Position Increase 2024 2023 (Decrease Operating Revenues Operating Expenses Cost of Operations Depreciation and Amortization Total Operating Expenses Operating Income (Loss) Nonoperating Revenues (Expenses) Change in Net Position Net Position, Beginning of Year Net Position, End of Year Budgetary Highlights $ 41,741,827 $ 42,000,714 $ (258,887) 36,653,982 36,942,998 (289,016) 4,312,636 4,451,820 (139,184) 40,966,618 41,394,818 (428,200) 775,209 605,896 169,313 1,817,367 1,030,598 786,769 2,592,576 1,636,494 956,082 76,779,236 75,142,742 1,636,494 $ 79,371,812 $ 76,779,236 $ 2,592,576 The Commission adopts an annual Operating Budget and a Capital Improvement Budget. Because of its enterprise nature and in order to comply with Federal Energy Regulatory Commission accounting and reporting requirements, the budgets are not operated as statutory budgets. The Commission and Utilities staff review budget results monthly and the budget is used as a financial management tool. A summary of the 2024 Budget Analysis is presented in Table 3. 7 HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2024 Budgetary Highlights (Cont'd) Table 3 Condensed Budget Analysis Operating Revenues Operating Expenses Cost of Operations Depreciation and Amortization Expense Total Operating Expenses Operating Income (Loss) Nonoperating Revenues (Expenses) Change in Net Position Net Position, Beginning of Year Net Position, End of Year 2024 Budget 2024 Actual Over $ 43,861,069 $ 41,741,827 $ (2,119,242) 38,302,041 36,653,982 (1,648,059) 4,430,000 4,312,636 (117,364) 42,732,041 40,966,618 (1,765,423) 1,129,028 775,209 (353,819) 264,524 1,817,367 1,552,843 1,393,552 2,592,576 1,199,024 76,779,236 76,779,236 $ 78,172,788 $ 79,371,812 $ 1,199,024 Actual operating revenues were $2,119,242 under budgeted revenues while operating income (loss) was under budget by $353,819. The actual operating revenues for the Commission had a variance of approximately 4.83% from budgeted operating revenues. Operating expenses were $1,765,423 less than budgeted. Gas for Generation Supervision and Engineering Distribution, and Purchased Natural Gas expenses were lower than budgeted due to a decrease in Gas demand for power generation and less engineering fees than the prior year. In 2018, the Commission entered into an agreement for a specific Payment in Lieu of Taxes (PILOT). The agreement requires the Commission to make payments equaling $1,942,628 in 2024. Starting in calendar year 2007, the Commission reallocated its common expenses between the two divisions. Formulas were developed and used to establish the common expenses between the two utilities, in particular, Customer Service and Collection Accounts and the Administrative and General Accounts. Capital and Riaht to Use Assets and Lona-Term Liabilitv Activit The Commission's investment in capital and right to use assets decreased to $146,124,457 in 2024. This is a decrease of $17,460,033 from 2023. Refer to Note 5 of the Notes to the Financial Statements for the Commission's 2024 capital asset activity. At year-end, the Commission had $16,600,000 in bonds outstanding and $985,052 in compensated absences. Refer to Note 6 of the Notes to the Financial Statements for a schedule showing the Commission's long-term liability activity. At 2024 year-end, the Commission had a Solar Array Land Lease Liability of $758,024. See Note 7 in the Financial Statements for a schedule showing the Commission's long-term lease activity. 0 HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2024 Economic Factors and Next Year's Budget The Commission considered many local community and external energy industry factors when setting the Electric & Gas Division fiscal year 2024 budgets, rates, and fees that will be charged to customers. Of significance was the continual increase in costs associated with purchased electrical wholesale power and transmission fees. Conversely, the Gas Division continues to see favorable prices for the procurement of the natural gas commodity but is budgeting for higher prices. Both divisions continue to see consistent energy consumption forecasts in the near future. The Commission continued to "bundle" its electric wholesale rate to its retail customers. What this means is the operating income the Commission receives from its wholesale KWHR sales is applied to the wholesale rate it charges its retail customers. This "bundling" effect reduces the overall blended cost of wholesale power which aids in retail rate pricing stability. Contact Information Any questions regarding information contained in this report and requests for additional information should be addressed to the Hutchinson Utilities Commission, 225 Michigan Street SE, Hutchinson, MN 55350 or by phone at (320) 587-4746. 0 This page intentionally left blank BASIC FINANCIAL STATEMENTS This page intentionally left blank HUTCHINSON UTILITIES COMMISSION STATEMENT OF NET POSITION DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2023 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $68,111 and $116,824, Respectively) Interest Receivable Sales Tax Receivable Inventory Prepaid Items Total Current Assets Noncurrent Assets Restricted Assets Cash and Investments Capital and Right to Use Assets 2024 2023 $ 20, 596, 789 $ 24, 524, 926 3,704,825 3,620,417 148,628 141,412 397,232 318,168 2,543,644 2,500,144 92,576 228,823 27,483,694 31,333,890 3,255,256 3,255,656 Assets Not Being Depreciated or Amortized 7,491,453 6,369,189 Other Capital and Right to Use Assets, Net of Depreciation and Amortization 68,149,821 65,567,564 Net Capital Assets 75,641,274 71,936,753 Total Noncurrent Assets 78,896,530 75,192,409 Total Assets 106,380,224 106,526,299 Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Accounts Payable Customer Deposits Unearned Revenue Accrued Expenses Interest Salaries Payable Total Current Liabilities Long -Term Liabilities Net Pension Liability Total OPEB Liability Other Long -Term Liabilities Due Within One Year Other Long -Term Liabilities Due in More Than One Year Total Long -Term Liabilities Total Liabilities Deferred Inflows of Resources Net Position Net Investment in Capital Assets Unrestricted Total Net Position Total Liabilities, Deferred Inflows of Resources and Net Position See Accompanying Notes to the Financial Statements 457.012 988.741 $ 106, 837, 236 $ 107, 515, 040 $ 2,960,729 $ 2,641,109 294,610 314,101 416,677 349,199 49,688 58,538 390,641 340,772 4,112,345 3,703,719 2,442,997 3,701,830 53,173 85,461 3,026,031 2,909,995 16,104, 946 19, 003, 046 21,627,147 25,700,332 25,739,492 29,404,051 1,725,932 1,331,753 60,750,605 54,151,882 18,621,207 22,627,354 79,371,812 76,779,236 $ 106, 837, 236 $ 107, 515, 040 10 HUTCHINSON UTILITIES COMMISSION STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 OPERATING REVENUES Electric Energy Sales Natural Gas Sales Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Production Operations Maintenance Purchased Power/Gas Other Power Supply Transmission Operations Maintenance Distribution Operations Maintenance Customer Accounts Expense Sales Expense Administrative and General Depreciation and Amortization Expense Contribution to City of Hutchinson Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR See Accompanying Notes to the Financial Statements 11 2024 2023 $ 27,516,949 $ 28,055,608 11,287,412 11,976,909 2,937,466 1,968,197 41,741,827 42,000,714 3,981,539 4,318,980 906,474 828,414 19,167, 749 19,688, 330 328,766 296,850 3,084,503 3,409,151 94,607 47,429 2,156,923 2,126,038 1,305,405 1,043,215 538,413 502,610 247,274 208,674 2,647,081 2,568,771 4,312,636 4,451,820 2,195,248 1,904,536 40,966,618 41,394,818 775,209 605,896 1,241,242 1,354,735 23,194 7,263 970,210 244,976 74,421 219,066 219,065 (710,766) (795,441) 1,817,367 1,030,598 2,592,576 1,636,494 76,779,236 75,142,742 $ 79,371,812 $ 76,779,236 HUTCHINSON UTILITIES COMMISSION STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers Payments Received from Other Sources Payments to Suppliers Payments to Employees Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Other Noncapital Income (Expense) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Additions to Utility Plant Proceeds from Sale of Assets Principal Payments on Long -Term Liabilities Interest Paid on Long -Term Liabilities Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest Income Net Increase (Decrease) in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION OF CASH AND CASH EQUIVALENTS Current Assets - Cash and Investments Restricted Assets - Cash and Investments Total Cash and Cash Equivalents See Accompanying Notes to the Financial Statements 12 2024 2023 $ 38,767,940 $ 41,096,708 2,858,402 1,874,246 (30,779,026) (32,823,447) (5,665,395) (4,955,434) 5,181,921 5,192,073 993,404 252,239 (8,072,320) (2,682,081) 129,584 (2,675,536) (2,594,582) (719,616) (802,437) (11,337,888) (6,079,100) 1,234,026 1,331,607 (3,928,537) 696,819 27,780,582 27,083,763 $ 23,852,045 $ 27,780,582 $ 20,596,789 $ 24,524,926 3,255,256 3,255,656 $ 23,852,045 $ 27,780,582 HUTCHINSON UTILITIES COMMISSION STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 RECONCILIATION OF OPERATING INCOME (LOSS) TO CASH FLOWS FROM OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Depreciation and Amortization Pension Related Adjustments OPEB Related Adjustments (Increase) Decrease in Assets Accounts Receivable Sales Tax Receivable Inventory Prepaid Items Increase (Decrease) in Liabilities Accounts Payable Customer Deposits Unearned Revenue Salaries Payable Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES Amortization of Premium on Bonds Payable See Accompanying Notes to the Financial Statements 13 2024 2023 $ 775,209 $ 605,896 4,312,636 4,451,820 (337,451) 174,465 (27,762) (12,206) (84,408) 727,666 (79,064) (93,951) (43,500) (287,172) 136,247 (40,347) 319,620 (737,798) (19,491) (12,674) 67,478 349,199 49,869 35,547 112,538 31,628 $ 5,181,921 $ 5,192,073 219,066 219,065 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, is governed by five members who are appointed by the Council of the City of Hutchinson, Minnesota. The accompanying financial statements present only the Hutchinson Utilities Commission fund and are not intended to present fairly the financial position of the City of Hutchinson, Minnesota. The financial statements present the Commission and its component units. The Commission includes all funds, organizations, institutions, agencies, departments and offices that are not legally separate from such. Component units are legally separate entities for which the Commission is financially accountable, or for which the exclusion of the component unit would render the financial statements of the Commission misleading. The criteria used to determine if the Commission is financially accountable for a component unit includes whether or not 1) the Commission appoints the voting majority of the potential component unit's governing body and is able to impose its will on the potential component unit or is in a relationship of financial benefit or burden with the potential component unit, or 2) the potential component unit is fiscally dependent on and there is a potential for the potential component unit to provide specific financial benefits to, or impose specific financial burdens on, the Commission. As a result of applying the component unit definition criteria above, the Commission does not have any component units. B. FUND ACCOUNTING The operations of the Commission are recorded as a proprietary fund. The proprietary fund is used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION The financial statements include the operations of the City of Hutchinson Municipal Utilities. The Electric and Natural Gas divisions are treated as a single enterprise fund of the City of Hutchinson, Minnesota. The Utilities are governed by the Hutchinson Utilities Commission, which is appointed by the City Council. No other operations are controlled by the Hutchinson Utilities Commission. The accounts of the Commission are organized on the basis of fund accounting. The operation of the fund is accounted for with a separate set of self -balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenues, and expenses. Government resources are allocated to and accounted for in the individual fund based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. 14 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION (Cont'd) The proprietary fund is accounted for using the accrual basis of accounting and economic resources measurement focus. Revenues are recognized when earned, and expenses are recognized when incurred. Revenue from electricity and gas sales is reflected in the accounts only at the time such revenue is actually billed to customers. Accordingly, no recognition is given in the accounts for revenue from sales between established cycle billing dates. The proprietary fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. It is generally the Commission's policy to use restricted resources first, then unrestricted resources as they are needed when an expense is incurred for purposes for which both restricted and unrestricted net position is available. D. DEPOSITS AND INVESTMENTS The Commission's cash and cash equivalents are considered to be cash on hand, deposits and highly liquid debt instruments purchased with original maturities of three months or less from the date of acquisition. The Commission may invest in the following types of investments as authorized by Minn. Stat. §§118A.04 and 118A.05: (1) securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress, except mortgage - backed securities defined as "high risk" by Minn. Stat. §118A.04, subd. 6; (2) mutual funds through shares of registered investment companies provided the mutual fund receives certain ratings depending on its investments; (3) general obligations of the State of Minnesota and its municipalities, and in certain state agency and local obligations of Minnesota and other states provided such obligations have certain specified bond ratings by a national bond rating service; (4) time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of United States banks; (5) commercial paper issued by United States corporations or their Canadian subsidiaries that is rated in the highest quality category by at least two nationally recognized rating agencies and matures in 270 days or less; and 15 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) D. DEPOSITS AND INVESTMENTS (Cont'd) (6) with certain restrictions, in repurchase agreements, securities lending agreements, joint powers investment trusts, and guaranteed investment contracts. Cash and investments were comprised of deposit accounts, money market accounts, municipal bonds, FFCB bonds, FHLB bonds, US Treasury Notes, US Treasury Strips, and brokered certificates of deposit. The Commission categorizes its fair value measurements within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. The Commission has an investment policy in place that addresses interest rate risk, credit risk, concentration of credit risk and custodial risk as follows: Custodial Credit Risk - Deposits: For deposits, this is the risk that in the event of bank failure, the Commission's deposits may not be returned to it. Minnesota Statutes requires that all Commission deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110 percent of deposits in excess of FDIC Insurance. The Commission's investment policy states the collateralization level will be 110% of the market value of principal and accrued interest. When the pledged collateral consists of notes secured by first mortgages, the collateral level will be 140% of the market value of principal and accrued interest. Authorized collateral includes the obligations of the U.S. Treasury, agencies, and instrumentalities, shares of investment companies whose only investments are in the aforementioned securities, obligations of the State of Minnesota or its municipalities, bankers' acceptances, futures contracts, repurchase and reverse repurchase agreements, and commercial paper of the highest quality with a maturity of no longer than 270 days, as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota statutes require that securities pledged as collateral be held in safekeeping by the Commission treasurer or in a financial institution other than that furnishing the collateral. Interest Rate Risk - This is the risk that market values of securities in a portfolio would decrease due to changes in market interest rates. The Commission's investment policy states the Commission should manage their interest rates based on safety, liquidity and the overall rate of return on the investment. The portfolio should contain both short-term and long-term investments to meet anticipated cash flow requirements. Extended maturities may be utilized to take advantage of higher yields; however, no investment shall be made with a term of more than ten years. Credit Risk - Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State law limits investments in commercial paper and corporate bonds to the top two ratings issued by nationally recognized statistical rating organizations. The Commission's investment policy states it will comply with Minnesota Statutes Chapter 118A. HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) D. DEPOSITS AND INVESTMENTS (Cont'd) Concentration of Credit Risk: This is the risk of loss attributed to the magnitude of an investment in a single issuer. Investments should be diversified to avoid incurring unreasonable risk inherent in over investing in specific instruments, individual financial institutions or maturities. The Commission's investment policy states the Commission will attempt to diversify its investments according to type and maturity. Custodial Credit Risk - Investments: For an investment, this is the risk that in the event of the failure of the counterparty, the Commission will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Commission's investment policy states when investments purchased by the Commission are held in safekeeping by a broker/dealer, they must provide asset protection of $500,000 through the Securities Investor Protection Corporations (SIPC) and at least another $2,000,000 Supplemental Insurance Protection, provided by the broker dealer. E. RECEIVABLES AND OPERATING REVENUES AND EXPENSES An allowance for doubtful accounts is recorded based on historical electric and natural gas revenues, historical loss levels, and an analysis of the collectability of individual accounts. Meters are read throughout the month and revenues are recognized when utility services are billed to customers. Hutchinson Utilities Commission did not accrue revenues for services provided but not billed at the end of the year. Monthly billings from the wholesale power and natural gas suppliers, which are for power and natural gas costs to the last day of the month, are reflected in the accounts. F. INVENTORY Inventories of materials and supplies are recorded at average cost, which does not exceed market. G. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. H. CAPITAL AND RIGHT TO USE ASSETS Capital and right to use assets, both tangible and intangible, which include property, plant, equipment and infrastructure assets (e.g., roads, sidewalks and similar items) and easements, are recorded at cost. Right to use assets are capitalized at the present value of minimum lease payments. The cost of additions to capital assets includes contracted work, direct labor, and materials. Major outlays for capital assets and improvements are capitalized as projects are constructed. Repairs, replacement, and the renewal of items determined to be less than units of property are charged to maintenance. Donated assets are recorded as capital assets at their estimated acquisition value at the date of donation. 17 HUTCHINSON UTILITIES COMMISSION NOTE 1 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) H. CAPITAL AND RIGHT TO USE ASSETS (Cont'd) Tangible and intangible capital and right to use assets of the Commission are amortized or depreciated using the straight-line, full month convention method over the following estimated useful lives: Buildings 35-60 years Transmission plant (electric) 20-35 years Distribution plant (electric) 20-35 years Building improvement 15-30 years Transmission plant (gas) 10-45 years Distribution plant (gas) 10-45 years Generation plant 10-30 years General plant 5-10 years Vehicles 5-10 years Office equipment 3-5 years Computer equipment 3-5 years Capital assets not being depreciated include land, easements and construction in progress, if any. I. DEFERRED OUTFLOWS OF RESOURCES In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. Deferred outflows of resources represents a consumption of net position that applies to a future reporting period. During that future period, it will be recognized as an outflow of resources (expense). The Commission has two items that qualify for reporting in this category on the financial statements which is related to pensions and other post -employment benefits. J. UNEARNED REVENUE Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and certain other payments received before eligibility requirements are met are also recorded as unearned revenue. K. COMPENSATED ABSENCES The liability for compensated absences reported in the financial statements consists of unpaid, accumulated vacation and sick leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. Compensated absences are accrued when incurred in the financial statements. The Statement of Net Position reports both current and noncurrent portions of compensated absences using full accrual accounting. The current portion consists of an amount based on a trend analysis of current usage of vacation and vested sick leave. The noncurrent portion consists of the remaining amount of vacation and total vested sick leave. 18 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) K. COMPENSATED ABSENCES (Cont'd) Both union and nonunion employees can accrue a maximum of 200 hours per year of vacation pay. Both union and nonunion employee may carry over a maximum of two times their annual accrual of vacation into the next year. Each permanent nonunion full-time employee must use at least 40 hours of vacation per year. Vacation pay is 100% payable at severance of employment. A maximum of 720 hours can be accrued for sick leave. After accumulation of 720 hours, a payback of one-half of the amount over 720 hours will be made annually. Upon retirement or death before retirement, severance payable is paid back at one-half of any amount of hours remaining will be made by the commission. L. PENSIONS For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The Commission participates in various pension plans; total pension expense for the year ended December 31, 2024, was $92,569. The components of pension expense are noted in the plan summaries. M. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Employees of the Commission pay premiums based on a negotiated schedule. Since the insurance rate is not based on age, the Commission has an implicit rate subsidy factor in postemployment health care expenses. Additionally, Minnesota Statutes require the Commission to allow retired employees to stay on the health care plan with the retiree responsible to pay the entire premium for continuation coverage. The Commission's bargaining agreement and personnel policy do not provide for any contributions upon employee retirement. N. LONG-TERM OBLIGATIONS In the financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Lease liabilities are measured at the present value of payments expected to be made and amortized as a component of interest expense over the lease term. O. DEFERRED INFLOWS OF RESOURCES In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. Deferred inflows of resources represents an acquisition of net position that applies to a future reporting period. During that future period, it will be recognized as an inflow of resources (revenue). The Commission has one item that qualifies for reporting in this category on the financial statements which is related to pensions. 19 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) P. NET POSITION Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources in the financial statements. Net investment in capital assets consists of capital assets, net of accumulated depreciation, and right to use assets, net of accumulated amortization, reduced by the outstanding balance of any long-term liabilities used to build or acquire the capital and right to use assets. Net position is reported as restricted in the financial statements when there are limitations on their use through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Unrestricted net position consists of all other net position that does not meet the definition of restricted or net investment in capital assets. Q. BUDGETS AND BUDGETARY ACCOUNTING The General Manager is responsible for preparing and submitting an annual budget. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. R. USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and deferred outflows of resources, and liabilities and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. S. PRIOR YEAR INFORMATION The basic financial statements include certain prior -year partial comparative information in total but not at the level of detail required for a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Commission's financial statements for the year ended December 31, 2023, from which the partial information was derived. NOTE 2. DEPOSITS AND INVESTMENTS A. DEPOSITS In accordance with applicable Minnesota Statutes, Hutchinson Utilities Commission maintains deposits at depository banks authorized by the Commission. Custodial Credit Risk - Deposits: The Commission's bank balances were not exposed to custodial credit risk because they were fully insured through the Federal Deposit Insurance Corporation as well as collateralized with securities held by the pledging financial institution's trust department or agent and in the Commission's name. 20 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 2. DEPOSITS AND INVESTMENTS (Cont'd) A. DEPOSITS (Cont'd) Deposits in Bank Money Market Accounts Petty Cash Total Deposits B. INVESTMENTS The Commission had the following investments: $ 3,935,804 19,678 850 $ 3,956,332 Interest Rate Risk Fair Value Maturity Date Municipal Bonds $ 10,000,540 1-11 years FFCB Bonds 1,595,826 1-2 years FHLB Bonds 2,499,637 1-3 years US Treasury Note 1,038,658 1-year US Treasury Strip 1,387,936 1-2 years Brokered Certificates of Deposit 3,373,116 1-4 years Total Investments $ 19,895,713 The Municipal Bonds had a variety of ratings. The FFCB Bonds, FHLB Bonds, and US Treasury Note were rated AAA. The Brokered Certificates of Deposit and US Treasury Strip were not rated. Investment's fair value measurements are as follows: Fair Value Measuring Unit Fair Level Level Level Value Inputs Inputs Inputs Municipal Bonds $ 10,000,540 $ $ 10,000,540 $ FFCB Bonds 1,595,826 1,595,826 FHLB Bonds 2,499,637 2,499,637 US Treasury Note 1,038,658 1,038,658 US Treasury Strip 1,387,936 1,387,936 Brokered Certificates of Deposit 3,373,116 3,373,116 Total Investments $ 19,895,713 $ 0 $ 19,895,713 $ 0 21 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 2. DEPOSITS AND INVESTMENTS (Cont'd) B. INVESTMENTS (Cont'd) The following is a summary total of deposits and investments: Deposits (Note 2.A.) $ 3,956,332 Investments (Note 2.B.) 19,895,713 Total Deposits and Investments $ 23,852,045 Deposits and investments are presented in the basic financial statements as follows: Current Assets Cash and Investments $ 20,596,789 Noncurrent Assets Restricted Assets Cash and Investments 3,255,256 Total Deposits and Investments $ 23,852,045 NOTE 3. DEPOSITS AND INVESTMENTS - RESTRICTED Restricted cash and investments are designated by bond covenants for specific purposes. Restricted cash consisted of the following: Public Utility Revenue Refunding Bonds, Series 2012A Funds required to be held in a debt service reserve account based on criteria set aside in the bond issuance document. $ 2,072,000 Public Utility Revenue Bonds, Series 2017B Funds required to be held in a debt service reserve account based on criteria set aside in the bond issuance document. 1,183,256 Total Cash and Investments - Restricted $ 3,255,256 The following items have been designated by the Commission for the following purposes: Rate Stabilization - Electric $ 478,181 Rate Stabilization - Gas 615,294 Payment in Lieu of Taxes 1,942,626 Catastrophic 1,000,000 22 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 3. DEPOSITS AND INVESTMENTS - RESTRICTED (Cont'd) Expansion and Development Reserve Account Funds designated for the expansion and development of the utility. 3,450,000 60 Days Operating Cash 6,542,569 Total Cash and Investments - Designated $ 14,028,670 The above Commission designated amounts are included in the Current Assets -Cash and Investments total. NOTE 4. INVENTORY Inventory consists of the following: Electric Division Fuel Oil and Lubricants $ 67,143 Plant Systems Material 13,569 Engine Parts 1,070,087 Distribution Materials 513,562 Transformers 334,017 Total Electric Division 1,998,378 Natural Gas Division Fittings 241,696 Transmission Line Gas 303,570 Total Natural Gas Division 545,266 Total Inventory 23 $ 2,543,644 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 5. CAPITAL ASSETS Capital asset activity was as follows: Capital Assets, Not Being Depreciated Land Easements Construction in Progress Total Capital Assets, Not Being Depreciated Beginning Ending Balance Increase Decrease Balance $ 559,528 $ $ $ 559,528 4,030,760 4,030,760 1,778,901 8,270,962 (7,148,698) 2,901,165 6,369,189 8,270,962 (7,148,698) 7,491,453 Capital Assets, Being Depreciated Structures and Improvements 136,307,258 Equipment 19,858,095 Software 208,632 Total Capital Assets, Being Depreciated 156,373,985 Right to Use Assets, Being Amortized Land Less Accumulated Depreciation for Structures and Improvements Equipment Software Total Accumulated Depreciation Less Accumulated Amortization for Land 4,978,876 (25,112,489) 116,173,645 1,971,180 (419,864) 21,409,411 208,632 6,950,056 (25,532,353) 137,791,688 841,316 841,316 78,728,294 3,588,738 (25,103,547) 57,213,485 12,691,885 694,340 (373,643) 13,012,582 171,470 1,514 172,984 91,591,649 4,284,592 (25,477,190) 70,399,051 56,088 28,044 84,132 Total Capital and Right to Use Assets, Being Depreciated and Amortized, Net 65,567,564 2,637,420 (55,163) 68,149,821 Net Capital Assets $ 71,936,753 $ 10,908,382 $ (7,203,861) $ 75,641,274 Depreciation and amortization expense was charged to the following functions: Electric Division Natural Gas Division $ 3,188,060 1,124, 576 Total Depreciation and Amortization Expense $ 4,312,636 24 HUTCHINSON UTILITIES COMMISSION NOTE 6 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 LONG-TERM LIABILITIES A. COMPONENTS OF LONG-TERM LIABILITIES Interest Rates Public Utility Revenue Refunding Bonds, Series 2012A 4.00-5.00% Public Utility Revenue Bonds, Series 2017B 2.50-4.00% Bond Premium Long -Term Leases 2.50% Compensated Absences Total Long -Term Liabilities Final Balance Maturity Outstanding 12/01/2026 $ 4,060,000 12/01 /2037 12, 540, 000 787,901 1 /31 /2051 758,024 985,052 $ 19,130,977 On July 19, 2012, Hutchinson Utilities Commission issued Public Utility Revenue Refunding Bonds, Series 2012A for $20,720,000, with an interest rate of 4.00% to 5.00%. The Commission issued the bonds to advance refund a portion of the 2013 through 2025 maturities of the Public Utility Revenue Bonds, Series 2003B. The Commission completed the refunding to reduce its debt service payment over the next 14 years by $1,638,277. This results in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $1,245,620. On October 31, 2017, the Hutchinson Utilities Commission issued Public Utility Revenue Bonds of 2017 for $16,675,000. The proceeds of the issue were used to purchase and install new generators for the expansion of electric generation. B. MINIMUM DEBT PAYMENTS Annual debt service requirements to maturity for bonded debt is as follows: Year Ending December 31 Revenue Refunding Bonds, Series 2012A Principal Interest Revenue Bonds, Series 2017B Principal Interest 2025 $ 1,980,000 $ 203,000 $ 790,000 $ 393,256 2026 2,080,000 104,000 820,000 361,656 2027 850,000 328,856 2028 885,000 294,856 2029 910,000 272,731 2030-2034 4,950,000 961,909 2035-2037 3,335,000 206,345 $ 4,060,000 $ 307,000 $ 12,540,000 $ 2,819,609 25 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 6. LONG-TERM LIABILITIES (Cont'd) C. CHANGES IN LONG-TERM LIABILITIES Beginning Ending Due Within Balance Additions Reductions Balance One Year Revenue Refunding Bonds, Series 2012A $ 5,955,000 $ $ (1,895,000) $ 4,060,000 $ 1,980,000 Revenue Bonds, Series 2017B 13,300,000 (760,000) 12,540,000 790,000 Bond Premium 1,006,967 (219,066) 787,901 219,065 Long -Term Leases 778,560 (20,536) 758,024 Compensated Absences* 872,514 112,538 985,052 36,966 Total Long -Term Liabilities $ 21,913,041 $ 112,538 $ (2,894,602) $ 19,130,977 $ 3,026,031 * The change in compensated absences liability is presented as a net change. D. PLEDGED REVENUES Future revenue pledged for the payment of long-term debt is as follows: Bond Issue/ Percent Remaining Principal Pledged Use of Proceeds/ of Total Term of Principal and Interest Revenue Type Debt Service Pledge and Interest Paid Received Revenue Refunding Bonds, Series 2012A Natural Gas Utility Charges 100% 2012-2026 $ 4,367,000 $ 2,173,800 $ 11,287,412 Revenue Bonds, Series 2017B Electric Utility Charges 100% 2017-2037 15,359,609 1,183,656 27,516,949 W, HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 7. LONG-TERM LEASES Lease agreements are summarized as follows: Origination Payment Payment Date Terms Amount Interest Rate Solar Array Land Lease 1/31/2022 30 years $ 40,000 2.50% Current Year Original Lease Additional Balance Liability Outflows Outstanding Solar Array Land Lease $ 841,316 $ $ 758,024 Land was leased by the Commission from the City of Hutchinson to be used to construct and operate a solar power generating facility starting on 1/31/2022. The lease is for a period of 20 years and can be renewed for up to two five year extensions. The interest rate on the lease is a fixed rate of 2.50%. Annual requirements to amortize lease obligations and related interest are as follows: Year Ending December 31 Principal Interest 2025 $ $ 2026 2027 2028 2029 2030-2034 2035-2039 2040-2044 2045-2049 2050-2051 NOTE 8. RISK MANAGEMENT 21,049 18,951 21,576 18,424 22,115 17,885 22,668 17,332 122,129 77,871 138,177 61,823 156,335 43,665 176,879 23,121 77,096 2,903 $ 758,024 $ 281,975 The Commission purchases commercial insurance coverage through the League of Minnesota Cities Insurance Trust (LMCIT), which is a public entity risk pool currently operating as a common risk management and insurance program, with cities in the state. The Commission pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self-sustaining through commercial companies for excess claims. The Commission is covered through the pool for any claims incurred but unreported, but retains risk for the deductible portion of its insurance policies. The amount of these deductibles is considered immaterial to the financial statements. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. 27 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 8. RISK MANAGEMENT (Cont'd) The Commission's workers' compensation insurance policy is retrospectively rated. With this type of policy, final premiums are determined after loss experience is known. The amount of premium adjustment for 2024 is estimated to be immaterial based on workers' compensation rates and salaries for the year. There are no other claims liabilities reported in the funds based on the requirements of accounting standards, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. NOTE 9. DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION The Commission participates in the following cost -sharing multiple -employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). These plan provisions are established and administered in accordance with Minnesota Statutes, Chapters 353, 353D, 353E, 353G, and 356. Minnesota Statutes chapter 356 defines each plan's financial reporting requirements. PERA's defined benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code. General Employees Retirement Plan (GERP; General Employees Plan; accounted for in the General Employees Fund): Membership in the General Plan includes employees of counties, cities, townships, schools in non - certified positions, and other governmental entities whose revenues are derived from taxation, fees, or assessments. Plan membership is required for any employee who is expected to earn more than $425 in a month, unless the employee meets exclusion criteria. B. BENEFITS PROVIDED PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state Legislature. Vested, terminated employees who are entitled to benefits, but are not receiving them yet, are bound by the provisions in effect at the time they last terminated their public service. When a member is "vested," they have earned enough service credit to receive a lifetime monthly benefit after leaving public service and reaching an eligible retirement age. Members who retire at or over their Social Security full retirement age with at least one year of service qualify for a retirement benefit. 28 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 9. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) B. BENEFITS PROVIDED (Cont'd) GERP Benefits: General Employees Plan requires three years of service to vest. Benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for General Plan members. Members hired prior to July 1, 1989, receive the higher of the Step or Level formulas. Only the Level formula is used for members hired after June 30, 1989. Under the Step formula, General Plan members receive 1.20% of the highest average salary for each of the first 10 years of service and 1.70% for each additional year. Under the Level formula, General Plan members receive 1.70% of highest average salary for all years of service. For members hired prior to July 1, 1989 a full retirement benefit is available when age plus years of service equal 90 and normal retirement age is 65. Members can receive a reduced requirement benefit as early as age 55 if they have three or more years of service. Early retirement benefits are reduced by 0.25% for each month under age 65. Members with 30 or more years of service can retire at any age with a reduction of 0.25% for each month the member is younger than age 62. The Level formula allows General Plan members to receive a full retirement benefit at age 65 if they were first hired before July 1, 1989 or at age 66 if they were hired on or after July 1, 1989. Early retirement begins at age 55 with an actuarial reduction applied to the benefit. Benefit increases are provided to benefit recipients each January. The postretirement increase is equal to 50% of the cost -of -living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 % and a maximum of 1.50%. The 2024 annual increase was 1.50%. Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective date of the increase will receive the full increase. Recipients receiving the annuity or benefit for at least one month but less than a full year as of the June 30 before the effective date of the increase will receive a prorated increase. C. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state Legislature. GERP Contributions: Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in fiscal year 2024 and the Commission was required to contribute 7.50 percent for Coordinated Plan members. The Commission's contributions to the General Employees Fund for the year ended December 31, 2024, were $428,792. The Commission's contributions were equal to the required contributions as set by state statute. 29 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 9. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) D. PENSION COSTS GERP Pension Costs: At December 31, 2024, the Commission reported a liability of $2,442,997 for its proportionate share of the General Employees Fund's net pension liability. The Commission's net pension liability reflected a reduction due to the State of Minnesota's contribution of $16 million. The State of Minnesota is considered a non -employer contributing entity and the state's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the Commission totaled $63,171. The net pension liability was measured as of June 30, 2024, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Commission's proportionate share of the net pension liability was based on the Commission's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2023, through June 30, 2024, relative to the total employer contributions received from all of PERA's participating employers. The Commission's proportion share was 0.0661 percent at the end of the measurement period and 0.0662 percent for the beginning of the period. Commission's Proportionate Share of the Net Pension Liability $ 2,442,997 State of Minnesota's Proportionate Share of the Net Pension Liability Associated With the Commission 63,171 Total $ 2,506,168 There were no provision changes during the measurement period. For the year ended December 31, 2024, the Commission recognized pension expense of $124,933 for its proportionate share of GERP's pension expense. In addition, the Commission recognized an additional $1,694 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's contribution of $16 million to the General Employees Fund. During the plan year ended June 30, 2024, the State of Minnesota contributed $170.1 million to the General Employees Fund. The State of Minnesota is not included as a non -employer contributing entity in the General Employees Plan pension allocation schedules for the $170.1 million in direct state aid because this contribution was not considered to meet the definition of a special funding situation. The Commission recognized $112,401 for the year ended December 31, 2024 as revenue and an offsetting reduction of net pension liability for its proportionate share of the State of Minnesota's on -behalf contributions to the General Employees Fund. At December 31, 2024, the Commission reported its proportionate share of GERP's deferred outflows of resources and deferred inflows of resources from the following sources: 30 HUTCHINSON UTILITIES COMMISSION NOTE 9 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) D. PENSION COSTS (Cont'd) GERP Pension Costs: (Cont'd) Differences Between Expected and Actual Economic Experience Changes in Actuarial Assumptions Net Difference Between Projected and Actual Investment Earnings on Pension Plan Investments Changes in Proportion Contributions Paid to GERP Subsequent to Measurement Date Totals Deferred Deferred Outflows of Inflows of Resources Resources $ 230,215 $ 12,220 925,911 719,345 80,676 213,687 $ 456,122 $ 1,725,932 The $213,687 reported as deferred outflows of resources related to pensions resulting from Commission contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2025. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31, Pension Expense Amount 2025 $ (842,136) 2026 (153,145) 2027 (300,923) 2028 (187,293) E. LONG-TERM EXPECTED RETURN ON INVESTMENT The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best -estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long -Term Expected Real Rate of Return Domestic Equity 33.50% International Equity 16.50% Fixed Income 25.00% Private Markets 25.00% 100.00% 31 5.10% 5.30% 0.75% 5.90% HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 9. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) F. ACTUARIAL METHODS AND ASSUMPTIONS The total pension liability for each of the cost -sharing defined benefit plans was determined by an actuarial valuation as of June 30, 2024, using the entry age normal actuarial cost method. The long-term rate of return on pension plan investments used in the determination of the total liability is 7%. The 7% assumption is based on a review of inflation and investments return assumptions from a number of national investment consulting firms. The review provided a range of investment return rates considered reasonable by the actuary. An investment return of 7% is within that range. Inflation is assumed to be 2.25 percent for the General Employees Plan. Benefit increases after retirement are assumed to be 1.25 percent for the General Employees Plan. Salary growth assumptions in the General Employees Plan range in annual increments from 10.25 percent after one year of service to 3.0 percent after 27 years of service. Mortality rates for the General Employees Plan are based on the Pub-2010 General Employee Mortality Table. The table is adjusted slightly to fit PERA's experience. Actuarial assumptions for the General Employees Plan are reviewed every four years. The most recent four-year experience study for the General Employees Plan was completed in 2022. The assumption changes were adopted by the Board and became effective with the July 1, 2023 actuarial valuation. PERA anticipates the experience study will be approved by the Legislative Commission on Pensions and Retirement and become effective with the July 1, 2025 actuarial valuation. The following changes in actuarial assumptions occurred in 2024: GERP Changes in Actuarial Assumptions: Rates of merit and seniority were adjusted, resulting in slightly higher rates. Assumed rates of retirement were adjusted as follows: increase the rate of assumed unreduced retirements, slight adjustments to Rule of 90 retirement rates, and slight adjustments to early retirement rates for Tier 1 and Tier 2 members. Minor increase in assumed withdrawals for males and females. Lower rates of disability. Continued use of Pub-2010 general mortality table with slight rate adjustments as recommended in the most recent experience study. Minor changes to form of payment assumptions for male and female retirees. Minor changes to assumptions made with respect to missing participant data. 32 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 9. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) F. ACTUARIAL METHODS AND ASSUMPTIONS (Cont'd) GERP (Cont'd) Changes in Plan Provisions: The workers' compensation offset for disability benefits was eliminated. The actuarial equivalent factors updated to reflect the changes in assumptions. G DISCOUNT RATE The discount rate used to measure the total pension liability in 2024 was 7%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net position of the General Employees were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. H. PENSION LIABILITY SENSITIVITY The following presents the Commission's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the Commission's proportionate share of the net pension liability would be if it were calculated using a discount rate one percentage point lower or one percentage point higher than the current discount rate: GERP 1 % Lower 6.00% $ 5,335,899 Current Discount Rate 7.00% 2,442,997 1 % Higher 8.00% 63,322 I. PENSION PLAN FIDUCIARY NET POSITION Detailed information about each pension plan's fiduciary net position is available in a separately -issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org. NOTE 10. DEFERRED COMPENSATION PLAN The Commission offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Commission employees, permits them to defer a portion of their salary into future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Investments are managed by the plan's trustee under one of four investment options, or a combination thereof. The choice of the investment option(s) is made by the participants. 33 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 11. PUBLIC EMPLOYEES DEFINED CONTRIBUTION PLAN Five Commissioners of the Hutchinson Utilities Commission are covered by the Defined Contribution Plan, a multiple -employer deferred compensation plan administered by PERA. The Defined Contribution Plan is a tax qualified plan under Section 401(a) of the Internal Revenue Code and all contributions by or on behalf of employees are tax deferred until time of withdrawal. Plan benefits depend solely on amounts contributed to the plan plus investment earnings, less administrative expenses. Minnesota Statutes, Chapter 353D and 356, specifies plan provisions, including the employee and employer contribution rates for those qualified personnel who elect to participate. An eligible elected official who decides to participate contributes 5% of salary which is matched by the elected official's employer. Employees who are paid for their services may elect to make member contributions in an amount not to exceed the employer share. Employer and employee contributions are combined and used to purchase shares in one or more of the seven accounts of the Minnesota Supplemental Investment Fund. For administering the plan, PERA receives 2% of employer contributions and 0.25% of the assets in each member's account annually. Total contributions made by the Commission during fiscal year 2024 were: Contribution Amount Percentage of Covered Payroll Employee Employer Employee Employer Required Rate Commissioners $ 1,228 $ 1,228 5.00% 5.00% 5.00% NOTE 12. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN A. PLAN DESCRIPTION The Commission operates a single -employer retiree benefit plan (the Plan) that provides health, dental, and life insurance to eligible employees and their spouses through the Commission's commercial insurance plans. There are 50 active participants and 0 retired participants. Benefit and eligibility provisions are established through negotiations between the Commission and employee groups including a union. The union contract is renegotiated each two-year bargaining period. The Plan does not issue a publicly available financial report. No assets are accumulated in a trust that meets all of the criteria in GASB Statement No. 75, paragraph 4. B. TOTAL OPEB LIABILITY The Commission's total OPEB liability of $53,173 was measured as of December 31, 2023, and was determined by an actuarial valuation as of that date. Update procedures were used to roll forward the total OPEB liability to December 31, 2024. 34 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 12. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN (Cont'd) C. CHANGES IN TOTAL OPEB LIABILITY Changes in the total OPEB liability were as follows: Total OPEB Liability Beginning of Year $ 85,461 Changes for the Year Service Cost 3,096 Interest 3,477 Differences Between Expected and Actual Experience (42,280) Changes of Assumptions or Other Inputs 8,835 Benefit Payments (5,416) Net Changes (32,288) End of Year $ 53,173 Changes of assumptions and other inputs reflect a change in the discount rate from 4.05% in 2023 to 3.77% in 2024. Sensitivity of the total OPEB liability to changes in the discount rate. The following presents the total OPEB liability of the Commission, as well as what the Commission's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.77%) or 1-percentage-point higher (4.77%) than the current discount rate: Total OPEB Liability 1.0% Decrease 1.0% Increase in Discount Discount Rate in Discount Rate (2.77%) (3.77%) Rate (4.77%) $ 57,575 $ 53,173 $ 48,985 Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The following presents the total OPEB liability of the Commission, as well as what the Commission's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (7.60% decreasing to 2.90%) or 1-percentage-point higher (9.60% decreasing to 4.90%) than the current healthcare cost trend rates: Healthcare Cost 1.0% Decrease Trend Rates 1.0% Increase (7.60% (8.60% (9.60% decreasing decreasing decreasing to 2.90%) to 3.90%) to 4.90%) Total OPEB Liability $ 47,271 $ 53,173 $ 59,921 35 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 12. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN (Cont'd) D. OPEB EXPENSE, DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO OPEB For the year ended December 31, 2024, the Commission recognized OPEB expense of ($27,763). At December 31, 2024, the Commission reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Contributions Paid Subsequent to Measurement Date $ 890 $ $890 reported as deferred outflows of resources related to OPEB resulting from Commission contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ended December 31, 2025. E. ACTUARIAL METHODS AND ASSUMPTIONS The total OPEB liability in the December 31, 2023 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation Salary Increases Healthcare Cost Trend Rates Retiree's Share of Benefit -Related Costs 2.50% Based on the most recently disclosed assumptions for the pension plan in which the employee participates. 8.6% for 2024, decreasing over several decades to an ultimate rate of 3.9% for 2075 and later years. Assumed to increase with healthcare trend rates. A discount rate of 3.77% was applied in the measurement of the total OPEB liability. The discount rate is based on the index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. Mortality rates were based on assumptions for General Employees used in the July 1, 2023 PERA of Minnesota Retirement Plan actuarial valuations, PUB-2010 General mortality tables with projected mortality improvements based on a scale MP-2021, and other adjustments. The actuarial assumptions used in the December 31, 2023 valuation were based on the results of an actuarial experience study for the period January 1, 2023— December 31, 2023. NOTE 13. MAJOR CUSTOMERS The Electric Division derived approximately 46.11 % of utility revenue from the top five major customers. The Natural Gas Division derived approximately 49.78% of its utility revenue from the top five major customers. REP HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024 NOTE 14. RECLASSIFICATIONS Certain immaterial prior year financial statement amounts have been reclassified to conform to the current year's presentation. There was no affect on total net position. NOTE 15. COMMITMENTS A. PURCHASED POWER The Commission is committed to purchase 25 MW of its power requirements from Missouri River Energy Services pursuant to the Power Sale Agreement dated April 28, 2010. This contract is effective through January 1, 2046. B. PAYMENT IN LIEU OF TAXES The Commission is committed to contribute a portion of its total operating revenue to the City of Hutchinson in lieu of the payment of taxes pursuant to the Resolution No. 14853 dated February 10, 2018. NOTE 16. DEFERRED OUTFLOWS AND INFLOWS OF RESOURCES The following is a summary of the major components of deferred outflows and inflows as presented in the Statement of Net Position: Related to Pensions Related to OPEB Total NOTE 17. PRIOR PERIOD ADJUSTMENT Deferred Outflows of Resources $ 456,122 890 Deferred Inflows of Resources $ 1,725,932 $ 457,012 $ 1,725,932 The beginning balances of the Electric Division, Gas Division and Business -Type Activities accounts receivables and unearned revenues have been restated to reflect a correction of an error. In the Commission's December 31, 2023 financial statements, utility overpayments were incorrectly netted with accounts receivable. The Electric Division December 31, 2023 balance for Accounts Receivable has been restated from $1,850,267 to $2,028,358 (an increase of $178,091) and the balance for Unearned Revenue has been restated from $0 to $178,091 (an increase of $178,091). The Gas Division December 31, 2023 balance for Accounts Receivable has been restated from $1,420,951 to $1,592,059 (an increase of $171,108) and the balance for Unearned Revenue has been restated from $0 to $171,108 (an increase of $171,108). The Business -Type Activities December 31, 2023 balance for Accounts Receivable has been restated from $3,271,218 to $3,620,417 (an increase of $349,199) and the balance for Unearned Revenue has been restated from $0 to $349,199 (an increase of $349,199). 37 REQUIRED SUPPLEMENTARY INFORMATION This page intentionally left blank O -00--00--00--00--00--00--00--00-O N 0)CU 00 O I- O O M M O O O CDO CD CD N O O N co a O-- U :_ O >+ O M O r-O O O U)M M 00 00 I- 00 I- 00 I- r- O y N .0 "0 O L N w Q LL d N O Co J CO Z CO p d N CO 0 0 0 0 0 0 0 0 0 NOR CU 4- O O O I-- M- O O19t N ^ O N M Oq9t I- N O I- N N c L O N y 0-\ I- O O 00 00 00 O m 00 0 O N Q C> O Q O O O CU+ E 8cu LUd W�Z� `. CO } J J m CDco LO LO co N CD CD Q L O- N LO- O 00 I-- O- 00 O LO 00 q-t 00 q-t co O M M _ J >, O 00 I� M 00 L (fl (fl �i Q 0 r— N LO� � CDr— � M O M- O 00 O M- M N O cu E cncricricri������ Z W d N M M CD LO M z .= L L a)0 a) a) 0 a 0M O I� M� � � N- - O CDDI-- N O 0O LO M W 0) C.• y CU C y >, O O ^ (fl M O O O M 00 N 00 O O O mt' O O a) O a)- C1 0 0- G LO M- O CD CD2 LOW O- O� ~ N LL CL 0 d Co 0" 0- CCU • u W cu CL "� CL N M M M M M N O_ - J "' J O W Z Z N CO cu E � Q 2 W m N O 00 00 00 00 I- LO N LO 00 N N O 00 w 0 -- N M N M N O LO Q U cn a) O to �' O O M N I� O � 00 - M O CD LO O N LO I� Z W O O " c N Q � � -- — O= r W coEu W O J O O O N O Qz 0- 0 N �. CD CD r- r- M O O LL 0) "' O M O N M LO M O L 4 O y O 00 00 114 O (fl M N O M 0 C= 0 0 y r N- - O N CD q-* CD W >, •O L �' CD LO M M CD CD J O CO CB M O CD LO O O� Q O= d �' — Q U) N M L N M M w M O O N _ W z U Q J (A U .� 0 0 0 0 0 0 0 0 0 -00- N N - N I-- CO CO 00 O I-t I-t N � c cm y O O O O C N >, O L CU Z .0 Q O O O O O O O O O CD CD CD CD CD CD CD CD CD CD -E cuQ N �' CD CD CD CD CD CD CD CD CD CD O �L U L �, C Q VJ L �--— o d W d CO � � J CO N 0 M 00 I-- CO LO O O O O O O O O O O N N N N N N N N N N CBL r NCO N _ _ _ _ _ _ _ _ _ _ CD CD CD CD CD CD CD CD CD CD LL W co co co co M M M M M M N N N N N N N N N N o c c c c c c c c c c N d co M HUTCHINSON UTILITIES COMMISSION SCHEDULE OF EMPLOYER CONTRIBUTIONS DECEMBER 31, 2024 Contributions in Relation Statutorily to the Statutorily Contribution Required Required Deficiency Covered Fiscal Year Contribution Contribution (Excess) Payroll Ending (a) (b) (a-b) (d) Pensions GERP 12/31 /2024 12/31 /2023 12/31 /2022 12/31 /2021 12/31 /2020 12/31 /2019 12/31 /2018 12/31 /2017 12/31 /2016 12/31 /2015 Contributions as a Percentage of Covered Payroll (b/d) $ 428,792 $ 428,792 $ $ 5,717,227 7.50% 405,709 405,709 5,409,453 7.50% 388,459 388,459 5,179,453 7.50% 376,462 376,462 5,019,493 7.50% 367,734 367,734 4,903,120 7.50% 351,656 351,656 4,688,747 7.50% 337,735 337,735 4,503,133 7.50% 314,977 314,977 4,201,039 7.50% 310,915 310,915 4,145,538 7.50% 327,065 327,065 4,360,868 7.50% See Accompanying Notes to the Required Supplementary Information 39 H J_ CO Q J CO W 0- 0 J Q H O H Z O o N OW U [0 LU W U Z W — p W C� Z Q S U W O W J 0 W U LO O O co co (O 00 0 I— 1— 1— O LO O LO (O O V CO O N N 00 N O Lo C V ('7 N ('7 (O (O N 00 O O N N (A (A (A O ('7 I-- O m 00 0 00 O O V V Lo O (O I— ('7 00 I� N O LO N O (O (h co LO (O N 00 N N O) O 00 co N � EA EA EA V N V V I� O) CO N (O o O O 00 00 N V (O O 1— 1— (3) O V O co O O O co O L(i ('7 O O N N N co N O CO N (A (A (A LO N O) O� N O) O o O V N N 1— 1— V (O (O N CO N V LO V O LO V LO O I� C7 I� V ('6 N N L(i (O N N O 00 N � EA EA EA I� O O N O I— O o co N I— N O V V O O) (h N LO (O 00 O LO N LO co O O CO N LO N LO N LO CO N N co N o N I— O LO Na- O (O Na- V NO N 00 O CD 00 co V CD(O N V C7 L(i V O CO O N m LO N 0 I— O Lo (O 00 co O o co O I— 00 CO CO (O I— 00 N O Na- N 00 Na- N Na- O_ O O C7 ('7 N 00 L(i N N L(i ('7 O co 00 Lo V N N O c x W — U) m U 7 J Q Q m (6 N �O '6 LUc 0- O o Lj N O o o — o Q O C O) N m O (6 x� W O m J m m c > LU > o O — N vi U m o m w m Q E °) J E m Z m LU ~ LU m W U _ v � o 0- > (6 0- > (6 — O m U co U � H O Z c E CO Q U C N E N E c O U) O E E O U s H O V This page intentionally left blank HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 1. CHANGES IN PLAN PROVISIONS A. GENERAL EMPLOYEE RETIREMENT PLAN (GE 2024 Changes: The workers' compensation offset for disability benefits was eliminated. The actuarial equivalent factors updated to reflect the changes in assumptions. 2023 Changes: An additional one-time direct state aid contribution of $170.1 million will be contributed to the Plan on October 1, 2023. The vesting period of those hired after June 30, 2010, was changed from five years of allowable service to three years of allowable service. The benefit increase delay for early retirements on or after January 1, 2024, was eliminated. A one-time, non -compounding benefit increase of 2.5 percent minus the actual 2024 adjustment will be payable in a lump sum for calendar year 2024 by March 31, 2024. 2022 Changes: There have been no changes since the prior valuation. 2021 Changes: There have been no changes since the prior valuation. 2020 Changes: Augmentation for current privatized members was reduced to 2.0% for the period July 1, 2020 through December 31, 2023 and 0.0% after. Augmentation was eliminated for privatizations occurring after June 30, 2020. 2019 Changes: The employer supplemental contribution was changed prospectively, decreasing from $31.0 million to $21.0 million per year. The State's special funding contribution was changed prospectively, requiring $16.0 million due per year through 2031. 2018 Changes: The augmentation adjustment in early retirement factors is eliminated over a five-year period starting July 1, 2019, resulting in actuarial equivalence after June 30, 2024. Interest credited on member contributions decreased from 4.00 percent to 3.00 percent, beginning July 1, 2018. 41 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 1. CHANGES IN PLAN PROVISIONS (Cont'd) A. GENERAL EMPLOYEE RETIREMENT PLAN (GERP) (Cont'd) 2018 Changes: (Cont'd) Deferred augmentation was changed to 0.00 percent, effective January 1, 2019. Augmentation that has already accrued for deferred members will still apply. Contribution stabilizer provisions were repealed. Postretirement benefit increases were changed from 1.00 percent per year with a provision to increase to 2.50 percent upon attainment of 90.00 percent funding ratio to 50.00 percent of the Social Security Cost of Living Adjustment, not less than 1.00 percent and not more than 1.50 percent, beginning January 1, 2019. For retirements on or after January 1, 2024, the first benefit increase is delayed until the retiree reaches normal retirement age; does not apply to Rule of 90 retirees, disability benefit recipients, or survivors. Actuarial equivalent factors were updated to reflect revised mortality and interest assumptions. 2017 Changes: The State's contribution for the Minneapolis Employees Retirement Fund equals $16,000,000 in 2017 and 2018, and $6,000,000 thereafter. The Employer Supplemental Contribution for the Minneapolis Employees Retirement Fund changed from $21,000,000 to $31,000,000 in calendar years 2019 to 2031. The state's contribution changed from $16,000,000 to $6,000,000 in calendar years 2019 to 2031. 2016 Changes: There have been no changes since the prior valuation. 2015 Changes: On January 1, 2015 the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised; the State's contribution of $6.0 million, which meets the special funding situation definition, was due September 2015. B. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN NOT ADMINISTERED IN A TRUST 2024 Changes: Retiree premiums were update to current levels. 2023 Changes: There have been no changes since the prior valuation. 42 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 1. CHANGES IN PLAN PROVISIONS (Cont'd) B. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN NOT ADMINISTERED IN A TRUST (Cont'd) 2022 Changes: Retiree premiums were update to current levels. 2021 Changes: There have been no changes since the prior valuation. 2020 Changes: Retiree premiums were update to current levels. 2019 Changes: There have been no changes since the prior valuation. 2018 Changes: There have been no changes since the prior valuation. NOTE 2. CHANGES IN ACTUARIAL ASSUMPTIONS A. GENERAL EMPLOYEE RETIREMENT PLAN (GE 2024 Changes: Rates of merit and seniority were adjusted, resulting in slightly higher rates. Assumed rates of retirement were adjusted as follows: increase the rate of assumed unreduced retirements, slight adjustments to Rule of 90 retirement rates, and slight adjustments to early retirement rates for Tier 1 and Tier 2 members. Minor increase in assumed withdrawals for males and females. Lower rates of disability. Continued use of Pub-2010 general mortality table with slight rate adjustments as recommended in the most recent experience study. Minor changes to form of payment assumptions for male and female retirees. Minor changes to assumptions made with respect to missing participant data. 2023 Changes: The investment return assumption and single discount rate were changed from 6.5 percent to 7.00 percent. 43 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 2. CHANGES IN ACTUARIAL ASSUMPTIONS (Cont'd) A. GENERAL EMPLOYEE RETIREMENT PLAN (GERP) (Cont'd) 2022 Changes: The mortality improvement scale was changed from Scale MP-2020 to Scale MP-2021. 2021 Changes: The investment return and single discount rates were changed from 7.50 percent to 6.50 percent, for financial reporting purposes. The mortality improvement scale was changed from Scale MP-2019 to Scale MP-2020. 2020 Changes: The price inflation assumption was decreased from 2.50% to 2.25%. The payroll growth assumption was decreased from 3.25% to 3.00%. Assumed salary increase rates were changed as recommended in the June 30, 2019 experience study. The net effect is assumed rates that average 0.25% less than previous rates. Assumed rates of retirement were changed as recommended in the June 30, 2019 experience study. The changes result in more unreduced (normal) retirements and slightly fewer Rule of 90 and early retirements. Assumed rates of termination were changed as recommended in the June 30, 2019 experience study. The new rates are based on service and are generally lower than the previous rates for years 2-5 and slightly higher thereafter. Assumed rates of disability were changed as recommended in the June 30, 2019 experience study. The change results in fewer predicted disability retirements for males and females. The base mortality table for healthy annuitants and employees was changed from the RP-2014 table to the Pub-2010 General Mortality table, with adjustments. The base mortality table for disabled annuitants was changed from the RP-2014 disabled annuitant mortality table to the PUB-2010 General/Teacher disabled annuitant mortality table, with adjustments. The mortality improvement scale was changed from Scale MP-2018 to Scale MP-2019. The assumed spouse age difference was changed from two years older for females to one year older. The assumed number of married male new retirees electing the 100% Joint & Survivor option changed from 35% to 45%. The assumed number of married female new retirees electing the 100% Joint & Survivor option changed from 15% to 30%. The corresponding number of married new retirees electing the Life annuity option was adjusted accordingly. 2019 Changes: The mortality projection scale was changed from MP-2017 to MP-2018. 44 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 2. CHANGES IN ACTUARIAL ASSUMPTIONS (Cont'd) A. GENERAL EMPLOYEE RETIREMENT PLAN (GERP) (Cont'd) 2018 Changes: The mortality projection was changed from MP-2015 to MP-2017. The assumed benefit increase was changed from 1.00 percent per year through 2044 and 2.50 percent per year thereafter to 1.25 percent per year. 2017 Changes: The combined service annuity (CSA) loads were changed from 0.8 percent for active members and 60 percent for vested and non -vested deferred members. The revised CSA loads are now 0.0 percent for active member liability, 15.0 percent for vested deferred member liability and 3.0 percent for non -vested deferred member liability. The assumed post -retirement benefit increase rate was changed from 1.0 percent per year for all years to 1.0 percent per year through 2044 and 2.5 percent per year thereafter. 2016 Changes: The assumed post -retirement benefit increase rate was changed for 1.0 percent per year through 2035 and 2.5 percent per year thereafter to 1.0 percent per year for all years. The assumed investment return was changed from 7.9 percent to 7.5 percent. The single discount rate was changed from 7.9 percent to 7.5 percent. Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25 percent to 3.25 percent for payroll growth and 2.50 percent for inflation. 2015 Changes: The assumed post -retirement benefit increase rate was changed from 1.0 percent per year through 2030 and 2.5 percent per year thereafter to 1.0 percent per year through 2035 and 2.5 percent per year thereafter. B. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN NOT ADMINISTERED IN A TRUST 2024 Changes: The discount rate was changed from 4.05% to 3.77% based on updated 20-year municipal bond rates. Healthcare trend rates were reset to reflect updated cost increase expectations. Medical per capita claims costs were updated to reflect recent experience. Withdrawal, mortality, and salary increase rates were updated from the rates used in the 7/1/2021 PERA General Employees Plan valuation to the rates used in the 2023 experience study. 45 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 2. CHANGES IN ACTUARIAL ASSUMPTIONS (Cont'd) B. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN NOT ADMINISTERED IN A TRUST (Cont'd) 2024 Changes: (Cont'd) The inflation assumption was changed from 2.25% to 2.50% based on an updated historical analysis of inflation rates and forward -looking market expectations. The payroll growth rate was changed from 3.00% to 3.25% based on an update in the underlying inflation assumption. 2023 Changes: The discount rate was changed from 1.84% to 4.05% based on the updated 20-year municipal bond rates. 2022 Changes: The discount rate was changed from 2.00% to 1.84% based on the updated 20-year municipal bond rates. Healthcare trend rates were reset to reflect updated cost increase expectations. Medical per capita claims costs were update to reflect recent experience. Withdrawal, mortality, and salary increase rates were updated from the rates used in the 7/1/2019 PERA General Employees Plan valuation to the rates used in the 7/1/2021 valuation. The inflation assumption was changed from 2.50% to 2.25% based on an updated historical analysis of inflation rates and forward -looking market expectations. 2021 Changes: The discount rate was changed from 2.75% to 2.00% based on the updated 20-year municipal bond rates. 2020 Changes: The discount rate was changed from 3.71 % to 2.75% based on the updated 20-year municipal bond rates. Healthcare trend rates were reset to reflect updated cost increase expectations. Medical per capita claims costs were update to reflect recent experience. Mortality and salary increase rates were update from the rates used in the 7/1/2017 PERA General Employees Plan valuation to the rates used in the 7/1/2019 valuation. The inflation assumption was changed from 2.75% to 2.50% based on an updated historical analysis of inflation rates and forward -looking market expectations. 2019 Changes: The index rate for 20 year, tax-exempt municipal bonds used in the determination of the discount rate was changed from 3.31 % to 3.71 %. 46 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2024 NOTE 2. CHANGES IN ACTUARIAL ASSUMPTIONS (Cont'd) B. OTHER POST -EMPLOYMENT BENEFITS (OPEB) PLAN NOT ADMINISTERED IN A TRUST (Cont'd) 2019 Changes: (Cont'd) Healthcare trend rates were reset to reflect updated cost increase expectations, including an adjustment to reflect the impact of the Affordable Care Act's Excise Tax on high -cost health insurance plans. 2018 Changes: There have been no changes since the prior valuation. 47 This page intentionally left blank SUPPLEMENTARY INFORMATION This page intentionally left blank HUTCHINSON UTILITIES COMMISSION COMBINING STATEMENT OF NET POSITION DECEMBER 31, 2024 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $37,461 and $30,650, Respectively) Interest Receivable Sales Tax Receivable Inventory Prepaid Items Total Current Assets Noncurrent Assets Restricted Assets Cash and Investments Capital and Right to Use Assets Natural Electric Gas Division Division Total 4,989,092 $ 15,607,697 $ 20,596,789 2,034,887 1,669,938 3,704,825 74,314 74,314 148,628 397,232 397,232 1,998,378 545,266 2,543,644 65,244 27,332 92,576 9,559,147 17,924,547 27,483,694 1,183,256 2,072,000 3,255,256 Assets Not Being Depreciated or Amortized 3,591,534 3,899,919 7,491,453 Other Capital and Right to Use Assets, Net of Depreciation and Amortization 45,823,412 22,326,409 68,149,821 Net Capital Assets 49,414,946 26,226,328 75,641,274 Total Noncurrent Assets 50,598,202 28,298,328 78,896,530 Total Assets 60,157,349 46,222,875 106,380,224 Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Accounts Payable Customer Deposits Unearned Revenue Accrued Expenses Interest Salaries Payable Total Current Liabilities Long -Term Liabilities Net Pension Liability Total OPEB Liability Other Long -Term Liabilities Due Within One Year Other Long -Term Liabilities Due in More Than One Year Total Long -Term Liabilities Total Liabilities Deferred Inflows of Resources Net Position Net Investment in Capital Assets Unrestricted Total Net Position Total Liabilities. Deferred Inflows of Resources and Net Position 342,759 114,253 457,012 $ 60,500,108 $ 46,337,128 $ 106,837,236 $ 1,877,294 $ 1,083,435 $ 2,960,729 191,496 103,114 294,610 229,172 187,505 416,677 32,771 16,917 49,688 301,590 89,051 390,641 2,632,323 1,480,022 4,112,345 1,832,248 610,749 2,442,997 39,880 13,293 53,173 851,947 2,174,084 3,026,031 13,656,384 2,448,562 16,104,946 16,380,459 5,246,688 21,627,147 19,012,782 6,726,710 25,739,492 1,294,449 431,483 1,725,932 36,868,026 23,882,579 60,750,605 3,324,851 15, 296, 356 18, 621,207 40,192,877 39,178,935 79,371,812 $ 60,500,108 $ 46,337,128 $ 106,837,236 48 HUTCHINSON UTILITIES COMMISSION COMBINING SCHEDULE OF REVENUES AND EXPENSES YEAR ENDED DECEMBER 31, 2024 OPERATING REVENUES Electric Energy Sales Natural Gas Sales Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Production Operations Maintenance Purchased Power/Gas Other Power Supply Transmission Operations Maintenance Distribution Operations Maintenance Customer Accounts Expense Sales Expense Administrative and General Depreciation and Amortization Expense Contribution to City of Hutchinson Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position NET POSITION, BEGINNING OF YEAR Electric Natural Gas Division Division Total $ 27,516,949 $ $ 27,516,949 11,287,412 11,287,412 154,235 2,783,231 2,937,466 27,671,184 14,070,643 41,741,827 3,981,539 3,981,539 906,474 906,474 11,904,189 7,263,560 19,167,749 328,766 328,766 2,746,673 337,830 3,084,503 84,576 10,031 94,607 1,412,832 744,091 2,156,923 914,785 390,620 1,305,405 296,201 242,212 538,413 144,231 103,043 247,274 1,630,898 1,016,183 2,647,081 3,188,060 1,124,576 4,312,636 1,598,423 596,825 2,195,248 29,137,647 11,828,971 40,966,618 (1,466,463) 2,241,672 775,209 620,831 620,411 1,241,242 (26,401) 49,595 23,194 77,850 892,360 970,210 60,871 13,550 74,421 33,457 185,609 219,066 (432,134) (278,632) (710,766) 334,474 1,482,893 1,817,367 (1,131,989) 3,724,565 2,592,576 41,324,866 35,454,370 76,779,236 NET POSITION, END OF YEAR $ 40,192,877 $ 39,178,935 $ 79,371,812 49 HUTCHINSON UTILITIES COMMISSION SCHEDULE OF DIVISIONS CASH FLOWS YEAR ENDED DECEMBER 31, 2024 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers Payments Received from Other Sources Payments to Suppliers Payments to Employees Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Other Noncapital Income (Expense) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Additions to Utility Plant Sale of Assets Principal Payments on Long -Term Liabilities Interest Paid on Long -Term Liabilities Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest Income Net Increase (Decrease) in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION OF CASH AND CASH EQUIVALENTS Current Assets - Cash and Investments Restricted Assets - Cash and Investments Total Cash and Cash Equivalents See Accompanying Notes to the Financial Statements 50 Electric Natural Gas Division Division Total $ 27,548,831 $ 11,219,109 $ 38,767,940 75,171 2,783,231 2,858,402 (20,862,279) (9,916,747) (30,779,026) (4,776,827) (888,568) (5,665,395) 1,984,896 3,197,025 5,181,921 51,449 941,955 993,404 (7,540,389) (531,931) (8,072,320) 116,034 13,550 129,584 (780,536) (1,895,000) (2,675,536) (434,668) (284,948) (719,616) (8,639,559) (2,698,329) (11,337,888) 617,223 616,803 1,234,026 (5,985,991) 2,057,454 (3,928,537) 12,158,339 15,622,243 27,780,582 $ 6,172,348 $ 17,679,697 $ 23,852,045 $ 4,989,092 $ 15,607,697 $ 20,596,789 1,183,256 2,072,000 3,255,256 $ 6,172,348 $ 17,679,697 $ 23,852,045 HUTCHINSON UTILITIES COMMISSION SCHEDULE OF DIVISIONS CASH FLOWS YEAR ENDED DECEMBER 31, 2024 RECONCILIATION OF OPERATING INCOME (LOSS) TO CASH FLOWS FROM OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Depreciation and Amortization Pension Related Adjustments OPEB Related Adjustments (Increase) Decrease in Assets Accounts Receivable Sales Tax Receivable Inventory Prepaid Items Increase (Decrease) in Liabilities Accounts Payable Customer Deposits Unearned Revenue Salaries Payable Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH FINANCING ACTIVITIES Amortization of Premium on Bonds Payable Electric Natural Gas Division Division Total $ (1,466,463) $ 2,241,672 $ 775,209 3,188,060 1,124,576 4,312,636 (253,087) (84,364) (337,451) (20,822) (6,940) (27,762) (6,529) (77,879) (84,408) (79,064) (79,064) (52,589) 9,089 (43,500) 117,699 18,548 136,247 342,278 (22,658) 319,620 (12,670) (6,821) (19,491) 51,081 16,397 67,478 47,590 2,279 49,869 129,412 (16,874) 112,538 $ 33,457 $ 185,609 $ 219,066 51 HUTCHINSON UTILITIES COMMISSION STATEMENT OF NET POSITION ELECTRIC DIVISION DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2023 2024 2023 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments $ 4,989,092 $ 10,974,683 Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $37,461 and $59,580, Respectively) 2,034,887 2,028,358 Interest Receivable 74,314 70,706 Sales Tax Receivable 397,232 318,168 Inventory 1,998,378 1,945,789 Prepaid Items 65,244 182,943 Total Current Assets 9,559,147 15,520,647 Noncurrent Assets Restricted Assets Cash and Investments 1,183,256 1,183,656 Capital and Right to Use Assets Assets Not Being Depreciated or Amortized 3,591,534 1,631,459 Other Capital and Right to Use Assets, Net of Depreciation and Amortization 45,823,412 43,486,321 Net Capital Assets 49,414,946 45,117,780 Total Noncurrent Assets 50,598,202 46,301,436 Total Assets 60,157,349 61,822,083 Deferred Outflows of Resources 342,759 741,556 Total Assets and Deferred Outflows of Resources $ 60,500,108 $ 62,563,639 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Accounts Payable $ 1,877,294 $ 1,535,016 Customer Deposits 191,496 204,166 Unearned Revenue 229,172 178,091 Accrued Expenses Interest 32,771 35,305 Salaries Payable 301,590 254,000 Total Current Liabilities 2,632,323 2,206,578 Long -Term Liabilities Net Pension Liability 1,832,248 2,776,372 Total OPEB Liability 39,880 64,096 Other Long -Term Liabilities Due Within One Year 851,947 819,814 Other Long -Term Liabilities Due in More Than One Year 13,656,384 14,373,098 Total Long -Term Liabilities 16,380,459 18,033,380 Total Liabilities 19,012,782 20,239,958 Deferred Inflows of Resources 1,294,449 998,815 Net Position Net Investment in Capital Assets 36,868,026 31,757,267 Unrestricted 3,324,851 9,567,599 Total Net Position 40,192,877 41,324,866 Total Liabilities, Deferred Inflows of Resources and Net Position $ 60,500,108 $ 62,563,639 52 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 OPERATING REVENUES Utility Revenues Residential General Service Industrial Street Lighting Resale Total Utility Revenues Other Operating Revenues Penalties/Fees Security Lights Total Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Production Operations Supervision and Engineering Other Employee Benefits Station Gas for Generation Transportation Waste Disposal Total Operations Maintenance Structures Generating Units Other Equipment Total Maintenance Total Production Power Costs Purchased Power 2024 gng.i Over (Under) Budget Actual Budget Actual $ 6,170,826 $ 6,040,987 $ (129,839) $ 5,914,078 9,771,267 9,050,761 (720,506) 8,815,434 8,836,162 8,644,375 (191,787) 8,065,784 124,108 124,399 291 139,778 3,681,000 3,656,427 (24,573) 5,120,534 28,583,363 27,516,949 (1,066,414) 28,055,608 135,100 144,740 9,640 137,699 10,000 9,495 (505) 9,150 145,100 154,235 9,135 146,849 28,728,463 27,671,184 (1,057,279) 28,202,457 1,184,547 1,294,157 109,610 1,197,149 856,541 684,278 (172,263) 928,665 222,500 192,058 (30,442) 286,307 1,210,660 1,048,044 (162,616) 1,148,611 724,600 724,600 719,517 35,000 38,402 3,402 38,731 4,233,848 3,981,539 (252,309) 4,318,980 21,000 19,620 (1,380) 21,609 609,603 601,410 (8,193) 513,122 209,000 285,444 76,444 293,683 839,603 906,474 66,871 828,414 5,073,451 4,888,013 (185,438) 5,147,394 12,638,152 11,904,189 (733,963) 12,053,183 53 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 OPERATING EXPENSES (Cont'd) Other Power Supply Supervision and General Salaries Professional Services Total Other Power Supply Transmission Operations Transmission Station Total Operations Maintenance Plant and Equipment Total Transmission Distribution Operations Supervision and Engineering Other Employee Benefits Line Meter Other Total Operations Maintenance Station Equipment Underground Lines Lines Transformers Street Lighting Other Equipment Total Maintenance Total Distribution Customer Accounts Expense Meter Reading Collection Other Employee Benefits Uncollectible Accounts Customer Services Meetings and Training Total Customer Accounts Expense 2024 Over (Under) Budget Actual Budget $ 210,656 $ 292,166 $ 81,510 36,600 36,600 247,256 328,766 81,510 gng.i Actual $ 260,250 36,600 296,850 2,755,000 2,522,972 (232,028) 3,009,524 200,000 223,701 23,701 213,925 2,955,000 2,746,673 (208,327) 3,223,449 43,538 84,576 41,038 30,487 2,998,538 2,831,249 (167,289) 3,253,936 706,489 494,968 (211,521) 420,696 465,795 460,430 (5,365) 424,754 275,811 265,044 (10,767) 148,016 14,359 34,115 19,756 16,896 158,000 158,275 275 155,752 1,620,454 1,412,832 (207,622) 1,166,114 36,018 32,473 (3,545) 20,192 246,859 527,734 280,875 362,088 37,458 38,260 802 26,728 95,713 255,168 159,455 292,607 70,539 61,150 (9,389) 58,363 486,587 914,785 428,198 759,978 2,107,041 2,327,617 220,576 1,926,092 14,207 33,710 19,503 4,126 201,265 185,225 (16,040) 169,737 16,000 22,365 6,365 12,309 4,000 (17,174) (21,174) 33,848 73,840 70,799 (3,041) 61,457 3,850 1,276 (2,574) 5,023 313,162 296,201 (16,961) 286,500 54 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 OPERATING EXPENSES (Cont'd) Sales Expense Salaries Conservation Total Sales Expense Administrative and General Supervision and General Salaries Office Supplies Outside Services Employed Property Insurance Medical Insurance Other Employee Benefits Regulatory Commissioners Salaries Travel Miscellaneous Maintenance of General Plant Total Administrative and General Depreciation and Amortization Expense Contribution to City of Hutchinson Payment in Lieu of Taxes Lighting Total Contributions to City of Hutchinson Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR 2024 gng.i Over (Under) Budget Actual Budget Actual $ 54,319 $ 47,433 $ (6,886) $ 44,109 252,799 96,798 (156,001) 76,700 307,118 144,231 (162,887) 120,809 532,533 568,023 35,490 556,002 290,961 293,650 2,689 271,655 74,815 71,811 (3,004) 104,239 318,354 324,841 6,487 311,022 129,287 106,009 (23,278) 81,931 107,100 113,584 6,484 122,588 1,400 375 (1,025) 1,350 15,836 15,808 (28) 15,836 7,000 3,695 (3,305) 6,899 72,653 68,383 (4,270) 69,469 80,230 64,719 (15,511) 49,755 1,630,169 1,630,898 729 1,590,746 3,330,000 3,188,060 (141,940) 3,354,505 1,345,802 1,345,803 1 1,319,414 252,620 252,620 1,345,802 1,598,423 252,621 1,319,414 29,990,689 29,137,647 (853,042) 29,349,429 (1,262,226) (1,466,463) (204,237) (1,146,972) 375,000 620,831 245,831 677,583 (55,000) (26,401) 28,599 (21,797) 43,671 77,850 34,179 208,842 60,871 60,871 33,457 33,457 33,457 (424,807) (432,134) (7,327) (460,699) (27,679) 334,474 362,153 437,386 $ (1,289,905) (1,131,989) $ 157,916 (709,586) ElIW ►ZylIkLsl.9"i $ 40,192,877 $ 41,324,866 55 HUTCHINSON UTILITIES COMMISSION STATEMENT OF NET POSITION NATURAL GAS DIVISION DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2023 2024 2023 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments $ 15,607,697 $ 13,550,243 Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $30,650 and $57,244, Respectively) 1,669,938 1,592,059 Interest Receivable 74,314 70,706 Inventory 545,266 554,355 Prepaid Items 27,332 45,880 Total Current Assets 17,924,547 15,813,243 Noncurrent Assets Restricted Assets Cash and Investments 2,072,000 2,072,000 Capital and Right to Use Assets Assets Not Being Depreciated or Amortized 3,899,919 4,737,730 Other Capital and Right to Use Assets, Net of Depreciation and Amortization 22,326,409 22,081,243 Net Capital Assets 26,226,328 26,818,973 Total Noncurrent Assets 28,298,328 28,890,973 Total Assets 46,222,875 44,704,216 Deferred Outflows of Resources 114,253 247,185 Total Assets and Deferred Outflows of Resources $ 46,337,128 $ 44,951,401 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Accounts Payable $ 1,083,435 $ 1,106,093 Customer Deposits 103,114 109,935 Unearned Revenue 187,505 171,108 Accrued Expenses Interest 16,917 23,233 Salaries Payable 89,051 86,772 Total Current Liabilities 1,480,022 1,497,141 Long -Term Liabilities Net Pension Liability 610,749 925,458 Total OPEB Liability 13,293 21,365 Other Long -Term Liabilities Due Within One Year 2,174,084 2,090,181 Other Long -Term Liabilities Due in More Than One Year 2,448,562 4,629,948 Total Long -Term Liabilities 5,246,688 7,666,952 Total Liabilities 6,726,710 9,164,093 Deferred Inflows of Resources 431,483 332,938 Net Position Net Investment in Capital Assets 23,882,579 22,394,615 Unrestricted 15, 296, 356 13, 059, 755 Total Net Position 39,178,935 35,454,370 Total Liabilities, Deferred Inflows of Resources and Net Position $ 46,337,128 $ 44,951,401 56 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - NATURAL GAS DIVISION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 2024 2023 Over(Under) Budget Actual Budget Actual OPERATING REVENUES Utility Revenues Residential $ 3,891,334 $ 3,526,225 $ (365,109) $ 3,949,946 Commercial 2,849,910 2,526,865 (323,045) 2,888,770 Industrial 5,507,559 5,234,322 (273,237) 5,138,193 Total Utility Revenues 12,248,803 11,287,412 (961,391) 11,976,909 Other Operating Revenues Gas Transportation Contract - New Ulm 822,278 754,398 (67,880) 1,049,016 Transportation - Electric Division 724,600 724,600 719,517 Penalties/Fees 51,000 55,177 4,177 52,815 Gas Transportation Contract - Other 1,285,925 1,249,056 (36,869) Total Other Operating Revenues 2,883,803 2,783,231 (100,572) 1,821,348 Total Operating Revenues 15,132,606 14,070,643 (1,061,963) 13,798,257 OPERATING EXPENSES Purchased Natural Gas 7,740,876 7,263,560 (477,316) 7,635,147 Transmission Operations Supervision and Engineering 152,172 184,962 32,790 100,120 Other 233,500 152,868 (80,632) 85,582 Total Operations 385,672 337,830 (47,842) 185,702 Maintenance Supervision and Engineering 4,066 7,068 3,002 1,915 Other 38,000 2,963 (35,037) 15,027 Total Maintenance 42,066 10,031 (32,035) 16,942 Total Transmission 427,738 347,861 (79,877) 202,644 Distribution Operations Supervision and Engineering 311,320 179,285 (132,035) 260,811 Other Employee Benefits 543,108 348,006 (195,102) 469,285 Mains and Services 246,918 135,746 (111,172) 155,725 Meters 21,033 36,243 15,210 21,486 Other 58,200 44,811 (13,389) 52,617 Total Operations 1,180,579 744,091 (436,488) 959,924 Maintenance Mains and Services 195,805 280,700 84,895 211,864 Meters 44,415 18,891 (25,524) 19,619 Other Equipment 61,500 91,029 29,529 51,754 Total Maintenance 301,720 390,620 88,900 283,237 Total Distribution 1,482,299 1,134,711 (347,588) 1,243,161 57 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - NATURAL GAS DIVISION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 OPERATING EXPENSES (Cont'd) Customer Accounts Expense Meter Reading Collection Other Employee Benefits Uncollectible Accounts Customer Services Meetings and Training Total Customer Accounts Expense Sales Expense Salaries Conservation Total Sales Expense Administrative and General Supervision and General Salaries Office Supplies Outside Services Employed Property Insurance Medical Insurance Other Employee Benefits Regulatory Commissioners Salaries Travel Miscellaneous Maintenance of General Plant Total Administrative and General Depreciation and Amortization Expense Contribution to City of Hutchinson Payment in Lieu of Taxes Total Operating Expenses Operating Income (Loss) 2024 gng.i Over (Under) Budget Actual Budget Actual $ 24,715 $ 31,583 $ 6,868 $ 2,686 156,853 152,191 (4,662) 138,076 9,000 19,621 10,621 10,714 1,000 (20,154) (21,154) 10,183 60,415 57,927 (2,488) 50,283 3,150 1,044 (2,106) 4,168 255,133 242,212 (12,921) 216,110 54,319 47,432 (6,887) 44,108 136,946 55,611 (81,335) 43,757 191,265 103,043 (88,222) 87,865 386,885 474,371 87,486 450,824 111,054 108,805 (2,249) 100,747 35,105 35,957 852 54,948 69,639 77,700 8,061 69,684 70,819 66,576 (4,243) 62,902 86,100 90,454 4,354 89,368 60,000 53,574 (6,426) 46,742 10,558 10,539 (19) 10,558 4,000 3,045 (955) 4,638 45,000 42,559 (2,441) 44,675 68,057 52,603 (15,454) 42,939 947,217 1,016,183 68,966 978,025 1,100,000 1,124,576 24,576 1,097,315 596,824 596,825 1 585,122 12,741,352 11,828,971 (912,381) 12,045,389 2,391,254 2,241,672 (149,582) 1,752,868 58 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - NATURAL GAS DIVISION YEAR ENDED DECEMBER 31, 2024 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2023 2024 2023 Over (Under) Budget Actual Budget Actual NONOPERATING REVENUES (EXPENSES) Interest Income $ 375,000 $ 620,411 $ 245,411 $ 677,152 Merchandise and Contract Work, Net (12,000) 49,595 61,595 29,060 Miscellaneous Income 23,515 892,360 868,845 36,134 Gain (Loss) on Disposal of Assets 13,550 13,550 Bond Premium 185,608 185,609 1 185,608 Interest Expense (279,920) (278,632) 1,288 (334,742) Total Nonoperating Revenues (Expenses) 292,203 1,482,893 1,190,690 593,212 Change in Net Position $ 2,683,457 3,724,565 $ 1,041,108 2,346,080 NET POSITION, BEGINNING OF YEAR 35,454,370 33,108,290 NET POSITION, END OF YEAR $ 39,178,935 $ 35,454,370 59 COMPLIANCE SECTION This page intentionally left blank INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE Members of the Hutchinson Utilities Commission Hutchinson, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2024, and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements, and have issued our report thereon dated March 26, 2025. In connection with our audit, nothing came to our attention that caused us to believe that the Commission failed to comply with the provisions of the contracting -bid laws, depositories of public funds and public investments, conflicts of interest, public indebtedness, claims and disbursements, and miscellaneous provisions sections of the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, insofar as they relate to accounting matters. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Commission's noncompliance with the above referenced provisions, insofar as they relate to account matters. The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide �� an opinion on compliance. Accordingly, this communication is not suitable for any other purpose. CONWAY, DEUTH & SCHMIESING, PLLP CPAS & ADVISORS LITCHFIELD, MINNESOTA March 26, 2025 Willmar Office 331 Third St SW, Ste 2 PO Box 570 Willmar, MN 56201 (320) 235-3311 (888( 388-1040 .e wwww w a dsw; pa coun Litchfield Office 820 Sibley Ave H Leitchfield, MN 55355 (3 ,0) 693.7975 Sarlell Office Ste 110 2351 ConnecticutAve Sarlell, MN 5637'7 (320) 2 52-7565 (800) 862-1337' Mernbem Ainerican institute of certified Public Accountants, Minnesota Society of Certified Public Accountants This page intentionally left blank INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Members of the Hutchinson Utilities Commission Hutchinson, Minnesota We have audited in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2024, and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements, and have issued our report thereon dated March 26, 2025. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Commission's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses or significant deficiencies. However, material weaknesses or significant deficiencies may exist that have not been identified. Willmar Office 331 Thirst 5t SK Ste 2 PO Box 570 `+, ilirnnar, MIN 56201 (320) 233..3311 (888) 388-1040 em on Office 11209Pacific Ave,Ste3 Benson, MIN56215 (320) 843 2;302 61 nrr°ry r r 1(-, a.r. rrn Liithf'ieildl Office 820 Sibley Ave N Litchfield, MIN 55355 1320) 3-7975 artelil Office Ste 110 2351 C:onnerticutAve Sartelill, MN 56377 (320) 232-7565 (800) 3 2-1337 Micnnbers: Arnericarn Institute of Certified Puiatic Accountants, Minnesota Socrety of: Certified PuNic Accountants Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the Commission's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Cone', Z)h cA ,;&s1 , �-Lim CONWAY, DEUTH & SCHMIESING, PLLP CPAS & ADVISORS LITCHFIELD, MINNESOTA March 26, 2025 62 HUTCHINSON UTILITIES COMMISSION Finding Reference SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS DECEMBER 31, 2024 Year Finding If Not Corrected, Provide Planned Finding Title Status Initially Occurred Corrective Action or Other Explanation Financial Statement Findings: None Minnesota Legal Compliance Findings: None 63 HUTCHINSON UTILITIES COMMISSION COMBINED DIVISIONS FINANCIAL REPORT FOR FEBRUARY, 2025 Combined Division Customer Revenue Sales for Resale NG Transportation Electric Division Transfer Other Revenues Interest Income TOTAL REVENUES Salaries & Benefits Purchased Commodities Transmission Generator Fuel/Chem. Depreciation Transfers (Elect./City) Operating Expense Debt Interest TOTAL EXPENSES NET PROFIT/(LOSS) 16.66% of Year Comp. 2025 2024 Di . %Chna 2025 2024 Di %Chna Full Yr Bud %of Bud $ 3,662,202 $ 3,150,719 $ 511,483 $ 274,960 $ 279,644 $ (4,684) $ 333,024 $ 185,264 $ 147,759 $ 60,639 $ 60,383 $ 255 $ 48,450 $ 41,839 $ 6,611 $ 61,617 $ 105,318 $ (43,701) $ 4,440,891 $ 3,823,167 $ 617,724 16.2% $ 7,421,306 $ 6,818,303 $ 603,003 8.8% $ 38,041,145 19.5% (1.7%) $ 612,534 $ 710,194 $ (97,660) (13.8%) $ 3,490,250 17.5% 79.8% $ 508,698 $ 356,629 $ 152,068 42.6% $ 2,071,218 24.6% 0.4% $ 121,278 $ 120,767 $ 511 0.4% $ 727,666 16.7% 15.8% $ 87,285 $ 77,391 $ 9,894 12.8% $ 483,841 18.0% (41.5%) $ 129,014 $ 183,179 $ (54,165) (29.6%) $ 633,457 20.4% 16.2% $ 8,880,115 $ 8,266,463 $ 613,652 7.4% $ 45,447,577 19.5% $ 623,725 $ 620,823 $ 2,902 0.47% $ 1,307,838 $ 1,317,630 $ (9,793) (0.7%) $ 8,248,534 15.9% $ 2,168,278 $ 1,995,430 $ 172,848 8.7% $ 4,545,198 $ 4,321,705 $ 223,493 5.2% $ 20,256,167 22.4% $ 163,749 $ 180,731 $ (16,982) (9.4%) $ 353,211 $ 364,413 $ (11,202) (3.1%) $ 3,015,064 11.7% $ 53,423 $ 24,796 $ 28,627 115.4% $ 151,407 $ 401,131 $ (249,724) (62.3%) $ 1,284,200 11.8% $ 349,379 $ 364,610 $ (15,231) (4.2%) $ 698,808 $ 729,005 $ (30,196) (4.1%) $ 4,310,000 16.2% $ 222,524 $ 222,269 $ 255 0.1% $ 445,049 $ 444,538 $ 511 0.1% $ 2,670,292 16.7% $ 153,932 $ 177,924 $ (23,992) (13.5%) $ 498,364 $ 468,028 $ 30,336 6.5% $ 3,174,901 15.7% $ 49,688 $ 58,538 $ (8,850) (15.1%) $ 99,376 $ 117,076 $ (17,700) 15.1% $ 596,257 16.7% $ 3,784,698 $ 3,645,121 $ 139,577 3.8% $ 8,099,251 $ 8,163,527 $ (64,276) (0.8%) $ 43,555,415 18.6% $ 656,193 $ 178,047 $ 478,147 268.6%1 780,864 $ 102,936 $ 677,928 658.6% $ 1,892,162 41.3% February February i, YTD YTD 2025 2024 Change 2025 2024 Change Gross Margin %: 36.7% 30.6% 6.2% 32.8% 27.4% 5.4% Operating Income Per Revenue $ (%): 14.2% 2.9% 11.3% 8.1% -0.1% 8.2% Net Income Per Revenue $ (%): 14.8% 4.7% 10.1% 8.8% 1.2% 7.5% 2025 HUC Budget Target 34.2% 3.5%N 4.2%N uuIIUuIINNI HUTCHINSON UTILITIES COMMISSION ELECTRIC DIVISION FINANCIAL REPORT FOR FEBRUARY, 2025 2025 2024 Di . %Chna 2025 2024 Di %Chna Full YrBud %of Bud Electric Division Customer Revenue $ 2,010,114 $ 1,743,198 $ 266,916 15.3% $ 3,987,666 $ 3,642,086 $ 345,581 9.5% $ 25,609,217 15.6% Sales for Resale $ 274,960 $ 279,644 $ (4,684) (1.7%) $ 612,534 $ 710,194 $ (97,660) (13.8%) $ 3,490,250 17.5% Other Revenues $ 19,220 $ 13,876 $ 5,344 38.5% $ 34,794 $ 27,454 $ 7,340 26.7% $ 191126 18.2% Interest Income $ 32,202 $ 54,053 $ (21,851) (40.4%) $ 67,295 $ 94,378 $ (27,082) (28.7%) $ 333:457 20.2% TOTAL REVENUES $ 2,336,497 $ 2,090,771 $ 245,726 11.8% $ 4,702,289 $ 4,474,111 $ 228,178 5.1% $ 29,624,050 15.9% Salaries & Benefits $ 476,029 $ 459,175 $ 16,853 3.7% $ 1,000,247 $ 991,240 $ 9,008 0.9% $ 5,955,489 16.8% Purchased Power $ 1,044,293 $ 862,364 $ 181,929 21.1% $ 2,218,176 $ 1,961,758 $ 256,417 13.1% $ 12,605,893 17.6% Transmission $ 163,749 $ 180,731 $ (16,982) (9.4%) $ 353,211 $ 364,413 $ (11,202) (3.1%) $ 3,015,064 11.7% Generator Fuel/Chem. $ 53,423 $ 24,796 $ 28,627 115.4% $ 151,407 $ 401,131 $ (249,724) (62.3%) $ 1,284,200 11.8% Depreciation $ 251,590 $ 271,817 $ (20,226) (7.4%) $ 503,231 $ 543,418 $ (40,187) (7.4%) $ 3,200,000 15.7% Transfers (Elect./City) $ 172,789 $ 172,534 $ 255 0.1% $ 345,578 $ 345,067 $ 511 0.1% $ 2,073,468 16.7% Operating Expense $ 86,694 $ 132,878 $ (46,185) (34.8%) $ 319,133 $ 354,759 $ (35,626) (10.0%) $ 2,145,148 14.9% Debt Interest $ 32,771 $ 35,305 $ (2,533) (7.2%) $ 65,543 $ 70,609 $ (5,067) JLZLI $ 393,257 16.7% TOTAL EXPENSES $ 2,281,338 $ 2,139,600 $ 141,738 6.6% $ 4,956,526 $ 5,032,395 $ (75,870) (1.5%) $ 30,672,519 16.2% NET PROFIT/(LOSS) $ 55,159 $ (48,829) $ 103,988 (213.0%) $ (254,237) $ (558,284) $ 304,048 (54.5%) $ (1,048,469) 24.2% 2025 2024 Di . %Chna 2025 2024 Di %Chna Full YrBud %of Bud Electric Division Residential 4,188,058 3,818,253 369,805 9.69% 8,977,676 8,447,384 530,292 6.28% 54,084,350 16.6% All Electric 331,591 240,213 91,378 38.04% 714,898 580,188 134,710 23.22% 2,585,300 27.7% Small General 1,337,229 1,363,064 (25,835) (1.90%) 3,160,035 2,958,936 201,099 6.80% 18,348,996 17.2% Large General 5,722,310 5,548,320 173,990 3.14% 11,924,360 11,500,240 424,120 3.69% 83,540,973 14.3% Industrial 8,289,000 8,248,000 41,000 0.50% 16,845,000 17,248,000 (403,000) (2.34%) 113,841,379 14.8% Total KWH Sold 19,868,188 19,217,850 650,338 3.38%1 41,621,969 40,734,748 887,221 2.18%1 272,400,998 15.3% February February YTD YTD 2025 HUC 2025 2024 Change 2025 2024 Change Budget Target Gross Margin %: 30.0% 30.6% -0.6% 24.9% 21.3% 3.6% 27.0% Operating Income Per Revenue $ (%): 2.3% -3.3% 5.6% -5.6% -13.3% 7.7% -3.5% 0%- 1% Net Income Per Revenue $ (%): 2.4% -2.3% 4.7% -5.4% -12.5% 7.1% -3.5% 0%- 1% Customer Revenue per KWH: $0.1012 $0.0907 $0.0105 $0.0958 $0.0894 $0.0064 $0.0940 IIII���I Total Power Supply Exp. per KWH: $0.0810 $0.0735 $0.0075 $0.0835 $0.0846 -$0.0011 $0.0784 $0.0784 Net Profit increased by $103,988 over February 2024. Customer usage and revenues were up but also helped by an additional $151,798 in PCA compared to a year ago. Purchased power was up $181,929 but that was in large part due to a true up of past expenses that actually lowered purchased power by $120,000 in February 2024. Sales for Resale of $274,960 consisted of $30,710 in market sales, $98,000 in capacity sales to Rice Lake, and $146,250 in capacity sales to AEP. February 2024 Sales for Resale of $279,644 included $35,394 in market sales, $98,000 in capacity sales to Rice Lake, $146,250 in capacity sales to AEP. February 2023 Sales for Resale of $360,365 consisted of $48,341 in market sales, $98,000 in capacity sales to Rice Lake, $146,250 in capacity sales to AEP, and $67,774 in tolling and energy sales to Dynasty Power. Overall Purchased Power increased by $181,929. MRES purchases increased by $19,305 and market purchases/MISO costs increased by $162,624. The average cost of MISO power was $37.10/mwh (3,428 mwh's purchased), compared to $43.29/mwh (2,346 mwh's purchased) in February 2024. Power Cost Adjustment for February 2025 was $.00763/kwhr bringing in an additional $151,798 for the month and YTD. There was no PCA in February 2024 or YTD 2024. Gas Division Customer Revenue Transportation Electric Div. Transfer Other Revenues Interest Income TOTAL REVENUES Salaries & Benefits Purchased Gas Operating Expense Depreciation Transfers (City) Debt Interest TOTAL EXPENSES NET PROFIT/(LOSS) HUTCHINSON UTILITIES COMMISSION GAS DIVISION FINANCIAL REPORT FOR FEBRUARY, 2025 16.66% of Year Comp. 2025 2024 2 %Chna 2025 2024 2 . %Chna Full Yr Bud % of Bud $ 1,652,088 $ 1,407,522 $ 244,567 17.4% $ 3,433,640 $ 3,176,217 $ 257,423 8.1% $ 12,431,928 27.6% $ 333,024 $ 185,264 $ 147,759 79.8% $ 508,698 $ 356,629 $ 152,068 42.6% $ 2,071,218 24.6% $ 60,639 $ 60,383 $ 255 0.4% $ 121,278 $ 120,767 $ 511 0.4% $ 727,666 16.7% $ 29,230 $ 27,963 $ 1,267 4.5% $ 52,492 $ 49,937 $ 2,554 5.1% $ 292,715 17.9% $ 29,414 $ 51,265 $ (21,851) (42.6%) $ 61,719 $ 88,801 $ (27,082) (30.5%) $ 300,000 20.6% $ 2,104,395 $ 1,732,397 $ 371,998 21.5% $ 4,177,826 $ 3,792,352 $ 385,474 10.2% $ 15,823,527 26.4% $ 147,696 $ 161,648 $ (13,952) (8.6%) $ 307,590 $ 326,391 $ (18,800) (5.8%) $ 2,293,045 13.4% $ 1,123,985 $ 1,133,066 $ (9,080) (0.8%) $ 2,327,022 $ 2,359,947 $ (32,924) (1.4%) $ 7,650,274 30.4% $ 67,238 $ 45,045 $ 22,193 49.3% $ 179,231 $ 113,269 $ 65,962 58.2% $ 1,029,753 17.4% $ 97,789 $ 92,794 $ 4,995 5.4% $ 195,577 $ 185,587 $ 9,990 5.4% $ 1,110,000 17.6% $ 49,735 $ 49,735 $ (0) (0.0%) $ 99,471 $ 99,471 $ (0) (0.0%) $ 596,824 16.7% $ 16,917 $ 23,233 $ (6,317) 0.0% $ 33,833 $ 46,467 $ (12,633) 27.2% $ 203,000 16.7% $ 1,503,360 $ 1,505,521 $ (2,161) (0.1%) $ 3,142,725 $ 3,131,131 $ 11,594 0.4% $ 12,882,896 24.4% $ 601,035 $ 226,876 $ 374,159 164.9%1 1,035,101 $ 661,221 $ 373,880 56.5% $ 2,940,631 35.2% 2025 2024 2 . %Chnq Gas Division Residential 74,996,518 52,030,771 22,965,747 44.14% Commercial 52,726,379 36,008,917 16,717,462 46.43% Industrial 94,058,961 76,355,329 17,703,632 23.19% 2025 2024 p %Chnq 162,183,518 129,210,430 32,973,088 25.52% 113,321,147 89,607,635 23,713,512 26.46% 201,876,581 172,621,593 29,254,988 16.95% 16.66% of Year Comp. Full Yr Bud % of Bud 435,250,000 37.3% 337,584,000 33.6% 895,764,000 22.5% Total CF Sold 221,781,858 164,395,017 57,386,841 34.91% 477,381,246 391,439,658 85,941,588 21.96% 1,668,598,000 28.6% February February YTD YTD 2025 HUC 2025 2024 Change 2025 2024 Change Budget Target Gross Margin %: 44.3% 30.5% 13.8% 41.7% 34.7% 7.0% 48.0% Operating Income Per Revenue $ (%): 27.5% 10.6% 16.9% 23.7% 15.8% 7.9% 17.0% Net Income Per Revenue $ (%): 28.6% 13.1% 15.5% 24.8% 17.4% 7.3% 18.6% Contracted Customer Rev. per CF: $0.0069 $0.0080 -$0.0011 $0.0069 $0.0082 -$0.0014 $0.0061 Customer Revenue per CF: $0.0078 $0.0090 -$0.0012 $0.0074 $0.0080 -$0.0006 $0.0087 $0.0087 Total N.G. Supply Exp. per CF: $0.0052 $0.0070 ($0.0019) $0.0050 $0.0061 ($0.0011) $0.0048 Notes/Graphs: February Net Income increased by $374,159 mostly due to increased usage with a much colder month compared to a year ago. February 2025 Fuel Credit Adjustment was $.61929/MCF crediting customers $81,455 for the month and $264,540 YTD. There was no February 2024 FCA but $150,146 was returned to customers YTD. Current Assets UnrestrictedlUndesignated Cash Cash Petty Cash Designated Cash Capital Expenditures - Five Yr. CIP Payment in Lieu of Taxes Rate Stabilization - Electric Rate Stabilization - Gas Catastrophic Funds Restricted Cash Bond & Interest Payment 2017 Bond & Interest Payment 2012 Debt Service Reserve Funds Total Current Assets Receivables Accounts (net of uncollectible allowances) Interest Total Receivables Other Assets Inventory Prepaid Expenses Sales Tax Receivable Deferred Outflows - Electric Deferred Outflows - Gas Total Other Assets Total Current Assets Capital Assets Land & Land Rights Depreciable Capital Assets Accumulated Depreciation Construction - Work in Progress Total Net Capital Assets HUTCHINSON UTILITIES COMMISSION BALANCE SHEET - CONSOLIDATED FEBRUARY 28, 2025 Electric Gas Total Total Net Change Division Division 2025 2024 Total (YTD) (2,099,315.38) 13,643,218.79 11,543,903.41 16,095,315.84 (4,551,412.43) 680.00 170.00 850.00 850.00 - 2,750,000.00 700,000.00 3,450,000.00 3,450,000.00 - 1,345,802.00 596,824.00 1,942,626.00 1,942,626.00 - 337,362.32 - 337,362.32 204,746.72 132,615.60 - 615,294.19 615,294.19 472,900.68 142,393.51 800,000.00 200,000.00 1,000,000.00 1,000,000.00 - 295,814.05 - 295,814.05 295,914.06 (100.01) - 545,749.97 545,749.97 543,450.00 2,299.97 1,183,656.00 2,072,000.00 3,255,656.00 3,255,656.00 - 4,613,998.99 18,373,256.95 22,987,255.94 27,261,459.30 (4,274,203.36) 2,025,986.53 1,792,094.50 3,818,081.03 3,477,268.26 340,812.77 74,314.28 74,314.29 148,628.57 141,412.63 7,215.94 2,100,300.81 1,866,408.79 3,966,709.60 3,618,680.89 348,028.71 2,111,100.75 548,262.43 2,659,363.18 2,474,595.04 184,768.14 331,483.60 200,921.31 532,404.91 504,374.78 28,030.13 405,752.26 - 405,752.26 334,474.03 71,278.23 741,556.00 - 741,556.00 741,556.00 - - 247,185.00 247,185.00 247,185.00 - 3,589,892.61 996,368.74 4,586,261.35 4,302,184.85 284,076.50 10,304,192.41 21,236,034.48 690,368.40 3,899,918.60 94,054,405.57 44,579,509.55 (48,705,265.36) (22,448,678.78) 3,370,222.97 21,608.69 49,409,731.58 26,052,358.06 31,540,226.89 35,182,325.04 (3,642,098.15) 4,590,287.00 4,590,287.00 - 138,633,915.12 157,262,496.41 (18,628,581.29) (71,153,944.14) (92,376,742.18) 21,222,798.04 3,391,831.66 2,071,681.99 1,320,149.67 75,462,089.64 71,547,723.22 3,914,366.42 Total Assets 59,713,923.99 47,288,392.54 107,002,316.53 106,730,048.26 272,268.27 Current Liabilities Current Portion of Long-term Debt Bonds Payable Bond Premium Lease Liability - Solar Array Accounts Payable Accrued Expenses Accrued Interest Accrued Payroll Total Current Liabilities Long -Term Liabilities Noncurrent Portion of Long-term Debt 2017 Bonds 2012 Bonds Bond Premium 2012 Pension Liability- Electric Pension Liability - Electric OPEB Pension Liability - Nat Gas Pension Liability - Nat Gas OPEB Accrued Vacation Payable Accrued Severance Deferred Outflows - Electric Deferred Outflows - Nat Gas Total Long -Term Liabilities Net Position Retained Earnings Total Net Position HUTCHINSON UTILITIES COMMISSION BALANCE SHEET - CONSOLIDATED FEBRUARY 28, 2025 Electric Gas Total Division Division 2025 790,000.00 19, 546.00 2,302,975.58 98,314.05 58,949.37 3,269,785.00 11,750,000.00 426,576.24 2,776,372.00 64,096.00 569,807.22 208,347.54 998,815.00 16,794,014.00 1,980,000.00 185,608.32 1,250,756.27 50,749.99 19,278.15 3,486,392.73 2,080,000.00 139,205.87 925,458.00 21,365.00 169,522.80 37,374.19 332,938.00 3,705,863.86 2,770,000.00 185,608.32 19, 546.00 3,553,731.85 149,064.04 78,227.52 6,756,177.73 11,750,000.00 2,080,000.00 565,782.11 2,776,372.00 64,096.00 925,458.00 21,365.00 739,330.02 245,721.73 998,815.00 332,938.00 20,499,877.86 Total Net Change 2024 Total (YTD) 2, 655, 000.00 115, 000.00 185,608.32 - - 19,546.00 3, 392, 536.29 161,195.56 175,614.07 (26,550.03) 62,713.53 15,513.99 6, 471, 472.21 284, 705.52 12,540,000.00 (790,000.00) 4,060,000.00 (1,980,000.00) 784,847.39 (219,065.28) 2,776,372.00 - 64,096.00 - 925,458.00 - 21,365.00 - 718,594.32 20,735.70 153,920.05 91,801.68 998,815.00 - 332,938.00 - 23,376,405.76 (2,876,527.90) 39,650,124.99 40,096,135.95 79,746,260.94 76,882,170.29 2,864,090.65 39,650,124.99 40,096,135.95 79,746,260.94 76,882,170.29 2,864,090.65 Total Liabilities and Net Position 59,713,923.99 47,288,392.54 107,002,316.53 106,730,048.26 272,268.27 Hutchinson Utilities Commission Cash -Designations Report, Combined 2/28/2025 Financial Institution Current Interest Rate Annual Interest Balance, February 2025 Balance, January 2025 Change in Cash/Reserve Position Savings, Checking, Investments varies varies varies 22,987,255.94 23,139,420.87 (152,164.93) Total Operating Funds 22,987,255.94 23,139,420.87 (152,164.93) Debt Reserve Requirements Bond Covenants - sinking fund Debt Reserve Requirements Bond Covenants -1 year Max. P & I Total Restricted Funds Operating Reserve Rate Stabalization Funds PILOT Funds Catastrophic Funds Capital Reserves Total Designated Funds Min 60 days of 2025 Operating Bud. Charter (Formula Only) Risk Mitigation Amount 5 Year CIP (2025-2029 Fleet & Infrastructure Maintenance) 841,564.02 561,042.66 280,521.36 3,255,656.00 3,255,656.00 - 4,097,220.02 3,816,698.66 280,521.36 6,542,569.17 6,542,569.17 952,656.51 952,656.51 1, 942, 626.00 1, 942, 626.00 1, 000, 000.00 1, 000, 000.00 3,450,000.00 3,450,000.00 13,887,851.68 13,887,851.68 YE YE YE YE YTD HUC 2021 2022 2023 2024 2025 Target Debt to Asset 30.8% 31.4% 28.6% 26.0% 25.5% Current Ratio 5.22 4.47 4.48 3.67 3.93 RONA 0.41% -1.38% 1.96% 2.63% 0.82% Change in Cash Balance (From 12131114 to 212812025) Month End Electric Elec. Change Natural Gas Gas Change Total Total Change 2/28/2025 4,613,999 18,373,257 22,987,256 12/31/2024 6,134,710 (1,520,711) 17,717,453 655,804 23,852,164 (864,908) 12/31/2023 12,158,338 (6,023,628) 15,622,242 2,095,211 27,780,580 (3,928,416) 12/31/2022 11,633,212 525,126 15,450,554 171,688 27,083,766 696,815 12/31/2021 12,870,253 (1,237,041) 15,086,000 364,554 27,956,253 (872,487) 12/31/2020 14,239,233 (1,368,981) 15,019,173 66,827 29,258,406 (1,302,153) 12/31/2019 12,124,142 2,115,092 13,837,040 1,182,133 25,961,181 3,297,225 12/31/2018 15,559,867 (3,435,725) 12,335,998 1,501,042 27,895,864 (1,934,683) 12/31/2017 23,213,245 (7,653,378) 10,702,689 1,633,309 33,915,934 (6,020,070) 12/31/2016 8,612,801 14,600,444 9,500,074 1,202,615 18,112,875 15,803,059 12/31/2015 6,170,790 2,442,011 9,037,373 462,701 15,208,163 2,904,712 12/31/2014 3,598,821 2,571,969 6,765,165 2,272,208 10,363,986 4,844,177 * 2017's Significant increase in cash balance is due to issuing bonds for the generator project. Hutchinson Utilities Commission Cash -Designations Report, Electric 2/28/2025 Change in Financial Annual Balance, Balance, Cash/Reserve Institution Current Interest Rate Interest February 2025 January 2025 Position �' Rr Savings, Checking, Investments varies varies varies 22,987,255.94 23,139,420.87 (152,164.93) Total HUC Operating Funds 22,987,255.94 23,139,420.87 (152,164.93) Debt Restricted Requirements Debt Restricted Requirements Total Restricted Funds Bond Covenants - sinking fund Bond Covenants -1 year Max. P & 1 295,814.05 1,183,656.00 1,479,470.05 197,209.36 1,183,656.00 1,380,865.36 98,604.69 - 98,604.69 Excess Reserves Less Restrictions, Electric 3,134,528.94 3,827,732.71 (693,203.77) J11J! !!1 1 !1 J Operating Reserve Min 60 days of 2025 Operating Bud. 4,578,753.17 4,578,753.17 Rate Stabalization Funds $400K-$1.2K 337,362.32 337,362.32 PILOT Funds Charter (Formula Only) 1,345,802.00 1,345,802.00 Catastrophic Funds Risk Mitigation Amount 800,000.00 800,000.00 Capital Reserves 5 Year CIP (2025-2029 Fleet & Infrastructure Maintenance) 2,750,000.00 2,750,000.00 Total Designated Funds 9,811,917.49 9,811,917.49 Excess Reserves Less Restrictions & Designations, Electric (6,677,388.55) (5,984,184.78) (693,203.77) YE YE YE YE YTD APPA Ratio HUC 2021 2022 2023 2024 2025 5K-10K Cust. Target Debt to Asset Ratio (* w/Gen.) 32.2% 34.8% 34.0% 33.9% 33.6% 39.8% pp ppppp ryry NNNNNNNNNNNN Current Ratio 5.70 4.96 4.35 2.38 2.47 3.75 RONA -1.2% -4.2% -0.9% -2.1% -0.5% NA >0% Hutchinson Utilities Commission Cash -Designations Report, Gas 2/28/2025 Change in Financial Annual Balance, Balance, Cash/Reserve Institution Current Interest Rate Interest February 2025 January 2025 Position 51' Rr Savings, Checking, Investments varies varies varies 22,987,255.94 23,139,420.87 (152,164.93) Total HUC Operating Funds 22,987,255.94 23,139,420.87 (152,164.93) Debt Restricted Requirements Bond Covenants - sinking fund 545,749.97 363,833.30 181,916.67 Debt Restricted Requirements Bond Covenants -1 year Max. P & 1 2,072,000.00 2,072,000.00 - Total Restricted Funds 2,617,749.97 2,435,833.30 181,916.67 Excess Reserves Less Restrictions, Gas 0. i 1 1 JJJ1 111 1 11 J J Operating Reserve Min 60 days of 2025 Operating Bud. 1,963,816.00 1,963,816.00 - Rate Stabalization Funds $200K-$600K 615,294.19 615,294.19 PILOT Funds Charter (Formula Only) 596,824.00 596,824.00 Catastrophic Funds Risk Mitigation Amount 200,000.00 200,000.00 Capital Reserves 5 Year CIP (2025-2029 Fleet & Infrastructure Maintenance) 700,000.00 700,000.00 Total Designated Funds 4,075,934.19 4,075,934.19 YE YE YE YE YTD HUC 2021 2022 2023 2024 2025 AGA Ratio Target Debt to Asset 28.8% 26.5% 21.0% 15.5% 15.2% 35%-50% Current Ratio 4.79 4.06 4.61 5.08 5.27 1.0-3.0 RONA 2.9% 3.0% 6.2% 9.1% 2.5% 2%-5% Notes/Graphs: ELECTRIC DIVISION Operating Revenue February 2025 CLASS AMOUNT KWH /KWH Street Lights $21.04 2,561 $0.0545 Electric Residential Service $503,192.99 4,188,058 $0.1201 All Electric Residential Service $35,396.85 331,591 $0.1067 Electric Small General Service $157,064.10 1,337,229 $0.1175 Electric Large General Service $596,665.27 5,722,310 $0.1043 Electric Large Industrial Service $717,773.52 8,289,000 $0.0866 Total $2,010,113.77 19,870,749 $0.1012 Power Adjustment $0.00763 Rate Without Power Adjustment $0.09353 Electric Division Year -to -Date ® 2025 $ Amount ❑ 2024 $ Amount ® 2025 KWH110 ❑ 2024 KWH110 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Residential All Elec. Resid. Small Gen. Srv. Large Gen. Srv. Large Industrial Sales For Resale Total NOTE: This graph includes sales for resale (capacity and energy sales) but excludes street lights and security lights NATURAL GAS DIVISION Operating Revenue February 2025 CLASS AMOUNT MCF /MCF Residential $587,875.37 74,997 $7.8387 Commercial $409,339.92 52,726 $7.7635 Large Industrial $20,963.59 2,618 $8.0076 Large Industrial Contracts $633,909.57 91,441 $6.9324 Total $1,652,088.45 221,782 $7.4492 Fuel Adjustment-$0.61929 Rate Without Fuel Adjustment $8.06845 Natural Gas Division Year -to -Date ❑ 2025 $ Amount ❑ 2024 $ Amount m 2025 MCF ❑ 2024 MCF 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 Gas Residential Gas Commercial Large Industrial Large Industrial Total Contracts � U N N N N N N O N O N N O Q Q Q Q Q O 0 0 0 0 0 E Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q s Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q z= Z Z Z Z Z N O O 0M 0M N C Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z M Z ?j Z Z O Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z Z O Z R Q U o00000 o Y o 0 m W COOlMWNlomoo -000r- 0000r-00r-W VW�O 0 WNMO ��I�� ON N- WI�OCOO V 7 V rcci W I� W W W W �6Ni0 MONOMWW C00MO�V CM000iM�6WiN 6iW M W W6Wi W CO � r m 0 W � I� M" A W N MI�rN r r� M V I�0) I� V �WNMM-N- I- 0)I- E V N O W W `� O V V 0 W M0rO 0 W Vr N W r V M CO M�MI 0 r O V� d 0 N OW I. 1V M00000 VOcoco O O Nco 00Lo M co � COOMM W �00r- 00O ,I- CO ,I-�6000000 co Com0 co co ooVM � co —I-� �0 V V 6l Lo0ONONI-OCO OLoOVCO O0lO0O0W0Lo0 6VlCMOWO WINf� CO W M W O W CO CO O CO CO I� CO � � V M M CO O IL 0� CO W CO M W N CO V N O 0 M 0 0 r Or d V N O N 6� V O CO V co m N p V co co CO co V IO Nc) co NMN MI�� � rO c) mc)COO co W-tIO W �M CO O ISO _ W I W M I 0 r N M V CO N R J O V L W V VO; 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Yes No Hutchinson Utilities Commission Minimum duration Substation Maximum duration Circuit Top-level Cause Remove Major Events? ----- Use APPA Event threshol, IEEE 1366 Statistics Metric SAIDI SAIFI CAI DI ASAI Momentary Interruptions Sustained Interruptions Circuit Ranking - Worst Performing Ranked by Outage Count Circuit Substation Fdr#16 Plant 1 Ranked by Customer Interruptions Circuit Substation Fdr#16 Plant 1 Ranked by Customer Minutes of Duration Circuit Substation Feb 2025 Feb 2024 0.082 None 0.00094 None 88 None 99.9997% 100% 0 0 1 0 Number of Outages 1 Customer Interruptions 7 Customer Minutes of Duration Fdr#16 Plant 1 616 Historical Monthly SAIDI Chart 20 M o thly 15 W11 5 u Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2024 2024 2024 2024 2024 2024 2024 2024 2024 2024 2025 2025 Historical Monthly SAIFI Chart 1.0 M o thly Av age M ot 0.8 0.6 0.4 0.2 SAIDI of monthly SAIDI values SAIFI of monthly SAIFI values Causes Ranked by Count Cause Underground Causes Ranked by Duration Cause Count Duration Underground 616 Top 1 Outages for the Month Address 875 Lynn Rd SW Customers Interrupted 7 Total Customers Affected for the Month: Average Customers Affected per Outage: Customer Minutes of Duration Interruption 88 616 Start Date 02/18/2025 7 7 HUTCHINSON UTILITIES COMMISSION 9T, Board Action Form iiiiiiiiiiiiiiiiiiiiiillillillillillillilliillillillillillillilliilliillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliilllI Agenda Item: Review Policies Presenter: Angie Radke Agenda Item Type: Time Requested (Minutes): 5 Review Policies Attachments: Yes BACKGROUND/EXPLANATION OFAGENDA ITEM: As part of HUC's standard operating procedures, a continual policy review is practiced. This month, the following policies were reviewed and no changes are recommended on these policies at this time: i. Section 3 of Exempt Handbook ii. Section 3 of Non -Exempt Handbook BOARD ACTION REQUESTED: None Fiscal Impact: Included in current budget: Budget Change: PROJECT SECTION: Total Project Cost: Remaining Cost: EXEMPT SECTION 3 — HOURS AND CONDITIONS OF EMPLOYMENT REST PERIODS Employees may take one 15-minute paid rest period during each four-hour work period. One rest period is taken in the morning and the other rest period is taken in the afternoon. Rest periods shall not be cumulative and shall not be utilized to compensate for other absences. MEAL PERIODS Employees receive an unpaid meal period either one-half hour or one -hour long for a shift lasting at least six hours. Meal periods shall not be cumulative and shall not be utilized to compensate for other absences. INCLEMENT WEATHER If inclement weather causes an employee to arrive late or leave the job early, the employee must use vacation time, floating holiday, compensatory time or time without pay for the portion of the scheduled shift the employee did not work. If the General Manager determines it is necessary to close HUC offices due to weather, all employees will be paid their regular pay. Essential employees will be required to remain on -duty, however, they will be given comparable time off at a later date. If an essential employee living within the limits of the City of Hutchinson cannot get to the job site due to inclement weather, a HUC vehicle or snowplow will be dispatched to pick up the essential employee. NON-EXEMPT SECTION 3 — HOURS AND CONDITIONS OF EMPLOYMENT MEAL PERIODS Employees receive an unpaid meal period of one-half hour for a shift lasting at least six hours. Meal periods may not be cumulative and may not be utilized to compensate for other absences. INCLEMENT WEATHER If inclement weather causes an employee to arrive late or leave the job early, the employee must use vacation time, floating holiday, compensatory time or time without pay for the portion of the scheduled shift the employee did not work. If the General Manager determines it is necessary to close HUC offices due to weather, all employees will be paid their regular pay. Essential employees will be required to remain on -duty, however, they will be given comparable time off at a later date. If an essential employee living within the limits of the City of Hutchinson cannot get to the job site due to inclement weather, a HUC vehicle or snowplow will be dispatched to pick up the essential employee. HUTCHINSON UTILITIES COMMISSION Board Action Form �rre tit' Agenda Item: Approve Policy Changes Presenter: Angie Radke Agenda Item Type: Time Requested (Minutes): 5 Approve Policy Changes Attachments: Yes BACKGROUND/EXPLANATION OFAGENDA ITEM: As part of HUC's standard operating procedures, a continual policy review is practiced. The following revisions to the policies below are recommended. i. Flextime Program (Exempt) ii. Attendance/Tardiness (Exempt and Non -Exempt) iii. Rest Periods (Non -Exempt) iv. Use of Facilities During Off -Duty Hours (Non -Exempt) BOARD ACTION REQUESTED: Approve Policy Changes Fiscal Impact: Included in current budget: Budget Change: PROJECT SECTION: Total Project Cost: Remaining Cost: EXEMPT SECTION 3 — HOURS AND CONDITIONS OF EMPLOYMENT Staff Personnel will establish work schedules, subject to the General Manager's approval. The regular work week is five 8-hour working days with two consecutive days off. The normal work week is Monday through Friday, except as otherwise established by Staff Personnel based on the customers' and Department's needs. The Utilities office hours are 7:30 a.m. to 4:00 p.m. Monday through Friday. FLEXTIME PROGRAM HUC's flextime program allows exempt employees to vary their scheduled work hours to conform with the operations of the Utilities. Flextime is approved by the employee's Manager f444-ee�t. ATTENDANCE/TARDINESS Employees are expected to work or use approved leave for all their scheduled hours. Unsatisfactory attendance including reporting late, quitting early or excessive absenteeism shall be cause for disciplinary action. An employee anticipating being late for any reason, must contact his/her DiFeetof: Manager or Supervisor as far in advance as possible. Employees are also required to report to their P�i..Fee.�(:).F Manager or Supervisor if they are ill and unable to continue working. If an employee is ill and cannot report to work, the employee must notify his/her Dk:eetof:; Manager or Supervisor before the scheduled start of the workday. NON-EXEMPT SECTION 3 — HOURS AND CONDITIONS OF EMPLOYMENT See Union Contract. REST PERIODS Employees may take one 15-minute paid rest period during each four-hour work period. Rest periods are taken during the second and third hours and between the sixth and seventh hours of the workday. During the summer, the afternoon rest period shall be taken when the Manager of 1)iFeetof: deems it appropriate. Rest periods shall not be cumulative and shall not be utilized to compensate for other absences. ATTENDANCE/TARDINESS Employees are expected to work or use approved leave for all their scheduled hours. Unsatisfactory attendance including reporting late, quitting early or excessive absenteeism shall be cause for disciplinary action. An employee anticipating being late for any reason, must contact his/her Dk:ee�oF of: Manager as far in advance as possible. Employees are also required to report to the P.i..Fee.�ofrr....(:)F Manager if they are ill and unable to continue working. If an employee is ill and cannot report to work, the employee must notify his/her DiFee of: oF Manager before the scheduled start of the workday. USE OF FACILITIES DURING OFF -DUTY HOURS Employees are not allowed on -site during off -duty hours without prior approval of a P�i..Fee.�(:*....(:).F Manager. HUTCHINSON UTILITIES COMMISSION Board Action Form �rre�rtic'% Agenda Item: HTI Substation Transformer Repair Presenter: Dave Agenda Item Type: Time Requested (Minutes): 5 New Business Attachments: Yes BACKGROUND/EXPLANATION OF AGENDA ITEM: The HTI Substation transformer was taken out of service in January due to a nitrogen leak. A complete inspection of the transformer was required and Global Transformer Solutions completed it on January 30th. The transformer was manufactured in 1989 and after the inspection and evaluating previous oil samples and maintenance records, it is recommended to complete the suggested repairs. Attachments: HTI Substation -LTC Inspection & Evaluation Proposal (this is completed and paid) HTI Substation -LTC Inspection & Evaluation Field Report HTI Substation -Active Live Replacement Proposal Requisition # 010181 BOARD ACTION REQUESTED: Approve Req# 010181 Fiscal Impact: $140,563.00 Included in current budget: No Budget Change: No PROJECT SECTION: Total Project Cost: Remaining Cost: IHI UT iU H II HI S U HII UT'IIILIITIIIE'S a I(,� ii'JG 11�p Ili II I! � �a II ii';� If1i PURCHASE REQUISITION HUTCHINSON UTILITIES COMMISSION 225 MICHIGAN ST SE HUTCHINSON, MN 55350 Phone:320-587-4746 Fax:320-587-4721 GLOBAL TRANSFORMER SOLUTIONS CORP. 2220 COUNTY RD 210 W, STE 108 JACKSONVILLE, FL 32259 Note Description: HTI Substation Transformer Repair Date Requisition No. 03/18/2025 010181 Required by: Requested by: dhunstad Item No. Part No. Description Qty Unit Due Date Unit Price Ext. Amount HTI SUBSTATION TRANSFORMER REPAIR - MFG. PART: 1 1.00 EA $140,563.000 $140,563.00 Total: 140,563.00 Date Printed: 03/18/2025 Requisitioned By: dhunstad Page: 1/1 I March 10, 2025. Quote 4GQ3030 Dave Hunstad Electric Transmission/Distribution Manager Hutchinson Utilities Commission 320-583-9330 �.v Subject: Cooper #4C-46559-1-1 -HTI Substation -Active Live Replacement Proposal Mr. Hunstad, Global Transformer Solutions Corp. is pleased to provide a proposal to perform the Load 550B Tap Changer (LTC) active live replacement on the Cooper44C-46559-1-1 Transformer located at the HTI substation in the city of Hutchinson, MN. The following is the proposed scope of work. ➢ One mobilization /de -mobilization to the jobsite (Hutchinson, MN). ➢ Supply a crew of 5 qualified transformer technicians for four days onsite. ➢ Supply our 48-foot Barron's Oil Processing Unit (OPU) with all the necessary hand tools, safety equipment and containment. ➢ Supply a clean certified tanker to store the entire contents of oil from the transformer. ➢ Drain the entire contents of oil from the unit while backfilling with onboard -55 dewpoint breathing air. ➢ Perform confined space entry to remove all internal LTC tap winding leads. ➢ Remove old LTC active assembly, back board, and gasket. ➢ Hutchinson Utility is to supply boom truck to assist GTS in the removal and installation of the active live. ➢ Supply and install new remanufactured 550B LRV Tap (Active Core Exchange) Assembly/ Contacts, Panelboard, Stuffing box and door gasket. (Unit includes new bearings, with upgraded G10 insulation material utilized on the backboard and standoffs). ➢ Re -terminate all internal LTC tap leads and torque to specifications. ➢ Perform field installation startup on LTC including timing, sequence and operation check out. ➢ Supply and replace the main tank pressure relief device indicator flag. ➢ Supply and replace the top access handhole cover gasket. ➢ Supply and install a new liquid level gauge on LTC. ➢ Supply equipment and weld main tank leaking seam. 1 ➢ Perform a vacuum leak up test, continue to pull vacuum for 12 hours under 1 Torr, fill unit with dielectrically acceptable and reconditioned degassed oil. Perform 1 recirculation finishing pass on the nameplate volume of oil. ➢ Supply 188 gallons of new mineral oil type 2 for the LTC compartment. ➢ Condition and fill LTC compartment with new GTS supplied oil. ➢ Perform the following commissioning field tests: Insulation Resistance, Power Factor Testing, Overall, Excitation (as found DETC tap), Turn to Turns Ratio (All LTC Taps), Winding Resistance (All LTC Taps), and provide two Oil Analytical Samples to be sent to an independent lab for analysis. ➢ Furnish a formal written field report with our comments, recommendations, test data and its supporting field pictures taken at the time of service. For this service we propose a fixed price cost of $140,563.00. Clarifications and conditions to the proposal We have assumed weekday working hours, Monday through Friday. The proposal does not include any holidays. The customer is responsible for de -energizing the equipment which should include switching, grounding, and lock -out / tag -out of the system. The quote is only valid for transformers with oil less than two PPM PCBs (Test date must be within six months of project date). Delays caused by others will be billed and submitted at our T&M rates. All taxes, if applicable, would be in addition to the quoted prices. The quote is valid for 30 days. An invoice will be sent at the conclusion of the fieldwork and is due on Net 15. Please feel free to call me at any time with your comments, questions, or other requests at (612) 710-6088. We look forward to working for you. Sincerely, Brett Ptacek Director of Operations Global Transformer Solutions Corp. 1584 Reidner LN Centuria WI, 54824 612-710-6088 cellular 2 I 0 Site Information Service Date: January 30, 2024 Site Location: H1 Substation Customer: Hutchinson Utilities Contractor: GTS / Brett Ptacek (612) 710-6088 Site Representative: Daniel Lang (320) 583-7908 Transformer's Characteristics Manufacturer: Cooper Transformer Serial Number: 4C-46559-1-1 Configuration: Delta -Wye Year: 1989 Voltage: 69,000- 13,800Y/7970 Rating: 15/20/25 MVA LTC: Cooper Type: 550-B Serial Number: C-46616-1 1 U February 2, 2025 DANIEL LANG I Engineering Services Manager Hutchinson Utilities Commission main: 320.587.4746 1 direct: 320.234.0564 cell: 320.583.7908 1 fax: 320.587.4721 HutchinsonUtilities.com Subject: Cooper #4C-46559-1-1-HTI Substation -LTC Inspection & Evaluation Mr. Lang, Global Transformer Solutions would like to thank you for the opportunity to perform the inspection and evaluation on your 550-B Load tap changer located at the HTI Substation. A description of the work performed, its findings, recommendations, and pictures taken in the field at the time of service can be found below. Initial Overview & external Inspection We performed an overall visual inspection on the exterior of load tap changer (LTC) compartment and transformer. The transformer has a leaking 2-inch drain valve, and a DETC packing gland leak. The LTC board has been leaking causing the main tank to overfill the LTC compartment. The tap changer was found ranging between 4 raise and 4 lower. The operation counter was left at 95,747 after the inspection and repair had been completed. The 550-B load tap changer has a recommended contact replacement at 5 years or 50,000 operations. Final Drive Cabinet Inspection & Repair The drive and control cabinet were found sealed and dry with no signs of moisture. All relays, motor, and switches have been recently replaced. We found the tap changer off tap timing position. When electrically operating the unit, it would stop 25 degrees short of being on time and on tap position in both directions! I reviewed the S1 seal in switch. The mounting hardware was tight but the microswitch was not staying sealed in allowing the full 180-degree rotation prior to dropping out on the cam. I loosened the switch and adjusted it in about 1/8 inch towards the cam, so it had positive seal in circuit throughout the whole rotation. I electrically operated and manually operated the unit. All contactors and limit switches were left operating correctly. Proper sequence timing and breaking was observed and left functioning properly. We observed 2 U and function checked the lower and raise limit switches. Both Switches left satisfactory. We verified the safety motor cut off switch on the maintenance handle. Deadman switch was found functioning properly. The cabinet heater was found to be in good working order as well. Tap Compartment Inspection & Evaluation We removed the oil from the load tap changer compartment utilizing our filter pump cart that has a 1/z micron filter press in line. We pumped the entire contents of oil into a clean dry tote to enable our inspection of the active live unit. We performed an overall visual inspection. We verified the proper functionality of the oil level gauge. The level gauge float operates correctly but the external gauge hangs up in both directions causing faulty oil level readings. Recommend replacing the gauge. We wiped down the entire unit with clean, lint free cotton rags. We found the main active live backboard leaking primarily on the top edge of the board along with several standoff hubs leaking as well. These leaks are allowing the nitrogen blanket from the transformer compartment to push oil into the LTC compartment until it reaches oil level equilibrium. The unit has had a rebuild field contact kit installed within the last 5 years. The inspection disclosed several very unusual anomalies considering the age of contact replacement. We found a small burning and pitting area on the c-phase reversing switch. The B-phase rear moveable contact is beginning to form filming, sludge and coking. B=Phase tap winding contacts have uneven and leading contact wear due to mis alignment of the carrier contact to the collector ring. These are all associated signs of the backboard warping. The Pennsylite (Micarta) backboard is prone to absorbing moisture over time and warping. The three phases of the active unit mount on the board which are gasketed on the outside edge. The board bows on center causing most of the issues on the B-phase alignment and contact wear. We lubricated the door gasket with Molykote I I I and torqued the door back to 45 ft/lbs. Once sealed we filtered the oil back into the unit. We restored all control switches, handles, and tap position back to the as found status. Please see the pictures below for further details. Comments and Recommendations 1. Main TX drain valve is leaking. Recommend replacing. 2. The LTC level gauge float operates correctly but the external gauge hangs up in both directions causing faulty level readings. Recommend replacing gauge. 3. Leaking DETC packing gland is leaking. 4. Motor control fuse periodically blowing is typically associated with a warped back board causing contact misalignment or extremely worn and damaged contacts. The results in this case are center phase collector ring and moveable contact alignment failure and misaligned moveable and uneven wear on stationary contacts as seen in this case. 5. We would recommend an active live upgraded replacement unit. To make repairs it will expose the internal windings. Oil processing will be required for repair. 3 U Please feel free to call me at any time with your comments, questions, or other requests at (612) 710-6088. We look forward to working for you again in the future. Sincerely, Brett Ptacek Director of Operations Global Transformer Solutions Corp. 1584 Reidner LN Centuria WI, 54824 612-710-6088 cellular bp%cek&gtrnasformer.com 4 U Mai ent. U Sl U As acts. U Overall as found. Overall after insbection. U W )king. U 10 U As left. January 27, 2024. Quote 4GQ3011 Dave Hunstad Electric Transmission/Distribution Manager Hutchinson Utilities Commission 320-583-9330 �.v Subject: Cooper #4C-46559-1-1 -HTI Substation -LTC Inspection & Evaluation Proposal Mr. Hunstad, Global Transformer Solutions Corp. is pleased to provide a proposal to perform the Load 550B Tap Changer (LTC) inspection and evaluation on the Cooper44C-46559-1-1 Transformer located at the HTI substation in the city of Hutchinson, MN. The following is the proposed scope of work. ➢ One mobilization /de -mobilization to the jobsite (Hutchinson, MN). ➢ Supply a crew of 2 qualified transformer technicians for one day onsite. ➢ Supply all necessary equipment such as hand tools, scaffolding, oil filter press (0.5 micron), test equipment and clean dry oil storage to enable the technicians to conduct the overall evaluation of the LTC active live compartment. ➢ Perform the manufacturers recommended internal inspection to include and identify leak origins, contact integrity inspections, wear, timing sequence, and operational function checks, safety features. ➢ Identify any deficiencies to determine proper corrective actions for future repair. ➢ Remove transformer top inspection handhole cover to document the height of backboard vs core and coil assembly height to determine if processing is required when repairing back board repairs. ➢ Furnish a formal written field report with our comments, recommendations, and its supporting pictures taken in the field at the time of service. For this service we propose a fixed price cost of $5,562.00. Clarifications and conditions to the proposal 1 I We have assumed weekday working hours, Monday through Friday. The proposal does not include any holidays. The customer is responsible for de -energizing the equipment which should include switching, grounding, and lock -out / tag -out of the system. Delays caused by others will be billed and submitted at our T&M rates. All taxes, if applicable, would be in addition to the quoted prices. The quote is valid for 30 days. An invoice will be sent at the conclusion of the fieldwork and is due on Net 15. Please feel free to call me at any time with your comments, questions, or other requests at (612) 710-6088. We look forward to working for you. Sincerely, Brett Ptacek Director of Operations Global Transformer Solutions Corp. 1584 Reidner LN Centuria WI, 54824 612-710-6088 cellular Pt.tc,;l<(ar)u;, try„;c:x:.Y.`.:.:.x::Y. 2 I