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01-15-2013 HUCMMINUTES Special Meeting — Hutchinson Utilities Commission Tuesday, January 15, 2013 Called to order at 12:00 p.m. Members present: President Dwight Bordson; Vice President Craig Lenz; Secretary Leon Johnson; Commissioner Monty Morrow; Commissioner Anthony Hanson; General Manager Michael Kumm. Members Absent: Attorney Marc Sebora Guests: Jeremy Carter (City), Mayor Steve Cook, and Council Member Chad Czmowski. President Bordson explained this PILOT presentation meeting is for discussion purposes only. PILOT (Payment in Lieu of Taxes) is an acronym which means portions of funds Hutchinson Utilities Commission transfers to the City of Hutchinson. GM Kumm presented a recap of the problems in natural gas utility with the existing 2.75% PILOT. GM Kumm recommended alternatives to the existing PILOT formula for the natural gas utility. (Presentation attached.) After discussion, President Bordson thanked GM Kumm for the presentation. A motion was made by Secretary Johnson, seconded by Commissioner Hanson to adjourn the meeting at 12:47 p.m. Motion was unanimously carried. ATTEST: Dwight Bordson, President Leon Johnson, Secretary MINUTES Special Meeting — Hutchinson Utilities Commission Tuesday, January 15, 2013 Called to order at 12:00 p.m. Members present: President Dwight Bordson; Vice President Craig Lenz; Secretary Leon Johnson; Commissioner Monty Morrow; Commissioner Anthony Hanson; General Manager Michael Kumm. Members Absent: Attorney Marc Sebora Guests: Jeremy Carter (City), Mayor Steve Cook, and Council Member Chad Czmowski. President Bordson explained this PILOT presentation meeting is for discussion purposes only. PILOT (Payment in Lieu of Taxes) is an acronym which means portions of funds Hutchinson Utilities Commission transfers to the City of Hutchinson. GM Kumm presented a recap of the problems in natural gas utility with the existing 2.75% PILOT. GM Kumm recommended alternatives to the existing PILOT formula for the natural gas utility. (Presentation attached.) After discussion, President Bordson thanked GM Kumm for the presentation. A motion was made by Secretary Johnson, seconded by Commissioner Hanson to adjourn the meeting at 12:47 p.m. Motion was unanimously carried. eon Johnson, Secretary ATTEST: P(vight Bordson, President i 0 C6 N i 0 J CL 14" I. • i • • • t 4-J J Vi V n� W 4–j LJ f6 U 4- O c O 4-Ji cc U EO W � L1 W 4—J (/i b.0 Q c/1 > O }' Q • X W cu E E 4� N C: +� Jc: � I � `n .� +-j X CAA 0 E • aj O w (U +-j =3 E w m C: 4-j 4-j o +� a, C: E c� •- .� O — � a"' c4-J/� U C6 +-' O X C: • - C: LU U N ro — i V O c- -0 O V U -0 _ cn U DC cn . _ r—I N m N C6 (D i z .CI N N O 4- O C� U 4� U Q. .> �0 p � O p QL � m 4-j D C: ,0 E ._ ._ p p U F— U Z L. 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N O N O p C }' E U i aJ O U O v) 41 +-J • X O C L 0 cc +- U L C M U O +-' Q -C }, ,,, c��U O f� N � - U U c� +�' � hL0 �J o 0 O.v °0�c UoM 4-J � � O •�� v �•� _ o-+, 0 O0 O • N -� O O o a--+ >' bn N — ±' O . •— O .+.j > s N in , Q� C .0 a� tu0 C N • teQ J QJ Ln U .— �- 0 N-0 tiA L vi 4-J u O J N-0 U a-+ Q L N 4-J N E_ M + , O O L > L 4"J a--+ +--+ f0 L 4- N O C6 0-- • Ln 4- — M M O O +� — I_ O a1 U N E N O U N N 4-1 o L O O L - }, Q O U L CO L L N _ _� L 41 cn Q E - ±' 4J Q1 N U � � � •O- cn Vi U N V) � U z 0— _ v U o � Q �� Ito �, E -0 N -0 -r- c +� C �^ o O � >z D QU O— v O U cOa �•0 O� a U m O O _U Q O c U NUS - O O O c O N E� cOC v o N O C 3 o cn m Ln O> N v, },U —•N O - 'E�EaE c: lD C cn N N ca to L Z E ai E f° *p N_ C N E cn O O t —� + I aj '�_ • — o t o ai 0_ cn +1 O O D ri N Qom+ -+U2 E U V a 4--j V) X N z �O (/) m - C6 O C- 0 4-J a--j '.� (I) fo •— ,� •� �+- O s— .� v _0 •can Ln -0 W ro E O - O = C: L- � U M \1 O O O un -0 -3 O O ro s- � N W > _ N O O 0 °ro. -�E -� Q N O� O v ca Q O U p O O H O Q) Q E c -C ru a� c6 Q +� O +-+ ca ro O U O .N . cn E E O O O .Ln Ln Ln M*l Based on 5% Retail Revenue NATURAL GAS INCOME & EXPENSE SUMMARY OPERATING REVENUES 2013 2014 2015 2016 2017 Sales - Naturel Gas - Retail 8,381,803.07 8,490,262.14 8,603,887.73 8,754,102.10 8,750,000.00 Approximate 1% growth rate for retail sales Contract Sale to Large Cuslomer(Includes 3M 8 HTI transport) 4,085,086.37 4,085,086.37 4,861,415.37 6,504,073.37 6,550,000.00 N. Gas Prices $4 /MCF In 2013 and 2014, $5 /MCF in 2015, $7 /MCF in 2016 and 2017 New Ulm Transportation 700,000.00 700,000.00 700,000.00 700,000.00 700,000.00 T rtation- Electric Division 1,100,000.00 1,100,000.00 1,100,000.00 1,100,000.00 1,100,000.00 TOTAL OPERATING REVENUES 14,266,889.44 14,375,348.51 15,265,303.10 17,058,175.47 17,100,000.00 OPERATING EXPENSES Purchased Gas for Retail (807) 4,329,291.74 4,348,768.80 4,850,000.00 5,400,000.00 5,400,000.00 Many long term N. Gas contracts purchased in 2013/14, for 2015/16/17. Contract Gas for Large Customer 3,285,316.00 3,2851316.00 4,061,41537 5,704,07100 5,750,000.00 N. Gas Prices $4 /MCF in 2013 and 2014, $5 /MCF in 2015, $7 /MCF in 21 Total Gas Purchased 7,614,607.74 7,634,084.80 8,911,415.37 11,104,073.00 11,150,000.00 Transmission (858, 863) Gas Transmission Operations (856) 105,500.00 108,665.00 111,924.95 115,282.70 118,741.18 Gas Transmission Maintenance (863) 11,000.00 11,330.00 11,669.90 12,020.00 12,380.60 year over year 3% increase Total Transmission (805, 863) 116,500.00 119,995.00 123,594.85 127,302.70 131,121.78 Distribution Expense: Distribution Operation (870, 874, 878, 880): Supervision and Engineering (870) 146,500.00 150,895.00 155,421.85 160,084.51 164,887.04 Mains and Services (874) 93,000.00 95,790.00 98,663.70 101,623.61 104,672.32 Year over year 3% increase Meters (878) 3,500.00 3,605.00 3,713.15 3,824.54 3,939.28 Misc. (880) 174,600.00 179,838.00 185,233.14 190,790.13 196,513.84 Total Distribution Operation (870, 874, 878, 880) 417,600.00 430,128.00 443,031.84 456,322.80 470,012.48 Distribution Maintenance (892, 893, 895) Lines - Services and Mains (892) 110,500.00 113,815.00 117,229.45 120,746.33 124,368.72 Meters and House Regulators (893) 15,000.00 15,450.00 15,913.50 16,390.91 16,882.63 Year over year 3% increase Maintenance of Other Plant (895) 58,500.00 60,255.00 62,062.65 63,924.53 65,842.27 Total Distribution Maintenance (892, 893, 895) 184,000.00 189,520.00 195,205.60 201,061.77 207,093.62 Customer Service and Collection(902, 903, 904, 906) Meter Reading (902) 13,950.00 14,368.50 14,799.56 15,243.54 15,700.85 Collection Expense (903) 100,080.00 103,082.40 106,174.87 109,360.12 112,640.92 Year over year 3% increase Bad Debt Write offs (904) 4,500.00 4,635.00 4,774.05 4,917.27 5,064.79 Customer Services (906) 38,250.00 39,397.50 40,579.43 41,796.81 43,050.71 Total Customer Service and Collection (902, 903, 904, 906) 156,780.00 161,483.40 166,327.90 171,317.74 176,457.27 Sales Expense (911, 916) Supervison(911) 2,080.00 2,142.40 2,206.67 2,272.87 2,341.06 Misc. Selling Expense (916) 66,920.00 68,927.60 70,995.43 73,125.29 75,319.05 Year over year 3% increase Total Sales Expense (911,916) 69,000.00 71,070.00 73,202.10 75,398.16 77,660.11 Administrative and General (920, 921, 923, 924, 926, 928, 930, 935) Adminstrative and General Labor (920) 160,000.00 164,800.00 169,744.00 174,836.32 180,081.41 Office Supplies and Expenses (921) 80,875.00 83,301.25 85,800.29 88,374.30 91,025.53 Year over year 3% increase Outside Services (923) 36,343.75 37,434.06 38,557.08 39,713.80 40,905.21 Property Insurance (924) 95,850.00 98,725.50 101,687.27 104,737.88 107,880.02 E ansion 8 Benefits (926) 391,376.25 403,117.54 415,211.06 427,667.40 440,497.42 R =xpense (928) 26,100.00 26,883.00 27,689.49 28,520.17 29,375.78 Mi ral Expense (930) 87,525.00 90,150.75 92,855.27 95,640.93 98,510.16 Mainl. Of General Plant (935) 38,520.00 39,675.60 40,865.87 42,091.84 43,354.60 Total Administrative and General (920, 921, 923, 924, 926, 928, 930, 935) 916,590.00 944,087.70 972,410.33 1,001,582.64 1,031,630.12 Depreciation Expense (403) 1,056,000.00 1,075,000.00 1,090,000.00 1,105,000.00 1,125,000.00 Payment in Lieu of T.... (408) 515,013.60 493,824.01 471,299.62 477,488.34 483,806.98 1,571,013.60 1,568,824.01 1,561,299.62 1,582,488.34 1,608,806.98 TOTAL OPERATING EXPENSE 11,046,091.34 11,119,192.91 12,446,487.61 14,719,547.14 14,852,782.35 OPERATING INCOME 3,220,798.10 3,256,155.60 2,818,815.49 2,338,628.34 2,247,217.65 OTHER INCOME AND DEDUCTIONS Other Misc. Income Other - Net 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 Interest Income 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 Misc. Income 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 Misc. Expense (61000.00) (6,000.00) (6,000.00) (6,000.00) (6,000.00) Interest Expense (1,348,680.63) (867,500.00) (825,500.00) (781,500.00) (735,100.00) Bond Refinancing TOTAL OTHER INCOME AND DEDUCTIONS (1,288,680.63) (807,500.00) (765,500.00) (721,500.00) (675,100.00) NET INCOME 1,932,117.47 2,448,655.60 2,053,315.49 11617112834 1,572,117.65 Based on 5% Retail Revenue ELECTRIC INCOME & EXPENSE SUMMARY 2013 2014 2015 2016 2017 OPERATING REVENUES Sales - Electric Energy (440, 442, 444) 26,286,422.30 26,549,286.52 26,814,779.39 27,082,927.18 27,353,756.45 1% Growth Rate in retail sales Sales For Resale (447) 1,512,000.00 1,490,000.00 1,680,000.00 2,016,000.00 2,016,000.00 No Energy Wholesale increase for 2014, 20% Increase in 2015 over 2015, 20% increase in Street Lighting (444) 142,666.32 148,777.00 151,752.00 154,78840 157,800.00 2016 over 2015, no increase in 2017, Wholesale Energy increases due to increaseing N. Gas Total Energy Sales 27,941,088.62 28,188,063.52 28,646,531.39 29,153,715.18 29,527,556.45 prices Assume No Capacity Sales for 2015, 2016, 2017 OTHER OPERATING REVENUES Net Income From Other Sources (450,451) 220,000.00 220,000.00 220,000.00 220,000.00 220,000.00 Security Lights (454.01) 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 Pole Rental (454.02, 454.03) 500.00 500.00 500.00 500.00 500.00 Total Other Operating Revenues 230,500.00 230,500.00 230,500.00 230,500.00 230,500.00 TOTAL OPERATING REVENUE 28,171,588.62 28,418,563.52 28,877,031.39 29,484,215.18 29,758,056.45 OPERATING EXPENSES Production Operation (546, 547, 550) Operation Supervison & Engineering (546) 1,140,600.00 1,174,818.00 1,210,062.54 1,246,364.42 1,283,755.35 Fuel (547) 2,842,650.00 2,842,650.00 3,173,650.00 3,570,850.00 3,570,850.00 Operating Supplies and Expense (550) 148,000.00 152,440.00 157,013.20 161,723.60 166,575.30 N. Gas Prices $4 /MCF in 2013 and 2014, $5 /MCF in 2015, $7 /MCF in 2016 and 2017 Total Production Operation (548, 547, 550) 4,131,250.00 4,169,908.00 4,540,725.74 4,978,938.01 5,021,180.65 Production Maintenance (554) 484,000.00 306,600.00 315,798.00 325,272.00 325,272.00 Purchased Gas Generation 13,350,629.48 14,072,265.31 14,135,750.21 14,201,139.66 14,268,490.78 Other Power Supply Expense (555, 558, 557) Purchased Power (555) 13,350,629.00 14,072,265.00 14,135,750.00 14,201,139.00 14,268,490.00 Assume $660,000 MRES increase in 2014, MISO purchases increase 3% annually, 556, and System Control & Load Dispatch (556) 329,600.00 334,184.00 344,209.00 354,535.00 365,171.05 557 increase 3% annually Engineering Services (557) 55,000.00 10,609.00 10,927.00 11,255.00 11,592.65 Total Other Power Supply Expense (555, 556, 557) 13,735,129.00 14,417,058.00 14,490,886.00 14,566,929.00 14,645,253.70 Transmission Expense (560, 567, 574) Transmission Expense Operation (560, 567) 1,125,489.16 1,225,000.00 1,325,000.00 1,425,000.00 1,425,000.00 Transmission increase of $100,000 in 2014 and 2015- negotiated settlement with GRE, 574 Transmission Expanse Maintenance (574) 26,200.00 26,986.00 27,795.58 28,629.45 29,488.33 increase of 3% annually Total Transmission Expense (560, 567, 574) 1,151,689.16 1,251,986.00 1,352,795.58 1,453,629.45 1,454,488.33 Distribution Expense: Distnbution Operation (580, 581, 586, 588, 589) 482,600.00 497,078.00 511,990.34 527,350.05 543,170.55 Distribution Maintenance (592, 594, 595, 596, 598) 232,500.00 239,475.00 246,659.25 254,059.03 261,680.80 year over year 3% increase Total Distribution Expense: 715,100.00 736,553.00 758,649.59 781,409.08 804,851.35 Customer Service and Collection(902, 903, 904, 906) Meter Reading (902) 17,050.00 17,561.50 18,088.35 18,631.00 19,189.93 Collection Expense (903) 122,320.00 125,989.60 129,769.29 133,662.37 137,672.24 year over year 3% increase Bad Debt Write offs (904) 5,500.00 5,665.00 5,834.95 6,010.00 6,190.30 Customer Services (906) 46,750.00 48,152.50 49,597.08 51,084.99 52,617.54 Total Customer Service and Collection (902, 903, 904, 906) 191,620.00 197,368.60 203,289.66 209,388.35 215,670.00 S nse (911, 916) S (911) 6,240.00 6,427.20 6,620.02 6,818.62 7,023.17 Mis g Expense (916) 200,760.00 206,782.80 212,986.28 219,375.87 225,957.15 year over year 3% increase Total Sales Expense (911, 916) 207,000.00 213,210.00 219,606.30 226,194.49 232,980.32 Administrative and General (920, 921, 923, 924, 926, 928, 930, 935) Adminstrative and General Labor (920) 480,000.00 494,400.00 509,232.00 524,508.96 540,244.23 Office Supplies and Expenses (921) 242,625.00 249,903.75 257,400.86 265,122.89 273,076.58 year over year 3% increase Outside Services (923) 109,031.25 112,302.19 115,671.25 119,141.39 122,715.63 Property Insurance (924) 117,150.00 120,664.50 124,294.4 128,012.97 131,853.36 Employee Pension & Benefits (926) 1,174,128.75 1,209,352.61 1,245,633.19 1,283,002.19 1,321,492.25 Regulatory Expense (928) 31,900.00 32,857.00 33,842.71 34,857.99 35,903.73 Misc General Expense (930) 106,975.00 110,184.25 113,489.78 116,894.47 120,401.30 Maint. Of General Plant (936) 47,080.00 48,492.40 49,947.17 51,445.59 52,988.95 Total Administrative and General (920, 921, 923, 924, 926, 928, 930, 935) 2,308,890.00 2,378,156.70 2,449,501.40 1,522,986.44 2,598,676.04 Depreciation Expense (403) 2,400,000.00 2,600,000.00 2,650,000.00 2,700,000.00 2,750,000.00 Amortixadon- Development Study 200,000.00 1,400,000.00 - - Assume Paid in 2013 Payment in Lieu of Taxes (408) 924,473.37 987,648.16 942,599.37 954,976.82 967,614.10 Contribution To City-for Roadway Lighting (408) 142,666.32 148,777.00 151,752.00 154,788.00 154,788.00 3,667,139.69 5,136,425.16 3,744,351.37 3,809,764.82 3,872,402.10 TOTAL OPERATING EXPENSE 26,591,917.85 18,807,265.46 28,075,603.64 28,874,511.63 29,170,774.49 OPERATING INCOME 1,579,670.77 (388,701.94) 801,427.75 609,703.55 587,281.96 OTHER INCOME AND DEDUCTIONS Other - Net 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 Interest Income 35,000.00 35,000.00 35,000.00 35,000.00 35,000.00 Misc. Income 15,000.00 15,000.00 15,000.00 15,000.00 15,000.00 Misc. Expense (25,000.00) (25,000.00) (25,000.00) (25,000.00) (25,000.00) Interest Expense (116,948.58) (40,488.00) (35,613.00) (30,613.00) (25,488.00) TOTAL OTHER INCOME & EXP. (71,848.58) 4,512.00 9,387.00 14,387.00 19,512.00 NET INCOME 1,507,822.19 (384,189.94) 810,814.75 624,090.55 606,793.96 w co V T O 7 C N O 0) C L a L (1) N C N O_ X W m C ^Ll W a A] l0 O M p O 3 i I�t Ln I:t -1 LIl -q N I'D 00 lD O LO Ln lD LO Dl 00 c I M Ln Ln Ql 00 c-1 m O Ln v Ln of Ol O 00 m t LI) 00 MI N (:: N NO 00 M 00 M Lo 00 O 00 LO -1 O lD I:T N N Ct IZT Q' O � N LO I" 00 O 00 N lD n 00 O 00 O O 00 1--1 M 00 M a) Ln M r1 -1 LD M O M r1 N E c-1 O U N O m 00 ct r- O a--I O N lfl Ln m Il N Lo l0 M N N L Q O O O O Z 0 00 Ol Ln O In l N N O N ,�* r+ M m O M M cn It -4 M O N r -I `O N Y N N O N lD Ln LO i Ln LD 1� 00 Ct O M N I:T �t O 7 C N O 0) C L a L (1) N C N O_ X W m C ^Ll W a A] l0 O M I" O 3 i I O N O r14 r-I al M Ql ^ M 00 Ln lD N Ol Ln LIl N al I'D Ql M M 4 Ln lD O lD 00 00 O 00 o m p cn Ln 00 Ol C 1, O O MI lz (:: N NO 00 M 00 M Lo m C N n m O M O 7 C N O 0) C L a L (1) N C N O_ X W m C ^Ll W a A] l0 O Lo lD O LD M 00 Ln LIl 00 LD I'D Ql M J Ct Ln lD O lD 00 00 O N I N Ol r-I M -;z LD N 00 N lD `-i 00 Ql Ol O I'D N M J Ct Ln Ol co W 00 m � U C N O J co W U X W C O O U Q' O � N 4) Q) 0 � L _0 O a) > E O O (0 O � E O U O O L Lo L Q O O O O Z 0 IA 3 _G LL t H m V A E O V C 7 O U U Q Q N _7 U c t m V m v } 0 00 tto C .c C N m v E O u c N Z a c O E O E Q C (6 C O �u v CL aJ 7 a L N en c fII L 06 a T f6 O CL E v C m a V v L O ., O O O O Lri 0) m rl rl O O O O Lr� N M 0 N O O O O Lr) LT n Lfi M O O O Ln M ri 0 Ql O 00 n 00 Ln M V c v E v O a E m CL m V O! 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