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02-24-2016 HUCMMINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, February 24, 2016 Call to order — 3:00 p.m. Vice President Morrow called the meeting to order. Members present: Vice President Monty Morrow; Secretary Mark Girard; Commissioner Anthony Hanson; Commissioner Robert Wendorff; Attorney Marc Sebora; General Manager Jeremy Carter. Member absent: President Donna Luhring. 1. Conflict of Interest 2. Approve Consent Agenda a. Approve Minutes b. Ratify Payment of Bills A motion was made by Commissioner Hanson, seconded by Secretary Girard to approve the Consent Agenda. Motion was unanimously carried. 3. Approve Financial Statements GM Carter presented the financial statements. Carter noted an HUC investment report will be included with the financial statements starting in March. Jared Martig mentioned the payable was booked for pack gas. HUC also received the GASB 68 journal entries at a liability of $3.7 million at the end of 2015. Dave Hunstad mentioned the 2015 year-end outage report was included in the financial report. After discussion, a motion was made by Secretary Girard, seconded by Commissioner Wendorff to approve the financial statements. Motion was unanimously carried. 4. Open Forum 5. Communication a. City Administrator — Matthew Jaunich i. 2016 will be a busy construction season with the approval of a new hotel on Highways 7 and 15, the aquatic center, incubator project in the industrial park along with the street construction in the Linden and Church Street area. b. Divisions i. Randy Blake — 1. Ran Unit 8 the month of January and into February. Doing maintenance preparing for summer. 1 Dave Hunstad — 1. Working with the City preparing for this year's construction season. 2. Performing regular maintenance. iii. Jared Martig - 1. Received the GASB 68 information. 2. The 2015 audit will be presented next month. iv. John Webster - 1. Nothing to report. v. Brenda Ewing — 1. The job evaluation study consultant was having difficulty getting responses from different municipals. Brenda is contacting those municipals to gather the information. C. Legal — Attorney Sebora i. Nothing to report. d. General Manager — Jeremy Carter i. Close to completing the wholesale generation model. ii. Working on updating the fleet and infrastructure information. iii. Continuing to stay informed on the State legislative activities. 6. Policies a. Review Policies i. Holidays ii. Electric Meter Placement iii. Sealing of Meters - Electric No changes were recommended at this time. b. Approve Changes i. Vacation The changes recommended were for clarification. Electric Meter Requirements The current policy language does not allow the sub -metering of electricity. However, this policy is in conflict with Minnesota State Statute 216B.022. Current Minnesota State Statute does not grant the commission or a public utility the authority to limit the availability of sub -metering to a building occupant when the building is served by a public utility's master meter which measured the total electric energy delivered to the building. Therefore, staff is recommending this policy be omitted. iii. Policy on Purchasing The changes recommended were for clarification. After discussion, a motion was made by Commissioner Hanson, seconded by Secretary Girard to approve the changes to Vacation, Electric Meter Requirements and Policy on Purchasing. Motion was unanimously carried. (Changes attached.) 7. Unfinished Business a. Update on Pack Gas Discussions Nothing to report. 8. New Business a. Approve Exception Agreement between McLeod Cooperative Power Association and Hutchinson Utilities Commission Dave Hunstad presented the Exception Agreement explaining a customer requested to be released from their electric service agreement with McLeod Cooperative Power Association (MCPA) and have electricity provided by HUC. After the request, it was determined that because of the close proximity of HUC's distribution system and location of the current MCPA service, the electric service should be transferred to HUC. After discussion, a motion was made by Commissioner Hanson, seconded by Secretary Girard to approve the Exception Agreement between McLeod Cooperative Power Association and Hutchinson Utilities Commission. Motion was unanimously carried. (Exception Agreement attached.) 9. Adjourn There being no further business, a motion was made by Secretary Girard, seconded by Commissioner Wendorff to adjourn the meeting at 3:28 p.m. Motion was unanimously carried. Mark Girard, Secretary ATTEST: Monty�w, Vice President 41 Exempt Vacation Exempt employees shall accrue paid vacation on the employment anniversary date according to the following schedule: Number of Years Employed Vacation 20 hours 1 I 40 hours 2-6 I 80 hours 7-10 I 120 hours 11 I 128 hours 12 136 hours 13 I 144 hours 14 I 152 hours 15 160 hours 16 168 hours 17 I 176 hours 18 184 hours 19 I 192 hours 20 and up 200 hours Vacation may be used after completion of the probationary period. Employees must receive prior approval of their vacation requests from their Director, Manager or Supervisor. A vacation request for more than one day must be submitted in person at least two workdays in advance. (For example, if an employee is scheduled to work Wednesday, Thursday, Monday and the employee wants to take Monday afternoon as vacation, the employee must submit a request in person by Wednesday afternoon.) An employee may carry over up to a maximum of one time their annual accrual of vacation into the next vacation year. Vacation year is defined as service anniversary to service anniversary. Each p tenon -Probationary full-time employee must use at least 40 hours of vacation leave each year. New employees who only receive 40 hours of vacation per year must use at least 20 hours of vacation leave each year. Employees who are on vacation and experience a disabling accident or illness may use sick leave instead of vacation upon providing their Director, Manager or Supervisor appropriate proof of the accident or illness. Non -Exempt Vacation See Union Contract. • • . . • • MOST -1, • r • • • r . r • r • . • . • • • • • • • • • . .. • • • . • kil • W.' • • • • . • • .Z • . r • 11.11 I.M. . • • 11�71�7 Amended FmebF ry 25 2015 February 24, 2016 POLICIES POLICY ON PURCHASING State Statute 471:345 Hutchinson Utilities Commission hereby adopts a general policy on the purchasing of equipment, supplies and services. Inventory Agent o, mhaSiRg ogeRt, is authorized to create requisitions and approve purchase orders for purchases associated with Hutchinson Utilities' standard inventory part numbers, which are based on set order points and order quantities. If requirements exceed current order quantities, either an approved Bill of Materials or an approved requisition will be required. All other purchases shall require supervisor permission. Emergency situations may require a deviation from this policy to insure electric and/or natural gas services to the customers of the Hutchinson Utilities. Joint purchasing of materials, supplies and services shall be considered with other departments only when net economic benefits can be seen. When a tie exists between low bids, preference will be given to a local supplier. For purchases when the estimate is more than $100,000: 1. The Hutchinson Utilities Commission will request permission to advertise for bids. 2. Specifications shall be made available to all prospective bidders. 3. Bids will be opened at a public bid opening. Date will be set in the advertisement for bids. 4. The staff will review bids and recommend to the Hutchinson Utilities Commission to accept the lowest responsible bidder meeting specifications. 5. Hutchinson Utilities Commission will enter into a contract with the responsible bidder. For purchases between $25,000 and $100,000: 1. The Hutchinson Utilities Commission staff will solicit written, informal quotations from at least three (3) suppliers and tabulate the results. 2. Fuel purchases for electrical generation is an exception, for additional exceptions refer to Minnesota Statutes 2003, 471.345 Uniform Municipal Contracting Law. 3. Staff will recommend acceptance of the lowest responsible quote. 4. Hutchinson Utilities Commission will approve the quote. For purchases up to $25,000: 1. General Manager authorized to approve purchases up to $25,000. 2. For purchases of $5,000 - $25,000, the Hutchinson Utilities Commission staff will solicit written, informal quotations from at least two (2) suppliers and tabulate the results. 3. Staff will recommend acceptance of the lowest responsible quote to the General Manager for approval. For purchases up to $5,000: Directors and the City Attorney are authorized to approve requisitions via the WIN -STS System for purchases requiring a purchase order number. If purchase order numbers are not required each Division may use their assigned credit card. 1. Division Director will approve all item requests prior to purchasing the item. 2. Receipts will be given to each Division Director as items are purchased to initial, assign appropriate account number and give a description of the item purchased; then forward to Accounting. 3. Accounting will keep a file for each Division until monthly credit card statements are received and reconciled. For purchases up to $5,000: Managers are authorized to approve requisitions via the WIN -STS System for purchases requiring a purchase order number. If purchase order numbers are not required, each department may use their assigned credit card. 1. Department manager will approve all item requests prior to purchasing item. 2. Receipts will be given to each department manager as items are purchased to initial, assign appropriate account number and give a description of the item purchased; then forward to accounting. 3. Accounting will keep a file for each department until monthly credit card statements are received and reconciled. Petty cash may be used for purchases less than $25.00. Employees may make local purchases with prior approval from their Director/Manager. The employee has the option of using a HUC credit card, paying cash for the item, if less than $25.00, and being reimbursed from petty cash, or making the purchase at a local retailer with whom we have an account established. All receipts must to be turned in to the appropriate Director/Manager to initial, assign appropriate account number and then forward to the financial manager. CREDIT CARDS A purchase by credit card must comply with all statutes and rules applicable to Hutchinson Utilities Commission (HUC) purchases. Credit card purchases must comply with the following requirements: Minn. Stat. 412.271, subd. 2 and 471.38, subd.1. Claims presented to HUC for payment must be in writing and itemized. Bills from credit card companies do not contain the detail necessary to satisfy these requirements; therefore, HUC must retain invoices and itemized receipts for items charged to a credit card. The Office of the State Auditor strongly urges local government units to develop a comprehensive credit card use policy to avoid misappropriation of funds or other misuse of the credit card. The following are authorized to make credit card purchases on behalf of HUC: General Manager Natural Gas Division Director Electric Transmission/Distribution Manager Production Manager Engineering Services Manager Inventory Agent Company purchases up to $5,000 are allowed to be made with a credit card. No personal purchases are to be made with the credit card. Receipts will be given to each Division Director/Manager as items are purchased to initial, assign appropriate account numbers and give a description of the item purchased. The receipt then gets forwarded to the financial manager. The financial manager will keep a file for each Division until monthly credit card statements are received and reconciled. The financial manager has the authority to approve and question all credit card purchases in so far as the policy applies. The full amount of the statement must be paid each month. FIXED ASSET CAPITALIZATION The Hutchinson Utilities Commission (HUC) will regard fixed assets as capitalized when all of the following criteria are met: (1) Assets purchased, built or leased have useful lives of one year or more. (2) The cost of the asset (including installation) is $5,000 or more, or. Multiple work order infrastructure assets whose cost is less than $5,000 individuallv but the aggregate requester total is $5,000 or more. are Gapitolize (3) The cost of repairing or renovating the asset is $5,000 or more and prolongs the life of the asset. HUG will regard the PUrGhase of software pregra—S as foxed r.tc n.'Mont to the above Gapitalization POI;Gy, and will amortize ever an estimated useful life of 3 . Costs associated with purchasing and implementing software, software maintenance and customer support are considered expenditures and will not be capitalized. Other Considerations: (1) REPAIR is an expenditure that keeps the property in ordinary efficient operating condition. The cost of the repair does not add to the value or prolong the life of the asset. All repair expenditures are charged to the appropriate department and fund. (2) IMPROVEMENTS are expenditures for additions, alterations and renovations that appreciably prolong the life of the asset, materially increase its value or adapt it to a different use. Improvements of the nature are capitalized. Examples of Repairs vs. Improvements Repairs=Expenditures All items -life less than one year All items under $5,000 Property maintenance, wall repair Replacement of machine parts to keep machine in normal operating condition Property restoration (rebuilding) for normal operations Existing building repairs Replacement of small sections of wiring, pipes or light fixtures Patching walls, minor repairs of floors, painting, etc. Patching driveways Improvements=Capitalized Assets Life of more than one year All items $5,000 or more Property rebuilding Replacement of machine parts that prolong the useful life Property restoration for something different or better Building regulation confonnity Major replacement of wiring, lighting, pipes or sewer Installation of floor, wall, roof, wall covering, etc. New driveway or major repair Cleaning drapery, carpet, furniture New drapery, carpets, furniture Depreciation Method — Straight Line over the following useful lives: Buildings Transmission Plant (electric) Distribution Plant (electric) Building Improvement Transmission Plant (gas) Distribution Plant (gas) Generation Plant General Plant Vehicles Office Equipment Computer Equipment 35-60 years 20-35 years 20-35 years 15-30 years 10-45 years 10-45 years 10-30 years 5-10 years 5-10 years 3-5 years 3-5 years EXCEPTION AGREEMENT BETWEEN MCLEOD COOPERATIVE POWER ASSOCIATION AND HUTCHINSON UTILITIES COMMISSION THIS AGREEMENT, made this 25 day of February , 2016, by and between MCLEOD COOPERATIVE POWER ASSOCIATION, a corporation organized under the laws of State of Minnesota (hereinafter referred to as "the Cooperative") and HUTCHINSON UTILITIES COMMISSION a municipal corporation organized under the laws of State of Minnesota, by its CITY OF HUTCHINSON (hereinafter referred to as "HUC'), individually or collectively referred to as a "Party" or "Parties". RECITALS WHEREAS, the Cooperative and HUC each have electric service areas assigned by the Minnesota Public Utilities Commission in which the Parties have exclusive rights to provide electric service to customers within their respective territories; AND WHEREAS, the Cooperative is currently serving a residential customer, Russell Darnell, 20502 Highway 15, Hutchinson, Minnesota ("Customer") within the Cooperative's service territory; AND WHEREAS, the Customer requests to be released from his service agreement with, and to have his electric service discontinued from, the Cooperative; AND WHEREAS, the Customer requests to have his electric service provided by HUC from its electrical distribution system; AND WHEREAS, the Parties have come to a mutual agreement that will allow HUC to provide electric service by exception to the Customer's premises within the exception area. NOW, THEREFORE, in consideration of the promises exchanged herein, the Parties agree as follows: 1. Scone of Agreement: The scope of this agreement is limited to residential electric service within the exception area specifically identified on Attachment 1 and further described as: The west 298.85 feet of the north 709.41 feet of the south 775.41 feet of the Southeast Quarter of the Northeast Quarter of Section 30, Township 117 North, Range 29 West, McLeod County, Minnesota, containing 4.87 acres, more or less, and the east 50.00 feet of the north 709.41 feet of the south 775.41 feet of the South 25 acres of the Southwest Quarter of the Northeast Quarter of Section 30, Township 117 North, Range 29 West, McLeod County, Minnesota, containing 0.81 acres, more or less. 2. Compensation: The Parties agree that HUC shall compensate the Cooperative for the transfer of the Customer in the amount of a single $1600.00 payment, due and payable prior to the transfer of the Customer service from the Cooperative to HUC. This payment shall be made in lieu of annual payments based upon the language found in Article I1 Section 2.3, 2.3(a), and 2.7 of the April 28, 2010, ELECTRIC SERVICE TERRITORY AGREEMENT between HUC and the Cooperative. The single $1600.00 payment is based upon an approximate present worth of anticipated payments made annually by HUC to the Cooperative, assuming the Customer would continue to have an annual energy usage equal to that used for the 2015 calendar year. 3. Facilities Costs: HUC shall pay the Cooperative the original cost of the pole at the service termination point on the Customer's property, less depreciation through the transfer date of the service, based upon generally accepted accounting principles. 4. Reservation of Rights: Except as specifically set forth herein, this Agreement does not modify or limit the legal rights of any Party. 5. No Precedent: The Parties recognize that this agreement is the result of negotiations between the Parties and does not represent any binding or legal precedent on any party in any other matter. 6. Agreement Drafted Jointiv: The Parties agree that none of the Parties shall be deemed solely responsible for drafting all or any portion of this Agreement, and in the event of a dispute, responsibilities for any ambiguities arising from any provision of this Agreement shall be shared equally among the Parties. 7. Effective Date: The effective date of this Agreement is the date upon which the Agreement has been signed by a duly appointed representative of both Parties. 8. Notice: Any notice permitted or required by this Agreement shall be made in writing and personally served or mailed (postage prepaid, return receipt requested) and shall be effective upon the date of personal service, or if by mail, upon the date of receipt. IN WITNESS WHEREOF, the Parties hereto have caused the Agreement to be executed as of the day and year first above written and the Parties agree to take such additional steps and actions including execution of such instrument and other documents as are reasonably necessary to effectuate the expressions hereby. MCLEOD COOPERATIVE POWER ASSOCIATION Darrel W. Beste Title: Manaeer of Eneineering Services Date: HUTCHINSON UTILITIES COMMISSION By: I — - Title: �A t.1 r 11, P - Date: —24 — 7-016 By: Title: �t'C ►' L',� Date: 6