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11-30-2016 HUCMMINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, November 30, 2016 Call to order — 3:00 p.m. President Luhring called the meeting to order. Members present: President Donna Luhring; Vice President Monty Morrow; Secretary Mark Girard; Commissioner Anthony Hanson; Commissioner Robert Wendorff; Attorney Marc Sebora; General Manager Jeremy Carter. 1. Conflict of Interest None 2. Approve Consent Agenda a. Approve Minutes b. Ratify Payment of Bills A motion was made by Secretary Girard, seconded by Commissioner Wendorff to approve the Consent Agenda. Motion was unanimously carried. 3. Approve Financial Statements GM Carter presented the financial statements. A motion was made by Secretary Girard, seconded by Commissioner Hanson to approve the financial statements. Motion was unanimously carried. 4. Open Forum 5. Communication a. City Administrator — Matthew Jaunich i. Not present. b. Divisions i. Dan Lang — 1. Nothing to report. ii. Jared Martig - 1. There were no power cost adjustments made last month. iii. Randy Blake — 1. A conditional offer was made for the vacant operator position. 2. The parts for the Unit 3 repair arrived. iv. Dave Hunstad — 1. A thank you is extended to HUC linemen who helped McLeod Power offering mutual aid on November 18 and 19. v. Brenda Ewing — 1. Nothing to report. 1 c. Legal — Attorney Sebora i. Nothing to report. d. General Manager — Jeremy Carter i. Finishing the 2017 budget and capital expenditure for Board approval. ii. Working on insurance renewal information. iii. Finalizing end -of -year items. 6. Policies a. Review Policies i. Appendix A — Acknowledgement ii. Appendix B — New Employee Acknowledgement iii. Appendix C — Temporary Employee Acknowledgement iv. Appendix D — Acknowledgement v. Explanation of Billing Procedure No changes were recommended. b. Approve Changes i. Automatic Bill Payment Plan ii. Budget Payment Plan The recommended changes to Automatic Bill Payment Plan were to clean up language and for clarification. The recommended changes to Budget Payment Plan were also to clean up language and for clarification. A motion was made by Commissioner Hanson, seconded by Vice President Morrow to approve the changes to Automatic Bill Payment Plan and to Budget Payment Plan. Motion was unanimously carried. (Changes attached.) 7. Unfinished Business a. Update on Pack Gas Discussions Progress is being made with both Heartland Corn and New Ulm as they are agreeing to the calculations HUC put together. Attorney Sebora is creating drafts of the settlement agreements. 8. New Business a. Approve Charge -Offs Jared Martig presented the 2016 charge-offs for approval. A motion was made by Vice President Morrow, seconded by Commissioner Hanson to approve the 2016 charge-offs. Motion was unanimously carried. (Charge-offs attached.) b. Approve Financial Reserve Policy GM Carter presented the final version of the Financial Reserve Policy which incorporated the changes requested by the Board. A motion was made by Secretary Girard, seconded by Commissioner Hanson to approve the Financial RIA Reserve Policy. Motion was unanimously carried. (Financial Reserve Policy attached.) c. Declare Employee Recognition Dinner on December 9, 2016 as an Open Meeting A motion was made by Commissioner Hanson, seconded by Vice President Morrow to declare the Employee Recognition Dinner on December 9, 2016, as an Open Meeting. Motion was unanimously carried. d. Discuss New Commissioner Matrix Four candidates applied for the vacant commissioner position. After discussion, a motion was made by Commissioner Hanson, seconded by Commissioner Wendorff to approve the first three of the four candidates who expressed interest in the vacant commission position. Motion was unanimously carried. e. Approve Rescheduling the December Regular Commission Meeting to Wednesday, December 21, 2016 A motion was made by Vice President Morrow, seconded by Commissioner Hanson to approve the rescheduling of the December regular commission meeting to Wednesday, December 21, 2016. Motion was unanimously carried. Adjourn There being no further business, a motion was made by Commissioner Hanson, seconded by Commissioner Wendorff to adjourn the meeting at 3:20 p.m. Motion was unanimously carried. ATTEST: Donna Luhring, President 3 Monty Morrow, Vice President Automatic Bill Payment Plan Customers D' may be made d*reGtlei from authorize automatic bill payment through ACH withdrawals eute from a checking/savings account, or freta with the use of a credit/debit card. These payments are withdrawn on the date the bill is due. To authorize the withdrawals or automatic payment, the customer must fall-eot complete an Authorization for Automatic Payment form supplied by available at the HUC's business office or sn"ne on the HUC website. ¶The customer will receive their monthly utility billing statement showing the payment amount to be withdrawn. The customer may contact the HUCLs Customer Service Department before the amount is withdrawn if they don't agFee with to dispute the billing or have with any questions. The customer will have approximately 10 days to review their bill before the money is withdrawn. If a customer's payment is dishonored for two consecutive months, that the customer will be removed from the automatic payment plan and so notified. A service charge of $30 will be assessed to the customer's account for each dishonored payment occurrence. Budget Payment Plan A budget payment plan is available fer to residential customers who have been at their present location for a minimum of 12 continuous months or more. Procedures are in place for setting up and reviewing the budget payment plan calculation. Changes to the budget payment amount are made at the discretion of the Customer Service Department based on the customer's average bill from the previous 12 months. Customers will be notified, in writing, of any changes. A customer may concurrently participate in the budget payment plan and automatic bank payment plan. CHARGE OFF FOR 2016 CUST. # ACCOUNT # AMT. OWING ELECTRIC NAT. GAS REASON FOR LAST CHARGE OFF ACTIVITY DATE 71822 160542 $98.96 $85.16 $13.80 Bankruptcy 7/18/2016 TOTAL BANKRUPTCY $98.96 $85.16 $13.80 34146 80405 $186.41 $105.99 $80.42 Deceased 5/4/2016 68592 130503 $24.47 $24.47 Deceased 4/16/2012 10675 420206 $115.00 $115.00 Deceased 8/24/2015 44891 31455 $44.55 $44.55 Deceased 7/18/2016 TOTAL DECEASED $370.43 $290.01 $80.42 55895 280655 $461.62 $199.43 $262.19 uncollectable 4/13/2009 67319 350456 $98.83 $29.07 $69.76 uncollectable 9/23/2009 58002 470255 $324.71 $250.60 $74.11 uncollectable 10/9/2009 67338 260294 $87.18 $87.18 $0.00 uncollectable 7/10/2009 28609 280630 $518.48 $378.12 $140.36 uncollectable 8/13/2009 22547 470040 $103.16 $103.16 $0.00 uncollectable 11/9/2009 60046 360795 $105.70 $0.00 $105.70 uncollectable 9/14/2009 60396 361002 $955.97 $328.22 $627.75 uncollectable 11/20/2009 5005 50556 $67.54 $67.54 $0.00 uncollectable 1/22/2010 67278 420084 $107.59 $107.59 $0.00 uncollectable 1/29/2010 37842 101075 $21.18 $0.00 $21.18 uncollectable 3/4/2010 50190 120640 $65.18 $0.00 $65.18 uncollectable 4/19/2010 53634 140034 $539.03 $20.35 $518.68 uncollectable 2/1/2010 53634 140035 $122.10 $122.10 $0.00 uncollectable 2/1/2010 67475 420355 $198.58 $198.58 $0.00 uncollectable 4/20/2010 32998 30085 $941.47 $138.78 $802.69 uncollectable 3/3/2010 66621 40140 $690.13 $690.13 $0.00 uncollectable 1/12/2010 67579 121411 $152.25 $152.25 $0.00 uncollectable 4/12/2010 67410 370919 $70.02 $70.02 $0.00 uncollectable 3/12/2010 17465 470032 $107.98 $107.98 $0.00 uncollectable 5/24/2010 67549 121444 $38.87 $38.87 $0.00 uncollectable 6/11/2010 17801 220292 $1,183.19 $165.43 $1,017.76 uncollectable 5/17/2010 68074 60645 $115.06 $115.06 $0.00 uncollectable 6/1/2010 34734 80450 $400.94 $0.00 $400.94 uncollectable 5/13/2010 30100 370623 $292.93 $94.01 $198.92 uncollectable 5/14/2010 66831 120825 $100.55 $100.55 $0.00 uncollectable 6/14/2010 34419 420428 $50.70 $50.70 $0.00 uncollectable 7/23/2010 11368 170080 $227.76 $185.88 $41.88 uncollectable 8/19/2010 45731 120565 $74.43 $0.00 $74.43 uncollectable 9/10/2010 4907 31012 $3,127.18 $973.93 $2,153.25 uncollectable 2/24/2016 TOTAL UNCOLLECTABLE $11,350.31 $4,775.53 $6,574.78 GRAND TOTAL $11,819.70 $5,150.70 $6,669.00 a��C N I NgB♦ HUTCHINSON UTILITIES FINANCIAL RESERVE POLICY A. PURPOSE: In order to maintain stable rates and provide reliable service, Hutchinson Utilities Commission (HUC) must have various tools in place to deal with changes in costs or operational performance. Maintaining appropriate financial reserves is one such tool that ensures sufficient funding is available for current operating, capital and debt service needs. Financial reserves absorb short-term financial variability resulting from unexpected operational changes or can reduce the need for large amounts of debt. This policy establishes a Capital Reserve (CR), which is used to cover acquisition of capital assets, including replacement of existing assets, and an Operating Reserve (OR), which addresses short-term financial volatility. HUC will establish a Capital Reserve and Operating Reserve for each of the two utilities — Electric and Gas. B. DEFINITIONS: Hutchinson Utilities Commission reserves can be classified into three broad categories that include Restricted Cash Reserves, Capital Reserve Funds, and Operating Reserve Funds. A "fund" is a segregation within the Utility's accounting system to keep sources and uses for a particular purpose easily identifiable and reportable. C. GENERAL PROVISIONS In the context of funding future capital equipment or facilities or replacing existing assets with substantial value HUC will analyze the most cost effective and efficient method to finance a project, be it through debt financing, pay -as -you go financing, use of reserves, use of contractual agreements, or through some combination of those various sources or others that may present themselves. At a minimum, reserve balances will be reviewed on an annual basis at, or near, the end of the fiscal year during preparation of the Capital & Operating Spending Plans to ensure adequate compliance with policy and intended funding targets. The minimum funding requirements established for each fund represents the baseline financial condition that is acceptable to the Commission from a risk and long-range financial planning perspective. Maintaining reserves at appropriate levels is a prudent, ongoing business process that consists of an assessment and application of various revenue generating alternatives. These alternatives (either alone or in combination with each other) include, but are not limited to: fees & charges, capital financing, investment of funds, contractual commitments, and levels of capital expenses. I. RESTRICTED RESERVES MR) - Restrictions on these monies are imposed by an outside source such as creditors, grantors, contributors, laws or regulations governing use. An example of restricted funds is bond reserve covenants required as a part of debt issuance. The funds are legally protected by bond covenants and can only be used in the event of default by HUC or to pay down principal at maturity. A. Funding Amount —The bond reserve requirements are established at the time of bond issuance. B. The sources of funds for the (RR) come from the undesignated fund balance of each utility which can change annually based on yearly operating performance and accumulated net revenues and, when appropriate, available short-term liquidity arrangements. ll. CAPITAL RESERVES (CR) - This reserve is established by action of the board to fund capital projects including electric and gas distribution & transmission system infrastructure, production facilities, and fleet that are a part of the 5 -year capital improvement plan so HUC can avoid issuing bonds to pay for maintaining normal operations. This reserve is not intended to fund large major capital purchases. (he ... Fleet, infrastructure replacement or acquisitions) A. Funding Amount — Minimum funding shall be targeted at the estimated current replacement costs of assets expected to be replaced within the next five years. B. Funding Sources —The sources of funds for the (CR) come from the undesignated fund balance of each utility which can change annually based on yearly operating performance and accumulated net revenues and, when appropriate, available short-term liquidity arrangements. 11h OPERATING RESERVES (OR) — This reserve is established by action of the board to address short- term financial risk or variability resulting from unexpected operating results and to address those financial risks that have a more immediate potential impact on the existing organization cost structure. (Le ... Rate Stabilization Reserve Funds, Catastrophic Reserve Funds, PILOT Reserve Funds, Operating Reserves) A. Risk Exposures —Potential sources of cash flow variability addressed by the (OR) include the following risk exposures: 1. Reductions in overall customer demand, 2. Changes in total system load resulting from the actions of large customers, 3. Failure to achieve the budgeted level of net income, 4. Changes in the costs of purchased power, 5. Catastrophic disasters or community events 6. General operation exposures, such as timing mismatch between revenue receipts and expense payment, unforeseen maintenance costs, regulatory compliance costs, and other unexpected increases in the operating budget B. Funding Amount— Target (OR) level has been set at a minimum of 60 99 -days and a maximum of 90 12-9 days of total budgeted operating expenses for both the Electric Division and Gas Division. Since the (OR) changes annually for each division based on the following years budget, the (OR) will be adjusted annually. The (OR) target is in addition to the other operating reserve funds listed above. C. Funding Sources —The sources of funds for the (OR) come from the undesignated fund balance of each utility which can change annually based on yearly operating performance and accumulated net revenues and, when appropriate, available short-term liquidity arrangements. IV. FINANCIAL RESERVES HIERARCHY OF FUNDING —The following lists the priorities applied to HUC's reserves. A. Maintaining Operating Reserves (OR) within a 60 day to 90 day operating range. Sinee beFrew meney to cever these types of expendituFes, excess cash geneFated by the uti4t-y B. Once the Target LQRLkCR4 level is achieved, excess cash may s4A be applied to the CR (0R} or other areas at the discretion of the Hutchinson Utilities Commission. V. FINANCIAL RESERVES REPLENISHMENT— The above section describes the hierarchy of funding the reserves. The following describes what actions may be taken to generate toe cash and replenish the reserves under different scenarios of each of the two utilities. A. If the (OR) (CR and (CR)4QR4 are at the Target Level: Take no action B. If either the (OR) or (CR) is at the TaF Level and tke QP ;& below the Target Level or if both the (OR) and (CR) are below the Target Level: Take no action during the current year,-. If the (OR) dee_,; Pet ..AGrPArP to the Target Level d g the ale da reevaluate the following year and reduce expenses and/or increase revenues, if necessary, to reach the Target Level within the next three years. .. • ■ �tita—a:�iaa e el y eaFc the (' ill censideF the fallowing epti i c feF f ch• WVi. FINANCIAL RESERVES FUNDING LEVEL AND FUND BALANCE REVIEWS — The Target levels and fund balance are to be reviewed as follows: A. Target Level Review: Although the actual monetary values are reviewed annually and adjusted to reflect target goals when approving budgets, the Target OR and (CR) ) funding levels are to be evaluated at least every k!IE e years. For example, the Commission could revise (reduce or increase) the OR or (CR) eF (OR) reserves based on future external factors and forward looking cost drivers. B. Financial Reserves Fund Balance Review: The OR and (CR) ) fund balances are to be monitored monthly by the Finance Department and reviewed annually during the budget review process by the Commission or if an event were suddenly to reduce the fund balances.