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07-26-2017 HUCMMINUTES Regular Meeting — Hutchinson Utilities Commission July 26, 2017 Call to Order- 3:00 p.m. President Monty Morrow called the meeting to order at 3:00 p.m. Members present: President Monty Morrow; Secretary Mark Girard; Vice President Anthony Hanson; Commissioner Robert Wendorff; and Commissioner Don Martinez. Others present: General Manager Jeremy Carter; Attorney Marc Sebora. 1. CONFLICT OF INTEREST There were no conflicts of interest noted. At this time, President Morrow acknowledged and welcomed new Hutchinson Commission (HUC) employee Angie Radke, Administrative Coordinator. 2. APPROVE CONSENT AGENDA a. Approve Minutes b. Ratify Payment of Bills Motion by Commissioner Hanson, second by Commissioner Girard, to approve the Consent Agenda. Motion carried unanimously. 3. APPROVE FINANCIAL STATEMENTS General Manager Carter presented the financial statements. Jared Martig, mentioned that the financials are comparable to 2016. He also noted that the cash has decreased due to balance sheet items including the New Ulm pack gas settlement payment and the generator project consultant services. He also stated that sales for resale tipped up approximately $30,000 due to the Southern Minnesota Municipal Power Agency (SMMPA) contract. We are tracking as we should to the budget. General Manager Carter noted two new investments and the resulting change to the allocation of investments and the maturity schedule. Motion by Commissioner Wendorff, second by Commissioner Martinez, to approve the financial statements. Motion carried unanimously. 4. OPEN FORUM —none 5. COMMUNICATION a. City Administrator - Matt Jaunich i. Communicated that the City is formulating the 2018 budgets. ii. Uponor has purchased TDK/HTI Development Center facility. City staff has been working with TDK/HTI on the associated lot split for the property. Renovations to the facility are expected next year with anticipating operations in 2019. The company should generate utility use for both HUC and City. iii. The preparations for the hotel project proposed for the Hwy 7 & Hwy 15 location is continuing, construction possibly to start in September. b. Divisions i. Dan Lang- HUC has been generating due to the warm weather. TransAlta has been calling on capacity contracts. ii. Dave Hunstad — nothing to report iii. Randy Blake —The Unit 8 projects were completed, however when ready to start up Unit 8, 2 electrical components went out. Production is working on obtaining the necessary parts to complete the repairs. Unit 1 has had issues but is currently running. The bid opening on July 14th for units 6 & 7 generated only two bids from Wartsila and Caterpillar. Bids were reviewed with HDR and at this point HUC is waiting on further clarification and responses to questions from both engine manufacturers. The Caterpillar bid included all the necessary information however it was in a format that needs some clarification. Mr. Blake and Mr. Booty both went to Owatonna, to look at the Caterpillar Engine plant. This was very informative and helpful. Staff may request that the Commission hold a special meeting in early August to consider bid award. General Manager Carter, noted that Wartsila did not include sales tax in their calculations, so that must be determined to compare the bids equally. As of now there is a substantial cost difference between the bids. Information regarding the bids and special meeting dates will be forwarded to the Commission. The project is currently ahead of schedule. General Manager Carter, further communicated that because HUC issues bonds through the City, the City will need to be involved in the financing process of the project for consistency. Ehlers, the bonding consultant, has run preliminary numbers for HUC and there continues to be competitive bid awards that are resulting in competitive rates. Commissioner Girard inquired if there was an indication on why only 2 bids were received. Mr. Blake replied that there was one company that did not feel comfortable with having a bid bond, another company was interested but had personnel matters that prohibited them from submitting a bid. Commissioner Hanson asked staff to contact the Commissioners to determine possible dates for a special meeting. General Manager Carter advised the Commission that week of August 14 is preferred for the Payment in Lieu of Taxes (PILOT) sub -committee meeting with the City. iv. John Webster — Successfully completed field MNOPS audit on the gas systems and the Brownton Distribution system with no issues. v. Jared Martig- Work continues on the remaining issues with the new software. These issues should be resolved within the next week. C. Legal - Marc Sebora —nothing to report d. General Manager - Jeremy Carter i. Mr. Carter is compiling PILOT data solicited from municipal utilities and the APPA. As of now 9 of the 12 are back. When complete, the information will be forwarded to the Commission. ii. Working on the 2018 budgets and CIP iii. Work continues on other miscellaneous items. 6. POLICIES a. Review Policies i. Deposit Requirement -Residential ii. Deposit Requirement-Commercial/Industrial iii. Jury, Witness or Board Duty iv. Volunteer Fire or Rescue Squad Duty v. School Conference Leave vi. Bone Marrow/Organ Donation Leave No changes were recommended at this time. b. Approve Changes i. No changes were made to the policies under review. 7. UNFINISHED BUSINESS a. Update on Pack Gas Discussions General Manager Carter noted not a whole lot has changed. Heartland Corn has not communicated with HUC since the July Commission meeting. Marc Sebora, Legal Counsel, noted that he has contacted Heartland Corn legal counsel regarding moving forward, but has not received a response. Heartland Corn has not communicated any concerns or issues with the HUC settlement calculations. 8. NEW BUSINESS a. Discussion on Capacity Contracts General Manager Carter spoke to the contract option information regarding long-term and short-term capacity contract agreement structures he had provided to the Commission and asking commissioner feedback. Two of the options are with AEP, one of the largest power suppliers to utilities in the United States. AEP is interested in purchasing a 1 -year, 5MW contract for 2018-2019 at a favorable price. The Commission asked if there are other buyers that would be interested if HUC proceeds with the two new units, to generate additional revenues. It was noted that no inquiries have been received at the time. The problem with short term capacity is that it competes with the auction prices/platform. The larger contract option is a 5 -year contract with AEP for 20MW from June 2025 -May 2030. Staff is reviewing the request for feasibility as proposed with some modifications. The capacity contracts must work with the HUC business model, have acceptable risk and reward, and results in the proper balance between local capacity stability and other future options that could be advantageous for HUC. Staff is generally not comfortable with contracts longer than 5 years due to uncertainty. However, if our community is stable and the generation fleet is dependable, longer contracts may be considered. Dan Lang, Engineering Services Manager, commented on a request received to purchase 45MW on an 8 -year contract, however that is too high and a 20MW is more feasible. The Commission expressed their support of the approach staff has communicated. Mr. Carter further noted that HUC wants to maintain some flexibility for future regarding capacity contracts. The Commission can expect to consider contracts at the regular August meeting. 9. ADJOURN There being no further business, a motion was made by Commissioner Girard, second by Commissioner Martinez, to adjourn the meeting at 3:40 p.m. Motion carried unanimously. a k Girard, Secretary ATTEST:um�Y- Av*qdO-'J Apfm-�1'