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08-30-2017 HUCMMINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, August 30, 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; Vice President Anthony Hanson; Secretary Mark Girard; 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 added the following items to the New Business section of the agenda: 8b. Consideration of setting the annual customer appreciation event scheduled for October 3, 2017, from 4:00 to 7:00 p.m. as a Commission open meeting. 8c. Consideration to proceed with the process to retire the 2003 bonds 2. Approve Consent Agenda a. Approve Minutes — The minutes from the July 26, 2017, regular meeting were corrected as follows: Item 3 — Financial Statements Motion by Commissioner Wendorff, second by Commissioner Martinez, to approve the GenseRt Agenda financial statements. b. Ratify Payment of Bills Motion by Martinez, second by Wendorff to approve the Consent Agenda with the noted correction to the meeting minutes. Motion carried unanimously. 3. Approve Financial Statements General Manager Carter presented the financial statements. Through July 2017, the general financial numbers are comparable to the 2016 figures. Revenues are up in the Electric division due in part to the recent application of power adjustments. Market sales are up and capacity contracts are tracking higher than 2016. Electric usage was up in July and the year to date usage is now trending close to the 2016 figures. The Natural Gas division continues to perform well financially. Gas consumption is up about 5% over the same period in 2016. Cash balances have also increased. Commissioner Hanson commented that purchased power is on an upward trend. Growth accounts for approximately 5% of division revenues. He suggested that the Commission have a future conversation when appropriate, possibly in 2018, regarding the HUC's position and philosophy on purchased power. Jared Martig, Financial Manager, noted that current purchased power numbers are below the figures from two years previous. Mr. Carter noted this will be part of the budget discussion for 2018. He added he will attempt to revisit the energy contract with our wholesale supplier in an effort to reduce the purchased power costs. Great River Energy (GRE) drives the transmission improvements in our area/zone, so options for Hutchinson Utilities (HUC) to be involved in future transmission ventures may likely not be available. The current contractual agreements in place limit HUC's ability to maximize revenues in these areas. Commissioner Hanson also noted that HUC will need to see how the 2018/2019 load grows, particularly in the commercial industrial sector. There may not be as great a need to focus on purchased power and/or transmission revenues, if an increase in our local load is realized and the costs to provide power to our customers, whether purchasing or generating are reasonable. Motion by Hanson, second by Girard to approve the financial statements. Motion carried unanimously. 4. Open Forum -none 5. Communication a. City Administrator — Matt Jaunich i. Mr. Jaunich communicated that the first open house was recently held by MNDot for the Trunk Highway 15/Main Street project scheduled for 2020. ii. A site plan was approved for the hotel project to be constructed at the TH 7/15 intersection. iii. A contingent from the City toured the Uponor facilities in Apple Valley. The City is excited about Uponor becoming part of the Hutchinson community. Uponor noted that they desire to partner with local utilities on renewables. b. Divisions i. Dan Lang, Engineering Services Manager — 3M is performing a shutdown on Labor Day. HUC line crew staff will be completing maintenance work. The process has started to retire Unit #2 at Plant 1 to make room for the new units and auxiliary equipment. Unit #2 is generally out of use and only used in emergency situations. ii. Dave Hunstad, Electric Transmission/Distribution Manager — Staff has completed work on the Roberts Rd and High School projects. September work will include the feed for the hotel project at highways 7/15 and additional work on the HTI/TDK and Uponor properties. The Mid -Country bank drive thru project in the downtown area requires a transformer relocation. iii. Randy Blake, Production Manager — Staff are removing Unit #2 as previously noted. HUC will attempt to sell components of Unit #2 if demand exists. Mr. Blake continues to work with Caterpillar and HDR representatives on the generator project. iv. Jared Martig, Financial Manager — Continuing to work to address minor issues with the new integrated software. He noted that the graph contained on customer bills is not accurate, but is accurate on the website. The graph will likely be removed from the bills to eliminate any confusion. c. Legal — Marc Sebora — nothing to report. d. General Manager — Jeremy Carter i. Mr. Carter continues work related to the generator project. 2 ii. He is working with the City and the financial advisors on the pending bond sale. iii. Work continues with the rate study and the consultant. iv. The 2018 budgeting process will begin in the near future. 6. Policies a. Review Policies i. Terminating Electric/Natural Gas Service by Customer ii. Retirement Program iii. Deferred Compensation iv. Personal Use of Utility Facilities & Equipment b. Approve Changes i. Cold Weather Rule — 2009 is stricken and changed to 2016 statutes ii. Definition of Your Bill — updated to coincide with the new billing system Motion by Girard, second by Martinez, to approve the policy changes as recommended. Motion carried unanimously. 7. Unfinished Business a. Update of Pack Gas Discussions General Manager Carter noted there is no new information to report at this time. 8. New Business a. Approval on Capacity Contracts Mr. Carter noted that the Commission discussed the capacity contracts at the regular meeting in July. HUC is looking to enter into two contracts, 5MW and 20MW, with AEP Energy Partners, Inc. (AEP) to maximize revenues and offset costs. Mr. Carter reviewed the chart illustrating the current and pending contract distribution contained in the packet materials. It is requested that the Commission consider for approval the two capacity contracts. Mr. Carter noted that the supplemental agreement is already in place with AEP that does not require any additional action. The contract documents were reviewed by staff and legal counsel and deemed appropriate. Motion by Girard, second by Hanson, to approve the capacity contracts. Motion carried unanimously. b. Set open meeting for the Hutchinson Utilities customer appreciation event on October 3, 2017, from 4:00 — 7:00 p.m. Motion by Hanson, second by Wendorff, to set an open meeting for the October 3rd Customer Appreciation event. Motion carried unanimously. c. Consideration to Proceed with the Process to Retire the 2003 Bonds C Mr. Carter reviewed that HUC is looking to issue new bonds with the recently approved generator purchase project. It is appropriate to entertain the option to redeem the 2003 bonds at this time, as funds are available and to save on interest costs. If so directed to proceed, Mr. Carter will draft the necessary resolution for Hutchinson City Council consideration. The principal remaining on the bonds is $590,000. Total principal and accrued interest costs to retire the bonds will likely total approximately $600,000. The early payoff may positively affect HUC's bond rating and ability to achieve a more favorable interest rate for the new generator project. The new bond issue affects the Electric Division. The existing Natural Gas Division bonds have a 2026 redemption date. Commissioner Martinez inquired if the anticipated Interest rate on the new bonds is lower than the rate on the existing bonds. Mr. Carter confirmed it is anticipated that they will be lower. Commissioner Hanson asked if there are any concerns from a cash flow perspective if the bonds are retired at this time. Mr. Carter indicated the cash balance should be adequate, and the anticipated outcome of implementing recommendations from the rate study should put HUC in an even more acceptable cash position than currently exists. HUC can defer the repayment of principal on newly issued bonds, but not on interest payments, if a future cash issue arises. President Morrow asked if the Commission would like to entertain consideration of the bond retirement process or defer the item to the regular September 2017 meeting. The consensus of the Commission is to act on the request at this time. Motion by Martinez, second by Hanson, to approve proceeding with the process to retire the 2003 bonds. Motion carried unanimously. 9. Adjourn There being no further business, a motion was made by Girard, second by Hanson, to adjourn the meeting at 3:36 p.m. Motion carried unanimously. C -// 1�7 '14 J /� - - ar Girard, Sec etary ATTEST: QW4 M Monty Manow, t 4-tAq�l 4offico, � v iu �P"ikWr HUTCHINSON UTILITIES COMMISSION RESOLUTION RELATING TO PUBLIC UTILITY REVENUE BONDS, SERIES 2017B; AUTHORIZING THE HUTCHINSON CITY COUNCIL TO PROVIDE FOR THE ISSUANCE AND SALE THEREOF BE IT RESOLVED by the Hutchinson Utilities Commission (the "Commission") as follows: 1. Recitals. To finance improvements to the electric generation and distribution system operated and managed by the Commission it is proposed that the City of Hutchinson (the "City") issue its Public Utility Revenue Bonds, Series 201713, in the approximate principal amount of $17,455,000 ("the "Bonds"), the principal of and interest on which shall be payable from the net revenues of the electric generation and distribution system and natural gas system operated and managed by the Commission. The Bonds are to be issued pursuant to and secured by the covenants and agreements contained in a resolution to be adopted by the Hutchinson City Council on October 10, 2017, which resolution is attached hereto and is by reference incorporated herein (the "Resolution"). 2. Authorization and Concurrence. The Commission hereby finds and determines that the issuance of the Bonds is necessary and in the best interests of the Commission and authorizes the City to issue the Bonds as provided in the Resolution, and hereby joins in and adopts the Resolution, including all of the covenants and agreements therein contained with the same force and effect as if the Resolution had been adopted by the Commission. The Commission further approves the redemption of the City's Public Utility Revenue Bonds, Series 2003B, dated, as originally issued, as of March 1, 2003, currently outstanding in the principal amount of $590,000, as previously approved by the City. Adopted: September 27, 2017. ATTEST: Ay Mart o w, Pre6de4- Markibirard, Secretary