01-31-2018 HUCMMINUTES
Regular Meeting — Hutchinson Utilities Commission
Wednesday, January 31, 2018
Call to order — 3:00 p.m.
President 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; Commissioner Don Martinez; Others present: General Manager Jeremy
Carter; Attorney Marc Sebora.
Conflict of Interest
Commissioner Hanson declared a conflict of interest in voting on agenda item 2f -
Designate Depositories for Utility Funds as he is an employee of Citizens Bank &
Trust and agenda item 3- Ratify Payment, as he is 50% owner on AM2K Properties.
Secretary Girard also declared a conflict of interest in voting on agenda item 2f, as
he is a director for Citizens Bank & Trust.
2. Commission Reorganization
President Morrow called for the annual Commission reorganization.
a. A motion was made by Commissioner Hanson, seconded by Commissioner
Martinez to re-elect Monty Morrow to the position of president. Motion was
unanimously carried.
b. A motion was made by Commissioner Martinez, seconded by Commissioner
Wendorff to elect Anthony Hanson to the position of vice president. Motion was
unanimously carried.
c. A motion was made by Commissioner Hanson, seconded by Commissioner
Girard to appoint Robert Wendorff as secretary. Motion was unanimously carried.
d. A motion was made by President Morrow, seconded by Commissioner Martinez
to appoint Marc Sebora as legal counsel. Motion was unanimously carried.
e. A motion was made by Commissioner Hanson, seconded by Commissioner
Martinez to appoint Angie Radke as recording secretary. Motion was
unanimously carried.
A motion was made by Commissioner Wendorff, seconded by Commissioner
Martinez, to designate Citizens Bank & Trust, Wells Fargo Bank, Wells Fargo
Advisors, Home State Bank, Morgan Stanley and Cetera Investment Services
as depositories for utility funds. Motion was unanimously carried.
3. Approve Consent Agenda
a. Approve Minutes
b. Ratify Payment of Bills
A motion was made by Commissioner Martinez, seconded by Commissioner
Wendorff to approve the Consent Agenda. Motion was unanimously carried.
4. Approve Financial Statements
Mr. Martig presented the financial statements. Mr. Martig noted the Net Profit for
Dec 2017 decreased by $520K from Dec 2016. This is due to the additional gas
costs over the final three days of Dec, which caused a fuel cost adjustment of $879K.
HUC charged customers $433K while HUC absorbed the remaining, which will be
collected in the form of less credits, issued in 2018.
GM Carter stated for Electric Division, consumption tracked consistent throughout
the year. Natural Gas Division tracked pretty consistent except for the month of
December.
GM Carter reviewed the additional graphs that Mr. Lang included on Load Duration
Curve, Historical market, gas and HUC Energy pricing and HUC's load profile. .
These give a good pictorial of the data being collected even though they are not
reported on every month.
After discussion, a motion was made by Commissioner Girard, seconded by
Commissioner Hanson to approve the financial statements. Motion was
unanimously carried.
5. Open Forum
6. Communication
a. City Administrator — Matt Jaunich
i. For the year, August was a bad month for us with the aquatic center.
ii. The City has two big projects this year 1) 2nd Avenue Bridge to start in June
and 2) Century project.
b. Divisions
i. Dan Lange, Engineering Services Manager- Losing System Controller
today. Will be having interviews next month.
ii. Randy Blake, Production Manager- Had a mandatory pre-bid contractor
project meeting yesterday at plant 1 facility. This was a good turn out and
included local and Minneapolis contractors.
Cooling Tower Project is coming up, will be going out for bids to keep
moving and will be looking to have a special meeting.
Finished up unit 8- exciter project.
Maintenance Mechanic position is posted.
iii. John Webster, Natural Gas Division Manager- last Friday a gas marketer
placed a large quantity of gas on our pipeline and will pull out the month of
February; they are using our piping as storage.
Gas Welder position is posted
iv. Jared Martig, Financial Manger- Auditors are here. Will be looking for a
meeting in March possibly April.
v. Dave Hunstad, Electric Transmission/Distribution Manager- Transformer
Inspections are being done out in the field.
c. Brenda Ewing, Human Resources — Nothing to report.
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d. Legal — Attorney Marc Sebora- Nothing to report.
e. General Manager — Jeremy Carter
i. Working on Year-end.
ii. Legislative meetings are coming up the week of February 20.
iii. Trying to keep Heartland Corn moving forward, hoping to accomplish in the
near future. Met with the new CEO- Gary. Had good conversations on what
to expect now and future for long-term use on our pipeline.
7. Policies
a. Review Policies
i. Administration of Personnel Policies & Procedures
ii. Savings Clause
iii. Equal Employment Opportunity
iv. Identity Theft- Red Flag Program
v. Minnesota Government Data Practices Act & Public Records Request
No changes were recommended at this time.
b. Approve Changes - None
8. Unfinished Business
a. Update on Pack Gas Discussions
GM Carter stated staff would be following up at the end of week with the attorney
to move the settlement forward.
9. New Business
a. Approval of HTI's Natural Gas Transportation Agreement- John Webster stated
HTI's current agreement expires May 1, 2018. This agreement provides
transportation rights to HTI on Hutchinson's facilities from May 1, 2018 through
May 1, 2020. HUC has not changed the transportation rate or daily balancing
fees from previous agreement.
Motion by Commissioner Hanson, second by Commissioner Girard, to approve
HTI's Natural Gas Transportation Agreement. Motion carried unanimously.
b. Approval of 3M's Natural Gas Transportation Agreement- John Webster stated
3M's current agreement expired on January 1. This agreement provides
transportation rights to 3M on Hutchinson's facilities from January 1, 2018
through January 1, 2020. HUC has not changed the transportation rate or daily
balancing fees from previous agreement.
Motion by Commissioner Girard, second by Commissioner Wendorff, to approve
3M's Natural Gas Transportation Agreement. Motion carried unanimously.
c. Approval of 3M's Natural Gas Commodity Purchase Agreement- John Webster
stated the agreement allows 3M to continue to purchase base load natural gas
commodity through HUC. The agreement allows 3M to place segments of their
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base load commodity contracts into the Commodity Prepay Purchase Program
that is currently being put in place between HUC and its natural gas supplier.
Motion by Commissioner Martinez, second by Commissioner Hanson, to
approve 3M's Natural Gas Commodity Purchase Agreement. Motion carried
unanimously.
President Morrow would like to take the time to touch base on the COS study.
The Board appreciates the good job and all that is done by staff. The Board is
not exposed to big bumps. Thank you and nice job that we do not see that. The
Board agreed.
d. Approve 3M CIP Rebate- Jared Martig presented the 3M CIP Rebate. HUC staff
is trying to get 3M to commit to having this done quarterly.
Commissioner Girard inquired if this number has been going down.
Mr. Martig and GM Carter stated that it has. It has been taking more projects to
get to the same level of energy efficiency savings. (Rebate analysis attached)
A motion was made by Commissioner Hanson, seconded by Commissioner
Girard to approve the 3M CIP Rebate. Motion was unanimously carried.
e. Discussion of PILOT Resolution
President Morrow recapped there is a subcommittee made of Commissioner
Girard, Commissioner Hanson, Mr. Steve Cook and Mr. Chad Czmowski.
Commissioner Hanson communicated the subcommittee looked at the 2.75%
contribution of HUC's operating revenue. The subcommittee found the average
in this region is a 4.5% PILOT transfer. The subcommittee would like to be in
line with peers and feels comfortable with a 3 -year phase in. Commissioner
Hanson added the subcommittee tried to simplify the PILOT transfer by
eliminating tree and street lighting.
GM Carter stated the approved 2018 budget already includes year 1 of the 3 year
phase-in. In addition, the COS study takes the increased PILOT into
consideration as part of the analysis. .
Commissioner Hanson noted specific verbiage was added to consider 1 -time
requests when something comes up.
Mr. Jaunich communicated the Council did review this and is comfortable with
the language. Council wants what is close to its peer group and this is.
GM Carter mentioned right now the split is 60-40. However, each division is now
going to pay the PILOT percentage of their own operating revenue. There is also
a floor and ceiling added to the PILOT resolution to protect both organizations.
Mr. Morrow looked at the Board for any questions.
With no further discussion a motion was made by Commissioner Hanson,
seconded by Commissioner Girard to approve the PILOT Resolution. Motion
was unanimously carried.
f. Discussion of Cost of Service Study
President Morrow communicated the Commission had time to review the COS
study and now is the time to discuss our thoughts and ask further questions.
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GM Carter summarized this is the initial step in the process. The second step
would be to consider a rate track structure. It is important in this second step for
the Commission to be given time to review the information give their input and
make recommendations. Items for the Commission to consider 1) does the
Commission want to do anything different with HUC's current rate design. If yes,
what kind of a change; stay revenue neutral to the utility or generate addition
revenue? If the Commission desires to stay revenue neutral to the utility without
affecting the customer's bill to much this can be done by having the revenue
generated restructured in a different format; have less of an energy charge and
more in the fixed charge. 2) Does the Commission want to move in a direction
to incrementally adjust the customer classifications towards more equitability? 3)
If the commission would like to realign the energy rate and fixed charge in
addition to moving the classification towards more equitability the commission
should consider how much, +/- 1 % or +/- 2% bandwidth and also a glide path
over a certain length of time.
Commissioner Hanson inquired about time of day use and off peak pricing.
GM Carter noted that the Hutchinson community customer base has fairly
constant load with minimal large ups and downs. HUC is not a full -requirement
utility of MIRES we buy a constant load 24/7. Because of RUC's contract
structure, time of use is not as beneficial to HUC in addition to already being
sized infrastructure wise according to our peak load with some room for growth.
Although, there is more discussion going on in the industry about time of use
pricing or seasonal pricing in the future. MIRES currently has in place as a
wholesale supplier seasonal pricing for its member utilities. Commissioner
Martinez inquired if the billing system could handle this.
GM Carter stated additional class rates would have to be set up; this would
become a more sophisticated billing system. Some communities are doing or
are considering time of use rate structures, but those communities typically have
more variability in loads, are purchasing their power based on more variable
pricing, or are looking to reduce the peak demand on their system through energy
conservation to reduce utility costs or additional infrastructure investments.
After further discussion, Commission asked what the next steps are.
4:05 Mrs. Ewing left
GM Carter noted if the Board would like to make a change, the Staff would
recommend Mr. Dan Kasbohm to send some recommendations.
Commissioner Hanson asked the staff if there is anything the Commission needs
to be aware of as far as any major costs that should be factored in now to account
for down the road.
GM Carter stated this is something the Staff can take a relook at.
President Morrow summarized by saying it does sound like we need to move
forward with receiving recommendations and asked the Staff to please review
any major costs that may be coming up in the future so the Commission can
consider any changes that may be done.
10. Adjourn
There being no further business, a motion was made by Commissioner Girard,
seconded by Commissioner Martinez to adjourn the meeting at 4:20 p.m. Motion
was unanimously carried.
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ATTEST
Montyorrow, President