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08-29-2018 HUCMMINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, August 29, 2018 Call to order — 3:00 p.m. President Monty Morrow called the meeting to order. Members present: President Monty Morrow; Vice President Anthony Hanson; Commissioner Don Martinez; Commissioner Matt Cheney; General Manager Jeremy Carter; Attorney Marc Sebora: Absent: Secretary Robert Wendorff Conflict of Interest At this time, President Morrow noted that there would be an addition under New Business. Will be adding agenda 8g- Corval Settlement Agreement 2. Approve Consent Agenda a. Approve Minutes b. Ratify Payment of Bills Motion by Commissioner Hanson, second by Commissioner Martinez to approve the Consent Agenda. Motion carried unanimously. 5. Approve Financial Statements Jared Martig presented the financial statements. There were not a lot of changes. However would like to point out in the Electric Division year to date there is a difference of $43k from 2017 to 2018. This is due to having extra debt interest of $316K on the recently issued 2017B Bonds. GM Carter noted in the Electric Division, Generator/Fuel has increased by $145K through July. Offsetting that will be the Sales for Resales. A lot of this has to deal with the Transalta Contract. All energy sales are above 2017 with the exception of Industrial. Natural Gas Division is also comparable to 2017. In next month's Investment report, the Commission will see that there was a CD that was maturing in August, so that was reinvested for 18 months. After discussion, a motion by Commissioner Martinez, second by Commissioner Cheney to approve the financial statements. Motion carried unanimously. 6. Open Forum 7. Communication a. City Administrator — Matthew Jaunich i. The City is in the middle of working on projects; 2"d Ave Bridge will be done in September. Also, continuing to work on Century Ave. ii. Highfield Apartments are looking to start working on units 4 & 5 in September. iii. Received Application to have another commercial building added between Advanced Auto Parts and Goodwill. iv. Council just approved a TIF plan for Warrior Manufacturing to start this Fall. b. Divisions i. Dan Lang, Engineering Services Manager — Nothing to report ii. Dave Hunstad, Electric Transmission/Distribution Manager — 1. There were two outages last week; first outage was Monday at midnight a wire failure by Mid Country Bank affected businesses on Hwy 15 on the East Side, second outage was Wednesday that affected a Transformer at the City Center. 2. Projects are going well iii. Randy Blake, Production Manager - 1. All the equipment for Unit's 6 & 7 are here. The next step is to get a contractor. 2. Starting to work on 2019 quotes and budgets. 3. Working hard at both plants with being down one crew chief iv. John Webster, Natural Gas Division Manager- Nothing to report v. Jared Martig, Financial Manager- Nothing to report c. Human Resources - Brenda Ewing — absent d. Legal — Marc Sebora — Nothing to report e. General Manager — Jeremy Carter i. Sent out the Wholesale Generation Model for the Commissioners to review, which includes an income statement and a cash flow statement that Staff updates every year. This model is also updated to keep the Commissioners up to date on what types of business models are out there and how each model could potentially affect HUC's financial position. These models should show the Commissioners that as the marketlindustry changes whether or not HUC should stay in the generation model or if the model should change. If any of the Commissioners have any questions please feel free to stop in or call. It is important for the Commissioners to understand the Wholesale Generation Model. ii. Need to discuss this Fall the Performance Pay System with the Commissioners. The Compensation Study was done back in 2016; the structure was put in place as by grades but it was not finished down the path of putting in a Performance Based System. Would like to have a conversation with each of the Commissioners to make sure the understanding of the historical background is there. iii. Will be reviewing insurance coverages with Gallagher next Wednesday to make sure HUC has all proper coverages in place. Staff members will be present. iv. Will also be meeting with Rich Westlund on Health insurance renewals for 2019. HUC currently has over 50 employees, so anticipating that HUC will be moving back into a large group plan verses a small group plan. This is important for the Commission to know since large group plan premiums are based off health care utilization and community based claims significantly more compared to being in the small group plan, which HUC is currently in. Small group plans are not based on utilization. 2 v. Conversations to start in Oct about the 2019 Budget and CIP documents. Need to look at HUC's 5 year CIP. vi. Final COS documents were sent out to the Board. vii. Analysis on Transmission Rates for Natural Gas side - will be reviewing this with John. Looking at if HUC is charging a fair rate in town. viii. Had a due diligence call with John along with the Bond Council, attorneys, BP and PEAK for the Natural Gas Prepay contract. HUC is one of the larger participants, which is why Staff was on the call. The biggest piece of the conversation was to make sure HUC would be using the gas for the retail customers so that tax-exempt bonds can be issued. At this time, Commissioner Hanson thanked Jeremy, Jared and Randy for creating the Electric Production Profit and Loss statement. This is something the Commission has not had in the past and it is appreciated. 8. Policies a. Review Policies i. Cold Weather Rule ii. Terminating Electric/Natural Gas Service by Customer iii. Definition of Your Bill iv. Hours & Conditions of Employment v. Flextime Program — Exempt Only vi. Rest Periods vii. Meal Periods viii. Attendance/Tardiness ix. Use of Facilities during off -duty Hours- Non Exempt Only x. Inclement Weather No changes recommended at this time. b. Approve Changes No changes were made to the policies under review. 9. Unfinished Business 10. New Business a. Approve United Natural Gas Capacity Contract Mr. Webster reviewed the First Amendment to United Natural Gas/Lafayette Natural Gas Firm Transportation Capacity Agreement. United Natural Gas (UNG) would like to increase its firm natural gas transportation capacity on the HUC natural gas pipeline. UNG is selling more gas than what they have permission to transport. One of HUC's meters was damaged and UNG did pay for the repair. Through multiple conversations, Mr. Webster agreed to allow UNG to increase the capacity for October and November from 900DTH/Day to 1200DTH/Day along with increasing capacity for December through March to 1000DTH/Day. Along with increasing capacity, Mr. Webster would also like to allow UNG to exceed those levels when the grain dryers are running. During the months of October and November UNG is allowed to flow a maximum of 3 200 MCFH and/or 4,000 MCFD. Some accommodations were made to allow UNG to tier their contract levels agreeing that if they exceed the 1,200 DTH/day contracted level transport fees will be levied accordingly. Also need to point out on the first page of agreement it will read that this was 'entered into this 29th day of August, 2018, to be effective as of the 1 st day of September, 2018'. Bottom line is that HUC would see a minimum of $6900K more a year depending on crop conditions. Commissioner Hanson inquired if this would affect the pipeline or other projects. Mr. Webster explained it would not. After discussion, a motion by Commissioner Hanson, second by Commissioner Cheney to approve United Natural Gas Capacity Contract. Motion carried unanimously. b. Approve Energy Conservation Rebate for Hutchinson Public School Mr. Martig presented the Energy Conservation Rebate for Hutchinson Public School. The new lights will save 189,163 kWh. The rebate amount is $31,860.00. Motion by Commissioner Hanson, second by Commissioner Martinez to approve Energy Conservation Rebate for Hutchinson Public School. Motion carried unanimously. c. Approve Requisition #007671- Blade Replacement Mr. Blake presented Requisition #007671-Blade Replacement. HUC's Unit 1 has a General Electric (GE) gas turbine that needs to have the stages 3-5HPC turbine blades replaced. These blades need to be replaced periodically since they take the most stress due to the airflow to the machine. HUC is looking to complete the work this Fall. GM Carter added that this was a capital item for the year that was budgeted. The estimated amount was $150K and Mr. Blake was able to get this significantly lower. After discussion, a motion by Commissioner Martinez, second by Commissioner Cheney to approve Requisition #007671- Blade Replacement. Motion carried unanimously. d. Approve Exception Agreement between HUC and MCPA Mr. Hunstad reviewed Exception Agreement between HUC and MCPA. This is in regards to L&P Supply located on South Grade Road that was annexed into the City in 2002 and became part of HUC's service territory. There was an agreement between HUC, MCPA and the property owner that would allow MCPA to continue to serve the property due to the design of the electric heating system in the building although there was not any documentation. Verizon now has an agreement to install a cell tower on the property and since it is located 4 within the City, there is question on who should serve the tower. Through conversations, all parties involved agree that the current property and cell tower would be served by MCPA. After discussion, a motion by Commissioner Hanson, second by Commissioner Cheney to approve Exception Agreement between HUC and MCPA. Motion carried unanimously. e. Approve HDR Change Order Request GM Carter presented the HDR Change Order Request. This is the second change order request for the Board to consider. The original contract language did state that $382K is HDR's best -estimated guess with all the different components that the project contains. As time has gone on and with CAT having to have to do redesign work on the front end and reengineering on the auxiliary equipment this has taken longer than anticipated. There has been a lot of communication and time spent back and forth so HDR had to request the first change order request of $262K to get the project through the June timeframe. When Staff received the June invoice, it had exceeded the contract - approved amount. GM Carter notified HDR of the invoice exceeding the contract amount and had HDR submit a second change order request. The change order request is for $182K. There was acknowledgment from HDR with the litigation process and this change order did not include any additional time HDR had to spend on the rebidding process. GM Carter noted that HDR was asked if this would be the final change order. HDR cannot assure this will be the last change order but it should be close and hopefully another change order is not needed. Staff and HDR are asking to have the Commission approve the change order. HUC is anticipating this change order should complete the project. Commissioner Hanson addressed his concern with the mismanagement of the bid. Commissioner Martinez agreed with Commissioner Hanson and questioned how they could spend double the amount of time on the project. Attorney Marc Sebora noted that there have been many conversations with GM Carter, and that all the same concerns have been brought forward. In the contract, it is written that HDR could give a 7-day notice and walk away. HUC needs to have the project completed in a timely fashion right now so there really is not a different solution. Commissioner Martinez asked what can be learned from this situation and is there a safe guard that can be put in place. Discussions were held about what has been done in the past with other projects and different ideas can be considered for what can be done in the future. President Morrow noted that change orders are not that uncommon. It does lay everything in perspective with this size of a project. There were many bumps along the way but Staff has done a great job. Commissioner Hanson inquired how much contingency is left GM Carter noted that there is about $280K left in budgeted contingency dollars, plus $300K left in bond proceeds. 5 After much discussion, a motion by Commissioner Hanson, second by Commissioner Cheney to approve HDR Change Order Request. Motion carried unanimously. f. Declare an Open Meeting for HUC's Annual Open House Being Held on Tuesday, October 9 from 4:OOp.m. to 7:OOp.m. Motion by Commissioner Martinez, second by Commissioner Hanson to approve Declaring an Open Meeting for HUC's Annual Open House Being Held on Tuesday, October 9 from 4:OOp.m. to 7:OOp.m. Motion carried unanimously. g. Corval Settlement Agreement GM Carter noted this is the final step in finishing the process. Attorney Marc Sebora reviewed the recent disagreement with Corval Constructors with the project. Both parties have agreed to settle their differences and give Corval $30K, which is the cost of the preparation of the bid. Both parties will waive any claims there may be against each other and start over with the rebid. Commissioner Hanson inquired if this amount is in accordance with the statutes of what is allowable and it is not considered a buyout. Attorney Marc Sebora noted that this amount is allowable and all invoices have been reviewed to make sure all were legitimate costs and that this is not a buyout. Motion by Commissioner Hanson, second by Commissioner Martinez to approve Corval Settlement Agreement. Motion carried unanimously. 11. Adjourn There being no further business, a motion by Commissioner Martinez, second by Commissioner Cheney to adjourn the meeting at 3:55p.m. Motion carried unanimously. Robert Wen orff, Sec ATTEST: 6w'�' —�. � \J