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07-25-2018 HUCCPHUTCHINSON UTILITIES COMMISSION AGENDA REGULAR MEETING July 25, 2018 3:00 p.m. 1. CONFLICT OF INTEREST 2. SWEARING IN OF NEW COMMISSIONER - MATT CHENEY 3. APPROVE CONSENT AGENDA a. Approve Minutes b. Ratify Payment of Bills 4. APPROVE 2017 FINANCIAL AUDIT- PRESENTATION BY PAUL HARVEGO 5. APPROVE FINANCIAL STATEMENTS 6. OPEN FORUM 7. COMMUNICATION a. City Administrator b. Divisions C. Legal d. General Manager 8. POLICIES a. Review Policies i. Offensive behavior/sexual harassment ii. Retirement iii. Resignation iv. Solicitation on Utility Premises v. Employee Gifts vi. Flowers vii. Petty Cash b. Approve Changes i. Purchasing Policy ii. Deposit Requirement- Residential iii. Deposit Requirement-Commercial/Industrial 9. UNFINISHED BUSINESS 10. NEW BUSINESS a. Approval of Parallel Generation Contract b. Approval of Fagen Final Contract 11. ADJOURN MINUTES Special Meeting — Hutchinson Utilities Commission Wednesday, June 27, 2018 Call to order — 3:45 p.m. Mayor Gary Forcier called the meeting to order. Members present: President Monty Morrow; Vice President Anthony Hanson; Secretary Robert Wendorff; Commissioner Mark Girard; Commissioner Don Martinez; General Manger Jeremy Carter; Attorney Marc Sebora Others present: Steve Cook, Mary Christensen, Chad Czmowski, Matt Jaunich, City Administrator, Jared Martig, and Angie Radke. The purpose of the special meeting is to have further discussions on the Cost of Service (COS) Study. Matt Jaunich, City Administrator, reviewed the purpose of meeting and handed it over to Jeremy Carter, General Manager. Jeremy Carter, General Manger, presented before the Council. Mr. Carter reviewed the COS Study and the Commissioners goals to be achieved. This process started a year ago, looking at HUC's basic classifications and costs to run the utilities. HUC brought in Dan Kashbohm from Utility Financial Solutions to take an unbiased look at the utilities cost structure and revenue requirements. There are five objectives of the COS study 1) Validate if HUC is in good financial position over the next five years. 2) What are HUC's revenue requirements for 2018; is HUC generating a proper Rate of Return (ROR). 3) Identify cross -subsidies that may exist between rate classes; is each class picking up their fair share 4) Received recommendations on rate adjustments needed to meet targeted revenue requirements and 5) Identify the appropriate monthly customer charge for each customer class; what is the cost break down from minimum system requirement, meter staff and customer service to maintain the line. GM Carter spoke about the Cost and Rate Components. There are Distribution Costs and Power Supply Costs. Within Distribution Costs are Minimum System Requirements and Demand Costs. Within Power Supply Costs, there are Transmission and Commodities. HUC is stable and does not need to raise rates; however, a restructure is recommended to properly align the rate components with the cost components. The goals of HUC are to 1) Keep HUC Revenue Neutral 2) Better align the rate components with cost components; by creating better revenue stability and ensuring each customer is paying their fair share of a minimum system. 3) Start balancing out customer class subsidies; this can be accomplished by the recommended glide paths. Commission decided to a 6-year glide path for the Electric Division and a 9-year glide path for the Natural Gas Division and 4) Continue to monitor HUC's rates and rate structures more frequently; this will be accomplished by continuing rate structure changes every few years. Council members raised questions about the effect of the citizen's bills. GM Carter noted the fixed charge is increasing but the subsequent energy charge is decreasing to balance out a customer's bill. In addition, some of the citizen analysis did not include the demand charge, which is a component of the monthly fixed charge for the larger customers. Council Member Cook mentioned debt coverage. GM Carter stated that HUC wants to be conservative, but is not worried about debt coverage in the next couple of years on the Gas Division side because of a potential project that may or may not happen. From the Rate of Return industry standpoint, for Natural Gas and Electric we want to achieve 5-7%; we are above that rate of return on the Natural Gas side but not Electric side. When the organization is looked at as a whole, the Rate of Return is met. HUC does not foresee replacing a couple of major assets in town, units 1 & 9 account for a large portion of depreciation that may not be applicable for the community of Hutchinson in the long-term future. HUC is able to maximize assets and generate revenue. HUC has many different revenues coming in. Discussions were held about industry changes and renewables. GM Carter noted that with technology advancing it is becoming better every day. Council members raised questions about the fixed charges. Is there a goal, if the fixed charge goes up and becomes the predominate cost will this hurt fixed income customers. GM Carter noted a goal for the COS would be to grow to a rate of $14.00, or even if the COS would move into the 20-25% range. Around the area, Staff is seeing a range of 40- 50%. Commissioners and Staff talked about low-income residents wanting renewables, this should not discourage renewables. The Commissioners and Staff understand the concerns; however, the majority of a customer's bill will still be related to energy usage. Increasing rates is not the goal out of the COS Study; HUC wants to move towards creating more equitability between classes and balancing the revenue components with the cost components. Commissioner Mark Girard left the meeting at 4:33pm. Council Member Cook pointed out that there has not been a rate increase since 2006. John Webster attended the meeting at 4:35pm. Mayor Gary Forcier inquired if HUC tracks power outages. GM Carter stated that Staff tracks the number of outages along with the duration of the outage. HUC received national recognition for achieving exceptional electric reliability in 2017 from the American Public Power Association (APPA). APPA is a trade group that represents more than 2,000 not -for profit, community -owned electric utilities. GM Carter asked for additional thoughts or concerns. City Administrator Matt Jaunich looked to the Mayor and Council and added per our city charter the only act to be taken is to veto if chosen, the council does not have to take acceptance. Council Member Cook would like to officially take action and show the support for the Commission. Motion by Czmowski, second by Christensen, to adjourn at 4.43 p.m. Motion carried unanimously. ATTEST: Monty Morrow, President Robert Wendorff, Secretary MINUTES Regular Meeting — Hutchinson Utilities Commission Wednesday, June 27, 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; Secretary Robert Wendorff; Commissioner Mark Girard; Commissioner Don Martinez; General Manager Jeremy Carter; Attorney Marc Sebora Conflict of Interest 2. Approve Consent Agenda a. Approve Minutes b. Ratify Payment of Bills Motion by Commissioner Wendorff, second by Commissioner Girard to approve the Consent Agenda. Motion carried unanimously. 3. Approve Financial Statements Jared Martig presented the financial statements. Customer revenue is down due to switching software in April of last year; May of 2017 had five extra billing days. Mr. Martig also noted that cash is down $2.2M and will be going down every month due to paying the generator bills. GM Carter noted HUC had no power cost adjustment (PCA) for May 2018. Total PCA's for 2018 brought in an extra $466,036 YTD. Investment report dropped $7M due to not reinvesting the bond proceeds but having it come into HUC's bank account to make payments on the generator project. Otherwise trending well through May on both Natural Gas and Electric Divisions. Motion by Commissioner Hanson, second by Commissioner Martinez to approve the financial statements. Motion carried unanimously. 4. Open Forum 5. Communication a. City Administrator— Matthew Jaunich i. 2nd Ave Bridge project is looking to finish the end of August. ii. Century project will be starting in July. i. Dan Lang, Engineering Services Manager —Absent ii. Dave Hunstad, Electric Transmission/Distribution Manager — 1. For the monthly outage report there was nothing to report for May 2. Working on Projects in-between rain. 3. Working with Uponor on their project iii. Randy Blake, Production Manager - 1. Generators arrived at Duluth ports last night at 6pm. Unloading as of 8am today. 2. Installation bid opening is Monday July 2nd at 2pm iv. John Webster, Natural Gas Division Manager- Absent v. Jared Martig, Financial Manager- 1. Audit is complete. Looking to have a special meeting in July. 2. Working with BS&A on inventory testing. c. Human Resources - Brenda Ewing — Nothing to Report d. Legal — Marc Sebora — Nothing to report e. General Manager — Jeremy Carter i. APPA conference went well. Topics of discussion were cyber security, customer service, merging technology that is coming out and grid reliability; learning to prioritize in case of natural disaster. ii. Reviewing COS executive reports. Sent back remarks and should hear back in couple of weeks. iii. Continuing to go back and forth with Heartland Corn on Reservation Agreement. iv. Will be looking to schedule a Special meeting in July forAwarding bid on units 6 & 7 Installation bid and Advertising for Bid for Units 6 & 7 Electrical Installation. 6. Policies a. Review Policies i. Establishing a New Electric/Natural Gas Account ii. Complaint/Grievance Procedure iii. Employee Conduct iv. Discipline v. Conflict of Interest vi. Intellectual Property (Exempt only) vii. Other Employment No changes recommended at this time. b. Approve Changes i. Delegation of Authority Policy- as noted, cleaning up language ii. Hutchinson Utilities Commission- as noted, adjusted our website from last outage by revamping the call tree. Motion by Commissioner Girard, second by Commissioner Martinez to approve the policy changes as recommended. Motion carried unanimously. 7. Unfinished Business 8. New Business a. Declare Surplus Vehicles 2 GM Carter discussed disposing of vehicles as part of HUC's Fleet Management program. Staff is asking Commission for authorization to dispose of surplus vehicles so that when the new vehicles approved for purchase earlier in the year arrive the old vehicles can be sent to auction. Approximate value for auction is $48,000. A motion by Commissioner Hanson, second by Commissioner Girard to approve Declare Surplus Vehicles. Motion carried unanimously. b. Approval of Buyers Authorizing Resolution for the Short -Term Natural Gas Prepay Deal GM Carter presented the Approval of Buyers Authorizing Resolution for Short - Term Natural Gas Prepay Deal. The contract attached in the packet is for reference purposes at this point in relation to approval of the resolution. Approving the resolution does not tie HUC into any sort of agreement at this point. Passing the resolution just keeps HUC moving forward in the process of coming to mutual terms on an actual contract. The actual contract might come in September. After discussion, a motion by Commissioner Hanson, second by Commissioner Girard to approve Buyers Authorizing Resolution for the Short -Term Natural Gas Prepay Deal. Motion carried unanimously. c. Approval of Requisition #7618 to Provide for Purchase of Natural Gas Diaphragm Meters GM Carter presented the Approval of Requisition #7618 to Provide for Purchase of Natural Gas Diaphragm Meters. Natural Gas Division is in need for additional residential diaphragm meters to replace the 1960's meters being removed as well as for new construction for a cost of $57K. The budgeted amount was $90K. These purchases are part of the meter replacement program in the Natural Gas Division. A motion by Commissioner Girard, second by Commissioner Martinez to approve Requisition #7618 to Provide for Purchase of Natural Gas Diaphragm Meters. Motion carried unanimously. At this time the Commissioners, Mr. Sebora and Staff congratulated Commissioner Mark Girard on his 5 years of service on the Commission Board. 9. Adjourn There being no further business, a motion by Commissioner Girard, second by Commissioner Hanson to adjourn the meeting at 3:25p.m. Motion carried unanimously. 3 Robert Wendorff, Secretary ATTEST: Monty Morrow, President 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee Fund: 1 ELECTRIC 06/26/2018 GEN 222(E) MISO CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description 06/27/2018 GEN 226(E)* MINNESOTA REVENUE 06/27/2018 GEN 227(E)* POINT & PAY 06/27/2018 GEN 228(E)* TASC 07/03/2018 GEN 223(E) MISO 07/06/2018 GEN 66919 AERODERIVATIVE GAS TURBINE 07/06/2018 GEN 66920 ALEX ALMICH 07/06/2018 GEN 66921 AMERICINN 07/06/2018 GEN 66922* AMERIPRISE FINANCIAL 07/06/2018 GEN 66923* AMY METCALF 07/06/2018 GEN 66924 ANDY JUTTING 07/06/2018 GEN 66926 ENO SHEETMETAL 07/06/2018 GEN 66928*dk BORDER STATES ELECTRIC SUPPLY Pag 1/24 Account Dept Amount Deferred Energy Cost - Miso 174-000- 00 35,371.25 Deferred Energy Cost - Miso 174-000- 00 865.42 HECK GEN 222(E) TOTAL 36,236.67 State Sales Tax 242-000- 00 60,000.00 City Sales Tax 242-000- 00 4,300.00 HECK GEN 226(E) TOTAL 64,300.00 Collection - Materials 401-903- 06 60.99 Health Insurance 401-926- 08 702.10 Deferred Energy Cost - Miso 174-000- 00 43,657.14 Deferred Energy Cost - Miso 174-000- 00 895.33 HECK GEN 223(E) TOTAL 44,552.47 Hydraulic supply hose -part 42772222 402-554- 01 729.18 OVERPAYMENTS 142-000- 00 146.50 Cip - Residential 401-916- 07 202.50 DEP REFUND/APPLIED 235-000- 00 338.00 DEP REFUND/APPLIED 235-000- 00 130.00 OVERPAYMENTS 142-000- 00 183.09 Generators 107-344- 00 88.15 Sales Tax Receivable - Replace 186-000- 00 6.06 HECK GEN 66926 TOTAL 94.21 ELL, 1/0, 15KV 1STR-1/OSOL, .70-.91, 154-000- 00 511.20 GREASE, LUBRICATING, SILICONE 154-000- 00 24.10 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee Fund: 1 ELECTRIC CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description 07/06/2018 GEN 66929* BRETT OR NATALIE GERMAN 07/06/2018 GEN 66930* BRIAN LUDOWESE 07/06/2018 GEN 66931* CALEB OR LASSIE LING 07/06/2018 GEN 66932 CARLY'S SHOE STORE 07/06/2018 GEN 66934*dk CINTAS CORPORATION 4470 07/06/2018 GEN 66935*dk CITY OF HUTCHINSON Pag 2/24 Account Dept Amount BULB, TRAFFIC, 130VOLT, 116W 154-000- 00 15.70 SPLIT BOLT 48 KS-15 Cu BURNDY 154-000- 00 13.32 CONDUCTOR, 41/0 15 KV SOL At, TRXLP, 154-000- 00 13,359.36 BLADE, RECIP SAW, LENX 9114R, 9" 14T 154-000- 00 19.55 INHIBITOR, OXIDE, DE-OX, 8 OR, ILSCO 154-000- 00 34.14 BLADE, RECIP SAW, LENX 614R, 6" 14T 154-000- 00 10.45 PEDESTAL, SECONDARY, NORDIC PRMC-150-MG 154-000- 00 493.24 GROUND ROD, 5/8" X 8, STEEL, BLACKBURN 154-000- 00 70.10 TAPE, SUPER 33+ PROFESSIONAL GRADE 154-000- 00 84.40 ASSEMBLY, BALLAST, COMPLETE LUNIMARE 154-000- 00 3,779.74 CONDUCTOR, 14 TW BLACK SOL 154-000- 00 35.50 Sales Tax Receivable - New 186-000- 00 36.66 Sales Tax Receivable - New 186-000- 00 924.97 Sales Tax Receivable - New 186-000- 00 2.31 Sales Tax Receivable - New 186-000- 00 44.54 Sales Tax Receivable - New 186-000- 00 2.50 VEST, SAFETY, RVZ2410SEX3 401-550- 01 53.45 HECK GEN 66928 TOTAL 19,515.23 DEP REFUND/APPLIED 235-000- 00 211.25 DEP REFUND/APPLIED 235-000- 00 221.00 DEP REFUND/APPLIED 235-000- 00 110.50 Uniforms & Laundry 401-588- 02 148.70 Uniforms & Laundry 401-550- 01 290.99 Uniforms & Laundry 401-550- 01 310.31 UNIFORMS & LAUNDRY 401-588- 02 234.45 Uniforms & Laundry 401-588- 02 292.05 HECK GEN 66934 TOTAL 1,127.80 Generator 41 Water & Sewer 401-547- 01 1,411.11 Generator 41 Water & Sewer 401-547- 01 1,174.68 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 3/24 Amount Fund: 1 ELECTRIC Waste Disposal 401-550- 01 135.60 Waste Disposal 401-550- 01 723.88 Waste Disposal 401-550- 01 464.08 It Admin And Support 401-921- 08 2,351.85 Advertising/Printing 401-921- 08 48.77 Utility Expenses - Water/Waste 401-930- 08 64.77 Utility Expenses - Water/Waste 401-930- 08 382.87 Utility Expenses - Water/Waste 401-930- 08 8.46 CHECK GEN 66935 TOTAL 6,766.07 07/06/2018 GEN 66936 COLONIAL SUPPLEMENTAL INS CO COLONIAL INSURANCE 242-000- 00 113.76 07/06/2018 GEN 66937 CREEKSIDE SOILS Materials 401-588- 02 43.28 Materials 401-588- 02 28.86 Materials 401-588- 02 21.64 Materials 401-588- 02 115.43 HECK GEN 66937 TOTAL 209.21 07/06/2018 GEN 66939* DAVID CHAMBERS DEP REFUND/APPLIED 235-000- 00 39.00 07/06/2018 GEN 66940 DON KIECKER Cip - Residential 401-916- 07 25.00 07/06/2018 GEN 66941* DONNA GEHRKE OR SANDRA HARDER DEP REFUND/APPLIED 235-000- 00 65.00 07/06/2018 GEN 66942 DUSTIN BAUNE OVERPAYMENTS 142-000- 00 243.06 07/06/2018 GEN 66943 DUSTIN BOLLIN OVERPAYMENTS 142-000- 00 25.46 07/06/2018 GEN 66944 DWANE BUCKLIN Cip - Residential 401-916- 07 25.00 07/06/2018 GEN 66946* EFI OR MINDY TEMBON DEP REFUND/APPLIED 235-000- 00 91.00 07/06/2018 GEN 66947* ELIZABETH BLOCK DEP REFUND/APPLIED 235-000- 00 123.50 07/06/2018 GEN 66948 ELIZABETH WINKELMULLER OVERPAYMENTS 142-000- 00 154. 92 07/06/2018 GEN 66950* EMILY FORBERG DEP REFUND/APPLIED 235-000- 00 48.75 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 1 ELECTRIC 07/06/2018 GEN 66951 EUGENE OTTO 07/06/2018 GEN 66952#k FASTENAL COMPANY 07/06/2018 GEN 66953 FERGUSON ENTERPRISES 4525 07/06/2018 GEN 66954* FINK FAMILY CHIROPRACTIC 07/06/2018 GEN 66955* FIRST CHOICE FOOD & BEVERAGE 07/06/2018 GEN 66956 FREMONT INDUSTRIES INC Pag 4/24 Account Dept Amount Cip - Residential 401-916- 07 30.00 Generators 107-344- 00 27.09 Sales Tax Receivable - Replace 186-000- 00 1.86 Maintenance Other - Materials 402-554- 01 16.44 HECK GEN 66952 TOTAL 45.39 1" black sch 40 pipe - part 4DEPTCA53G 107-344- 00 438.10 1" SCH 40 BLACK TEE - part# BIG 107-344- 00 11.43 1" SCH 40 BLACK 90 DEG ELBOW -part # B9G 107-344- 00 36.48 1" sch 40 blk1504 union -part# ELF150UG 107-344- 00 48.68 1" sch 40 blk coupling - part # BCD 107-344- 00 25.33 1 1/2" X 1" reducing coupling -Pt# 107-344- 00 80.83 Sales Tax Receivable - Replace 186-000- 00 44.06 HECK GEN 66953 TOTAL 684.91 DEP REFUND/APPLIED 235-000- 00 136.50 BREAKROOM/RECOGNITION BANQUET 401-926- 08 142.50 FTR-60, Testing reagents 401-550- 01 332.48 FTR-68, Testing reagents 401-550- 01 72.86 FTR-70, Testing reagents 401-550- 01 72.86 FTR-72, Testing reagents 401-550- 01 72.86 FTE-163, Bacteria dip slides 401-550- 01 248.34 FTR-57, Testing reagents 401-550- 01 120.00 FTR-17, Testing reagents 401-550- 01 26.00 FTR-37, Testing reagents 401-550- 01 13.00 FTR-42, Testing reagents 401-550- 01 37.76 FTR-44, Testing reagents 401-550- 01 48.00 FTR-46, Testing reagents 401-550- 01 66.40 FTR-2, Testing reagents 401-550- 01 52.00 FTR-3, Testing reagents 401-550- 01 64.00 FTR-4, Testing reagents 401-550- 01 42.00 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Dept Pag 5/24 Amount Fund: 1 ELECTRIC FTR-12,Testing reagents 401-550- 01 39.00 FTR-80, Testing reagents 401-550- 01 65.00 FTR-11, Testing reagents 401-550- 01 90.60 FTR-28, Testing reagents 401-550- 01 10.68 FTR-29, Testing reagents 401-550- 01 10.52 FTR-50, Testing reagents 401-550- 01 43.32 FWT-18, PH 7 buffer 401-550- 01 78.00 FWT-19, PH 10 buffer 401-550- 01 78.00 FWT-5, 45 Micromho standard 401-550- 01 44.00 FWT-6, 445 Micromho standard 401-550- 01 32.00 FWT-7, 2060 Micromho standard 401-550- 01 36.00 1995-32, Molybdate 3 reagent for silica 401-550- 01 68.00 PLANT 41 CHEMICALS -SALES TAX & SHIPPING 401-550- 01 166.97 HECK GEN 66956 TOTAL 2,030.65 07/06/2018 GEN 66957* GAGE HARWICK DEP REFUND/APPLIED 235-000- 00 97.50 07/06/2018 GEN 66958* GAGE HARWICK DEP REFUND/APPLIED 235-000- 00 65.00 07/06/2018 GEN 66959 GERGARD BAHR Cip - Residential 401-916- 07 25.00 07/06/2018 GEN 66960 GREAT RIVER ENERGY TRANSMISSION EXPENSE 401-565- 03 136,063.67 07/06/2018 GEN 66962* GUARDIAN DENTAL INSURANCE -COBRA 242-000- 00 303.12 DENTAL INSURANCE-80o ELEC 242-000- 00 3,662.12 HECK GEN 66962 TOTAL 3,965.24 07/06/2018 GEN 66963 HER ENGINEERING INC Generators 107-344- 00 495.94 07/06/2018 GEN 66964*#k HILLYARD/HUTCHINSON Supplies 401-550- 01 215.65 Misc Other - Materials 401-935- 08 158.17 HECK GEN 66964 TOTAL 373.82 07/06/2018 GEN 66965* HUTCHFIELD SERVICES INC MISC OTHER - MATERIALS 401-935- 08 1,057.09 07/06/2018 GEN 66966 HUTCHINSON HEALTH Misc Expenses 401-935- 08 265.00 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 1 ELECTRIC 07/06/2018 GEN 66967* INNOVATIVE OFFICE SOLUTIONS 07/06/2018 GEN 66968* JANET FRAUENDIENST 07/06/2018 GEN 66969 JANICE SCHMELING 07/06/2018 GEN 66970* JENNA ANDERSON 07/06/2018 GEN 66971* JERRY OR LUANN RUSCH 07/06/2018 GEN 66972 JOHN ALRICK 07/06/2018 GEN 66973* JORDAN HENDRICKS 07/06/2018 GEN 66974* KDUZ/KARP 07/06/2018 GEN 66975* KELLI DORIVAL 07/06/2018 GEN 66976 KIMBERLY IBBITSON 07/06/2018 GEN 66977 KRISTEN MALONE 07/06/2018 GEN 66978 DRESSY FEILER 07/06/2018 GEN 66979 KYLE FELBER OR MARIE FELBER 07/06/2018 GEN 66980* LANE OR DONNA SCHLECHT 07/06/2018 GEN 66981 LEE OR SANDRA ALLISON 07/06/2018 GEN 66982* LESLIE HAPSCH 07/06/2018 GEN 66983dk LOCATORS & SUPPLIES INC Pag 6/24 Account Dept Amount OFFICE SUPPLIES 401-921- 08 84.44 DEP REFUND/APPLIED 235-000- 00 58.50 Cip - Residential 401-916- 07 25.00 DEP REFUND/APPLIED 235-000- 00 292.50 DEP REFUND/APPLIED 235-000- 00 169.00 Cip - Residential 401-916- 07 25.00 Cip - Residential 401-916- 07 425.00 ADVERTISING/PRINTING 401-921- 08 147.00 DEP REFUND/APPLIED 235-000- 00 84.50 OVERPAYMENTS 142-000- 00 47. 98 Cip - Residential 401-916- 07 50.00 OVERPAYMENTS 142-000- 00 16. 82 OVERPAYMENTS 142-000- 00 584.48 DEP REFUND/APPLIED 235-000- 00 117.00 OVERPAYMENTS 142-000- 00 317. 97 DEP REFUND/APPLIED 235-000- 00 139.75 GLASSES, SAFETY, CLEAR ANTI -FOG, 19GB79 401-550- 01 89.60 GLASSES, SAFETY, CLEAR ANTI -FOG, 19GB79 401-550- 01 6.15 RAIN JACKET, 1503JFY, SIZE 3X-LARGE 401-588- 02 134.97 07/18/2018 11:52 AM CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES User: JMartig CHECK DATE FROM 06/21/2018 - 07/17/2018 DE: Hutchinson Utili Check Date Bank Check # Payee Description Account Dept Fund: 1 ELECTRIC HECK GEN 66983 TOTAL 07/06/2018 GEN 66984* LOGAN OR CHARITY WOOD DEP REFUND/APPLIED 235-000- 00 07/06/2018 GEN 66985 MARY KONERZA Cip - Residential 401-916- 07 07/06/2018 GEN 66986 MCLEOD COUNTY CHIROPRACTIC CTR HEALTH INSURANCE 401-926- 08 07/06/2018 GEN 66987* MEDICA HEALTH INSURANCE 85% ELEC 242-000- 00 07/06/2018 GEN 66988 MEGAN BLAZINSKI OVERPAYMENTS 142-000- 00 07/06/2018 GEN 66989* MICHAEL SWARMER DEP REFUND/APPLIED 235-000- 00 07/06/2018 GEN 66990* MICHAEL SWARMER DEP REFUND/APPLIED 235-000- 00 07/06/2018 GEN 66991 MICHEEE MEIS OVERPAYMENTS 142-000- 00 07/06/2018 GEN 66992* MN MUNICIPAL UTILITIES ASSOCIATION MISC SERVICES-QTR SAFETY/MGMT 750 401-923- 08 DUES/MEMBERSHIP EXPENSE-QTR ELEC DUES 401-930- 08 HECK GEN 66992 TOTAL 07/06/2018 GEN 66993* MN NCPERS LIFE INSURANCE-PERA LIFE 242-000- 00 07/06/2018 GEN 66995* NICOLE BEITO DEP REFUND/APPLIED 235-000- 00 07/06/2018 GEN 66997* NUVERA TELEPHONE 401-921- 08 07/06/2018 GEN 66998 OLSON APARTMENTS OVERPAYMENTS 142-000- 00 07/06/2018 GEN 66999* ORION LOKENSGARD Cip - Residential 401-916- 07 07/06/2018 GEN 67000* OSCAR AGUINIGA CABRERA DEP REFUND/APPLIED 235-000- 00 Pag 7/24 Amount 230.72 32.50 30.00 56.00 49,776.03 37.21 143.00 52.00 225.28 4,715.63 48.00 48.75 1,876.25 18.91 400.00 91.00 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 8/24 Amount Fund: 1 ELECTRIC 07/06/2018 GEN 670011dk PROCHASKA LLC OIL, AIR COMPRESSOR, CHEVRON REGAL R & 154-000- 00 1,082.21 OIL, AIR COMPRESSOR, CHEVRON REGAL R & 154-000- 00 0.14 HECK GEN 67001 TOTAL 1,082.35 07/06/2018 GEN 67002#k QUADE ELECTRIC Structures & Improvements (Bui 107-341- 00 140.35 Sales Tax Receivable - Replace 186-000- 00 9.64 Maintenance Other - Materials 402-554- 01 154.15 HECK GEN 67002 TOTAL 304.14 07/06/2018 GEN 67003* RACHEL FRATZKE DEP REFUND/APPLIED 235-000- 00 65.00 07/06/2018 GEN 67004* RACHEL FRATZKE Cip - Residential 401-916- 07 400.00 07/06/2018 GEN 67005 KID EQUIPMENT Vehicles - Material 402-598- 02 584.37 Power Equipment - Materials 402-598- 02 20.18 HECK GEN 67005 TOTAL 604.55 07/06/2018 GEN 67007 REINER CONTRACTING, INC Generators 107-344- 00 77,752.39 07/06/2018 GEN 67008* RELIANCE STANDARD LIFE -LIFE LTD INSURANCE-80o ELEC 242-000- 00 1,224.70 LIFE INSURANCE-80o ELEC 242-000- 00 741.94 HECK GEN 67008 TOTAL 1,966.64 07/06/2018 GEN 67009* RIANA OR KYLE KLAUSTERMEIER DEP REFUND/APPLIED 235-000- 00 305.50 07/06/2018 GEN 67010 RONALD BEST Cip - Residential 401-916- 07 30.00 07/06/2018 GEN 67011* RONALD OTTO DEP REFUND/APPLIED 235-000- 00 97.50 07/06/2018 GEN 67012*#k RUNNING'S SUPPLY INC Generators 107-344- 00 211.78 Sales Tax Receivable - Replace 186-000- 00 15.62 HECK GEN 67012 TOTAL 227.40 07/18/2018 11:52 AM CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES Pag 9/24 User: JMartig CHECK DATE FROM 06/21/2018 - 07/17/2018 DE: Hutchinson Utili Check Date Bank Check # Payee Description Account Dept Amount Fund: 1 ELECTRIC 07/06/2018 GEN 67013* RUSTEN OR CHERYL HULS DEP REFUND/APPLIED 235-000- 00 130.00 07/06/2018 GEN 67014* SHANE BERKNESS DEP REFUND/APPLIED 235-000- 00 65.00 07/06/2018 GEN 67015 SHANE KARTALA OVERPAYMENTS 142-000- 00 51.73 07/06/2018 GEN 67016 SHANE KARTALA OVERPAYMENTS 142-000- 00 56.25 07/06/2018 GEN 67017* SHANNON SHOEN DEP REFUND/APPLIED 235-000- 00 78.00 07/06/2018 GEN 67019* SHRED RIGHT OFFICE SUPPLIES -SHREDDING SERVICES 401-921- 08 12.48 07/06/2018 GEN 67020 STEVEN LAROSE OR MARY LAROSE OVERPAYMENTS 142-000- 00 122.29 07/06/2018 GEN 67021* TIM COOK OR KRISTINA OLSON DEP REFUND/APPLIED 235-000- 00 146.25 07/06/2018 GEN 67022*kk TOYOTA LIFT OF MINNESOTA OUTSIDE SERVICES 402-554- 01 11.67 POWER EQUIPMENT - LABOR 402-598- 02 11.67 HECK GEN 67022 TOTAL 23.34 07/06/2018 GEN 67023* TRAVIS OR MINDY KINSELL DEP REFUND/APPLIED 235-000- 00 136.50 07/06/2018 GEN 67024 TROY OLSON Cip - Residential 401-916- 07 25.00 07/06/2018 GEN 67025* UIS/SOURCECORP COLLECTION - MATERIALS 401-903- 06 414.16 COLLECTION - MATERIALS 401-903- 06 1,485.00 HECK GEN 67025 TOTAL 1,899.16 07/06/2018 GEN 67026* UNITED PARCEL SERVICE MAIL SERVICES - UPS, FEDEX 401-921- 08 81.00 07/06/2018 GEN 67027 UPONOR Cip- Commercial 401-916- 07 8,147.79 07/06/2018 GEN 67028* VAN IWAARDEN ASSOCIATES Misc Services 401-923- 08 880.00 07/06/2018 GEN 67029* VERIZON WIRELESS TELEPHONE 401-921- 08 1,283. 92 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 1 ELECTRIC 07/06/2018 GEN 67030* ZEE SERVICE COMPANY 07/10/2018 GEN 224(E) MISO 07/13/2018 GEN 229(E)*#k VISA 07/13/2018 GEN 67033*dk ACE HARDWARE Account Dept Pag 10/24 Amount MISC OTHER - MATERIALS -MEDICAL SUPPLIES 401-935- 08 93.37 Deferred Energy Cost - Miso 174-000- 00 60,606.57 Deferred Energy Cost - Miso 174-000- 00 895.43 HECK GEN 224(E) TOTAL 61,502.00 GENERATORS -PLANT 1 CABLES 107-344- 00 52.14 GENERATORS -REFUND FLIGHT 107-344- 00 (90.00) GENERATORS-CASHWISE ROLLS PREBD MTG 107-344- 00 26. 97 Sales Tax Receivable - Replace 186-000- 00 1.66 Sales Tax Receivable - Replace 186-000- 00 11.94 SUPPLIES -PLANT 1 LIGHT BULBS 401-550- 01 25.75 SUPPLIES-TAPE/STAR TRIB/GREASE 401-550- 01 224.84 MAINT POWER PROD PLANT - BUILD -TILE 402-554- 01 67.51 GENERATOR 45 MATERIAL -CABLES 402-554- 01 47.22 GENERATOR 48 MATERIAL -SENSOR PLT1 COOL 402-554- 01 449. 00 Accessory Plant - Materials 402-554- 01 161.85 MEETINGS & TRAVEL - MMUA 401-580- 02 335.00 MATERIALS -TOOL TOTE 401-588- 02 211.28 Office Supplies 401-921- 08 242.89 TRAINING - EXPENSE -NEW ORLEANS 401-930- 08 95.16 HECK GEN 229(E) TOTAL 1,863.21 Generators 107-344- 00 110.12 Sales Tax Receivable - Replace 186-000- 00 7.56 Supplies 401-550- 01 26.26 Accessory Plant - Materials 402-554- 01 6.95 Maintenance Other - Materials 402-554- 01 5.25 Line - Materials 401-581- 02 29.88 Materials 401-588- 02 19.18 Power Equipment - Materials 402-598- 02 7.60 Misc Other - Materials 401-935- 08 5.67 HECK GEN 67033 TOTAL 218.47 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 1 ELECTRIC 07/13/2018 GEN 67034 ALESHIA WENDORFF 07/13/2018 GEN 670351 dk BORDER STATES ELECTRIC SUPPLY 07/13/2018 GEN 67036 BRAUN INTERTEC CORPORATION 07/13/2018 GEN 67038 BRUCE ROBERT ANDERSON 07/13/2018 GEN 67039* CARD SERVICES 07/13/2018 GEN 67040* CARTER, JEREMY J 07/13/2018 GEN 67042 CINDY BROWN 07/13/2018 GEN 67043*dk CINTAS CORPORATION 4470 07/13/2018 GEN 67044*dk CITY OF HUTCHINSON Account Dept Pag 11/24 Amount OVERPAYMENTS 142-000- 00 55.14 CONDUCTOR, 41/0 15 KV SOL At, TRXLP, 154-000- 00 6,670.27 BULB, TRAFFIC, 130VOLT, 116W 154-000- 00 15.71 TAPE, DUCT, 2 X 60 YD, 3M, 43939 154-000- 00 20.67 TAPE, RED, 3/4" x 66, 3M SCOTCH 35 154-000- 00 42.75 TAPE, ORANGE, 3/4" x 66, 3M SCOTCH 35 154-000- 00 8.57 TAPE, YELLOW, 3/4" x 66, 3M SCOTCH 35 154-000- 00 8.57 SHOVEL, SQUARE POINT, CLOSED BACK, 154-000- 00 178.52 CONDUCTOR, 500 MCM 15KV AL 154-000- 00 21,892.42 Sales Tax Receivable - New 186-000- 00 461.49 Sales Tax Receivable - New 186-000- 00 1,504.97 BATTERY, SIZE D 401-581- 02 59.26 BATTERY, SIZE AA 401-581- 02 38.45 HECK GEN 67035 TOTAL 30,901.65 SPECIAL INSPECTION AND TESTING 107-344- 00 2,335.50 OVERPAYMENTS 142-000- 00 40.70 BREAKROOM/RECOGNITION BANQUET 401-926- 08 198.05 Training - Expense 401-930- 08 79.91 OVERPAYMENTS 142-000- 00 87.78 Uniforms & Laundry 401-550- 01 400.46 Uniforms & Laundry 401-550- 01 340.84 UNIFORMS & LAUNDRY 401-588- 02 234.45 UNIFORMS & LAUNDRY 401-588- 02 234.47 HECK GEN 67043 TOTAL 1,210.22 Vehicle/Equipment Fuel 401-550- 01 235.06 Vehicles/Equipment Fuel 401-588- 02 1,778.98 IT ADMIN AND SUPPORT 75/25 401-921- 08 17,972.25 LEGAL SERVICES 75/25 401-923- 08 7,875.00 07/18/2018 11:52 AM CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES User: JMartig CHECK DATE FROM 06/21/2018 - 07/17/2018 DE: Hutchinson Utili Check Date Bank Check # Payee Description Account Dept Fund: 1 ELECTRIC HUMAN RESOURCES SERVICES 75/25 401-923- 08 Vehicles/Equipment Fuel 401-935- 08 HECK GEN 67044 TOTAL 07/13/2018 GEN 67045 CREEKSIDE SOILS Materials 401-588- 02 Materials 401-588- 02 Materials 401-588- 02 HECK GEN 67045 TOTAL 07/13/2018 GEN 67046 DONOVAN HOLTBERG Cip - Residential 401-916- 07 07/13/2018 GEN 67048* FIRST CHOICE FOOD & BEVERAGE BREAKROOM/RECOGNITION BANQUET 401-926- 08 07/13/2018 GEN 67049 FORBES AUTO STORE Vehicles - Material 402-554- 01 07/13/2018 GEN 67050 FRANCISCO OR CHRISTINA GUERRA OVERPAYMENTS 142-000- 00 07/13/2018 GEN 67051*dk GOPHER STATE ONE -CALL INC LINE - MATERIALS 401-581- 02 07/13/2018 GEN 67053* HAROLD ELDER Cip - Residential 401-916- 07 07/13/2018 GEN 67054 HER ENGINEERING INC GENERATORS -PRELIM & OPERATIONS 107-344- 00 GENERATORS -ENGINE PROCUREMENT 107-344- 00 GENERATORS-BAL OF PLT DOGS & CONTRCT 107-344- 00 GENERATORS -BOP CONSTRUCTION 107-344- 00 GENERATORS -ENGINE INSTALLATION 107-344- 00 GENERATORS -COOLING WATER SYSTEM 107-344- 00 HECK GEN 67054 TOTAL 07/13/2018 GEN 67055 HILLYARD/HUTCHINSON Supplies 401-550- 01 07/13/2018 GEN 67056 HINTZMAN ENVIRONMENTAL SERVICES Generator 41 Outside Services 402-554- 01 07/13/2018 GEN 67057 HUG ENGINEERING INC USA TRANSMITTER, DIFFERENTIAL, 0-100 MBAR 154-000- 00 FILTER ELEMENT, 2U 154-000- 00 SENSOR, TEMPERATURE, WITH CABLE, 3 154-000- 00 Pag 12/24 Amount 6,201.57 101.20 34,164.06 154.52 64.81 50.50 269.83 25.00 97.50 544.59 19.58 162.00 425.00 3,731.63 45,316.49 139,114.28 3,813.69 30,558.54 156.51 1,425.00 1,101.67 475.80 793.72 07/18/2018 11:52 AM CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES User: JMartig CHECK DATE FROM 06/21/2018 - 07/17/2018 DE: Hutchinson Utili Check Date Bank Check # Payee Description Account Dept Fund: 1 ELECTRIC HECK GEN 67057 TOTAL 07/13/2018 GEN 670601dk HUTCHINSON LEADER GENERATORS -ADS FOR BIDS 107-344- 00 Cip - Marketing 401-916- 07 HECK GEN 67060 TOTAL 07/13/2018 GEN 67061*#k HUTCHINSON WHOLESALE SUPPLY CO Power Equipment - Materials 402-598- 02 07/13/2018 GEN 67062* JEREMY ANFINSON Cip - Residential 401-916- 07 07/13/2018 GEN 67063*dk KDUZ/KARP ADVERTISING/PRINTING 401-921- 08 07/13/2018 GEN 67064 KYLE JORGENSEN Cip - Residential 401-916- 07 07/13/2018 GEN 67065*dk LOCATORS & SUPPLIES INC SAFETY VEST, MLK-FM389Z-2X 401-550- 01 SAFETY VEST, MLK-FM389Z-2X 401-550- 01 SAFETY VEST, MLK-FM389Z-3X 401-550- 01 SAFETY VEST, MLK-FM389Z-3X 401-550- 01 Rain Jacket, 1503JFY-3XL 401-550- 01 Rain Jacket, 1503JFY-3XL 401-550- 01 SAFETY GLASSES, GRAY, SILVER MIRROR, 401-550- 01 Rain Jacket, 1503JFY-2XL 401-588- 02 Rain Jacket, 1503JFY-2XL 401-588- 02 SAFETY VEST, MLK-FM389Z-L 401-588- 02 SAFETY VEST, MLK-FM389Z-L 401-588- 02 SAFETY GLASSES, GRAY, SILVER MIRROR, 401-588- 02 HECK GEN 67065 TOTAL 07/13/2018 GEN 67066* MAILFINANCE LEASE/SERVICE AGREEMENTS 401-921- 08 LEASE/SERVICE AGREEMENTS 401-921- 08 HECK GEN 67066 TOTAL 07/13/2018 GEN 67067* MARCO TECHNOLOGIES, LLC OFFICE SUPPLIES 401-921- 08 Pag 13/24 Amount 2,371.19 196.27 253.50 449.77 5.33 25.00 141.75 50.00 72.00 6.93 152.00 14.64 112.00 10.78 47.85 110.00 10.59 69.00 6.64 660.33 304.96 654.30 959.26 255.91 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 14/24 Amount Fund: 1 ELECTRIC 07/13/2018 GEN 67068#k MATHESON TRI-GAS INC Sales Tax Receivable - Replace 186-000- 00 2.55 Generator 41 Material 402-554- 01 37.08 HECK GEN 67068 TOTAL 39.63 07/13/2018 GEN 67069 MAYONNE MARTIN Cip - Residential 401-916- 07 25.00 07/13/2018 GEN 67070d MCC ENERGY SOLUTIONS, LLC I AM MANAGEMENT FEES 401-555- 02 3,900.00 IAM USAGE FEES 401-556- 03 3,050.00 CHECK GEN 67070 TOTAL 6,950.00 07/13/2018 GEN 67072#k O'REILLY AUTOMOTIVE INC Generators 107-344- 00 52.85 Vehicles - Material 402-598- 02 (39.73) HECK GEN 67072 TOTAL 13.12 07/13/2018 GEN 670731#k OXYGEN SERVICE COMPANY INC Supplies 401-550- 01 40.57 Supplies 401-550- 01 81.18 Materials 402-574- 03 123.38 HECK GEN 67073 TOTAL 245.13 07/13/2018 GEN 67074* PREMIUM WATERS INC OFFICE SUPPLIES -BOTTLED WATER 401-921- 08 20. 90 07/13/2018 GEN 67075*dk PRO AUTO & TRANSMISSION REPAIR VEHICLES - MATERIAL-ELEC 402-598- 02 821.10 07/13/2018 GEN 67076 KID EQUIPMENT Materials 401-588- 02 895.14 07/13/2018 GEN 67077 RYAN PETERSON Cip - Residential 401-916- 07 25.00 07/13/2018 GEN 67078* SHELDON ROBINSON Cip - Residential 401-916- 07 425.00 07/13/2018 GEN 67081* STANDARD PRINTING & MAILING OFFICE SUPPLIES 401-921- 08 55.52 07/13/2018 GEN 67082 STEPHANI OR TYLER BONDERSON OVERPAYMENTS 142-000- 00 247.83 07/13/2018 GEN 67083* STEVEN LAMMERS Cip - Residential 401-916- 07 425.00 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 1 ELECTRIC 07/13/2018 GEN 67084 THERESA BRANDEL 07/13/2018 GEN 67085 THOMAS OR KATHLEEN SERVATY 07/13/2018 GEN 67086 TIFFANY PETERSEN 07/13/2018 GEN 67087 TWO-WAY COMMUNICATIONS INC 07/13/2018 GEN 670881dk WEST CENTRAL SANITATION INC 07/13/2018 GEN 67089 ZIMMERMAN, BROCK OR AMY 07/16/2018 GEN 218(E) MISO 07/16/2018 GEN 219(E) MISO 07/16/2018 GEN 220(E) MISO 07/17/2018 GEN 225(E) MISO Account Dept Pag 15/24 Amount Cip - Residential 401-916- 07 40.00 OVERPAYMENTS 142-000- 00 110.43 OVERPAYMENTS 142-000- 00 402.72 Telephone 401-921- 08 359.60 GENERATOR 41 WATER & SEWER 401-547- 01 86.70 Waste Disposal 401-550- 01 139.72 UTILITY EXPENSES - WATER/WASTE 55/45 401-930- 08 210.95 HECK GEN 67088 TOTAL 437.37 FINAL BILL REFUND 186-000- 00 28.31 SCHEDULE 10 401-565- 03 7,450.14 Transmission Expense 401-565- 03 6,671.06 Transmission Expense 401-565- 03 17,961.13 Transmission Expense 401-565- 03 595.73 HECK GEN 219(E) TOTAL 25,227.92 26A 401-565- 03 31,813.99 26 401-565- 03 23,382.63 HECK GEN 220(E) TOTAL 55,196.62 Deferred Energy Cost - Miso 174-000- 00 59,133.52 Deferred Energy Cost - Miso 174-000- 00 880.97 HECK GEN 225(E) TOTAL 60,014.49 Total for fund 1 ELECTRIC 1,021,329.03 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 2 GAS 06/27/2018 GEN 226(E)* MINNESOTA REVENUE 06/27/2018 GEN 227(E)* POINT & PAY 06/27/2018 GEN 228(E)* TASC 07/06/2018 GEN 66922* AMERIPRISE FINANCIAL 07/06/2018 GEN 66923* AMY METCALF 07/06/2018 GEN 66925 B & C PLUMBING AND HEATING 07/06/2018 GEN 66927 BONNIE MOISAN 07/06/2018 GEN 66928*dk BORDER STATES ELECTRIC SUPPLY 07/06/2018 GEN 66929* BRETT OR NATALIE GERMAN 07/06/2018 GEN 66930* BRIAN LUDOWESE Account Dept Pag 16/24 Amount State Sales Tax 242-000- 00 10,000.00 City Sales Tax 242-000- 00 700.00 HECK GEN 226(E) TOTAL 10,700.00 METER READING - MATERIALS 401-903- 06 49. 90 Health Insurance 401-926- 08 175.52 DEP REFUND/APPLIED 235-000- 00 182.00 DEP REFUND/APPLIED 235-000- 00 70.00 Materials 402-892- 04 371.43 Materials 401-874- 04 90.00 VALVE, BALL, 1/2", BALON, LM - 05361, 154-000- 00 161.49 FITTING, WELD STOP 2", LOW PRESSURE 154-000- 00 269. 91 VAVVE, BALL, 2" WELD X WELD, 154-000- 00 437. 02 TAPE, BELOW GROUND USE, 41 WAX, 4" X 9 154-000- 00 229.20 RISER, TRANSITION, ANODELESS FLEX, 3/4" 154-000- 00 2,570.00 NIPPLE, 1/2" X 2", BM, STD, SMLS, TEE 154-000- 00 4.72 VALVE, BALL, 1/2", BALON, LM - 05361, 154-000- 00 226.10 NIPPLE, 1/2" X 2", BM, STD, SMLS, TEE 154-000- 00 7.35 PRIMER, TEMCOAT 3000, ANTICORROSION, 154-000- 00 41.63 GASKET, 2" RING, 150 ANSI FLANGE, 154-000- 00 13.25 FLANGE, WELD NECK, FLAT FACED , 150 154-000- 00 61.94 CAP, 3", SMLS WELD FITTING, STD WGHT 154-000- 00 6.58 Other Equipment - Materials 402-895- 04 462.81 HECK GEN 66928 TOTAL 4,492.00 DEP REFUND/APPLIED 235-000- 00 113.75 DEP REFUND/APPLIED 235-000- 00 119.00 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 2 GAS 07/06/2018 GEN 66931* CALEB OR LASSIE LING 07/06/2018 GEN 66933 CENTRAL HYDRAULICS 07/06/2018 GEN 66934*#k CINTAS CORPORATION 4470 07/06/2018 GEN 66935*dk CITY OF HUTCHINSON 07/06/2018 GEN 66938 CYNTHIA RETZLAFF 07/06/2018 GEN 66939* DAVID CHAMBERS 07/06/2018 GEN 66941* DONNA GEHRKE OR SANDRA HARDER 07/06/2018 GEN 66945 E-Z LINE PIPE SUPPORT 07/06/2018 GEN 66946* EFI OR MINDY TEMBON 07/06/2018 GEN 66947* ELIZABETH BLOCK 07/06/2018 GEN 66949 EMBROIDERY PLUS Account Dept Pag 17/24 Amount DEP REFUND/APPLIED 235-000- 00 59.50 Materials 401-874- 04 72.47 UNIFORMS & LAUNDRY 401-880- 04 143.45 UNIFORMS & LAUNDRY 401-880- 04 137.86 HECK GEN 66934 TOTAL 281.31 IT ADMIN AND SUPPORT 250 401-921- 08 783. 95 Advertising/Printing 401-921- 08 16.25 Utility Expenses - Water/Waste 401-930- 08 52.98 Utility Expenses - Water/Waste 401-930- 08 313.25 Utility Expenses - Water/Waste 401-930- 08 6.91 HECK GEN 66935 TOTAL 1,173.34 Cip - Residential 401-916- 07 500.00 DEP REFUND/APPLIED 235-000- 00 21.00 DEP REFUND/APPLIED 235-000- 00 35.00 E-Z Line Support, 204 F, 2" Pipe Size, 107-385- 00 880.00 E-Z Line Support, 204 F, 2" Pipe Size, 107-385- 00 87.50 E-Z Line Support, 204 F, 4" Pipe Size, 107-385- 00 880.00 E-Z Line Support, 204 F, 4" Pipe Size, 107-385- 00 87.50 HECK GEN 66945 TOTAL 1,935.00 DEP REFUND/APPLIED 235-000- 00 49.00 DEP REFUND/APPLIED 235-000- 00 66.50 Uniforms & Laundry 401-880- 04 29.93 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 18/24 Amount Fund: 2 GAS 07/06/2018 GEN 66950* EMILY FORBERG DEP REFUND/APPLIED 235-000- 00 26.25 07/06/2018 GEN 66954* FINK FAMILY CHIROPRACTIC DEP REFUND/APPLIED 235-000- 00 73.50 07/06/2018 GEN 66955* FIRST CHOICE FOOD & BEVERAGE BREAKROOM/RECOGNITION BANQUET 401-926- 08 47.50 07/06/2018 GEN 66957* GAGE HARWICK DEP REFUND/APPLIED 235-000- 00 52.50 07/06/2018 GEN 66958* GAGE HARWICK DEP REFUND/APPLIED 235-000- 00 35.00 07/06/2018 GEN 66961 GREEN EARTH LAWN CARE, INC Mains 107-376- 00 160.31 07/06/2018 GEN 66962* GUARDIAN DENTAL INSURANCE-20o GAS 242-000- 00 915.52 07/06/2018 GEN 66964*#k HILLYARD/HUTCHINSON Materials 401-874- 04 120.99 Misc Other - Materials 401-935- 08 129.40 HECK GEN 66964 TOTAL 250.39 07/06/2018 GEN 66965* HUTCHFIELD SERVICES INC MISC OTHER - MATERIALS 401-935- 08 864.89 07/06/2018 GEN 66967* INNOVATIVE OFFICE SOLUTIONS OFFICE SUPPLIES 401-921- 08 28.15 07/06/2018 GEN 66968* JANET FRAUENDIENST DEP REFUND/APPLIED 235-000- 00 31.50 07/06/2018 GEN 66970* JENNA ANDERSON DEP REFUND/APPLIED 235-000- 00 157.50 07/06/2018 GEN 66971* JERRY OR LUANN RUSCH DEP REFUND/APPLIED 235-000- 00 91.00 07/06/2018 GEN 66973* JORDAN HENDRICKS Cip - Residential 401-916- 07 400.00 07/06/2018 GEN 66974* KDUZ/KARP ADVERTISING/PRINTING 401-921- 08 49.00 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 19/24 Amount Fund: 2 GAS 07/06/2018 GEN 66975* KELLI DORIVAL DEP REFUND/APPLIED 235-000- 00 45.50 07/06/2018 GEN 66980* LANE OR DONNA SCHLECHT DEP REFUND/APPLIED 235-000- 00 63.00 07/06/2018 GEN 66982* LESLIE HAPSCH DEP REFUND/APPLIED 235-000- 00 75.25 07/06/2018 GEN 66984* LOGAN OR CHARITY WOOD DEP REFUND/APPLIED 235-000- 00 17.50 07/06/2018 GEN 66987* MEDICA HEALTH INSURANCE 15% GAS 242-000- 00 8,784.00 07/06/2018 GEN 66989* MICHAEL SWARMER DEP REFUND/APPLIED 235-000- 00 77.00 07/06/2018 GEN 66990* MICHAEL SWARMER DEP REFUND/APPLIED 235-000- 00 28.00 07/06/2018 GEN 66992* MN MUNICIPAL UTILITIES ASSOCIATION MISC SERVICES-QTR SAFETY/MGMT 250 401-923- 08 1,571.87 07/06/2018 GEN 66993* MN NCPERS LIFE INSURANCE-PERA LIFE 242-000- 00 16.00 07/06/2018 GEN 66994 MRC GLOBAL PLUG, BULL, SOLID HEX HEAD, MALE THRD, 154-000- 00 123.54 07/06/2018 GEN 66995* NICOLE BEITO DEP REFUND/APPLIED 235-000- 00 26.25 07/06/2018 GEN 66996 NORTHERN BORDER PIPELINE CO LINE - OUTSIDE SERVICES -INTERCONNECT 401-856- 05 2,000.00 07/06/2018 GEN 66997* NUVERA TELEPHONE 401-921- 08 625.42 07/06/2018 GEN 66999* ORION LOKENSGARD Cip - Residential 401-916- 07 400.00 07/06/2018 GEN 67000* OSCAR AGUINIGA CABRERA DEP REFUND/APPLIED 235-000- 00 49.00 07/06/2018 GEN 67001*#k PROCHASKA LLC TOTE FEE 402-895- 04 500.01 TOTE FEE 402-895- 04 0.07 HECK GEN 67001 TOTAL 500.08 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # Payee CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Description Fund: 2 GAS 07/06/2018 GEN 67003* RACHEL FRATZKE 07/06/2018 GEN 67004* RACHEL FRATZKE 07/06/2018 GEN 67006 REDLINE SYSTEMS, INC 07/06/2018 GEN 67008* RELIANCE STANDARD LIFE -LIFE 07/06/2018 GEN 67009* RIANA OR KYLE KLAUSTERMEIER 07/06/2018 GEN 67011* RONALD OTTO 07/06/2018 GEN 67012*dk RUNNING'S SUPPLY INC 07/06/2018 GEN 67013* RUSTEN OR CHERYL HULS 07/06/2018 GEN 67014* SHANE BERKNESS 07/06/2018 GEN 67017* SHANNON SHOEN 07/06/2018 GEN 67018 SHARON SCHWARZE 07/06/2018 GEN 67019* SHRED RIGHT 07/06/2018 GEN 67021* TIM COOK OR KRISTINA OLSON 07/06/2018 GEN 67022*kk TOYOTA LIFT OF MINNESOTA Account Dept GET REFUND/APPLIED 235-000- 00 Cip - Residential 401-916- 07 BRACKET, WALL MT RISER, 3/4", HUC DWG 154-000- 00 LTD INSURANCE-20o GAS 242-000- 00 LIFE INSURANCE-20o GAS 242-000- 00 HECK GEN 67008 TOTAL GET REFUND/APPLIED 235-000- 00 GET REFUND/APPLIED 235-000- 00 SERVICES 107-380- 00 Materials 401-874- 04 HECK GEN 67012 TOTAL GET REFUND/APPLIED 235-000- 00 GET REFUND/APPLIED 235-000- 00 GET REFUND/APPLIED 235-000- 00 Cip - Residential 401-916- 07 OFFICE SUPPLIES -SHREDDING SERVICES 401-921- 08 GET REFUND/APPLIED 235-000- 00 POWER EQUIPMENT - MATERIALS 402-895- 04 Pag 20/24 Amount 35.00 325.00 10,041.44 306.17 164.50 52.50 4.58 70.00 35.00 42.00 25.00 4.16 78.75 11.66 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 21/24 Amount Fund: 2 GAS 07/06/2018 GEN 67023* TRAVIS OR MINDY KINSELL DEP REFUND/APPLIED 235-000- 00 73.50 07/06/2018 GEN 67025* UIS/SOURCECORP COLLECTION - MATERIALS 401-903- 06 338.85 COLLECTION - MATERIALS 401-903- 06 1,215.00 HECK GEN 67025 TOTAL 1,553.85 07/06/2018 GEN 67026* UNITED PARCEL SERVICE MAIL SERVICES - UPS, FEDEX 401-921- 08 27.00 07/06/2018 GEN 67028* VAN IWAARDEN ASSOCIATES Misc Services 401-923- 08 720.00 07/06/2018 GEN 67029* VERIZON WIRELESS TELEPHONE 401-921- 08 427.97 07/06/2018 GEN 67030* ZEE SERVICE COMPANY MISC OTHER - MATERIALS -MEDICAL SUPPLIES 401-935- 08 76.39 07/13/2018 GEN 229(E)*#k VISA Meetings & Travel - Expense (S 401-870- 04 435.00 LINE - OUTSIDE SERVICES -REMOTE 401-856- 05 74.25 HECK GEN 229(E) TOTAL 509.25 07/13/2018 GEN 67033*#k ACE HARDWARE Materials 401-874- 04 45.02 Materials 402-892- 04 9.15 Misc Other - Materials 401-935- 08 1.89 HECK GEN 67033 TOTAL 56.06 07/13/2018 GEN 67035*#k BORDER STATES ELECTRIC SUPPLY Industrial M & R Station Equip 107-385- 00 149.45 THREAD-0-LET, 1/4" X 2 1/2" X 1 1/4", 154-000- 00 24.92 NIPPLE, 1/2" X 2", BM, STD, SMLS, TEE 154-000- 00 4.39 BATTERY, SIZE D 401-874- 04 59.26 BATTERY, SIZE AAA 401-874- 04 38.45 HECK GEN 67035 TOTAL 276.47 07/13/2018 GEN 67037 BROWN COUNTY RURAL ELECTRIC Utilities (Electric, Satellite 401-856- 05 137.58 07/13/2018 GEN 67039* CARD SERVICES BREAKROOM/RECOGNITION BANQUET 401-926- 08 66.02 07/18/2018 11:52 AM User: JMartig DE: Hutchinson Utili Check Date Bank Check # CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES CHECK DATE FROM 06/21/2018 - 07/17/2018 Payee Description Account Pag Dept 22/24 Amount Fund: 2 GAS 07/13/2018 GEN 67040* CARTER, JEREMY J Training - Expense 401-930- 08 79.90 07/13/2018 GEN 67041 CENTURYLINK Utilities (Electric, Satellite 401-856- 05 59.84 07/13/2018 GEN 67043*dk CINTAS CORPORATION 4470 UNIFORMS & LAUNDRY 401-880- 04 169.90 UNIFORMS & LAUNDRY 401-880- 04 147.43 HECK GEN 67043 TOTAL 317.33 07/13/2018 GEN 67044*#k CITY OF HUTCHINSON Vehicle/Equipment Fuel 401-880- 04 1,849.64 IT ADMIN AND SUPPORT 75/25 401-921- 08 5, 990.75 LEGAL SERVICES 75/25 401-923- 08 2,625.00 HUMAN RESOURCES SERVICES 75/25 401-923- 08 2,067.18 Vehicles/Equipment Fuel 401-935- 08 33.73 HECK GEN 67044 TOTAL 12,566.30 07/13/2018 GEN 67047#k ENERTECH 2O18 Public Awareness Program for 401-874- 04 8,704.58 2019 Public Awareness 416-108- 04 1,052.38 2018 Public Awareness Program for 401-856- 05 2,184.36 HECK GEN 67047 TOTAL 11,941.32 07/13/2018 GEN 67048* FIRST CHOICE FOOD & BEVERAGE BREAKROOM/RECOGNITION BANQUET 401-926- 08 32.50 07/13/2018 GEN 67051*dk GOPHER STATE ONE -CALL INC MATERIALS 401-874- 04 162.00 MATERIALS 401-856- 05 40.50 HECK GEN 67051 TOTAL 202.50 07/13/2018 GEN 67052 HANSEN GRAVEL INC Mains 107-376- 00 80.16 07/13/2018 GEN 67053* HAROLD ELDER Cip - Residential 401-916- 07 400.00 07/13/2018 GEN 67058 HUGHES NETWORK SYSTEMS UTILITIES -NEW ULM COMMUNICATIONS 401-856- 05 106.94 07/13/2018 GEN 67059 HUTCHINSON CO-OP Vehicle/Equipment Fuel 401-880- 04 6.46 07/18/2018 11:52 AM CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES User: JMartig CHECK DATE FROM 06/21/2018 - 07/17/2018 DE: Hutchinson Utili Check Date Bank Check # Payee Description Account Dept Fund: 2 GAS Vehicles - Material 402-895- 04 HECK GEN 67059 TOTAL 07/13/2018 GEN 670601#k HUTCHINSON LEADER Cip - Marketing 401-916- 07 07/13/2018 GEN 67061*#k HUTCHINSON WHOLESALE SUPPLY CO Vehicles - Material 402-895- 04 07/13/2018 GEN 67062* JEREMY ANFINSON Cip - Residential 401-916- 07 07/13/2018 GEN 67063*dk KDUZ/KARP PUBLIC AWARENESS - MATERIAL 401-874- 04 Public Awareness - Material 401-856- 05 ADVERTISING/PRINTING 401-921- 08 HECK GEN 67063 TOTAL 07/13/2018 GEN 67065*dk LOCATORS & SUPPLIES INC SAFETY GLASSES, GRAY, SILVER MIRROR, 401-880- 04 07/13/2018 GEN 67066* MAILFINANCE LEASE/SERVICE AGREEMENTS 401-921- 08 LEASE/SERVICE AGREEMENTS 401-921- 08 HECK GEN 67066 TOTAL 07/13/2018 GEN 67067* MARCO TECHNOLOGIES, LLC OFFICE SUPPLIES 401-921- 08 07/13/2018 GEN 67071 MICHAEL BRADLEY Cip - Residential 401-916- 07 07/13/2018 GEN 67073*#k OXYGEN SERVICE COMPANY INC Materials 401-874- 04 Materials 401-874- 04 HECK GEN 67073 TOTAL 07/13/2018 GEN 67074* PREMIUM WATERS INC OFFICE SUPPLIES -BOTTLED WATER 401-921- 08 07/13/2018 GEN 67075*dk PRO AUTO & TRANSMISSION REPAIR VEHICLES - MATERIAL -GAS 402-895- 04 Pag 23/24 Amount 1,083.24 1,089.70 134.50 3.94 25.00 98.00 98.00 52.60 101.66 85.30 25.00 40.57 6.97 4,017.56 07/18/2018 11:52 AM CHECK DISBURSEMENT REPORT FOR HUTCHINSON UTILITIES Pag 24/24 User: JMartig CHECK DATE FROM 06/21/2018 - 07/17/2018 DE: Hutchinson Utili Check Date Bank Check # Payee Description Account Dept Amount Fund: 2 GAS 07/13/2018 GEN 67078* SHELDON ROBINSON Cip - Residential 401-916- 07 400.00 07/13/2018 GEN 67079 SPRINT Utilities (Electric, Satellite 401-856- 05 141.52 07/13/2018 GEN 67080 ST JAMES PUBLISHING Public Awareness - Material 401-856- 05 121.80 07/13/2018 GEN 67081* STANDARD PRINTING & MAILING OFFICE SUPPLIES 401-921- 08 18.50 07/13/2018 GEN 67083* STEVEN LAMMERS Cip - Residential 401-916- 07 400.00 07/13/2018 GEN 67088*dk WEST CENTRAL SANITATION INC UTILITY EXPENSES - WATER/WASTE 45/55 401-930- 08 172.60 Total for fund 2 GAS 86,649.08 TOTAL - ALL FUNDS 1,107,978.11 '*'-INDICATES CHECK DISTRIBUTED TO MORE THAN ONE FUND '#'-INDICATES CHECK DISTRIBUTED TO MORE THAN ONE DEPARTMENT HUTCHINSON UTILITIES COMMISSION MANAGEMENT LETTER DECEMBER 31, 2017 Conway, Deuth & Schmiesing, PLLP Certified Public Accountants & Consultants Litchfield, Minnesota This page intentionally left blank HUTCHINSON UTILITIES COMMISSION TABLE OF CONTENTS DECEMBER 31, 2017 PAGE Required Communications 1-3 Comparative Financial Data 4 Graphical Information 5-12 Schedule of Findings on Accounting Issues and Internal Controls 13-14 This page intentionally left blank CDS CERTIFIED PUBLIC : ACCOUNTANTS & CONSULTANTS (; loll:»eZKe] O I L L1101LN_ygIEel 0 Members of the Hutchinson Utilities Commission Hutchinson, Minnesota We have audited the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2017. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated January 9, 2018. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Commission are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed for the year ended December 31, 2017. We noted no transactions entered into by the Commission during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Management's estimate of the allowance for doubtful accounts is based on historical electric and natural gas revenues, historical loss levels, and an analysis of the collectability of individual accounts. We evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of depreciation is based on the number of years an asset is in service. We evaluated the key factors and assumptions used to develop the depreciation estimate in determining that it is reasonable in relation to the financial statements taken as a whole. Members: American Institute of Certified) Public Accountants, Minnesota Society of Certified Pubk Accountants w71,+ittar Office 331 Third St SW, Ste 2 PO Box 570 Willmar, MN56201 P (320) 235-3311 T (888) 388 1040 Benson Office Morris Office 1209 Pacific Ave, Ste 3 401 Atlantic Ave Benson„ MN 56215 Morris, MN 56267 P' (320) 843-2302 P (320) 589-2602 C 01r r`11 Litchfield Office 820 Sibley Ave N Litchfield, MN 55355 P (32'0) 693-7975 St, Cto ud-Sartetl Office Ste 110 2351 Connecticut Ave Sarteti, MINI56377 P' (320) 252-7565 T (800) 862-1337 Qualitative Aspects of Accounting Practices (Cont'd) Management's estimate of pension and other post -employment benefit liabilities is based on actuarial valuations performed by consultants specializing in those areas. We evaluated the key factors and assumptions used to develop those estimates in determining that it is reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 15, 2018. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Commission's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Commission's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to Management's Discussion and Analysis and the Schedules of Proportionate Share of the Net Pension Liability and Employer Contributions which is required supplementary information that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurances on the required supplementary information. 2 Other Matters (Cont'd) We were engaged to report on the statements and schedules listed in the table of contents as supplementary information, which accompany the financial statements but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the Organizational Data, which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information and we do not express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the use of the Commission and management of Hutchinson Utilities Commission and is not intended to be and should not be used by anyone other than these specified parties. ��E Z 'Ell E CONWAY, DEUTH & SCHMIESING, PLLP Certified Public Accountants & Consultants Litchfield, Minnesota June 15, 2018 3 This page intentionally left blank ELECTRIC DIVISION Residential General Service Industrial Street Lighting Resale Total Electric Sales Other Operating Revenues Total Operating Revenues Purchased Power - Electric Other Operating Expenses Total Operating Expenses HUTCHINSON UTILITIES COMMISSION COMPARATIVE FINANCIAL DATA 2011 2012 2013 2014 2015 2016 2017 $ 5,255,333 $ 5,202,559 $ 5,176,489 $ 5,162,073 $ 5,080,964 $ 5,269,261 $ 5,341,820 9,075,811 9,264,941 8,903,085 8,787,907 8,763,091 8,567,839 9,050,034 11,692,880 10,763,758 10,375,605 11,001,396 11,399,155 10,941,617 10,778,629 143,378 148,968 143,002 139,532 146,931 144,641 147,484 1,234,285 1,618,582 891,276 678,293 1,114,918 1,931,859 2,171,853 27,401,687 26,998,808 25,489,457 25,769,201 26,505,059 26,855,217 27,489,820 306,435 310,828 308,590 304,095 297,007 293,294 167,159 27,708,122 27,309,636 25,798,047 26,073,296 26,802,066 27,148,511 27,656,979 15,990,893 15, 521, 329 14,607, 779 15,034,661 15,429,451 14, 568,448 15,062,252 9,790,120 11,014,195 12,271, 736 12,072,182 11, 739,870 12,837, 733 12,863, 710 25,781,013 26,535,524 26,879,515 27,106,843 27,169,321 27,406,181 27,925,962 Net Nonoperating Revenues (Expenses) (727,681) (329,483) (529,363) (451,322) (201,467) 52,536 (8,337) Change in Net Position GAS DIVISION Residential Commercial Industrial Total Gas Revenues Gas Transportation Total Operating Revenues Purchased Power - Gas Other Operating Expenses Total Operating Expenses Net Nonoperating Revenues (Expenses) $ 1,199,428 $ 444,629 $ (1,610,831) $ (1,484,869) $ (568,722) $ (205,134) $ (277,320) $ 4,327,788 $ 3,697,538 $ 4,626,722 $ 4,706,388 $ 3,731,066 $ 3,839,034 $ 3,937,048 3,823,161 3,150,925 3,729,790 3,853,504 2,748,161 2,824,329 3,019,230 4,246,780 2,826,424 3,646,509 6,066,290 3,444,273 3,215,714 3,842,863 12,397,729 9,674,887 12,003,021 14,626,182 9,923,500 9,879,077 10,799,141 1,824,187 1,855,472 1,885,149 1,508,575 1,417,997 1,479,135 1,579,495 14,221,916 11,530,359 13,888,170 16,134,757 11,341,497 11,358,212 12,378,636 9,028,704 6,400,838 7,500,621 10,460,268 5,988,821 5,697,867 6,883,154 3,094,567 3,326,558 3,419,575 3,541,750 3,145,695 3,346,056 3,242,875 12,123,271 9,727,396 10,920,196 14,002,018 9,134,516 9,043,923 10,126,029 (929,711) (989,164) (992,161) (605,361) (536,019) (269,688) (403,706) Change in Net Position $ 1,168,934 $ 813,799 $ 1,975,813 $ 1,527,378 $ 1,670,962 $ 2,044,601 $ 1,848,901 HUTCHINSON UTILITIES COMMISSION ELECTRIC DIVISION Operating Revenues & Expenses and Net Nonoperating Revenues (Expenses) 7,925,962 (8,337) Change in Net Position $1,500,000 $1,199,428 $1,000,000 000 $444,629 $500, 11 $0 $(205,134) $(277,320) -$500,000 $(568,722) -$1,000,000 -$1,500,000 $(1,484,869) $(1,610,831) -$2,000,000 2011 2012 2013 2014 2015 2016 2017 ®Change in Net Position 5 HUTCHINSON UTILITIES COMMISSION ELECTRIC DIVISION Major Revenue by Source $13, 000, 000 $12, 000, 000 $11,000,000 $10, 000, 000 $9,000,000 $8, 000, 000 $7,000,000 $6, 000, 000 $5,000,000 $4, 000, 000 $3,000,000 $2, 000, 000 $1,000,000 $0 2011 2012 2013 2014 2015 2016 2017 ■Residential ®General Service Glndustrial Purchased Power & Fuel Costs Compared to Total Sales $30, 000, 000 $25, 000, 000 $20, 000, 000 $15, 000, 000 $10, 000, 000 $5,000,000 $0 2011 2012 2013 2014 2015 2016 2017 ®Purchased Power - Electric ®Total Electric Sales L HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS ELECTRIC DIVISION YEARS ENDED DECEMBER 31, 2017 AND 2016 The Statement of Revenues and Expenses set forth the results of the operations in detail for the years ended December 31, 2017 and 2016. Operating revenues, kilowatt hours (KWH) sold, and average revenue per kilowatt hour sold by class of service are as follows: Year Ended December 31, 2017 Revenue Per Amount KWH Sold KWH ,A-AIR10 Residential $ 5,093,852 49,389,408 $ 0.1031 All Electric 247,968 2,440,785 0.1016 Small General Service 1,814,703 17,896,264 0.1014 Large General Service 7,235,331 75,176,663 0.0962 Industrial 10,778,630 133,130,000 0.0810 Sale for Resale 1,932,274 13,000,000 0.1486 Street Lighting 147,484 102,156 1.4437 $ 27,250,242 291,135,276 $ 0.0936 CLASS Residential All Electric Small General Service Large General Service Industrial Sale for Resale Street Lighting Year Ended December 31, 2016 Revenue Per Amount KWH Sold KWH $ 5,029,631 50,847,924 239,630 2,449,790 1,730,236 17,933,482 6,837,603 73,932,676 10,941,617 138,496,000 1,931,859 23,284,000 144,641 101,656 7 0.0989 0.0978 0.0965 0.0925 0.0790 0.0830 1.4228 26,855,217 307,045,528 $ 0.0875 Sale for Resale Industrial Large General Service Small General Service All Electric Residential HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS ELECTRIC DIVISION YEARS ENDED DECEMBER 31, 2017 AND 2016 KWH Sold 13, 000, 000 13 23,284,000 133,130, 000 138, 496, 000 50,000,000 100,000,000 150,000,000 200,000,000 M2017 KWH Sold 02016 KWH Sold Average $/KWH 1;1 HUTCHINSON UTILITIES COMMISSION NATURAL GAS DIVISION Operating Revenues & Expenses and Net Nonoperating Revenues (Expenses) $18, 000, 000 $16, 000, 000 $14, 000, 000 $12, 000, 000 $10, 000, 000 $8, 000, 000 $6, 000, 000 $4, 000, 000 $2, 000, 000 $0 $2,000,000 2011 2012 2013 2014 2015 2016 2017 ®Total Operating Revenues ®Total Operating Expenses ®Net Nonoperating Revenues (Expenses) 26,029 706) Change in Net Position $2,500,000 $2,044,601 �� $1,975,813 $1,848,901 $2 $1,670,962 $1,527,378 $1,500,000 $1,168,934 000, 000 $1, $813,799 $500,000 $0 2011 2012 2013 2014 2015 2016 2017 ®Change in Net Position I HUTCHINSON UTILITIES COMMISSION NATURAL GAS DIVISION Major Revenue by Source $7,000,000 $6, 000, 000 $5,000,000 $4, 000, 000 $3,000,000 $2, 000, 000 $1,000,000 $0 2011 2012 2013 2014 2015 2016 2017 ®Residential ®Commercial Olndustrial $16, 000, 000 $14, 000, 000 $12, 000, 000 $10, 000, 000 $8, 000, 000 $6, 000, 000 $4, 000, 000 $2, 000, 000 $0 2011 Purchased Gas Compared to Total Sales 2012 2013 2014 2015 2016 ® Purchased Power - Gas ®Total Gas Revenues 2017 10 HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS NATURAL GAS DIVISION YEARS ENDED DECEMBER 31, 2017 AND 2016 The Statement of Revenues and Expenses set forth the results of the operations in detail for the years ended December 31, 2017 and 2016. Operating revenues, cubic feet sold, and average revenue per thousand cubic feet sold by class of service are as follows: Year Ended December 31, 2017 Revenue Per Thousand Amount CF Sold MCF CLASS Residential $ 3,937,048 396,761,756 $ 9.9230 Commercial 3,019,230 325,983,624 9.2619 Large industrial 3,842,863 859,892,970 4.4690 $ 10,799,141 1,582,638,350 $ 6.8235 Year Ended December 31, 2016 Revenue Per Thousand Amount CF Sold MCF CLASS Residential $ 3,839,034 382,182,736 $ 10.0450 Commercial 2,824,329 287,927,671 9.8092 Large industrial 3,215,714 793,154,339 4.0543 $ 9,879,077 1,463,264,746 $ 6.7514 11 HUTCHINSON UTILITIES COMMISSION ANALYSIS OF OPERATIONS NATURAL GAS DIVISION YEARS ENDED DECEMBER 31, 2017 AND 2016 CIF Sold Average $/MCF 12 This page intentionally left blank HUTCHINSON UTILITIES COMMISSION SCHEDULE OF FINDINGS ON ACCOUNTING ISSUES AND INTERNAL CONTROLS DECEMBER 31, 2017 We noted certain matters involving the internal control structure and its operation that we consider being deficiencies in internal control under standards established by the American Institute of Certified Public Accountants. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. INTERNAL CONTROL The objective of internal accounting control is to provide reasonable, but not absolute, assurance as to the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a system of internal accounting control should not exceed the benefits derived and also recognizes that the valuation of these factors necessarily requires estimates and judgments by management. It should be recognized that within the Commission, an inherent risk is present with certain positions. It is very common for entities such as Hutchinson Utilities Commission, to assign many major responsibilities to a few key individuals in an attempt to operate within limited budgets. The inherent risk is again addressed only to maintain the awareness of the internal control structure and to encourage the Commission's continual review of financial information at monthly meetings. GENERAL RECOMMENDATIONS Throughout the course of the audit, we spoke with management regarding certain items that we see as an opportunity to improve. None of these were considered significant within the scope of the audit. The items discussed requiring action have been resolved or are in the process of resolution. We would like to acknowledge the assistance and courtesies extended to us by the personnel of the Hutchinson Utilities Commission. CROSS -TRAINING In small public entities, it is common for one person to be primarily responsible for handling all financial matters (payroll, disbursements, receiving, recording transactions, etc.). This concentration of duties in one person is not desirable for a sound control environment and contingency planning. One measure to help counter this weakness involves training a second person in specific duties related to the entities finances. Cross -training has numerous benefits. It allows a second person to perform the duties when the employee primarily responsible is unavailable. Having someone else perform the job duties also provides a method of detecting errors and/or irregularities created by the person primarily responsible for those duties. Finally, cross -training provides continuity during periods of employee transitions. Cross -training offers advantages from both an accounting and a managerial point of view. We recommend the review of various responsibilities and cross -train other staff to perform non -routine duties on a timely basis in the absence of the individual typically responsible for such duties. Other remedies would be to have an outside source familiar in these specific areas be contracted when deemed necessary to keep the Commission current in the financial area. CAPITAL ASSET ACCOUNTING The Commission maintains its capital asset activity and balances using spreadsheet software (Microsoft Excel). While Excel is an automated software program, it is not the most effective and efficient program for capital asset accounting. A relational database program would operate more effectively and efficiently to manage and account for capital asset inventory. Because the Commission segregates capital assets by activity and function, the complexity of the spreadsheets increases annually and is very susceptible to human error. 13 HUTCHINSON UTILITIES COMMISSION SCHEDULE OF FINDINGS ON ACCOUNTING ISSUES AND INTERNAL CONTROLS DECEMBER 31, 2017 CAPITAL ASSET ACCOUNTING (Cont'd) We recommend the Commission use relational database software to maintain and account for its capital asset inventory. Implementation of this type of software will strengthen internal controls over capital asset accounting and provide efficiencies in the perpetual maintenance of capital assets. AUTHORIZED SIGNORS The Commission's authorized signors at one of the designated depositories have not been updated to reflect changes in Commissioners and personnel. We recommend the Commission update the authorized signors to reflect current Commissioners and personnel. 14 HUTCHINSON UTILITIES COMMISSION AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION DECEMBER 31, 2017 Conway, Deuth & Schmiesing, PLLP Certified Public Accountants & Consultants Litchfield, Minnesota This page intentionally left blank HUTCHINSON UTILITIES COMMISSION TABLE OF CONTENTS DECEMBER 31, 2017 ORGANIZATIONAL DATA INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION Management's Discussion and Analysis BASIC FINANCIAL STATEMENTS Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of Net Pension Liability Schedule of Employer Contributions Notes to Required Supplementary Information SUPPLEMENTARY INFORMATION Combining Statement of Net Position Combining Schedule of Revenues and Expenses Statement of Net Position - Electric Division Detailed Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Electric Division Statement of Net Position - Natural Gas Division Detailed Schedule of Revenues, Expenses and Changes in Net Position - Budget and Actual - Natural Gas Division 1 2-4 5-9 10 11 12-13 14-31 32 33 34 35 36 37 38-41 42 43-45 HUTCHINSON UTILITIES COMMISSION TABLE OF CONTENTS DECEMBER 31, 2017 COMPLIANCE SECTION Independent Auditor's Report on Minnesota Legal Compliance Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Summary Schedule of Prior Audit Findings PAGE EN 47-48 i • HUTCHINSON UTILITIES COMMISSION ORGANIZATIONAL DATA DECEMBER 31, 2017 A Light and Power Commission was formed under the provisions of an amendment to the Hutchinson City Charter in 1935; the Commission was charged with the operation of the Municipal Electric Plant. Charter amendments approved December 17, 1954, provided for a change in the name to Hutchinson Utilities Commission. Additional duties under that amendment provided for the control and management of a municipal gas distribution system. A revised city charter was adopted at a special election September 17, 1987. Some of the pertinent sections of this new charter are briefly summarized in the following paragraphs. The Commission shall have control and management of the Light Plant, the Light Plant distribution system, the Gas Plant and the Gas Plant distribution system. The Commission shall consist of five persons, qualified voters of the City, who shall be appointed by the Council. A member shall be appointed every year for a term of five years, to fill the place of the member whose term has expired. No member shall be appointed to more than two successive terms. The members of the Commission shall receive compensation for their services as determined annually by the Council. The Commission shall provide for its own organization and rules of procedure and annually shall elect a president and vice president from among its members. It shall also appoint a secretary who may or may not be a member of the Commission. The Commissioners and their official titles were as follows: Monty Morrow President Anthony Hanson Vice President Mark Girard Secretary Robert Wendorff Commissioner Don Martinez Commissioner This page intentionally left blank INDEPENDENT AUDITOR'S REPORT Members of the Hutchinson Utilities Commission Hutchinson, Minnesota Report on the Financial Statements We have audited the accompanying financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2017 and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 2 Members: American Institute of Certified Public Accountants, Minnesota Society of Certified Public Accountants Willmar Office 331 Third St SW, Ste 2 PO Box 570 Willmar, MN56201 P (320) 235-3311 T (888) 388-1040 Benson Office Morris Office 1209 Pacific Ave, Ste 3 401 Atlantic Ave Benson, MN 56215 Morris, MN 56267 P' (320) 843-2302 P (320) 589-2602 Litchfield Office 820 Sibley Ave N Litchfield, MN 55355 P (320) 693-7975 St. Cloud-5artell Office Ste 110 2351 Connecticut Ave Sarte(l, MNI 56377 P (320) 252-7565 T (800) 862-1337 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of December 31, 2017, and the changes in financial position, and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Partial Comparative Information We have previously audited the Commission's 2016 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated May 24, 2017. In our opinion, the partial comparative information presented herein as of and for the year ended December 31, 2016 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, the Schedule of Proportionate Share of Net Pension Liability, and the Schedule of Employer Contributions as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary and Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Commission's basic financial statements. The statements and schedules listed in the table of contents as supplementary information and the Organizational Data section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Organizational Data section has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on the information presented. 3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 15, 2018 on our consideration of the Commission's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Hutchinson Utilities Commission's internal control over financial reporting and compliance. r ", &AL& , P�L? CONWAY, DEUTH & SCHMIESING, PLLP Certified Public Accountants & Consultants Litchfield, Minnesota June 15, 2018 EI This page intentionally left blank REQUIRED SUPPLEMENTARY INFORMATION This page intentionally left blank HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Overview of the Financial Statements Hutchinson Utilities Commission is a fund of the City of Hutchinson, Minnesota, and is responsible for the full operation and management of the electric and natural gas systems of the City. The annual report of Hutchinson Utilities Commission includes the financial statements, the independent auditor's report, and notes detailing the financial statements and this management's discussion and analysis report. The report also includes supplementary information for each of Hutchinson Utilities Commission's divisions. Financial Statements Required The financial statements report information about Hutchinson Utilities Commission using accounting methods similar to those used by private sector companies. These statements offer short-term and long-term financial information about its activities. The Statement of Net Position includes all of the Commission's assets and deferred outflows of resources, liabilities and deferred inflows of resources, and net position and provides information regarding the nature and amount of investments in various assets and obligations to the Commission's creditors. They also provide the basis for computing rate of return, evaluating the capital structure, and determining the liquidity and financial flexibility of the Commission. The Statement of Revenues, Expenses and Changes in Net Position accounts for all the current year's revenues and expenses. This statement measures the success of operations over the past year and can be used to determine whether all costs are recovered through user fees and other charges. This statement measures the Commission's profitability and creditworthiness. The Statement of Cash Flows provides information about the Commission's cash receipts and cash payments during the reporting period. This statement reports cash receipts, cash payments, and net changes in cash resulting in cash balances during the reporting period. Financial Statement Analvsis Total gross investment in capital assets increased to $138,365,918 in 2017 from $134,904,559 in 2016. Capital assets increased $3,461,359 primarily because of upgrades and improvements to the generating plant and distribution systems as well as equipment purchases. Operating revenues and expenses increased from 2016 by$1,528,892 and $1,601,887, respectively. Operating income decreased from 2016 by $72,995. The primary increase in operating revenues was due to an increase in electric and gas sales in 2017, which increased by $634,603 and $920,064, respectively, from 2016 due to increased sales and higher energy cost adjustments. The primary area of the increase in operating expenses was due to an increase in purchased power expenses caused by increased sales. Payment in Lieu of Taxes increased by-$111,774 due to current agreement with the City of Hutchinson. HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Significant Transactions In 2017, the Commission transferred $1,196,331 per agreement to the City of Hutchinson. Condensed Financial Statements A summary of the Statement of Net Position is presented in Table 1 Table 1 Condensed Statement of Net Position Net Capital Assets Restricted Assets Current Assets Total Assets Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources Current Liabilities Long -Term Liabilities Total Liabilities Deferred Inflows of Resources Net Position Increase 2017 2016 (Decrease $ 70,830,339 $ 70,572,991 $ 257,348 17,983,727 2,539,625 15,444,102 21,917,436 20,821,182 1,096,254 110,731,502 93,933,798 16,797,704 1,003,849 2,328,080 (1,324,231)� $ 111,735,351 $ 96,261,878 $ 15,473,473 $ 6,518,979 $ 6,810,429 $ (291,450) 37,296,051 23,401,989 13,894,062 43,815,030 30,212,418 13,602,612 1,059,160 759,880 299,280 1 Net Investment in Capital Assets 51,060,879 51,727,376 (666,497) Restricted 3,561,829 2,539,625 1,022,204 Unrestricted 12,238,453 11,022,579 1,215,874 Total Net Position 66,861,161 65,289,580 1,571,581 Total Liabilities, Deferred Inflows of Resources and Net Position $ 111,735,351 $ 96,261,878 $ 15,473,473 HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Condensed Financial Statements (Cont'd) A summary of the Statement of Revenues, Expenses and Changes in Net Position is presented in Table 2. Table 2 Condensed Statement of Revenues, Expenses and Changes in Net Position Operating Revenues Operating Expenses Cost of Operations Depreciation Total Operating Expenses Operating Income (Loss) Nonoperating Revenues (Expenses) Change in Net Position Net Position, Beginning of Year Net Position, End of Year Budgetary Highlights Increase 2017 2016 (Decrease) $ 40,035,615 $ 38,506,723 $ 1,528,892 34,199,317 32,627,706 1,571,611 3,852,674 3,822,398 30,276 38,051,991 36,450,104 1,601,887 1,983,624 2,056,619 (72,995) (412,043) (217,152) (194,891) 1,571,581 1,839,467 (267,886) 65,289,580 63,450,113 1,839,467 $ 66,861,161 $ 65,289,580 $ 1,571,581 The Commission adopts an annual Operating Budget and a Capital Improvement Budget. Because of its enterprise nature and in order to comply with Federal Energy Regulatory Commission accounting and reporting requirements, the budgets are not operated as statutory budgets. The Commission and Utilities staff review budget results monthly and the budget is used as a financial management tool. A summary of the 2017 Budget Analysis is presented in Table 3. 7 HUTCHINSON UTILITIES COMMISSION Budgetary Highlights (Cont'd) MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Table 3 Condensed Budget Analysis 2017 Budget 2017 Actual Operating Revenues $ 40,719,940 $ 40,035,615 $ Operating Expenses Cost of Operations 35,076,449 34,199,317 Depreciation Expense 3,808,000 3,852,674 Total Operating Expenses 38,884,449 38,051,991 Operating Income (Loss) 1,835,491 1,983,624 Nonoperating Revenues (Expenses) (444,480) (412,043) Change in Net Position 1,391,011 1,571,581 Net Position, Beginning of Year 65,289,580 65,289,580 Net Position, End of Year $ 66,680,591 $ 66,861,161 $ Over (Under) (684,325) (877,132) 44,674 (832,458) 148,133 32,437 180,570 180.570 Actual operating revenues were $684,325 under budgeted revenues while operating income (loss) was over budget by $148,133. This is mainly due to natural gas sales coming in under budget by $758,450. The actual operating revenues for the Commission had a negative variance of approximately 1.68% from budgeted operating revenues. This difference was caused almost entirely by the gas division, while the electric division had a negative variance of $5,751. Operating expenses were $832,458 lower than budgeted. This is mainly due to lower electric generation costs, less maintenance and repairs in both electric and gas divisions, and lower conservation expense. In 2017, the Commission entered into an agreement for a specific Payment in Lieu of Taxes (PILOT). The agreement requires the Commission to make payments equaling $1,343,715 less $147,384 for specific services provided for a net total of $1,196,331. Starting in calendar year 2007, the Commission reallocated its common expenses between the two divisions. Formulas were developed and used to establish the common expenses between the two utilities, in particular, Customer Service and Collection Accounts and the Administrative and General Accounts. Capital Assets and Long -Term Liability Activity The Commission's investment in capital assets increased to $138,365,918 in 2017. This is an increase of $3,461,359 from 2016. Refer to Note 4 of the Notes to the Financial Statements for the Commission's 2017 capital asset activity. At year-end, the Commission had $31,870,000 in bonds outstanding, $528,831 in compensated absences and a net pension liability of $4,111,253. Refer to Note 6 of the Notes to the Financial Statements for a schedule showing the Commission's long-term liability activity. M. HUTCHINSON UTILITIES COMMISSION MANAGEMENT'S DISCUSSION AND ANALYSIS DECEMBER 31, 2017 Economic Factors and Next Year's Budget The Commission considered many local community and external energy industry factors when setting the Electric & Gas Division fiscal year 2018 budgets, rates, and fees that will be charged to customers. Of significance was the continual increase in costs associated with purchased electrical wholesale power and transmission fees. Conversely, the Gas Division continues to see favorable prices for the procurement of the natural gas commodity. Both divisions continue to see consistent energy consumption forecasts in the near future. In addition, the Payment in Lieu of Taxes (PILOT) was set for 2018 based on a three year phase in up to 4.50%, starting with 3.25% in 2018. The Commission continued to "bundle" its electric wholesale rate to its retail customers. What this means is the operating income the Commission receives from its wholesale KWHR sales is applied to the wholesale rate it charges its retail customers. This "bundling" effect reduces the overall blended cost of wholesale power which aids in retail rate pricing stability. Contact Information Any questions regarding information contained in this report and requests for additional information should be addressed to the Hutchinson Utilities Commission, 225 Michigan Street SE, Hutchinson, MN 55350 or by phone at (320) 587-4746. N This page intentionally left blank BASIC FINANCIAL STATEMENTS This page intentionally left blank HUTCHINSON UTILITIES COMMISSION STATEMENT OF NET POSITION DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2016 2017 2016 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments $ 16,027,769 $ 15,541,834 Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $71,132 and $71,132, Respectively) 4,113,840 3,553,448 Interest Receivable 38,078 31,416 Sales Tax Receivable 34,743 145,586 Inventory 1,565,580 1,446,575 Prepaid Items 137,426 102,323 Total Current Assets 21,917,436 20,821,182 Noncurrent Assets Restricted Assets Cash and Investments 17,983,727 2,539,625 Capital Assets Assets Not Being Depreciated 7,473,188 4,597,813 Other Capital Assets, Net of Depreciation 63,357,151 65,975,178 Net Capital Assets 70,830,339 70,572,991 Total Noncurrent Assets 88,814,066 73,112,616 Total Assets 110,731,502 93,933,798 Deferred Outflows of Resources Related to Pensions 1,003,849 2,328,080 Total Assets and Deferred Outflows of Resources $ 111,735,351 $ 96,261,878 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Current Portion of Long -Term Liabilities $ 1,535,391 $ 1,549,556 Accounts Payable 4,239,847 2,855,196 Due To Other Governments 1,757,601 Customer Deposits 437,920 456,240 Accrued Expenses Interest 146,728 63,382 Salaries Payable 159,093 128,454 Total Current Liabilities 6,518,979 6,810,429 Long -Term Liabilities Noncurrent Portion of Long -Term Liabilities 37,296,051 23,401,989 Total Liabilities 43,815,030 30,212,418 Deferred Inflows of Resources Related to Pensions 1,059,160 759,880 Net Position Net Investment in Capital Assets 51,060,879 51,727,376 Restricted 3,561,829 2,539,625 Unrestricted 12,238,453 11,022,579 Total Net Position 66,861,161 65,289,580 Total Liabilities, Deferred Inflows of Resources and Net Position $ 111,735,351 $ 96,261,878 See Accompanying Notes to the Financial Statements 10 HUTCHINSON UTILITIES COMMISSION STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING REVENUES Electric Energy Sales Natural Gas Sales Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Production Operations Maintenance Purchased Power/Gas Other Power Supply Transmission Operations Maintenance Distribution Operations Maintenance Customer Accounts Expense Sales Expense Administrative and General Depreciation Contribution to City of Hutchinson Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR See Accompanying Notes to the Financial Statements 11 2017 2016 $ 27,489,820 $ 26,855,217 10,799,141 9,879,077 1,746,654 1,772,429 40,035,615 38,506,723 2,670,073 2,936,626 401,731 450,663 21,141,106 19,219,353 376,398 368,091 2,747,938 2,474,137 86,959 21,676 1,013,466 1,056,252 504,137 494,158 480,196 448,412 324,749 392,888 3,256,233 3,460,194 3,852,674 3,822,398 1,196,331 1,305,256 38,051,991 36,450,104 1,983,624 2,056,619 145,409 8,372 48,772 4,990 160,158 354,499 62,027 40,758 191,184 185,608 (1,019,593) (811,379) (412,043) (217,152) 1,571,581 1,839,467 65,289,580 63,450,113 $ 66,861,161 $ 65,289,580 HUTCHINSON UTILITIES COMMISSION STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers Payments Received from Other Sources Payments to Suppliers Payments to Employees Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Other Noncapital Income Other Noncapital Expenses Net Cash Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Additions to Utility Plant Proceeds on Issuance of Long -Term Debt Principal Payments on Long -Term Debt Proceeds from Sale of Assets Interest Paid on Long -Term Debt Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest Income Net Increase (Decrease) in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR RECONCILIATION OF CASH AND CASH EQUIVALENTS Current Assets - Cash and Investments Restricted Assets - Cash and Investments Total Cash and Cash Equivalents See Accompanying Notes to the Financial Statements 12 2017 2016 $ 37,710,249 $ 36,282,324 1,857,497 1,755,202 (30,512,189) (28,587,731) (4,025,882) (3,814,264) 5,029,675 5,635,531 208,930 359,489 5,576 (1) 214,506 359,488 (4,110,022) (1,038,764) 17,341,351 (1,810,000) (1,285,000) 62,027 40,758 (936,247) (815,673) 10,547,109 (3,098,679) 138,747 (23,044) 15,930,037 2,873,296 18,081,459 15,208,163 $ 34,011,496 $ 18,081,459 $ 16,027,769 $ 15,541,834 17,983,727 2,539,625 $ 34,011,496 $ 18,081,459 HUTCHINSON UTILITIES COMMISSION STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 RECONCILIATION OF OPERATING INCOME (LOSS) TO CASH FLOWS FROM OPERATING ACTIVITIES Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Depreciation Pension Related Adjustments (Increase) Decrease in Assets Accounts Receivable Inventory Sales Tax Receivable Prepaid Items Increase (Decrease) in Liabilities Accounts Payable Due to Other Governments Customer Deposits Salaries Payable Compensated Absences Net Cash Provided (Used) by Operating Activities See Accompanying Notes to the Financial Statements 13 2017 2016 $ 1,983,624 $ 2,056,619 3,852,674 3,822,398 99,828 355,715 (560,392) (429,905) (119,005) 68,118 110,843 (17,227) (35,103) (101,312) 1,384,651 (138,479) (1,757,601) (18,320) (22,065) 30,639 17,497 57,837 24,172 $ 5,029,675 $ 5,635,531 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, is governed by five members who are appointed by the Council of the City of Hutchinson, Minnesota. The accompanying financial statements present only the Hutchinson Utilities Commission fund and are not intended to present fairly the financial position of the City of Hutchinson, Minnesota. The financial statements present the Commission and its component units. The Commission includes all funds, organizations, institutions, agencies, departments and offices that are not legally separate from such. Component units are legally separate entities for which the Commission is financially accountable, or for which the exclusion of the component unit would render the financial statements of the Commission misleading. The criteria used to determine if the Commission is financially accountable for a component unit includes whether or not 1) the Commission appoints the voting majority of the potential component unit's governing body and is able to impose its will on the potential component unit or is in a relationship of financial benefit or burden with the potential component unit, or 2) the potential component unit is fiscally dependent on and there is a potential for the potential component unit to provide specific financial benefits to, or impose specific financial burdens on, the Commission. As a result of applying the component unit definition criteria above, the Commission does not have any component units. B. FUND ACCOUNTING The operations of the Commission are recorded as a proprietary fund. The proprietary fund is used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION The financial statements include the operations of the City of Hutchinson Municipal Utilities. The Electric and Natural Gas divisions are treated as a single enterprise fund of the City of Hutchinson, Minnesota. The Utilities are governed by the Hutchinson Utilities Commission, which is appointed by the City Council. No other operations are controlled by the Hutchinson Utilities Commission. The accounts of the Commission are organized on the basis of fund accounting. The operation of the fund is accounted for with a separate set of self -balancing accounts that comprise its assets, liabilities, net position, revenues, and expenses. Government resources are allocated to and accounted for in the individual fund based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. 14 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION (Cont'd) The proprietary fund is accounted for using the accrual basis of accounting and economic resources measurement focus. Revenues are recognized when earned, and expenses are recognized when incurred. Revenue from electricity and gas sales is reflected in the accounts only at the time such revenue is actually billed to customers. Accordingly, no recognition is given in the accounts for revenue from sales between established cycle billing dates. The proprietary fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. It is generally the Commission's policy to use restricted resources first, then unrestricted resources as they are needed when an expense is incurred for purposes for which both restricted and unrestricted net position is available. D. DEPOSITS AND INVESTMENTS The Commission's cash and cash equivalents are considered to be cash on hand, deposits and highly liquid debt instruments purchased with original maturities of three months or less from the date of acquisition. The Commission may invest in the following types of investments as authorized by Minn. Stat. §§118A.04 and 118A.05: (1) securities which are direct obligations or are guaranteed or insured issues of the United States, its agencies, its instrumentalities, or organizations created by an act of Congress, except mortgage - backed securities defined as "high risk" by Minn. Stat. §118A.04, subd. 6; (2) mutual funds through shares of registered investment companies provided the mutual fund receives certain ratings depending on its investments; (3) general obligations of the State of Minnesota and its municipalities, and in certain state agency and local obligations of Minnesota and other states provided such obligations have certain specified bond ratings by a national bond rating service; (4) time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers acceptances of United States bank; (5) commercial paper issued by United States corporations or their Canadian subsidiaries that is rated in the highest quality category by at least two nationally recognized rating agencies and matures in 270 days or less; and 15 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) D. DEPOSITS AND INVESTMENTS (Cont'd) (6) with certain restrictions, in repurchase agreements, securities lending agreements, joint powers investment trusts, and guaranteed investment contracts. Cash and investments were comprised of a deposit account, a money market account, municipal bonds, agency bonds, and negotiable certificates of deposit. The Commission categorizes its fair value measurements within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs. The Commission has an investment policy in place that addresses interest rate risk, credit risk, concentration of credit risk and custodial risk as follows: Custodial Credit Risk - Deposits: For deposits, this is the risk that in the event of bank failure, the Commission's deposits may not be returned to it. Minnesota Statutes requires that all Commission deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must equal 110 percent. The Commission's investment policy states the collateralization level will be 110% of the market value of principal and accrued interest. When the pledged collateral consists of notes secured by first mortgages, the collateral level will be 140% of the market value of principal and accrued interest. Authorized collateral includes the obligations of the U.S. Treasury, agencies, and instrumentalities, shares of investment companies whose only investments are in the aforementioned securities, obligations of the State of Minnesota or its municipalities, bankers' acceptances, futures contracts, repurchase and reverse repurchase agreements, and commercial paper of the highest quality with a maturity of no longer than 270 days, as well as certain first mortgage notes, and certain other state or local government obligations. Minnesota statutes require that securities pledged as collateral be held in safekeeping by the Commission treasurer or in a financial institution other than that furnishing the collateral. Interest Rate Risk: This is the risk that market values of securities in a portfolio would decrease due to changes in market interest rates. The Commission's investment policy states the Commission should manage their interest rates based on safety, liquidity and the overall rate of return on the investment. The portfolio should contain both short-term and long-term investments to meet anticipated cash flow requirements. Extended maturities may be utilized to take advantage of higher yields; however, no investment shall be made with a term of more than ten years. Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State law limits investments in commercial paper and corporate bonds to the top two ratings issued by nationally recognized statistical rating organizations. The Commission's investment policy states it will comply with Minnesota Statutes Chapter 118A. ff HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) D. DEPOSITS AND INVESTMENTS (Cont'd) Concentration of Credit Risk: This is the risk of loss attributed to the magnitude of an investment in a single issuer. Investments should be diversified to avoid incurring unreasonable risk inherent in over investing in specific instruments, individual financial institutions or maturities. The Commission's investment policy states the Commission will attempt to diversify its investments according to type and maturity. Custodial Credit Risk - Investments: For an investment, this is the risk that in the event of the failure of the counterparty, the Commission will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Commission's investment policy states when investments purchased by the Commission are held in safekeeping by a broker/dealer, they must provide asset protection of $500,000 through the Securities Investor Protection Corporations (SIPC) and at least another $2,000,000 Supplemental Insurance Protection, provided by the broker dealer. E. RECEIVABLES AND OPERATING REVENUES AND EXPENSES An allowance for doubtful accounts is recorded based on historical electric and natural gas revenues, historical loss levels, and an analysis of the collectability of individual accounts. Meters are read throughout the month and revenues are recognized when utility services are billed to customers. Hutchinson Utilities Commission did not accrue revenues for services provided but not billed at the end of the year. Monthly billings from the wholesale power and natural gas suppliers, which are for power and natural gas costs to the last day of the month, are reflected in the accounts. F. INVENTORY Inventories of materials and supplies are recorded at average cost, which does not exceed market. G. PREPAID ITEMS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. H. CAPITAL ASSETS Capital assets, both tangible and intangible, are recorded at cost. The cost of additions to capital assets includes contracted work, direct labor, and materials. Repairs, replacement, and the renewal of items determined to be less than units of property are charged to maintenance. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets is included as part of the capitalized value of the assets constructed. During the current period, the Commission did not have any capitalized interest. 17 HUTCHINSON UTILITIES COMMISSION NOTE 1 NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) H. CAPITAL ASSETS (Cont'd) Depreciation of capital assets is computed using the straight-line method over the estimated service lives of the various assets as follows: Buildings 35-60 years Transmission plant (electric) 20-35 years Distribution plant (electric) 20-35 years Building improvement 15-30 years Transmission plant (gas) 10-45 years Distribution plant (gas) 10-45 years Generation plant 10-30 years General plant 5-10 years Vehicles 5-10 years Office equipment 3-5 years Computer equipment 3-5 years The Commission does not possess any material amounts of intangible assets. I. DEFERRED OUTFLOWS OF RESOURCES In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. Deferred outflows of resources represents a consumption of net position that applies to a future reporting period. During that future period, it will be recognized as an outflow of resources (expense). The Commission has one item that qualifies for reporting in this category on the financial statements which is related to pensions. COMPENSATED ABSENCES The liability for compensated absences reported in the financial statements consists of unpaid, accumulated vacation and sick leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. Compensated absences are accrued when incurred in the financial statements. The Statement of Net Position reports both current and noncurrent portions of compensated absences using full accrual accounting. The current portion consists of an amount based on a trend analysis of current usage of vacation and vested sick leave. The noncurrent portion consists of the remaining amount of vacation and total vested sick leave. Both union and nonunion employees can accrue a maximum of 200 hours per year of vacation pay. A nonunion employee may carry over a maximum of one time their annual accrual of vacation into the next year. Each permanent nonunion full-time employee must use at least 40 hours of vacation per year. A union employee may carry over up to forty hours of accrued vacation into the next year. Vacation pay is 100% payable at severance of employment. A maximum of 720 hours can be accrued for sick leave. After accumulation of 720 hours, a payback of one-third of the amount over 720 hours will be made annually. Upon retirement or death before retirement, severance payable is paid back at one-third of the amount over 240 hours will be made. 18 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) ► N rerk RI. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net position have been determined on the same basis as they are reported by PERA. For this purpose, plan contributions are recognized as of employer payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. L. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Employees of the Commission pay premiums based on a negotiated schedule. Since the insurance rate is not based on age, the Commission has an implicit rate subsidy factor in postemployment health care expenses. Additionally, Minnesota Statutes require the Commission to allow retired employees to stay on the health care plan with the retiree responsible to pay the entire premium for continuation coverage. The Commission's bargaining agreement and personnel policy do not provide for any contributions upon employee retirement. Any liability for other postemployment benefits is considered immaterial and not recognized in the financial statements. M. LONG-TERM OBLIGATIONS Long-term debt and other long-term obligations are reported as liabilities in the financial statements. Bond discounts and bond premiums are amortized over the terms of the related bond issues. N. DEFERRED INFLOWS OF RESOURCES In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. Deferred inflows of resources represents an acquisition of net position that applies to a future reporting period. During that future period, it will be recognized as an inflow of resources (revenue). The Commission has one item that qualify for reporting in this category on the financial statements which is related to pensions. O. NET POSITION Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources in the financial statements. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term debt used to build or acquire the capital assets. Net position is reported as restricted in financial statements when there are limitations on its use through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Unrestricted net position consists of all other net position that does not meet the definition of restricted or net investment in capital assets. P. BUDGETS AND BUDGETARY ACCOUNTING The General Manager is responsible for preparing and submitting an annual budget. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. 19 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) Q. USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and deferred outflows of resources, and liabilities and deferred inflows of resources and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. R. PRIOR YEAR INFORMATION The basic financial statements include certain prior -year partial comparative information in total but not at the level of detail required for a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the government's financial statements for the year ended December 31, 2016, from which the partial information was derived. NOTE 2. DEPOSITS AND INVESTMENTS A. DEPOSITS In accordance with applicable Minnesota Statutes, Hutchinson Utilities Commission maintains deposits at depository banks authorized by the Commission. Custodial Credit Risk - Deposits: The Commission's bank balances were not exposed to custodial credit risk because they were fully insured through the Federal Deposit Insurance Corporation as well as collateralized with securities held by the pledging financial institution's trust department or agent and in the Commission's name. Deposits in Bank Money Market Accounts Petty Cash Total Deposits B. INVESTMENTS The Commission had the following investments: 15,194,001 23,737 850 $ 15,218,588 Interest Rate Risk Fair Value Maturity Date Municipal Bonds $ 2,777,842 1-6 years Agency Bonds 14,551,081 1-6 years Negotiable Certificates of Deposit 1,463,985 1-5 years Total Investments $ 18,792,908 20 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 2. DEPOSITS AND INVESTMENTS (Cont'd) B. INVESTMENTS (Cont'd) The Municipal Bonds were rated A2/AA-. The Agency Bonds were rated Aaa/AA+. The Negotiable Certificates of Deposit were not rated. Investments' fair value measurements are as follows: Fair Value Measuring Unit Fair Level Level Level Value Inputs Inputs Inputs Municipal Bonds $ 2,777,842 $ $ 2,777,842 $ Agency Bonds 14,551,081 14,551,081 Negotiable Certificates of Deposit 1,463,985 1,463,985 Total Investments $ 18,792,908 $ 0 $ 18,792,908 $ 0 The following is a summary total of deposits and investments: Deposits (Note 3.A.) $ 15,218,588 Investments 18,792,908 Total Deposits and Investments $ 34,011,496 Deposits and investments are presented in the basic financial statements as follows: Current Assets Cash and Investments $ 16,027,769 Noncurrent Assets Restricted Assets Cash and Investments 17,983,727 Total Deposits and Investments $ 34,011,496 21 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 3. DEPOSITS AND INVESTMENTS - RESTRICTED Restricted cash and investments are designated by bond covenants for specific purposes. Restricted cash consisted of the following: Public Utility Revenue Refunding Bonds, Series 2012A Funds required to be held in a debt service reserve account based on criteria set aside in the bond issuance document. $ 2,352,786 Public Utility Revenue Bonds, Series 2017B Funds required to be held in a debt service reserve account based on criteria set aside in the bond issuance document. 1,209,043 Invested Unspent Bond Proceeds 14,421,898 Total Cash and Investments - Restricted $ 17,983,727 The following items have been designated by the Commission for the following purposes: Rate Stabilization - Electric $ 314,539 Rate Stabilization - Gas 200,027 Payment in Lieu of Taxes 1,251,469 Catastrophic 500,000 Expansion and Development Reserve Account Funds designated for the expansion and development of the utility. 3,450,000 Total Cash and Investments - Designated $ 5,716,035 The above Commission designated amounts are included in the Current Assets -Cash and Investments total. 22 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 4. CAPITAL ASSETS Capital asset activity was as follows: Capital Assets, Not Being Depreciated Land Easements Construction in Progress Total Capital Assets, Not Being Depreciated Capital Assets, Being Depreciated Structures and Improvements Equipment Software Total Capital Assets, Being Depreciated Less Accumulated Depreciation for Structures and Improvements Equipment Software Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Net Capital Assets Beginning Ending Balance Increase Decrease Balance $ 559,528 $ $ $ 559,528 4,030,760 4,030,760 7,525 2,882,900 (7,525) 2,882,900 4,597,813 2,882,900 (7,525) 7,473,188 113,752,554 876,445 114,628,999 16,075,840 358,202 (378,943) 16,055,099 478,352 (269,720) 208,632 130,306,746 1,234,647 (648,663) 130,892,730 54,186,909 3,347,221 57,534,130 9,715,369 503,361 (378,943) 9,839,787 429,290 2,092 (269,720) 161,662 64,331,568 3,852,674 (648,663) 67,535,579 65,975,178 (2,618,027) 0 63,357,151 $ 70,572,991 $ 264,873 $ (7,525) $ 70,830,339 23 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 5. INVENTORY Inventory consists of the following: Electric Division Fuel Oil and Lubricants $ 86,166 Plant Systems Material 3,844 Engine Parts 550,305 Distribution Materials 389,132 Transformers 131,600 Total Electric Division 1,161,047 Natural Gas Division Fittings 100,963 Transmission Line Gas 303,570 Total Natural Gas Division 404,533 Total Inventory $ 1,565,580 NOTE 6. LONG-TERM LIABILITIES A. COMPONENTS OF LONG-TERM LIABILITIES Interest Rates Public Utility Revenue Refunding Bonds, Series 2012A 4.00-5.00% Public Utility Revenue Bonds, Series 2017B 2.50-4.00% Bond Premium Compensated Absences Net Pension Liability Total Long -Term Liabilities Final Balance Maturity Outstanding 12/01 /2026 $ 15,195,000 12/01 /2037 16,675,000 2,321,358 528,831 4,111,253 $ 38,831,442 On March 31, 2003, the Hutchinson Utilities Commission issued Public Utility Revenue Bonds, Series 2003B for $31,725,000. $3,340,000 of the issue was used for the refunding of the Temporary Public Utility Revenue Bonds of 2001, and $28,385,000 was used for the natural gas pipeline project. On July 19, 2012, Hutchinson Utilities Commission issued Public Utility Revenue Refunding Bonds, Series 2012A for $20,720,000, with an interest rate of 4.00% to 5.00%. The Commission issued the bonds to advance refund a portion of the 2013 through 2025 maturities of the Public Utility Revenue Bonds, Series 2003B. The Commission completed the refunding to reduce its debt service payment over the next 14 years by $1,638,277. This results in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $1,245,620. On October 31, 2017, the Hutchinson Utilities Commission issued Public Utility Revenue Bonds of 2017 for $16,675,000. The proceeds of the issue were used to purchase and install new generators for the expansion of electric generation. 24 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 6. LONG-TERM LIABILITIES (Cont'd) B. MINIMUM DEBT PAYMENTS Annual debt service requirements to maturity for bonded debt is as follows: Revenue Refunding Revenue Bonds, Year Ending Bonds, Series 2012A Series 2017B December 31 Principal Interest Principal Interest 2018 $ 1,295,000 $ 674,100 $ $ 606,763 2019 1,370,000 609,350 625,000 558,656 2020 1,455,000 540,850 645,000 533,656 2021 1,565,000 482,650 675,000 507,856 2022 1,730,000 420,050 700,000 480,856 2023-2027 7,780,000 919,350 3,950,000 1,960,280 2028-2032 4,675,000 1,232,933 2033-2037 5,405,000 502,907 $ 15,195,000 $ 3,646,350 $ 16,675,000 $ 6,383,907 C. CHANGES IN LONG-TERM LIABILITIES Beginning Ending Due Within Balance Additions Reductions Balance One Year Revenue Bonds $ 590,000 $ 16,675,000 $ (590,000) $ 16,675,000 $ Revenue Refunding Bonds 16,415,000 (1,220,000) 15,195,000 1,295,000 Bond Premium 1,840,615 671,927 (191,184) 2,321,358 219,065 Compensated Absences 470,994 354,757 (296,920) 528,831 21,326 Net Pension Liability 5,634,936 1,729,394 (3,253,077) 4,111,253 Total Long -Term Liabilities $ 24,951,545 $ 19,431,078 $ (5,551,181) $ 38,831,442 $ 1,535,391 25 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 6. LONG-TERM LIABILITIES (Cont'd) D. PLEDGED REVENUES Future revenue pledged for the payment of long-term debt is as follows: Bond Issue/ Percent Use of Proceeds/ of Total Term of Type Debt Service Pledge Revenue Refunding Bonds, Series 2012A Natural Gas Utility Charges 100% 2012-2026 Revenue Bonds, Series 2017B Electric Utility Charges 100% 2017-2037 NOTE 7. RISK MANAGEMENT Remaining Principal Pledged Principal and Interest Revenue and Interest Paid Received $ 18,841,350 $ 1,955,100 $ 10,799,141 23,058,907 27,489,820 The Commission purchases commercial insurance coverage through the League of Minnesota Cities Insurance Trust (LMCIT), which is a public entity risk pool currently operating as a common risk management and insurance program, with cities in the state. The Commission pays an annual premium to the LMCIT for its insurance coverage. The LMCIT is self-sustaining through commercial companies for excess claims. The Commission is covered through the pool for any claims incurred but unreported, but retains risk for the deductible portion of its insurance policies. The amount of these deductibles is considered immaterial to the financial statements. There were no significant reductions in insurance from the previous year or settlements in excess of insurance coverage for any of the past three fiscal years. The Commission's workers' compensation insurance policy is retrospectively rated. With this type of policy, final premiums are determined after loss experience is known. The amount of premium adjustment for 2017 is estimated to be immaterial based on workers' compensation rates and salaries for the year. There are no other claims liabilities reported in the funds based on the requirements of accounting standards, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE A. PLAN DESCRIPTION The Commission participates in the following cost -sharing multiple -employer defined benefit pension plan administered by the Public Employees Retirement Association (PERA). PERA's defined benefit pension plans are established and administered in accordance with Minnesota Statutes Chapters 353 and 356. PERA's defined benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code. General Employees Retirement Plan (GERP): All full-time and certain part-time employees of the Commission, are covered by GERP. GERP members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. B. BENEFITS PROVIDED PERA provides retirement, disability and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90% funded for two consecutive years are given 2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1 % increases. The benefit provisions stated in the following paragraphs are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. GERP Benefits: Benefits are based on a member's highest average salary for any five successive years of allowable service, age and years of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first ten years of service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of average salary for each of the first ten years and 1.7% for each remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. 27 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) C. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. General Employees Retirement Fund (GERF) Contributions: Basic Plan members and Coordinated Plan members were required to contribute 9.1 % and 6.5%, respectively, of their annual covered salary in calendar year 2017. The Commission was required to contribute 11.78% of pay for Basic Plan members and 7.5% for Coordinated Plan members in calendar year 2017. The Commission's contributions to the GERF for the year ended December 31, 2017, were $314,977. The Commission's contributions were equal to the required contributions for each year as set by state statute. D. PENSION COSTS GERF Pension Costs: At December 31, 2017, the Commission reported a liability of $4,111,253 for its proportionate share of the GERF's net pension liability. The Commission's net pension liability reflected a reduction due to the State of Minnesota's contribution of $6 million to the fund in 2017. The State of Minnesota is considered a non - employer contributing entity and the state's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability associated with the Commission totaled $51,661. The net pension liability was measured as of June 30, 2017, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Commission's proportion of the net pension liability was based on the Commission's contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2016 through June 30, 2017, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2017, the Commission's proportionate share was 0.0644% at the end of the measurement period and 0.0694% at the beginning of the period. For the year ended December 31, 2017, the Commission recognized pension expense of $67,141 for its proportionate share of GERP's pension expense. In addition, the Commission recognized an additional $1,492 as pension expense (and grant revenue) for its proportionate share of the State of Minnesota's contribution of $6 million to the General Employees Fund. At December 31, 2017, the Commission reported its proportionate share of GERP's deferred outflows of resources and deferred inflows of resources from the following sources: Differences between expected and actual economic experience Changes in actuarial assumptions Differences between projected and actual investment earnings Changes in proportion Contributions paid to PERA subsequent to measurement date Deferred Outflows of Deferred Inflows Resources of Resources 135,495 $ 264,487 682,557 412,154 26,553 382,519 159,244 Totals $ 1,003,849 $ 1,059,160 28 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) D. PENSION COSTS (Cont'd) GERF Pension Costs: (Cont'd) $159,244 reported as deferred outflows of resources related to pensions resulting from Commission contributions to subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2018. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: Year ended December 31 Pension Expense Amount 2018 $ (29,582) 2019 140,422 2020 (150,879) 2021 (174,516) E. ACTUARIAL ASSUMPTIONS The total pension liability in the June 30, 2017 actuarial valuation was determined using the entry age normal actuarial cost method and the following actuarial assumptions: Assumption Inflation 2.50% per year Active Member Payroll Growth 3.25% per year Investment Rate of Return 7.50% per year Salary increases were based on a service -related table. Mortality rates for active members, retirees, survivors and disabilitants were based on RP 2014 tables for all plans for males or females, as appropriate, with slight adjustments to fit PERA's experience. Cost of living benefit increases for retirees are assumed to be one percent per year for all future years for the General Employees Plan through 2044 and then 2.5 percent thereafter for both plans. Actuarial assumptions used in the June 30, 2017 valuations were based on the results of actuarial experience studies. The most recent four-year experience study in the GERP was completed in 2015. The following changes in actuarial assumptions occurred in 2017: GERF: The Combined Service Annuity (CSA) loads were changed from 0.8% for active members and 60% for vested and non -vested deferred members. The revised CSA loads are now 0.0% for active member liability, 15.0% for vested deferred member liability and 3.0% for non -vested deferred member liability. The assumed post -retirement benefit increase rate was changed from 1.0% per year for all years to 1.0% per year through 2044 and 2.5% per year thereafter. 29 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd) E. ACTUARIAL ASSUMPTIONS (Cont'd) GERF: (Cont'd) The State Board of Investment, which manages the investments of PERA, prepares an analysis of the reasonableness on a regular basis of the long-term expected rate of return using a building-block method in which best -estimate ranges of expected future rates of return are developed for each major asset class. These ranges are combined to produce an expected long-term rate of return by weighting the expected future rates of return by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Domestic Stocks International Stocks Bonds Alternative Assets Cash F. DISCOUNT RATE Target Allocation 39% 19% 20% 20% 2% 100% Long -Term Expected Real Rate of Return 5.10% 5.30% 0.75% 5.90% 0.00% The discount rate used to measure the total pension liability in 2017 was 7.50%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at rates set in Minnesota Statutes. Based on these assumptions, the fiduciary net position of the GERF was projected to be available to make all projected future benefit payments of current plan participants. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. G. PENSION LIABILITY SENSITIVITY The following presents the Commission's proportionate share of the net pension liability for all plans it participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the Commission's proportionate share of the net pension liability would be if it were calculated using a discount rate 1 percentage point lower or 1 percentage point higher than the current discount rate: 1 % Lower Current Discount Rate 1 % Higher GERF 6.50% $ 6,376,860 7.50% 4,111,253 8.50% 2,256,443 H. PENSION PLAN FIDUCIARY NET POSITION Detailed information about each pension plan's fiduciary net position is available in a separately -issued PERA financial report that includes financial statements and required supplementary information. That report may be obtained on the Internet at www.mnpera.org. 30 HUTCHINSON UTILITIES COMMISSION NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 NOTE 9. DEFERRED COMPENSATION PLAN The Commission offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Commission employees, permits them to defer a portion of their salary into future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. Investments are managed by the plan's trustee under one of four investment options, or a combination thereof. The choice of the investment option(s) is made by the participants. NOTE 10. COMMITMENTS The Commission is committed to purchase 25 MW of its power requirements from Missouri River Energy Services pursuant to the Power Sale Agreement dated April 28, 2010. This contract is effective through January 1, 2046. NOTE 11. MAJOR CUSTOMERS The Electric Division derived approximately 52% of utility revenue from the top five major customers. The Natural Gas Division derived approximately 42% of its utility revenue from the top five major customers. NOTE 12. NET POSITION Net Investment in Capital Assets Net Capital Assets $ 70,830,339 Revenue Bonds Payable (31,870,000) Bond Premium (Unamortized) (2,321,358) Invested Unspent Bond Proceeds 14,421,898 $ 51,060,879 Restricted Cash and Investments Designated by Bond Covenants for Specific Purposes $ 3,561,829 NOTE 13. RECLASSIFICATIONS Certain immaterial prior year financial statement amounts have been reclassified to conform to the current year's presentation. There was no affect on total net position. NOTE 14. CONSTRUCTION COMMITMENT The commission has active construction projects that include the following: Units 6 & 7 Engine & Generator Sets $ Original Contract Remaining Commitment 9,123,500 $ 6,842,625 31 REQUIRED SUPPLEMENTARY INFORMATION This page intentionally left blank HUTCHINSON UTILITIES COMMISSION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY DECEMBER 31, 2017 Employer's Proportionate Share of the Net Pension Liability (Asset) Employer's State's and the State's Proportionate Proportionate Proportionate Share of the Employer's Share of the Share of the Net Pension Plan Fiduciary Employer's Proportionate Net Pension Net Pension Employer's Liability (Asset) Net Position Proportion Share of the Liability (Asset) Liability (Asset) Covered- as a Percentage of as a Percentage Fiscal of the Net Net Pension Associated with Associated with Employee its Covered- of the Total Year Pension Liability (Asset) the Employer the Employer Payroll Employee Payroll Pension Ending Liability (Asset) (a) (b) (a+b) (c) ((a+b)/c) Liability Pensions PERA - GERF 6/30/2017 0.0644% $ 4,111,253 $ 51,661 $ 4,162,914 $ 4,146,010 100.41% 75.90% 6/30/2016 0.0694% 5,634,936 73,588 5,708,524 4,334,384 131.70% 68.90% 6/30/2015 0.0714% 3,700,319 3,700,319 4,241,304 87.24% 78.20% The City implemented GASB Statement No. 68 for fiscal year ended December 31, 2015. Information for prior years is not available 32 HUTCHINSON UTILITIES COMMISSION SCHEDULE OF EMPLOYER CONTRIBUTIONS DECEMBER 31, 2017 Contributions Contributions in Relation as a Percentage Statutorily to the Statutorily Contribution Covered- of Covered - Required Required Deficiency Employee Employee Fiscal Year Contribution Contribution (Excess) Payroll Payroll Ending (a) (b) (a-b) (d) (b/d) Pensions PERA - GERF 12/31/2017 $ 314,977 $ 314,977 $ $ 4,201,039 7.50% 12/31/2016 310,915 310,915 4,145,538 7.50% 12/31/2015 327,065 327,065 4,360,868 7.50% The City implemented GASB Statement No. 68 for fiscal year ended December 31, 2015. Information for prior years is not available. 33 HUTCHINSON UTILITIES COMMISSION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION DECEMBER 31, 2017 NOTE 1. CHANGES IN PLAN PROVISIONS A. GERF 2017 Changes: No changes. 2016 Changes: No changes. 2015 Changes: On January 1, 2015 the Minneapolis Employees Retirement Fund was merged into the General Employees Fund, which increased the total pension liability by $1.1 billion and increased the fiduciary plan net position by $892 million. Upon consolidation, state and employer contributions were revised. NOTE 2. CHANGES IN ACTUARIAL ASSUMPTIONS A. GERF: 2017 Changes: The Combined Service Annuity (CSA) loads were changed from 0.8% for active members and 60% for vested and non -vested deferred members. The revised CSA loads are now 0.0% for active member liability, 15.0% for vested deferred member liability and 3.0% for non -vested deferred member liability. The assumed post -retirement benefit increase rate was changed from 1.0% per year for all years to 1.0% per year through 2044 and 2.5% per year thereafter. 2016 Changes: The assumed post -retirement benefit increase rate was changed from 1.0% per year through 2035 and 2.5% per year thereafter to 1.0% per year for all years. The assumed investment return was changed from 7.9% to 7.5%. The single discount rate was changed from 7.9% to 7.5%. Other assumptions were changed pursuant to the experience study dated June 30, 2015. The assumed future salary increases, payroll growth, and inflation were decreased by 0.25% to 3.25% for payroll growth and 2.50% for inflation. 2015 Changes: The assumed post -retirement benefit increase rate was changed from 1.0% per year through 2030 and 2.5% per year thereafter to 1.0% per year through 2035 and 2.5% per year thereafter. 34 This page intentionally left blank SUPPLEMENTARY INFORMATION This page intentionally left blank HUTCHINSON UTILITIES COMMISSION COMBINING STATEMENT OF NET POSITION DECEMBER 31, 2017 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $46,236 and $24,896, Respectively) Interest Receivable Sales Tax Receivable Inventory Prepaid Items Total Current Assets Noncurrent Assets Restricted Assets Cash and Investments Capital Assets Assets Not Being Depreciated Other Capital Assets, Net of Depreciation Net Capital Assets Total Noncurrent Assets Total Assets Deferred Outflows of Resources Related to Pensions Total Assets and Deferred Outflows of Resources LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Current Portion of Long -Term Liabilities Bonds Payable Bond Premium Accrued Vacation Accounts Payable Customer Deposits Accrued Expenses Interest Salaries Payable Total Current Liabilities Long -Term Liabilities Noncurrent Portion of Long -Term Liabilities Bonds Payable Bond Premium Accrued Vacation Accrued Severance Net Pension Liability Total Long -Term Liabilities Total Liabilities Deferred Inflows of Resources Related to Pensions Net Position Net Investment in Capital Assets Restricted Unrestricted Total Net Position Total Liabilities, Deferred Inflows of Resources and Net Position Natural Electric Gas Division Division Total 7,650,028 $ 8,377,741 $ 16,027,769 2,051,172 2,062,668 4,113,840 19,039 19,039 38,078 34,743 34,743 1,161,047 404,533 1,565,580 6,596 130,830 137,426 10,922,625 10,994,811 21,917,436 15,630,941 2,352,786 17,983,727 3,573,269 3,899,919 7,473,188 37,153,029 26,204,122 63,357,151 40,726,298 30,104,041 70,830,339 56,357,239 32,456,827 88,814,066 67,279,864 43,451,638 110,731,502 752,887 250,962 1,003,849 $ 68,032,751 $ 43,702,600 $ 111,735,351 $ $ 1,295,000 $ 1,295,000 33,457 185,608 219,065 16,187 5,139 21,326 1,955,546 2,284,301 4,239,847 284,648 153,272 437,920 90,553 56,175 146,728 122,172 36,921 159,093 2,502,563 4,016,416 6,518,979 16,675,000 13,900,000 30,575,000 632,894 1,469,399 2,102,293 307,549 97,635 405,184 73,740 28,581 102,321 3,083,440 1,027,813 4,111,253 20,772,623 16,523,428 37,296,051 23,275,186 20,539,844 43,815,030 794,370 264,790 1,059,160 37,806,845 13,254,034 51,060,879 1,209,043 2,352,786 3,561,829 4,947,307 7,291,146 12,238,453 43,963,195 22,897,966 66,861,161 $ 68,032,751 $ 43,702,600 $ 111,735,351 K1 HUTCHINSON UTILITIES COMMISSION COMBINING SCHEDULE OF REVENUES AND EXPENSES YEAR ENDED DECEMBER 31, 2017 OPERATING REVENUES Electric Energy Sales Natural Gas Sales Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Production Operations Maintenance Purchased Power/Gas Other Power Supply Transmission Operations Maintenance Distribution Operations Maintenance Customer Accounts Expense Sales Expense Administrative and General Depreciation Contribution to City of Hutchinson Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position Electric Natural Gas Division Division Total $ 27,489,820 $ $ 27,489,820 10, 799,141 10, 799,141 167,159 1,579,495 1,746,654 27,656,979 12,378,636 40,035,615 2,670,073 2,670,073 401,731 401,731 14,257,952 6,883,154 21,141,106 376,398 376,398 2,625,127 122,811 2,747,938 82,311 4,648 86,959 547,996 465,470 1,013,466 345,415 158,722 504,137 275,042 205,154 480,196 231,090 93,659 324,749 2,452,991 803,242 3,256,233 2,830,636 1,022,038 3,852,674 829,200 367,131 1,196,331 27,925,962 10,126,029 38,051,991 (268,983) 2,252,607 1,983,624 78,873 66,536 145,409 5,171 43,601 48,772 142,012 18,146 160,158 48,295 13,732 62,027 5,576 185,608 191,184 (288,264) (731,329) (1,019,593) (8,337) (403,706) (412,043) $ (277,320) $ 1,848,901 $ 1,571,581 36 HUTCHINSON UTILITIES COMMISSION STATEMENT OF NET POSITION ELECTRIC DIVISION DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31. 2016 2017 2016 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments $ 7,650,028 $ 8,567,614 Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $46,236 and $46,236, Respectively) 2,051,172 1,742,959 Interest Receivable 19,039 20,106 Sales Tax Receivable 34,743 145,586 Inventory 1,161,047 1,040,831 Prepaid Items 6,596 61,943 Total Current Assets 10,922,625 11,579,039 Noncurrent Assets Restricted Assets Cash and Investments 15,630,941 25,081 Capital Assets Assets Not Being Depreciated 3,573,269 697,894 Other Capital Assets, Net of Depreciation 37,153,029 39,038,851 Net Capital Assets 40,726,298 39,736,745 Total Noncurrent Assets 56,357,239 39,761,826 Total Assets 67,279,864 51,340,865 Deferred Outflows of Resources Related to Pensions 752,887 1,746,060 Total Assets and Deferred Outflows of Resources $ 68,032,751 $ 53,086,925 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Current Portion of Long -Term Liabilities Bonds Payable $ $ 125,000 Bond Premium 33,457 Accrued Vacation 16,187 14,320 Accounts Payable 1,955,546 1,807,467 Due to Other Governments 902,446 Customer Deposits 284,648 296,556 Accrued Expenses Interest 90,553 2,124 Salaries Payable 122,172 98,837 Total Current Liabilities 2,502,563 3,246,750 Long -Term Liabilities Noncurrent Portion of Long -Term Liabilities Bonds Payable 16,675,000 465,000 Bond Premium 632,894 Accrued Vacation 307,549 272,070 Accrued Severance 73,740 66,478 Net Pension Liability 3,083,440 4,226,202 Total Long -Term Liabilities 20,772,623 5,029,750 Total Liabilities 23,275,186 8,276,500 Deferred Inflows of Resources Related to Pensions 794,370 569,910 Net Position Net Investment in Capital Assets 37,806,845 39,146,745 Restricted 1,209,043 25,081 Unrestricted 4,947,307 5,068,689 Total Net Position 43,963,195 44,240,515 Total Liabilities, Deferred Inflows of Resources and Net Position $ 68,032,751 $ 53,086,925 37 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING REVENUES Utility Revenues Residential General Service Industrial Street Lighting Resale Total Utility Revenues Other Operating Revenues Penalties/Fees Security Lights Total Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Production Operations Supervision and Engineering Other Employee Benefits Fuels Station Gas for Generation Transportation Waste Disposal Total Operations Maintenance Structures Generating Units Other Equipment Total Maintenance Total Production Power Costs Purchased Power 2017 2016 Over (Under) Budget Actual Budget Actual $ 5,340,182 $ 5,341,820 $ 1,638 $ 5,269,261 9,192,523 9,050,034 (142,489) 8,567,839 10,505,372 10,778,629 273,257 10,941,617 147,384 147,484 100 144,641 2,310,110 2,171,853 (138,257) 1,931,859 27,495,571 27,489,820 (5,751) 26,855,217 270,200 155,879 (114,321) 282,041 10,000 11,280 1,280 11,253 280,200 167,159 (113,041) 293,294 27,775,771 27,656,979 (118,792) 27,148,511 1,594,158 986,955 (607,203) 965,917 5,035 93,913 88,878 99,801 30,100 12,149 (17,951) 27,247 129,500 98,675 (30,825) 117,788 1,090,301 804,300 (286,001) 1,046,962 651,700 651,699 (1) 647,166 26,000 22,382 (3,618) 31,745 3,526,794 2,670,073 (856,721) 2,936,626 10,000 8,938 (1,062) 9,160 493,496 285,528 (207,968) 343,228 40,000 107,265 67,265 98,275 543,496 401,731 (141,765) 450,663 4,070,290 3,071,804 (998,486) 3,387,289 14,208,043 14,257,952 49,909 13,521,486 38 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING EXPENSES (Cont'd) Other Power Supply Supervision and General Salaries Training Professional Services Total Other Power Supply Transmission Operations Transmission Station Total Operations Maintenance Plant and Equipment Total Transmission Distribution Operations Supervision and Engineering Line Meter Territory Service Agreement Other Total Operations Maintenance Station Equipment Underground Lines Lines Transformers Street Lighting Other Equipment Total Maintenance Total Distribution Customer Accounts Expense Meter Reading Collection Other Employee Benefits Uncollectible Accounts Customer Services Meetings and Training Total Customer Accounts Expense 2017 7n 1 Fi Over (Under) Budget Actual Budget Actual $ 450,552 $ 337,455 $ (113,097) $ 328,017 1,000 2,343 1,343 424 36,600 36,600 39,650 488,152 376,398 (111,754) 368,091 2,550,000 2,462,733 (87,267) 2,215,298 145,000 162,394 17,394 144,105 2,695,000 2,625,127 (69,873) 2,359,403 76,483 82,311 5,828 16,956 2,771,483 2,707,438 (64,045) 2,376,359 1,042,844 301,448 (741,396) 290,367 72,388 76,930 4,542 68,027 1,688 37,189 35,501 45,552 17,500 12,210 (5,290) 26,187 56,000 120,219 64,219 176,159 1,190,420 547,996 (642,424) 606,292 12,307 18,689 6,382 13,495 127,181 189,034 61,853 204,974 13,908 13,062 (846) 16,049 75,764 81,510 5,746 63,319 45,006 43,120 (1,886) 65,778 274,166 345,415 71,249 363,615 1,464,586 893,411 (571,175) 969,907 10,361 51,216 40,855 26,057 206,372 141,677 (64,695) 146,035 544 9,980 9,436 14,497 5,500 30,612 25,112 18,634 58,078 41,557 (16,521) 41,404 2,750 (2,750) 283,605 275,042 (8,563) 246,627 39 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING EXPENSES (Cont'd) Sales Expense Salaries Conservation Total Sales Expense Administrative and General Supervision and General Salaries Office Supplies Outside Services Employed Property Insurance Medical Insurance Other Employee Benefits Regulatory Commissioners Salaries Travel Miscellaneous Maintenance of General Plant Total Administrative and General Depreciation Contribution to City of Hutchinson Payment in Lieu of Taxes Roadway Lighting Total Contribution to City of Hutchinson Total Operating Expenses Operating Income (Loss) 2017 7n 1 Fi Over (Under) Budget Actual Budget Actual $ 43,201 $ 46,640 $ 3,439 $ 53,242 314,000 184,450 (129,550) 241,424 357,201 231,090 (126,111) 294,666 439,059 427,182 (11,877) 433,081 322,664 362,898 40,234 274,966 110,306 118,129 7,823 116,859 88,200 111,072 22,872 77,427 188,708 611,838 423,130 653,422 11,250 684,291 673,041 843,656 30,000 20,912 (9,088) 18,084 15,836 16,140 304 15,273 9,000 3,719 (5,281) 2,668 78,000 57,668 (20,332) 49,976 46,842 39,142 (7,700) 36,894 1,339,865 2,452,991 1,113,126 2,522,306 2,800,000 2,830,636 30,636 2,820,446 681,816 681,816 754,469 147,384 147,384 144,535 829,200 829,200 0 899,004 28,612,425 27,925,962 (686,463) 27,406,181 (836,654) (268,983) 567,671 (257,670) .o HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - ELECTRIC DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 2017 NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR 2016 Over (Under) Budget Actual Budget Actual $ 50,000 $ 78,873 $ 28,873 $ 4,186 5,171 5,171 (24,216) 142,012 142,012 83,272 48,295 48,295 20,379 5,576 5,576 (27,888) (288,264) (260,376) (31,085) 22,112 (8,337) (30,449) 52,536 $ (814,542) (277,320) $ 537,222 (205,134) 44,240,515 44,445,649 $ 43,963,195 $ 44,240,515 41 HUTCHINSON UTILITIES COMMISSION STATEMENT OF NET POSITION NATURAL GAS DIVISION DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2016 2017 2016 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES Assets Current Assets Cash and Investments $ 8,377,741 $ 6,974,220 Receivables Accounts Receivable (Net of Allowance for Doubtful Accounts of $24,896 and $24,896, Respectively) 2,062,668 1,810,489 Interest Receivable 19,039 11,310 Inventory 404,533 405,744 Prepaid Items 130,830 40,380 Total Current Assets 10,994,811 9,242,143 Noncurrent Assets Restricted Assets Cash and Investments 2,352,786 2,514,544 Capital Assets Assets Not Being Depreciated 3,899,919 3,899,919 Other Capital Assets, Net of Depreciation 26,204,122 26,936,327 Net Capital Assets 30,104,041 30,836,246 Total Noncurrent Assets 32,456,827 33,350,790 Total Assets 43,451,638 42,592,933 Deferred Outflows of Resources Related to Pensions 250,962 582,020 Total Assets and Deferred Outflows of Resources $ 43,702,600 $ 43,174,953 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Liabilities Current Liabilities Current Portion of Long -Term Liabilities Bonds Payable $ 1,295,000 $ 1,220,000 Bond Premium 185,608 185,608 Accrued Vacation 5,139 4,628 Accounts Payable 2,284,301 1,047,729 Due to Other Governments 855,155 Customer Deposits 153,272 159,684 Accrued Expenses Interest 56,175 61,258 Salaries Payable 36,921 29,617 Total Current Liabilities 4,016,416 3,563,679 Long -Term Liabilities Noncurrent Portion of Long -Term Liabilities Bonds Payable 13,900,000 15,195,000 Bond Premium 1,469,399 1,655,007 Accrued Vacation 97,635 87,926 Accrued Severance 28,581 25,572 Net Pension Liability 1,027,813 1,408,734 Total Long -Term Liabilities 16,523,428 18,372,239 Total Liabilities 20,539,844 21,935,918 Deferred Inflows of Resources Related to Pensions 264,790 189,970 Net Position Net Investment in Capital Assets 13,254,034 12,580,631 Restricted 2,352,786 2,514,544 Unrestricted 7,291,146 5,953,890 Total Net Position 22,897,966 21,049,065 Total Liabilities, Deferred Inflows of Resources and Net Position $ 43,702,600 $ 43,174,953 42 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - NATURAL GAS DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING REVENUES Utility Revenues Residential Commercial Industrial Total Utility Revenues Other Operating Revenues Gas Transportation Contract - New Ulm Transportation - Electric Division Penalties/Fees Total Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Purchased Natural Gas Transmission Operations Supervision and Engineering Other Total Operations Maintenance Supervision and Engineering Other Total Maintenance Total Transmission Distribution Operations Supervision and Engineering Other Employee Benefits Mains and Services Meters Other Total Operations Maintenance Mains and Services Meters Other Equipment Total Maintenance Total Distribution 2017 7n 1 Fi Over (Under) Budget Actual Budget Actual $ 4,474,618 $ 3,937,048 $ (537,570) $ 3,839,034 3,388,924 3,019,230 (369,694) 2,824,329 3,694,049 3,842,863 148,814 3,215,714 11,557,591 10,799,141 (758,450) 9,879,077 734,878 902,042 167,164 831,969 651,700 651,699 (1) 647,166 25,754 25,754 1,386,578 1,579,495 192,917 1,479,135 12,944,169 12,378,636 (565,533) 11,358,212 6,782,224 6,883,154 100,930 5,697,867 120,464 77,029 (43,435) 55,556 45,000 45,782 782 59,178 165,464 122,811 (42,653) 114,734 1,741 1,124 (617) 3,902 8,500 3,524 (4,976) 818 10,241 4,648 (5,593) 4,720 175,705 127,459 (48,246) 119,454 233,825 171,082 (62,743) 181,625 2,112 112,666 110,554 116,665 314,922 124,749 (190,173) 107,259 871 19,765 18,894 966 55,500 37,208 (18,292) 43,445 607,230 465,470 (141,760) 449,960 159,657 116,256 (43,401) 101,887 25,251 1,412 (23,839) 641 195,159 41,054 (154,105) 28,015 380,067 158,722 (221,345) 130,543 987,297 624,192 (363,105) 580,503 43 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - NATURAL GAS DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 OPERATING EXPENSES (Cont'd) Customer Accounts Expense Meter Reading Collection Other Employee Benefits Uncollectible Accounts Customer Services Meetings and Training Total Customer Accounts Expense Sales Expense Salaries Conservation Total Sales Expense Administrative and General Supervision and General Salaries Office Supplies Outside Services Employed Property Insurance Medical Insurance Other Employee Benefits Regulatory Commissioners Salaries Travel Miscellaneous Maintenance of General Plant Total Administrative and General Depreciation Contribution to City of Hutchinson Payment in Lieu of Taxes Total Operating Expenses Operating Income (Loss) 2017 2016 Over (Under) Budget Actual Budget Actual $ 8,477 $ 41,664 $ 33,187 $ 21,319 168,851 116,506 (52,345) 119,483 445 8,650 8,205 11,861 4,500 4,333 (167) 15,246 47,519 34,001 (13,518) 33,876 2,250 (2,250) 232,042 205,154 (26,888) 201,785 43,201 30,085 (13,116) 17,747 140,509 63,574 (76,935) 80,475 183,710 93,659 (90,051) 98,222 146,353 143,981 (2,372) 144,361 107,554 120,613 13,059 91,656 36,769 46,744 9,975 38,953 58,800 30,723 (28,077) 63,349 62,903 153,415 90,512 217,807 3,750 200,773 197,023 281,219 20,000 16,097 (3,903) 14,796 10,558 10,761 203 12,496 6,000 3,030 (2,970) 2,183 52,000 47,182 (4,818) 40,889 31,228 29,923 (1,305) 30,179 535,915 803,242 267,327 937,888 1,008,000 1,022,038 14,038 1,001,952 367,131 367,131 406,252 10,272,024 10,126,029 (145,995) 9,043,923 2,672,145 2,252,607 (419,538) 2,314,289 HUTCHINSON UTILITIES COMMISSION DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION BUDGET AND ACTUAL - NATURAL GAS DIVISION YEAR ENDED DECEMBER 31, 2017 WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2016 2017 NONOPERATING REVENUES (EXPENSES) Interest Income Merchandise and Contract Work, Net Miscellaneous Income Gain (Loss) on Disposal of Assets Bond Premium Interest Expense Total Nonoperating Revenues (Expenses) Change in Net Position NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR 2016 Over (Under) Budget Actual Budget Actual $ 50,000 $ 66,536 $ 16,536 $ 4,186 33,000 43,601 10,601 29,206 18,146 18,146 271,227 13,732 13,732 20,379 185,608 185,608 185,608 (735,200) (731,329) 3,871 (780,294) (466,592) (403,706) 62,886 (269,688) $ 2,205,553 1,848,901 $ (356,652) 2,044,601 21,049,065 19,004,464 $ 22,897,966 $ 21,049,065 45 This page intentionally left blank COMPLIANCE SECTION This page intentionally left blank CDIS CERTIIFIEG PUBLIC ACCOUNTANT'S CONSULTANTS INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE Members of the Hutchinson Utilities Commission Hutchinson, Minnesota We have audited, in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Hutchinson Utilities Commission's basic financial statements, and have issued our report thereon dated June 15, 2018. The Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minn. Stat. § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax increment financing. Our audit considered all of the listed categories, except that we did not test for compliance in tax increment financing because Hutchinson Utilities Commission does not have any tax increment financing. In connection with our audit, nothing came to our attention that caused us to believe that the Commission failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide for Cities. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention regarding the Commission's noncompliance with the above referenced provisions. The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other purpose. CONWAY, DEUTH & SCHMIESING, PLLP Certified Public Accountants & Consultants Litchfield, Minnesota June 15, 2018 46 Members: American Institute of CerWied Public Accountants, Minnesota Society of Certified Public Accountants Willmar Office 331 Third St SW, Ste 2 PO lox 570 Willmar, MN56201 P (320) 235-3311 T (888) 388-1040 Benson Office Morris Office 1209 Pacific Ave, Ste 3 401 Atlantic Ave Benson, MN 56215 Morris, MN 56267 P' (320) 843-2302 P (320) 589-2602 w,,v-a+ c 1:AurF)a :a:,n Litchf etd Office 820 Sibley Ave N Litchfield, MN 55355 P (320) 693-7975 t. Cloud- artelt Office Ste 110 2351 Connecticut Ave Sartell, MN, 56377 P (320) 252-7565 T (800) 862-1337 This page intentionally left blank CDS CERTIFIED PUBLIC ACCOUNTANTS CONSULTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Members of the Hutchinson Utilities Commission Hutchinson, Minnesota We have audited in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of and for the year ended December 31, 2017, and the related notes to the financial statements, which collectively comprise the Commission's basic financial statements, and have issued our report thereon dated June 15, 2018. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Commission's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the Commission's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 47 Members: American Institute of Certified Public Accountants, Minnesota Society of Certified Public Accountants Willmar Office 331 Third St SW, Ste 2 PO Box 570 Wiftar, MN56201 P (320) 235-3311 T (888) 388-1040 Benson Office Morris Office 1209 Pacific Ave, Ste 3 401 Atlantic Ave Benson, MN 56215 Morris, MN 56267 P' (320) 843-2302 P (320) 589-2602 Litchfield Office 820 Sibley Ave N Litchfield, MN 55355 P (320) 693-7975 St. Cloud-Sartell Office Ste 110 2351 Connecticut Ave Sarte[l, MNI 56377 P (320) 252-7565 T (800) 862-1337 Compliance and Other Matters As part of obtaining reasonable assurance about whether Hutchinson Utilities Commission's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the Commission's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ��m &a& q , no CONWAY, DEUTH & SCHMIESING, PLLP Certified Public Accountants & Consultants Litchfield, Minnesota June 15, 2018 M. HUTCHINSON UTILITIES COMMISSION Finding Reference SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS DECEMBER 31, 2017 Year Finding If Not Corrected, Provide Planned Finding Title Status Initially Occurred Corrective Action or Other Explanation Financial Statement Findings: None Minnesota Legal Compliance Findings: ►f= i • HUTCHINSON UTILITIES COMMISSION COMBINED DIVISIONS FINANCIAL REPORT FOR JUNE, 2018 2018 2017 p %Chnq 2018 2017 p %Chnq Full YrBud %of Bud Combined Division Customer Revenue $ 2,791,990 $ 2,717,720 $ 74,270 2.7% $ 18,819,374 $ 17,835,970 $ 983,404 5.5% $ 35,763,605 52.6% Sales for Resale $ 257,167 $ 218,851 $ 38,317 17.5% $ 1,521,868 $ 869,920 $ 651,948 74.9% $ 2,519,200 60.4% NU Transportation $ 71,183 $ 71,174 $ 9 0.0% $ 428,712 $ 431,527 $ (2,815) (0.7%) $ 739,440 58.0% Electric Division Transfer $ 54,697 $ 54,308 $ 389 0.7% $ 328,183 $ 325,850 $ 2,333 0.7% $ 656,366 50.0% Other Revenues $ 44,515 $ 31,848 $ 12,667 39.8% $ 272,594 $ 343,024 $ (70,430) (20.5%) $ 492,808 55.3% Interest Income $ 21,623 $ 5,052 $ 16,571 328.0% $ 149,518 $ 63,577 $ 85,941 135.2% $ 100,000 149.5% TOTAL REVENUES $ 3,241,175 $ 3,098,953 $ 142,222 4.6% $ 21,520,250 $ 19,869,868 $ 1,650,382 8.3% $ 40,271,419 53.4% Salaries & Benefits Purchased Commodities Transmission Generator Fuel/Chem. Depreciation Transfers (Elect./City) Operating Expense Debt Interest TOTAL EXPENSES NET PROFIT/(LOSS) $ 469,277 $ 466,387 $ 2,890 0.62% $ 2,926,193 $ 2,761,989 $ 164,203 5.9% $ 6,363,429 46.0% $ 1,606,461 $ 1,575,208 $ 31,253 2.0% $ 10,602,478 $ 10,276,119 $ 326,359 3.2% $ 19,600,000 54.1% $ 222,875 $ 161,519 $ 61,355 38.0% $ 1,118,430 $ 1,117,423 $ 1,006 0.1% $ 2,630,000 42.5% $ 115,958 $ 104,140 $ 11,818 11.3% $ 506,192 $ 254,476 $ 251,716 98.9% $ 992,082 51.0% $ 325,667 $ 317,333 $ 8,333 2.6% $ 1,954,000 $ 1,904,000 $ 50,000 2.6% $ 3,908,000 50.0% $ 158,986 $ 154,003 $ 4,984 3.2% $ 953,917 $ 924,015 $ 29,902 3.2% $ 1,907,835 50.0% $ 98,000 $ 143,452 $ (45,452) (31.7%) $ 926,945 $ 1,156,464 $ (229,519) (19.8%) $ 2,490,809 37.2% $ 103,551 $ 63,382 $ 40,169 63.4% $ 621,309 $ 380,294 $ 241,015 63.4% $ 1,280,863 48.5% $ 3,100,775 $ 2,985,425 $ 115,350 3.9% $ 19,609,464 $ 18,774,781 $ 834,682 4.4% $ 39,173,018 50.1% $ 140,400 $ 113,527 $ 26,872 23.7% $ 1,910,786 $ 1,095,086 $ 815,700 74.5% $ 1,098,401 174.0% June June YTD YTD 2018 2017 Change 2018 2017 Change Gross Margin % 31.9% 31.6% 0.3% 35.6% 32.9°% 2 7°% Operating Income Per Revenue $ (%) 6.2% 4.6% 1.5% 10.5% 6.0% 4.5% Net Income Per Revenue $ (%): 4.3% 3.7% 0.7% 8.9% 5.5% 3.4% 2018 HUC Budget Target 32.2% IIIIIIIIIIIIIII 10NNNNNNNN�1 5.2°%��IINIINIdI 2.7°% Notes/Graphs: After having too few days in the billings for April 2017 and too many days in the billings for May 2017 due to software conversion, monthly comparisons are now more accurate between June 2018 and June 2017. HUTCHINSON UTILITIES COMMISSION ELECTRIC DIVISION FINANCIAL REPORT FOR JUNE, 2018 2018 2017 2 . Electric Division Customer Revenue $ 2,434,567 $ 2,308,454 $ 126,114 Sales for Resale $ 257,167 $ 218,851 $ 38,317 Other Revenues $ 18,100 $ 9,170 $ 8,930 Interest Income $ 12,205 $ 2,526 $ 9,679 TOTAL REVENUES $ 2,722,040 $ 2,539,000 $ 183,040 Salaries & Benefits $ 371,453 $ 371,050 $ 403 Purchased Power $ 1,410,460 $ 1,348,840 $ 61,620 Transmission $ 222,875 $ 161,519 $ 61,355 Generator Fuel/Chem. $ 115,958 $ 104,140 $ 11,818 Depreciation $ 241,667 $ 233,333 $ 8,333 Transfers (Elect./City) $ 128,224 $ 123,408 $ 4,816 Operating Expense $ 57,118 $ 89,157 $ (32,039) Debt Interest $ 47,376 $ 2,124 $ 45,252 TOTAL EXPENSES $ 2,595,131 $ 2,433,573 $ 161,558 NET PROFIT/(LOSS) $ 126,909 $ 105,427 $ 21,482 50% of Year Comp. %Chna 2018 2017 2 . %Chna Full YrBud %of Bud 5.5% $ 12,301,071 $ 12,124,662 $ 176,409 1.5% $ 25,325,189 48.6% 17.5% $ 1,521,868 $ 869,920 $ 651,948 74.9% $ 2,519,200 60.4% 97.4% $ 99,863 $ 212,398 $ (112,535) (53.0%) $ 208,800 47.8% 383.2% $ 83,123 $ 31,789 $ 51,335 161.5% $ 50,000 166.2% 7.2% $ 14,005,925 $ 13,238,768 $ 767,157 5.8% $ 28,103,189 49.8% 0.1% $ 2,292,432 $ 2,168,593 $ 123,839 5.7% $ 4,942,964 4.6% $ 7,203,811 $ 6,963,100 $ 240,712 3.5% $ 14,000,000 38.0% $ 1,118,430 $ 1,117,423 $ 1,006 0.1% $ 2,630,000 11.3% $ 506,192 $ 254,476 $ 251,716 98.9% $ 992,082 3.6% $ 1,450,000 $ 1,400,000 $ 50,000 3.6% $ 2,900,000 3.9% $ 769,346 $ 740,450 $ 28,897 3.9% $ 1,538,693 (35.9%) $ 614,798 $ 819,947 $ (205,148) (25.0%) $ 1,613,834 2,130.6% $ 284,258 $ 12,744 $ 271,515 2,130.6% $ 606,763 6.6% $ 14,239,269 $ 13,476,733 $ 762,536 5.7% $ 29,224,336 20.4% $ (233,343) $ (237,964) $ 4,621 (1.9%) $ (1,121,1471 46.4% 51.5% 42.5% 51.0% 50.0% 50.0% 38.1% 46.8% 48.7% 20.8% 50% of Year Comp. 2018 2017 2 . %Chna 2018 2017 2 . %Chna Full YrBud %of Bud Electric Division Residential 4,924,959 4,628,679 296,280 6.40% 24,645,388 23,138,460 1,506,928 6.51% 50,432,797 48.9% All Electric 140,452 138,712 1,740 1.25% 1,417,076 1,276,602 140,474 11.00% 2,611,705 54.3% Small General 1,646,807 1,579,660 67,147 4.25% 9,353,169 8,745,671 607,498 6.95% 17,085,853 54.7% Large General 7,009,130 6,634,976 374,154 5.64% 37,233,080 35,609,225 1,623,855 4.56% 79,262,499 47.0% Industrial 12,008,000 12,258,000 (250,000) (2.04%) 64,361,000 66,403,000 (2,042,000) (3.08%) 134,707,856 47.8% Total KWH Sold 25,729,348 25,240,027 489,321 1.94% 137,009,713 135,172,958 1,836,755 1.36% 284,100,710 48.2% June June YTD YTD 2018 HUC 2018 2017 Change 2018 2017 Change Budget Target Gross Margin % 27.1% 26.5% 0.6% 26.6% 25.6% 1.1% 24.0% Operating Income Per Revenue $ (%) 5.8% 3.8% 2.0% -0.3% -2.8% 2.5% -2.0% 0%-5% Net Income Per Revenue $ (%): 4.7% 4.2% 0.5% -1.7% -1.8% 0.1% -4.0% 0%-5% Customer Revenue per KWH: $0.0932 $0.0915 $0.0017 $0.0892 $0.0894 -$0.0002 $0.0886 11llllllllllllllll� Total Power Supply Exp. per KWH: $0.0767 $0.0737 $0.0030 $0.0745 $0.0721 $0.0024 $0.0750 Overall net income increased by $21,482 due in large part to increased customer revenue. Purchased power and transmission expenses were also up due to the increased usage. There is also an increase of $45,252 in interest expense due to the new bonds. Sales for Resale of $257,167 consisted of $14,407 in market sales, $35,600 in the monthly tolling fee from Transalta, $91,160 in Transalta energy sales, and $116,000 in capacity sales to SMMPA. June 2017 Sales for Resale of $218,851 consisted of $24,517 in market sales, $34,400 in monthly tolling fees from Transalta, $63,934 in Transalta energy sales, and $96,000 in capacity sales to SMMPA. June 2016 Sales for Resale of $187,323 consisted of $30,118 market sales, $34,400 in Transalta tolling fees, $56,305 in Transalta energy sales, and capacity sales to SMMPA for $66,500. Overall Purchased Power increased by $61,620. MRES purchases decreased by $8,205 and market purchases/MISO costs increased by $69,825. June power cost adjustment was $.00919/kwhr bringing in an additional $236,113 in revenue for the month and $702,149 YTD. Last year's power cost adjustment for June 2017 generated $$205,143 in additional revenue for the month and $762,518 for the year. HUTCHINSON UTILITIES COMMISSION GAS DIVISION FINANCIAL REPORT FOR JUNE, 2018 50% of Year Comp. 2018 2017 2 . %Chna 2018 2017 2 . %Chna Full YrBud %of Bud Gas Division Customer Revenue $ 357,422 $ 409,266 $ (51,844) (12.7%) $ 6,518,303 $ 5,711,308 $ 806,995 14.1% $ 10,438,416 62.4% Transportation $ 71,183 $ 71,174 $ 9 0.0% $ 428,712 $ 431,527 $ (2,815) (0.7%) $ 739,440 58.0% Electric Div. Transfer $ 54,697 $ 54,308 $ 389 0.7% $ 328,183 $ 325,850 $ 2,333 0.7% $ 656,366 50.0% Other Revenues $ 26,415 $ 22,678 $ 3,737 16.5% $ 172,732 $ 130,626 $ 42,105 32.2% $ 284,008 60.8% Interest Income $ 9,417 $ 2,526 $ 6,891 272.8% $ 66,395 $ 31,789 $ 34,606 108.9% $ 50,000 132.8% TOTAL REVENUES $ 519,135 $ 559,952 $ (40,817) (7.3%) $ 7,514,324 $ 6,631,099 $ 883,225 13.3% $ 12,168,230 61.8% Salaries & Benefits $ 97,825 $ 95,337 $ 2,488 2.6% $ 633,760 $ 593,396 $ 40,364 6.8% $ 1,420,465 44.6% Purchased Gas $ 196,001 $ 226,368 $ (30,366) (13.4%) $ 3,398,667 $ 3,313,019 $ 85,647 2.6% $ 5,600,000 60.7% Operating Expense $ 40,882 $ 54,295 $ (13,413) (24.7%) $ 312,147 $ 336,518 $ (24,371) (7.2%) $ 876,975 35.6% Depreciation $ 84,000 $ 84,000 $ - 0.0% $ 504,000 $ 504,000 $ - 0.0% $ 1,008,000 50.0% Transfers (City) $ 30,762 $ 30,594 $ 168 0.5% $ 184,571 $ 183,566 $ 1,005 0.5% $ 369,142 50.0% Debt Interest $ 56,175 $ 61,258 $ (5,083) 0.0% $ 337,050 $ 367,550 $ (30,500) JL12L $ 674,100 50.0% TOTAL EXPENSES $ 505,645 $ 551,852 $ (46,208) (8.4%) $ 5,370,195 $ 5,298,049 $ 72,146 1.4% $ 9,948,682 54.0% NET PROFIT/(LOSS) $ 13,491 $ 8,100 $ 5,390 66.5% $ 2,144,129 $ 1,333,050 $ 811,079 60.8% $ 2,219,548 96.6% I�iRl�1l�i fllllllll�ll 50° o Year Com . % f P ��j t l I�r;(1lllllllllllllllllll��i fi�hTNYri ll'Nffffffflllllllll 2018 2017 Di %Chnq 2018 2017 Di %Chnq Full YrBud %of Bud Gas Division Residential 6,636,980 7,077,856 (440,876) (6.23%) 270,960,983 230,432,199 40,528,784 17.59% 449,582,000 60.3% Commercial 8,469,022 9,940,436 (1,471,414) (14.80%) 208,250,481 177,480,461 30,770,020 17.34% 420,183,000 49.6% Industrial 48,728,585 52,908,042 (4,179,457) (7.90%) 478,516,022 451,592,311 26,923,711 5.96% 786,836,000 60.8% Total CF Sold 63,834,587 69,926,334 (6,091,747) (8.71%) 957,727,486 859,504,971 98,222,515 11.43%1 1,656,601,000 57.8% June June YTD YTD 2018 HUC 2018 2017 Change 2018 2017 Change Budget Target Gross Margin % 58.8% 55.9% 2.8% 52.8% 47.8% 4.9% 51.4% IIIIIIIIIIIIIIIIIIIIIIII �� Operating Income Per Revenue $ (%) 8.0% 8.3% -0.2% 31.1% 23.8% 7.3% 22.1°% Net Income Per Revenue $ (%): 2.8% 1.5% 1.3% 29.5% 20.6% 8.9°% 18.8°% �pyN�NNpNp�p�p�p�N� ��MflIII�IIIIIIIIIIIIIIIIIyy Contracted Customer Rev. per CF: $0.0035 $0.0035 $0.0000 $0.0039 $0.0039 -$0.0001 $0.0035pp�pp�pp��pp��pp��ryry�I Customer Revenue per CF: $0.0123 $0.0132 -$0.0009 $0.0098 $0.0097 $0.0001 $0.0088IIIIIIIIII��II�'' Total Power Supply Exp. per CF: $0.0032 $0.0034 ($0.0002) $0.0036 $0.0039 ($0.0003) $0.0035 $0.0035 Natural Gas net income was nearly identical to June 2017 despite lower customer revenue which was offset by lower operating and gas costs. June's fuel cost credit adjustment was $1.89978/MCF totalling $35,392 for the month and $185,789 YTD. June 2017 credits totalled $35,104 for the month and $344,887 YTD. Current Assets Unnestricted/Undesignated Cash Cash Petty Cash Designated Cash Capital Expenditures - Five Yr. CIP Payment in Lieu of Taxes Rate Stabilization - Electric Rate Stabilization - Gas Catastrophic Funds Restricted Cash Bond Interest Payment 2017 Bond Interest Payment 2012 Debt Service Reserve Funds Total Current Assets Receivables Accounts (net of uncollectible allowances) Interest Total Receivables Other Assets Inventory Prepaid Expenses Sales Tax Receivable Deferred Outflows - Electric Deferred Outflows - Gas Total Other Assets Total Current Assets Capital Assets Land & Land Rights Depreciable Capital Assets Accumulated Depreciation Construction - Work in Progress Total Net Capital Assets Total Assets HUTCHINSON UTILITIES COMMISSION BALANCE SHEET - CONSOLIDATED JUNE 30, 2018 Electric Gas Total Total Net Change Division Division 2018 2017 Total (YTD) 10,634,845.89 7,629,327.85 18,264,173.74 10,195,482.77 8,068,690.97 680.00 170.00 850.00 850.00 - 2,750,000.00 700,000.00 3,450,000.00 2,415,525.98 1,034,474.02 882,327.00 369,142.00 1,251,469.00 1,196,331.00 55,138.00 372,736.68 - 372,736.68 314,539.41 58,197.27 - 651,306.61 651,306.61 646,058.37 5,248.24 400,000.00 100,000.00 500,000.00 500,000.00 - 1,008,442.29 - 1,008,442.29 100,324.99 908,117.30 - 1,148,641.65 1,148,641.65 1,303,400.00 (154,758.35) 522,335.64 2,188,694.02 2,711,029.66 2,188,694.02 522,335.64 16,571,367.50 12,787,282.13 29,358,649.63 18,861,206.54 10,497,443.09 2,549,790.69 19, 039.49 2,568,830.18 498,521.82 3,048,312.51 2,814,779.89 233,532.62 19,039.49 38,078.98 31,415.67 6,663.31 517,561.31 3,086,391.49 2,846,195.56 240,195.93 1,238,102.31 445,431.74 1,683,534.05 1,552,349.74 131,184.31 101,732.84 (12,817.26) 88,915.58 86,710.62 2,204.96 45,614.84 - 45,614.84 161,093.63 (115,478.79) 752,887.00 - 752,887.00 1,746,060.00 (993,173.00) - 250,962.00 250,962.00 582,020.00 (331,058.00) 2,138,336.99 683,576.48 2,821,913.47 4,128,233.99 (1,306,320.52) 21,278,534.67 13,988,419.92 35,266,954.59 25,835,636.09 9,431,318.50 690,368.40 3,899,918.60 4,590,287.00 4,591,691.75 (1,404.75) 89,599,337.97 41,294,704.69 130,894,042.66 127,984,058.44 2,909,984.22 (53,894,993.55) (15,510,585.00) (69,405,578.55) (66,235,826.59) (3,169,751.96) 10,216,383.27 152,379.42 10,368,762.69 1,016,784.50 9,351,978.19 46,611,096.09 29,836,417.71 76,447,513.80 67,356,708.10 9,090,805.70 67,889,630.76 43,824,837.63 111,714,468.39 93,192,344.19 18,522,124.20 HUTCHINSON UTILITIES COMMISSION BALANCE SHEET - CONSOLIDATED JUNE 30, 2018 Electric Gas Total Total Net Change Division Division 2018 2017 Total (YTD) Current Liabilities Current Portion of Long-term Debt Bonds Payable - 1,295,000.00 1,295,000.00 1,345,000.00 (50,000.00) Bond Premium - 185,608.32 185,608.32 185,608.32 - Accounts Payable 2,466,994.04 448,740.10 2,915,734.14 1,075,577.84 1,840,156.30 Accrued Expenses Accrued Interest 47,376.38 140,175.24 187,551.62 63,382.35 124,169.27 Accrued Payroll 45,497.08 12,668.23 58,165.31 50,354.17 7,811.14 Total Current Liabilities 2,559,867.50 2,082,191.89 4,642,059.39 2,719,922.68 1,922,136.71 Long -Term Liabilities Noncurrent Portion of Long-term Debt 2017 Bonds 16,675,000.00 - 16,675,000.00 - 16,675,000.00 2012 Bonds - 13,900,000.00 13,900,000.00 15,195,000.00 (1,295,000.00) 2003 Bonds - - - 465,000.00 (465,000.00) Bond Premium 2012 649,622.64 1,376,594.67 2,026,217.31 1,562,202.99 464,014.32 Pension Liability- Electric 3,083,440.00 - 3,083,440.00 4,226,202.00 (1,142,762.00) Pension Liability- Nat Gas - 1,027,813.00 1,027,813.00 1,408,734.00 (380,921.00) Accrued Vacation Payable 323,735.99 102,774.05 426,510.04 378,943.50 47,566.54 Accrued Severance 73,739.62 28,580.99 102,320.61 92,050.32 10,270.29 Deferred Outflows - Electric 794,370.00 - 794,370.00 569,910.00 224,460.00 Deferred Outflows - Nat Gas - 264,790.00 264,790.00 189,970.00 74,820.00 Total Long -Term Liabilities 21,599,908.25 16,700,552.71 38,300,460.96 24,088,012.81 14,212,448.15 Net Position Retained Earnings 43,729,855.01 25,042,093.03 68,771,948.04 66,384,408.70 2,387,539.34 Total Net Position 43,729,855.01 25,042,093.03 68,771,948.04 66,384,408.70 2,387,539.34 Total Liabilities and Net Position 67,889,630.76 43,824,837.63 111,714,468.39 93,192,344.19 18,522,124.20 Hutchinson Utilities Commission Cash -Designations Report, Combined 6/30/2018 Change in Financial Balance, Balance, Cash/Reserve Institution Current Interest Rate Annual Interest June 2018 May 2018 Position Savings, Checking, Investments varies varies Total Operating Funds Debt Reserve Requirements Bond Covenants - sinking fund Debt Reserve Requirements Bond Covenants -1 year Max. P & I Total Reserve Requirement Operating Reserve Rate Stabalization Funds PILOT Funds Catastrophic Funds Capital Reserves Total Earmarked Funds varies 29,358,649.63 33,132,937.24 (3,774,287.61) 29,358,649.63 33,132,937.24 (3,774,287.61) Min 60 days of 2018 Operating Bud. Charter (Formula Only) Risk Mitigation Amount 5 Year CIP ( 2018-2022 Fleet & Infrastructure Maintenance) 2,157,083.94 1,939,369.64 217,714.30 2,188,694.02 2,188,694.02 - 4,345,777.96 4,128,063.66 217,714.30 5,868,920.00 5,868,920.00 1,024,043.29 1,024,043.29 1,251,469.00 1,251,469.00 500,000.00 500,000.00 3,450,000.00 3,450,000.00 12,094,432.29 12,094,432.29 YE YE YE YE YTD HUC 2014 2015 2016 2017 2018 Target Debt to Asset 28.8% 32.0% 32.2% 40.8% 38.4% Current Ratio 2.26 2.52 3.06 5.73 6.33 �INigM� RONA 0.05% 1.31% 2.17% 1.80% 1.89% Change in Cash Balance (From 12131114 to 513112018) Month End Electric Elec. Change Natural Gas Gas Change Total Total Change 6/30/2018 16,571,368 12,787,282 29,358,650 12/31/2017 23,213,245 (6,641,878) 10,702,689 2,084,593 33,915,934 (4,557,284) 12/31/2016 8,612,801 14,600,444 9,500,074 1,202,615 18,112,875 15,803,059 12/31/2015 6,170,790 2,442,011 9,037,373 462,701 15,208,163 2,904,712 12/31/2014 3,598,821 2,571,969 6,765,165 2,272,208 10,363,986 4,844,177 * 2017's Signifcant increase in cash balance is due to issuing bonds for the generator project. Hutchinson Utilities Commission Cash -Designations Report, Electric 6/30/2018 Change in Financial Balance, Balance, Cash/Reserve Institution Current Interest Rate Annual Interest June 2018 May 2018 Position Savings, Checking, Investments varies varies varies 29,358,649.63 33,132,937.24 (3,774,287.61) Total HUC Operating Funds 29,358,649.63 33,132,937.24 (3,774,287.61) Debt Restricted Requirements Bond Covenants - sinking fund Operating Reserve Min 60 days of 2018 Operating Bud. Rate Stabalization Funds $400K-$1.2K PILOT Funds Charter (Formula Only) Catastrophic Funds Risk Mitigation Amount Capital Reserves 5 Year CIP ( 2018-2022 Fleet & Infrastructure Maintenance) Total Designated Funds 1,008,442.29 954,819.66 53,622.63 4,387,223.00 4,387,223.00 372,736.68 372,736.68 882,327.00 882,327.00 400,000.00 400,000.00 2,750,000.00 2,750,000.00 8,792,286.68 8,792,286.68 RestrictionsExcess Reserves Less Designations,O: YE YE YE YE YTD APPA Ratio HUC 2014 2015 2016 2017 2018 5K-10K Cust. Target Debt to Asset Ratio (* w/Gen.) 7.4% 13.2% 16.1% 36.1% 35.6% 50.1% Current Ratio 2.48 2.95 3.57 10.70 7.42 2.43 �I RONA -3.1% -1.2% -0.4% -0.1% -0.4% NA >0% Hutchinson Utilities Commission Cash -Designations Report, Gas 6/30/2018 Change in Financial Balance, Balance, Cash/Reserve Institution Current Interest Rate Annual Interest June 2018 May 2018 Position Savings, Checking, Investments varies varies Total HUC Operating Funds Debt Restricted Requirements Bond Covenants - sinking fund Debt Restricted Requirements Bond Covenants -1 year Max. P & I Total Restricted Requirements Operating Reserve Rate Stabalization Funds PILOT Funds Catastrophic Funds Capital Reserves Total Earmarked Funds varies 29,358,649.63 33,132,937.24 (3,774,287.6 29,358,649.63 33,132,937.24 (3,774,287.6 Min 60 days of 2018 Operating Bud. $200K-$600K Charter (Formula Only) Risk Mitigation Amount 5 Year CIP ( 2018-2022 Fleet & Infrastructure Maintenance) 1,148,641.65 984,549.98 164,091.67 2,188,694.02 2,188,694.02 - 3,337,335.67 3,173,244.00 164,091.67 1, 481, 697.00 1, 481, 697.00 651, 306.61 651, 306.61 369,142.00 369,142.00 100, 000.00 100, 000.00 700,000.00 700,000.00 3,302,145.61 3,302,145.61 YE YE YE YE YTD HUC 2014 2015 2016 2017 2018 APGA Ratio Target Debt to Asset 55.6% 54.8% 51.5% 48.1% 42.9% TBD Current Ratio 2.07 2.17 2.59 2.72 4.99 TBD RONA 4.3% 4.7% 5.6% 5.0% 5.6% TBD HUTCHINSON UTILITIES COMMISSION Investment Report For the Month Ended June 30, 2018 Interest Current Date of Date of Par Current Purchase Unrealized Premium Next Institution Description Rate YTM Purchase Maturity Value Value Amount Gain/(Loss) (Discount) Call Date Wells Fargo Money Market 0.600% 0.600% NA NA 46,349.40 50,874.02 - - - N/A Wells Fargo CD's 1.650% 1.650% 02/22/2018 08/22/2018 245,000.00 244,894.65 245,000.00 (105.35) - N/A Wells Fargo CD's 2.000% 2.000% 02/28/2018 03/28/2019 245,000.00 244,502.65 245,000.00 (497.35) - N/A Wells Fargo CD's 2.100% 2.100% 02/21/2018 08/21/2019 245,000.00 244,046.95 245,000.00 (953.05) - N/A Wells Fargo CD's 1.200% 1.200% 09/07/2016 09/21/2018 245,000.00 244,409.55 245,000.00 (590.45) - N/A Wells Fargo CD's 2.000% 2.000% 04/07/2016 10/07/2021 245,000.00 237,008.10 245,000.00 (7,991.90) - 10/07/2018 Wells Fargo CD's 2.150% 2.150% 06/27/2017 06/27/2022 245,000.00 236,074.65 245,000.00 (8,925.35) - 07/27/2018 Wells Fargo FHLMC - Step 1.500% 1.945% 09/07/2016 09/27/2019 260,000.00 258,991.20 260,000.00 (1,008.80) - 09/27/2018 Wells Fargo FHLMC - Step 2.000% 2.192% 06/29/2017 06/29/2022 275,000.00 268,848.25 275,000.00 (6,151.75) - 09/29/2018 Wells Fargo FHLMC - Step 2.000% 2.256% 10/27/2016 10/27/2023 1,025,000.00 1,005,996.50 1,025,000.00 (19,003.50) 07/27/2018 Broker Total 25.6% 3,030,000.00 3,035,646.52 3,030,000.00 (45,227.50) - Cetera Investment Services Money Market 0.150% 0.150% N/A N/A 32,117.80 54.55 - - - N/A Cetera Investment Services U.S. Treasury Bill 1.680% 1.680% 11/07/2017 09/06/2018 3,021,400.00 3,021,769.23 3,000,194.12 21,575.11 (21,205.88) N/A Cetera Investment Services U.S. Treasury Bill 1.101 % 1.101 % 11/07/2017 08/02/2018 3,016,000.00 3,059,220.16 2,999,985.04 59,235.12 (16,014.96) N/A Cetera Investment Services Municipal Bonds 2.995% 2.073% 03/07/2016 07/01/2020 250,000.00 250,705.00 260,835.21 (10,130.21) 10,835.21 N/A Cetera Investment Services Municipal Bonds 2.750 % 1.881 % 03/07/2016 08/01/2020 250,000.00 252,165.00 259,820.00 (7,655.00) 9,820.00 N/A Cetera Investment Services Municipal Bonds 2.163% 1.779% 03/08/2016 07/01/2019 500,000.00 496,905.00 506,145.00 (9,240.00) 6,145.00 N/A Cetera Investment Services Municipal Bonds 1.886% 1.886% 04/29/2016 04/15/2019 250,000.00 243,367.50 236,327.50 7,040.00 (13,672.50) N/A Cetera Investment Services Municipal Bonds 2.875 % 2.121 % 04/29/2016 09/01/2021 250,000.00 249,832.50 259,467.50 (9,635.00) 9,467.50 N/A Cetera Investment Services Municipal Bonds 3.751 % 2.399% 04/29/2016 11/01/2021 250,000.00 251,192.50 267,330.00 (16,137.50) 17,330.00 N/A Cetera Investment Services Municipal Bonds 3.139% 2.190% 12/11/2017 09/01/2021 300,000.00 298,404.00 310,116.00 (11,712.00) 10,116.00 N/A Cetera Investment Services Municipal Bonds 2.655% 2.208% 12/11/2017 03/01/2022 300,000.00 296,172.00 305,314.92 (9,142.92) 5,314.92 N/A Cetera Investment Services Municipal Bonds 2.300% 1.715% 12/11/2017 10/01/2020 100,000.00 98,986.00 101,595.00 (2,609.00) 1,595.00 N/A Cetera Investment Services Municipal Bonds 3.240% 3.240% 11/17/2017 02/15/2023 65,000.00 54,815.15 54,917.20 (102.05) (10,082.80) N/A Cetera Investment Services Municipal Bonds 5.000% 1.610% 10/11/2016 01/01/2020 250,000.00 262,047.50 276,500.00 (14,452.50) 26,500.00 N/A Broker Total 74.4% 8,802,400.00 8,835,636.09 8,838,547.49 15,838,330.70 15,838,330.70 TOTAL I NVESTM ENTS 100.0% $ 11,832,400.00 $ 11,871,282.61 $ 11,868,547.49 $15,793,103.20 $15,838,330.70 PORTFOLIO BY PRODUCT TYPE MATURITySCHBOULE 6/30/2018 % of 5/31/2018 % of Monthly Maturity Current Value % Product Type Total Value Total Total Value Total Change Less than 1 year $7,109,092.31 59.9 % EM Money Market $50,928.57 0.4% $47,400.58 0.4% $3,527.99 1 - 2 years 1,261,990.65 10.6% CD's 1,450,936.55 12.2 % 1,451,666.65 12.2 % (730.10) 2 - 3 years 601,856.00 5.1 % Government Bonds 7,614,825.34 64.1 % 7,607,198.40 64.1 % 7,626.94 3 - 4 years 1,568,683.75 13.2 % Municipal Bonds 2,754,592.15 23.2% 2,758,082.35 23.2% (3,490.20) 4-5years 323,663.40 2.7% TOTAL $11871282.61 100.0% $11864347.98 100.0% $6934.63 5+years 1,005,996.50 8.5% TOTAL $11,871,282.61 100.0% Municipal Bonds $8,000,000.00 ''...I 23.2% $7,000,000.00 $7,109,092 $6,000,000.00 Money Market $s,000,000.00 rrr vvvvvvvvvvvvvvvv II $3,000,000.00 Government Bonds CD's $2,000,000.00 $1,568,684 64.1% � 12.2% $1,000,000.00 $1,261,991 1�56 $32�63 $1,OOS,997 $0oo .$6 v Lessthan 1year 1-2 years 2-3 years 3-4 years 4-5years S+years ELECTRIC DIVISION Operating Revenue June 2018 CLASS AMOUNT KWH /KWH Street Lights $0.32 6 $0.05333 Electric Residential Service $514,011.98 4,924,959 $0.10437 All Electric Residential Service $15,238.45 140,452 $0.10850 Electric Small General Service $171,936.03 1,646,807 $0.10441 Electric Large General Service $693,463.05 7,009,130 $0.09894 Electric Large Industrial Service $1,003,071.52 12,008,000 $0.08353 Total $2,397,721.35 25,729,354 $0.09319 Power Adjustment $0.00919 Rate Without Power Adjustment $0.08400 Electric Division Year -to -Date 02018$A--t 02017$A-t ®2018 KWH110 02017KWH110 16,000,000 15,000,000 14,000,000 13,000,000 12,000,000 11,000,000 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Street Lights Residential All Elec. Small Gen. Large Gen. Large For Resale Total Resid. Srv. Srv. Industrial NOTE: Sales for resale includes capacity sales, market sales and Transalta sales. NATURAL GAS DIVISION Operating Revenue JUNE 2018 CLASS AMOUNT MCF /$ MCF Residential $81,084.64 6,637 $12.21706 Commercial $71,716.70 8,469 $8.46814 Large Industrial $204,621.05 48,729 $4.19916 Total $357,422.39 63,835 $5.59916 Fuel Adjustment-$0.00190 Rate Without Fuel Adjustment $7.49916 Natural Gas Division Year -to -Date ® 2018 $ Amount 0 2017 $ Amount ® 2018 MCF 0 2017 MCF 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Gas Residential Gas Commercial Large Industrial Total eReliability I Monthly Statistics Monthly Report - Hutchinson Utilities Hutchinson Utilities Commission Commission Year Minimum duration Substation 2018 Month 06 - June Annual Report? 0 Yes * No Maximum duration Circuit Top-level Cause Unscheduled �V Remove Major Events? V https:Hreliability.publicpower.org/reports/monthly/utility/9l/?year=2018&month=6&is—an... 7/13/2018 eReliability I Monthly Statistics Page 2 of 5 IEEE 1366 Statistics Metric Jun 2018 Jun 2017 SAIDI 0.035 1.678 SAIFI 0.00042 0.0137 CAIDI 85 122.185 ASAI 99.9999% 99.9959% Momentary Interruptions 0 0 Sustained Interruptions 1 3 Circuit Ranking - Worst Performing Ranked by Outage Count Circuit Substation Fdr#1 2 Plant 1 Ranked by Customer Interruptions Circuit Substation Fdr#1 2 Plant 1 Number of Outages 1 Customer Interruptions 3 Ranked by Customer Minutes of Duration Circuit Substation Customer Minutes of Duration Fdr#1 2 Plant 1 255 https:llreliability.publicpower.org/reports/monthly/utility/9l/?year=2018&month=6&is—an... 7/13/2018 eReliability I Monthly Statistics 40 ... ......, .................. 35 Monthly SAIDI Average of mo h 30 25 20 15 10' 5 0 ��wxn«�wxwmwrtaxaxm.,. ...w. iiinwmwrv. .,, .,.�..� rmmrcry u.mm ..... Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 201E Historical Monthly SAIFI Chart 1.0 0.8 0.6 0.4 0.2 0.0 . �. -�... .,. .. „ Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 SAIFI values https://reliability.publicpower.org/reports/ onthly/utility/9 I /?year=2018 onth=6 is an... 7/13/201 Causes Ranked by Count Cause Storm Causes Ranked by Duration Cause Storm Count Duration 255 https:Hreliability.publicpower.org/reports/`monthly/utility"`/9 1 8: • •& eReliability I Monthly Statistics 01� Top 1 Outages for the Month Customers Address Interrupted Hwy 15 3 N Customer Minutes of Duration Interruption 85 255 Total Customers Affected for the Month: Average Customers Affected per Outage: I Start Date 06/06/2018 3 11 https:llreliability.publicpower.orglreportslmonthlylutilityl9ll?year=2018&month°�,6&is.-an... 7/13/2018 Work Order Description 0. 11801 Unit 8 Building.. .Replacement 11802 Unit 1 ControlrConditioning 11803 Plant I Cooling Tower Piping Replacement ;04 Soft Start Motor 11805 ReplaceBlades ;0. Unit I CEMS Data Logger ;0PlantIn Replacement Total Total Percentage Materials Labor Budgeted Actual Difference Completed $ 14,369,702.00 $ - $ 14,369,702.00 $ 10,084,800.68 $ (4,284,901.32) 60% 10,000.00 $ 10,000.00 - $ (10,000.00) 15,000.00 $ 15,000.00 464.67 $ (14,535.33) 350,000.00 $ 350,000.00 - $ (350,000.00) 8,000.00 2,000.00 $ 10,000.00 10,565.96 $ 565.96 100% 150,000.00 $ 150,000.00 - $ (150,000.00) 30,000.00 - $ 30,000.00 $ (30,000.00) 7,000.00 - $ 7,000.00 - $ (7,000.00) Electric Distribution Work Total Total Percentage Order Description Materials Labor Budgeted Actual Difference Completed 21801 Pole Repair or Replacement 15,000.00 - 15,000.00 - $ (15,000.00) 21802 Hutch Substation Roof Replacement 10,000.00 10,000.00 - $ (10,000.00) 21803 Station Equipment 10,000.00 10,000.00 19,415.38 $ 9,415.38 100% 21804 Duct for Reconductor 15,000.00 65,000.00 80,000.00 5,170.87 $ (74,829.13) 10% 21805 Uponer New Feed 85,000.00 50,000.00 135,000.00 32,022.81 $ (102,977.19) 60% 21806 Feeder 16 and 17 Reconductor 30,000.00 70,000.00 100,000.00 2,916.69 $ (97,083.31) 5% 21807 MITGI New Feed 80,000.00 35,000.00 115,000.00 59,816.31 $ (55,183.69) 50% 21808 New Developments 50,000.00 50,000.00 18,601.99 $ (31,398.01) 30% 21809 Century Court Apartments 20,000.00 15,000.00 35,000.00 7,759.67 $ (27,240.33) 20% 21810 Century Avenue Trail Work Feeder 22 10,000.00 10,000.00 20,000.00 980.07 $ (19,019.93) 10% 21811 New Developments Transformers 50,000.00 50,000.00 85.86 $ (49,914.14) 21812 Plant 14160 Generator Transformer Repl 70,000.00 5,000.00 75,000.00 $ (75,000.00) 21813 Transformer Replacements 40,000.00 14,000.00 54,000.00 155.61 $ (53,844.39) 21814 Century Court Apartments 10,000.00 3,000.00 13,000.00 $ (13,000.00) 21815 Meters 30,000.00 - 30,000.00 - $ (30,000.00) $ 525,000.00 $ 267,000.00 $ 792,000.00 $ 146,925.26 $ (645,074.74) Administrative Total Total Work Order Description Budgeted Actual 51801 Replace 2008 Super Duty Bucket Truck 140,000.00 51802 Replace 2007 Metering Van 25,750.00 23,887.64 51803 Replace 2006 Production Dodge Dakota 25,000.00 51804 Replace 2006 Ford F150 25,750.00 51805 Replace Vehicle #433 37,080.00 Difference 140,000.00 1,862.36 25,000.00 25,750.00 37,080.00 $ 253,580.00 $ 23,887.64 $ (229,692.36) Percentage Completed 100% Work Order Description :iROW Easements 61802 Transmissionto 4 . 61803 Lafayette Interconnect Metering Upgrade 61804 Locator 61805 Misc Developments ♦ Improvements .1, Regulator Station Improvements 61807 Service Lines 61808 Meters, AMI, and all Fittings .i` Industrial Metering and Regulation LaborMaterials 1,000,000.00 4,200.00 6,000.00 125,000.00 28,000.00 ili ii 4,900.00 55,000.00 31,500.00 90,000.00 4,900.00 80,000.00 7,000.00 i iii ii i it li Total BudgetedTotal 504,200.00 1,004,200.00 108,000.00 i0i i' 7,674.16 i1i i0 25,952.44 19,900.00 86,500.00 29,575.13 94,900.00 21,569.45 i0i ii 67,834.64 01 OS HUTCHINSON UTILITIES COMMISSION 9T, Board Action Form iiiiiiiiiiiiiiiiiiiiiillillillillillillilliillillillillillillilliilliillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliilllI Agenda Item: Review Policies Presenter: Jeremy Carter Agenda Item Type: Time Requested (Minutes): 5 Review Policies Attachments: Yes BACKGROUND/EXPLANATION OFAGENDA ITEM: As part of HUC's standard operating procedures, a continual policy review is practiced. This month, the following policies were reviewed and no changes are recommended on these policies at this time: i. Offensive behavior/sexual harassment ii. Retirement iii. Resignation iv. Solicitation on Utility Premises V. Employee Gifts vi. Flowers vii. Petty Cash BOARD ACTION REQUESTED: None Fiscal Impact: Included in current budget: Budget Change: PROJECT SECTION: Total Project Cost: RemainingCost: EXEMPT OFFENSIVE BEHAVIOR/SEXUAL HARASSMENT It is HUC's policy to maintain a work environment free from offensive behavior and sexual harassment. Offensive behavior may include such actions as: rudeness, angry outbursts, inappropriate humor, vulgar obscenities, name calling, disrespectful language, or any other behavior regarded as offensive to a reasonable person. A violation of this policy is subject to discipline up to and including discharge. One specific kind of illegal behavior is sexual harassment. Sexual harassment includes unwelcome sexual advances, requests for sexual favors, sexually motivated physical conduct or other verbal or physical conduct or communication of a sexual nature when: 1. submission to that conduct or communication is made a term or condition of obtaining employment; or 2. submission to or rejection of that conduct or communication by an individual is used as a factor in a decision affecting that individual's employment; or 3. that conduct or communication has the purpose or effect of substantially interfering with an individual's employment or creating an intimidating, hostile, or offensive employment environment. Examples of conduct that violate this policy include, but are not limited to: • Repeated offensive sexual flirtations, unwelcome advances, propositions or invitations; or • Unwelcome repeated comments, jokes, displays, or suggestions of a sexual nature; or • Objectionable physical contact, including touching • In summary, sexual harassment is the unwanted, unwelcome and repeated action of an individual against another individual, using sexual overtones as a means of creating stress. Any employee who feels he/she is being subjected to offensive or discriminatory behavior of any kind or employees who are aware of such behavior is/are encouraged to express their objection to the behavior and should also immediately report the behavior to their immediate Supervisor, Department Manager or Director (if not the immediate supervisor), the Human Resources Director, or the General Manager. In addition, the employee may also file a complaint with the Minnesota Department of Human Rights and the EEOC. A person must file a complaint with the Minnesota Department of Human Rights within one year of the incident and file a complaint with the EEOC within 300 days of the incident. Staff Personnel who receives an offensive behavior or discrimination complaint shall inform the General Manager and Human Resources of the complaint as soon as possible. The General Manager must ensure an appropriate and prompt investigation of the complaint. If the investigation substantiates the complaint, HUC will take appropriate corrective action. Strict confidentiality is not possible in all cases of sexual harassment as the accused has the right to answer charges made against them; particularly if discipline is a possible outcome. Reasonable efforts will be made to respect the confidentiality of the individuals involved, to the extent possible. Any employee who makes a false complaint or provides false information during an investigation may be subject to disciplinary action, up to and including termination. Retaliation against any person who files a complaint or participates in an investigation is expressly prohibited. Retaliation includes, but is not limited to, any form of intimidation, reprisal or harassment. Any individual who retaliates against a person who testifies, assists, or participates in an investigation may be subject to disciplinary action up to and including termination. NON-EXEMPT OFFENSIVE BEHAVIOR/SEXUAL HARASSMENT It is HUC's policy to maintain a work environment free from offensive behavior and sexual harassment. Offensive behavior may include such actions as: rudeness, angry outbursts, inappropriate humor, vulgar obscenities, name calling, disrespectful language, or any other behavior regarded as offensive to a reasonable person. A violation of this policy is subject to discipline up to and including discharge. One specific kind of illegal behavior is sexual harassment. Sexual harassment includes unwelcome sexual advances, requests for sexual favors, sexually motivated physical conduct or other verbal or physical conduct or communication of a sexual nature when: 4. submission to that conduct or communication is made a term or condition of obtaining employment; or 5. submission to or rejection of that conduct or communication by an individual is used as a factor in a decision affecting that individual's employment; or 6. that conduct or communication has the purpose or effect of substantially interfering with an individual's employment or creating an intimidating, hostile, or offensive employment environment. Examples of conduct that violate this policy include, but are not limited to: • Repeated offensive sexual flirtations, unwelcome advances, propositions or invitations; or • Unwelcome repeated comments, jokes, displays, or suggestions of a sexual nature; or • Objectionable physical contact, including touching • In summary, sexual harassment is the unwanted, unwelcome and repeated action of an individual against another individual, using sexual overtones as a means of creating stress. Any employee who feels he/she is being subjected to offensive or discriminatory behavior of any kind or employees who are aware of such behavior is/are encouraged to express their objection to the behavior and should also immediately report the behavior to their immediate Supervisor, Department Manager or Director (if not the immediate supervisor), the Human Resources Director, or the General Manager. In addition, the employee may also file a complaint with the Minnesota Department of Human Rights and the EEOC. A person must file a complaint with the Minnesota Department of Human Rights within one year of the incident and file a complaint with the EEOC within 300 days of the incident. Staff Personnel who receives an offensive behavior or discrimination complaint shall inform the General Manager and Human Resources of the complaint as soon as possible. The General Manager must ensure an appropriate and prompt investigation of the complaint. If the investigation substantiates the complaint, HUC will take appropriate corrective action. Strict confidentiality is not possible in all cases of sexual harassment as the accused has the right to answer charges made against them; particularly if discipline is a possible outcome. Reasonable efforts will be made to respect the confidentiality of the individuals involved, to the extent possible. Any employee who makes a false complaint or provides false information during an investigation may be subject to disciplinary action, up to and including termination. Retaliation against any person who files a complaint or participates in an investigation is expressly prohibited. Retaliation includes, but is not limited to, any form of intimidation, reprisal or harassment. Any individual who retaliates against a person who testifies, assists, or participates in an investigation may be subject to disciplinary action up to and including termination. EXEMPT RETIREMENT Any employee who elects to retire shall give the Employer sixty (60) days' written notice of date that employee intends to retire. NON-EXEMPT RETIREMENT Any employee who elects to retire shall give the Employer sixty (60) days' written notice of date that employee intends to retire. EXEMPT RESIGNATION Employees leaving employment with HUC in good standing will be paid any accrued unused vacation. To leave employment in good standing, an employee should provide written notice of resignation to Supervisor or Manager at least 10 working days prior to the resignation effective date. The General Manager may waive this requirement for good cause. A terminating employee must also return all HUC property, and equipment including keys, security devices, clothing and small hand tools provided by HUC. NON-EXEMPT RESIGNATION Employees leaving employment with HUC in good standing will be paid any accrued unused vacation. To leave employment in good standing, an employee should provide written notice of resignation to Supervisor or Manager at least 10 working days prior to the resignation effective date. The General Manager may waive this requirement for good cause. A terminating employee must also return all HUC property, and equipment including keys, security devices, clothing and small hand tools provided by HUC. EXEMPT SOLICITATION ON UTILITY PREMISES Salespersons offering merchandise not related to HUC business are prohibited from soliciting during normal business hours. Employees are discouraged from soliciting other employees. Brochures and/or pamphlets are allowed to be put out in the breakroom for voluntary participation. Employees shall not provide another employee's contact information to a salesperson without the employee's consent. NON-EXEMPT SOLICITATION ON UTILITY PREMISES Salespersons offering merchandise not related to HUC business are prohibited from soliciting during normal business hours. Employees are discouraged from soliciting other employees. Brochures and/or pamphlets are allowed to be put out in the breakroom for voluntary participation. Employees shall not provide another employee's contact information to a salesperson without the employee's consent. EXEMPT EMPLOYEE GIFTS Employees are not required to make a contribution for a gift or grant a favor for another employee. NON-EXEMPT EMPLOYEE GIFTS Employees are not required to make a contribution for a gift or grant a favor for another employee. EXEMPT FLOWERS In the event of the death of a full-time or part-time employee, employee's spouse, mother, father, child of an employee, flowers/plant will be sent at HUC expense without delay to the appropriate funeral home. Information needed: Funeral Home Address Date to Send Flowers Similar consideration may be given, at the discretion of the General Manager, Directors, or Managers, for retirees, consultants, Commission members or others who provide significant service to HUC. NON-EXEMPT FLOWERS In the event of the death of a full-time or part-time employee, employee's spouse, mother, father, child of an employee, flowers/plant will be sent at HUC expense without delay to the appropriate funeral home. Information needed: Funeral Home Address Date to Send Flowers Similar consideration may be given, at the discretion of the General Manager, Directors, or Managers, for retirees, consultants, Commission members or others who provide significant service to HUC. EXEMPT PETTY CASH Petty cash funds are kept with the Accountant. The petty cash fund will be used to reimburse payment up to $25.00. Any expenditure over $25.00 will be reimbursed by check. Itemized receipts must be attached to a complete petty cash slip whenever possible. An employee may obtain an advance of petty cash by completing a petty cash slip and reconciling the advance with the actual amount as soon as possible. NON-EXEMPT PETTY CASH Petty cash funds are kept with the Accountant. The petty cash fund will be used to reimburse payment up to $25.00. Any expenditure over $25.00 will be reimbursed by check. Itemized receipts must be attached to a complete petty cash slip whenever possible. An employee may obtain an advance of petty cash by completing a petty cash slip and reconciling the advance with the actual amount as soon as possible. OS HUTCHINSON UTILITIES COMMISSION 9T, Board Action Form iiiiiiiiiiiiiiiiiiiiiillillillillillillilliillillillillillillilliilliillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliillillillillillillillillillillilliillillillillillillilliillillillillillillilliilllI Agenda Item: Approve Policy Changes Presenter: Jeremy Carter Agenda Item Type: Time Requested (Minutes): 5 App Changes to Policies Attachments: Yes BACKGROUND/EXPLANATION OFAGENDA ITEM: As part of HUC's standard operating procedures, a continual policy review is practiced. The following revisions to the policies below are recommended. i. Purchasing Policy ii. Deposit Requirement -Residential iii. Deposit Requirement-Commercial/Industrial BOARD ACTION REQUESTED: Approve Policy Changes Fiscal Impact: Included in current budget: Budget Change: PROJECT SECTION: Total Project Cost: RemainingCost: Amended A�ii' 25 JVu 25, 2018 POLICY ON PURCHASING State Statute 471.345 Hutchinson Utilities Commission hereby adopts a general policy on the purchasing of equipment, supplies and services. Inventory Agent is authorized to create requisitions and approve purchase orders for purchases associated with Hutchinson Utilities' standard inventory part numbers, which are based on set order points and order quantities. If requirements exceed current order quantities, either an approved Bill of Materials or an approved requisition will be required. All other purchases shall require supervisor permission. Emergency situations may require a deviation from this policy to ensure electric and/or natural gas services to the customers of the Hutchinson Utilities. Joint purchasing of materials, supplies and services shall be considered with other departments only when net economic benefits can be achieved. When a tie exists between low bids, preference will be given to a local supplier. For purchases when the estimate is more than $199,999 1 'J,JJJ: 1. The Hutchinson Utilities Commission will authorize permission to advertise for bids. 2. Specifications shall be made available to all prospective bidders. 3. Bids will be opened at a public bid opening. Date will be set in the advertisement for bids. 4. The staff will review bids and may recommend to the Hutchinson Utilities Commission to accept the lowest responsible bidder meeting specifications. 5. Hutchinson Utilities Commission will enter into a contract with the responsible bidder. For purchases between $25,000 and $199,999 1 'J,JJJ: 1. The Hutchinson Utilities Commission staff will solicit written, informal quotations from at least two (2) suppliers, if possible, and tabulate the results. 2. Fuel purchases for electrical generation is an exception, for additional exceptions refer to Minnesota Statutes 2017, 471.345 Uniform Municipal Contracting Law. 3. Staff will evaluate the quotes and, in its discretion, determine which quotation is most suitable for HUC and make a recommendation thereon to the commission. 4. Hutchinson Utilities Commission will approve the quote. For purchases up to $25,000- 1 . General Manager authorized to approve purchases up to $25,000. 2. For purchases of $5,000 - $25,000, the Hutchinson Utilities Commission staff may solicit written, informal quotations from at least two (2) suppliers and tabulate the results or, in the alternative purchase equipment, supplies or services on the open market. 3. Staff will recommend acceptance of purchases of $5,000 - $25,000 to the General Manager for approval. For purchases up to $5,000: Directors, Managers, and the City Attorney are authorized to approve requisitions via the purchasing software for purchases requiring a purchase order number. If purchase order numbers are not required each department may use their assigned credit card. 1. Directors, Managers, or the City Attorney will approve all item requests prior to purchasing the item. 2. Receipts will be given to each Director, Manager, or City Attorney as items are purchased to initial, assign appropriate account number and give a description of the item purchased; then forward to Accounting. 3. Accounting will keep a file for each department until monthly credit card statements are received and reconciled. Petty cash may be used for purchases less than $25.00. Employees may make local purchases with prior approval from their Director/Manager. The employee has the option of using a HUC credit card, paying cash for the item, if less than $25.00, and being reimbursed from petty cash, or making the purchase at a local retailer with whom we have an account established. All receipts must to be turned in to the appropriate Director/Manager to initial, assign appropriate account number and then forward to the financial manager. CREDIT CARDS A purchase by credit card must comply with all statutes and rules applicable to Hutchinson Utilities Commission (HUC) purchases. Credit card purchases must comply with the following requirements: Minn. Stat. 412.271, subd. 2 and 471.38, subd.1. Claims presented to HUC for payment must be in writing and itemized. Bills from credit card companies do not contain the detail necessary to satisfy these requirements; therefore, HUC must retain invoices and itemized receipts for items charged to a credit card. The Office of the State Auditor strongly urges local government units to develop a comprehensive credit card use policy to avoid misappropriation of funds or other misuse of the credit card. The following are authorized to make credit card purchases on behalf of HUC: General Manager Natural Gas Director Electric Transmission/Distribution Manager Production Manager Engineering Services Manager Inventory Agent Company purchases are allowed to be made with a credit card following all HUC spending limit requirements. No personal purchases are to be made with the credit card. Receipts will be given to each department Director/Manager as items are purchased to initial, assign appropriate account numbers and give a description of the item purchased. The receipt then gets forwarded to the financial manager. The financial manager will keep a file for each department until monthly credit card statements are received and reconciled. The financial manager has the authority to approve and question all credit card purchases in so far as the policy applies. The full amount of the statement must be paid each month. FIXED ASSET CAPITALIZATION The Hutchinson Utilities Commission (HUC) will regard fixed assets as capitalized when all of the following criteria are met- 1 . Assets purchased, built or leased have useful lives of one year or more. 2. The cost of the asset (including installation) is $5,000 or more, or work order infrastructure assets whose cost is less than $5,000 individually but the aggregate total is $5,000 or more. 3. The cost of repairing or renovating the asset is $5,000 or more and prolongs the life of the asset. Costs associated with purchasing and implementing software, software maintenance and customer support are considered expenditures and will not be capitalized. Other Considerations: 1. REPAIR is an expenditure that keeps the property in ordinary efficient operating condition. The cost of the repair does not add to the value or prolong the life of the asset. All repair expenditures are charged to the appropriate department and fund. 2. IMPROVEMENTS are expenditures for additions, alterations and renovations that appreciably prolong the life of the asset, materially increase its value or adapt it to a different use. Improvements of the nature are capitalized. Examples of Repairs vs. Improvements Repairs=Expenditures All items -life less than one year All items under $5,000 Property maintenance, wall repair Replacement of machine parts to keep machine in normal operating condition Property restoration (rebuilding) for normal operations Existing building repairs Replacement of small sections of wiring, pipes or light fixtures Patching walls, minor repairs of floors, painting, etc. Patching driveways Improvements=Capitalized Assets Life of more than one year All items $5,000 or more Property rebuilding Replacement of machine parts that prolong the useful life Property restoration for something different or better Building regulation conformity Major replacement of wiring, lighting, pipes or sewer Installation of floor, wall, roof, wall covering, etc. New driveway or major repair Cleaning drapery, carpet, furniture New drapery, carpets, furniture Depreciation Method — Straight Line over the following useful lives: Buildings 35-60 years Transmission Plant (electric) 20-35 years Distribution Plant (electric) 20-35 years Building Improvement 15-30 years Transmission Plant (gas) 10-45 years Distribution Plant (gas) 10-45 years Generation Plant 10-30 years General Plant 5-10 years Vehicles 5-10 years Office Equipment 3-5 years Computer Equipment 3-5 years Deposit Requirement - Residential New Residential Customers: inter... Addspading) Ana application for service sn^" "e filled a„f li urn fired t Il,s cs a sil l y �u� u�llsu�lill y pp....................................................................................................................IL................................................................................................................... prior to receiving service. The application fAr,-�e shall be accompanied Its pp�f of ulss a # identification preferably photo identification. '^ gQQ!2' a -A deposit is required for all new residential customers, prior to the "+ilk ullHl ly account being plaeed eslaLfll§hed in the# s:°u.ssls:sririeir's name. A44 IlWC WlHl conduct an internal rredi+ nhenL is perfermeiJ account rev�ew for all new customers Illllllillisu s MGViRg HUG see teff+ter If the results of the revlew ^ro,+i+ ^he^U indicate the customer has an s° ul lany'ing z4ance WiHh ewes-HUC for e previously provided services, the outstanding balance shall be paid, in ay'y'liLon 1 His ur fired plus a deposit, prior to the customer receiving service. u s u s l s 111 y s li l lip g . is two Limes 111 av ur . M2.0 ll Il .let ll ll for His pEopp!jy�address as deteri lined Iles l plJI::s° a new ure§denll4l con lrucllion WiHI un Ileslilllli . I 's[ 11 W IiIIII deteri fin lll� rat Mesa y' s up liu idler con lru�scllion y. A deposit a ay w 4-only be waived if the customer provides verfficaLon of a saLsfaclory Dayimenl h dory .for .I His DI"Q""`v' out 12 .."'urnonHh Derlod ir,ferm-a+ier, regaFdiRg their paymer+ from their current or previous ullHl ly provider liny'licaLing, 'Rd -the payMe Rt hiSfa`:Y indite the customer paid all of their bills on time with no late payment fees attached, issued a y'li cs° a necl noLce and no y' Illinqu nl or dishonored IlDayrnenl .s s. T-4e hic+ery Will IeeL a+ +he previe,,c I' men+hc Existing Residential Customers Moving Within Service Territory: (II: nl r...Addspading) A deposit lis n l reqUired be if the customer has a sallsfaclory 1''�n payment history for His IlDrevl 1 y...u`n snllh IlDeiJod, as defined IlDrevl sou lly.with HIJG A deposit for existing residential customers moving within HUC service territory will be required prior to His e1c+emer h-aViRg utilities laL lli§h ung His new account plaGed in +heir 44af4�e-for any of the following reasons: 44 Ih he customer has been disconnected, lissued a 6sconnecl nol�ce or Ih had a d6lnquenl or issued-ary dishonored IlDaymen s in the previous 12 months. 2. Subsequent credit information indicates the initial application for service was falsified. 3. The customer has the ability to pay for the utility service, but during the cold weather rule months, had an arrears amount incurred during that period that was 60 days or more past due. If a deposit is required of a customer ate, Uhe folHoWing lHHl aIIso appy(Ih�'''�'�'nle ) If customer has no deposit with HUC, the customer will pay the deposit amount for the customer's new address. 2. If customer already has a deposit with HUC and this deposit amount is greater than the new deposit required for His a +ma`s new address, HUC will transfer the deposit from the customer's previous address to the new address. The balance of the deposit from at -the a +ma`s previous address will be applied to the customer's final bill for the ^, is+nmor previous address. (Ih: nl r) 3. If His customer already has a deposit with HUC and this deposit amount is less than the new deposit required for customer's new address, HUC will transfer the deposit from the customer's previous address to the customer's new address. The customer will pay the balance of the deposit amount for the customer's new address, prior to the utilities being placed in their name. If a deposit is required I -A ^i -c+nmor apd the customer a may request 1°Xn, e a written explanation for His reqUreimenl. as +n Why they moor! +n make -A dePGGi+ them I- Yeiill ho Amount of Deposit: l he au gun f ilhdeposit is FequiFed it shall be equal to two times the average monthly bill for Uhe Dirop rty/adder as y' i irimi ed Ihsy based on HUC rates. Refusal or Disconnection of Service: Ih....W �ssid-I a' w may be refuse4 or disconnected ure§de L4l rvv ce for failure to pay a uregUired deposit4equeI Interest: Interest earned on a deposit-s is applied to the account as a credit on a calendar year basis. l hie a ale f lie l u l li y' I u u lie y' Ihsy Ilh Il lie u l Ih::: 11 auyu u l f u u u c and updated annua�Hy When His customer moves out of eer His Ih....UUservice-s sines, the account is fi^a',r,Gled Aut finaallzed Any depo§iU w#4 interest lis applied to the account as a credit, and the deposit amount is applied to the final bill. If this results in a credit balance, a check is issued to the customer for ##at His credit amount. Refund: The utility shall refund the deposit of a residential customer after 12 consecutive months of on -time payments (no late payment fees). If a customer amakes a +s-late OR payment in His IiinlL412monUhs of seryce, then the deposit will be retained, until such time as the customer makes 12 consecutive monthly on -time payments and liincurs un IIale Dayu nU fees. (RG late payment feeG If the customer provides a payment history from their previous provider, and the payment history indicates no late payment fees and no dishonored checks, then HUC will refund the deposit. HUC must receive this information from the customer within 30 days of customer moving into our services. Refund at Termination of Service: On termination of residential service, and if the customer has a deposit with HUC, HUC shall credit the deposit, with accrued interest, to the customer's final bill and return f#e any ureima nng balance within 30 days of issuing the final bill. Method of Refund: Any deposit or portion thereof refunded to a residential customer shall be refunded by check. Any interest earned will be applied to customer's account as a credit. paragraph is to be imoved above with changes) i Deposit Requirement — Commercial/Industrial pplllca on for Servlc QeP4P eFc4a!4P ►„ tr4a► Quste eg%Ei An application for service chill be filler! ^, it i Ufired to Ih,)e coimpleled and sd,)imflled prior to receiving service. The application shall be accompanied Ihsy proof of cuslomerwok-identification, preferably photo identification, and their Federal Tax ID number. '^, h: epo§il a -A deposit is required for all Commercial/Industrial customers, prior to the ullillliy account "+'ice being taL lli h ed plaeed in th&r- ci.,usuou.irieir's name. A44 IIWC l Hl conduct an internal ^redit ^h^^L 06 ^^rf^rm^,+ account urevi for all new customers applllcaLons m%ete HUG aewir-ate +ter If the results of the revlew l indicate the customer has an oulslan6ng Ihz4 anc Hhu ewes HUC for dee�e previously provided services, hies the outstanding balance shall be paid, in ay'y'lLon t Hie r fired plus a deposit, prior to the customer receiving service. Existing Commercial/Industrial Customers Moving Within Service Territory: A deposit will be waived if the Commercial/Industrial customer has a 24-month payment history with HUC indicating the Commercial/Industrial customer has not been disconnected, lissued a 6sconnecl noLc or issued any dishonored checks. A deposit for existing Commercial/Industrial customers moving within HUC service territory will be required prior, to customer having utilities placed in their name, for the following reasons- 1. If the customer has been disconnected, lissued a 6sconnl noLce or +sswed any dishonored ^ham Dayrnenl in the previous 24 months. 2. Subsequent credit information indicates the initial application for service was falsified. If a deposit is required of a customer, and; (Ih: nl r) 1. If a customer has no deposit with HUC, the customer will pay the deposit amount for the customer's new address. 2. If a customer alFeady has a deposit with HUC and this deposit amount is greater than the new deposit required for customer's new address, HUC will transfer the deposit from the customer's previous address to the customer's new address. The balance of the deposit at the customer's previous address will be applied to the customer's final bill for the previous address. 3. If a customer already has a deposit with HUC and this deposit amount is less than the new deposit required for customer's new address, HUC will transfer the deposit from the customer's previous address to the customer's new address. The customer will pay the balance of the deposit amount for the customer's new address, prior to the utilities being placed in their name. If a deposit is required, ef-a Hie customer a may request , and the ^„G+„mor ,^,^„'d like a written explanation for Hie regdre nl as +„ Why they Reed to Make -A depesi+ then „no will be pmyidod Amount of Deposit: The deposit shall be equal to the two highest bills for the past 12 months rounded to the nearest dollar. In the event that the building will be used for a different purpose Dian Hial of the previous tenant/owner, then similar use will be taken into consideration to determine the amount of deposit. The deposit may also be made by posting a performance bond or an Irrevocable Letter of Credit from an FDIC insured financial institution. These options will not earn any interest and will be terminated after 24 consecutive months of timely payments. In the event of a new building with no billing history, then similar construction will be used to establish the average monthly usage. Refusal or Disconnection of Service: Commercial/Industrial service may be refused or disconnected for failure to pay a reqUired deposit Fegaes . Interest: Interest earned on deposits is applied to the account as a credit on a calendar year basis. I Ise a ale f Iiu U u U li y' t u u liu y' Il,sy tII II Iiu u U II:)eIl auyu u U f u u u c and IIUUC dbtalnsHial linfori allon annuaIIIIy. When Hie Commercial/Industrial customer moves out of Hi h....UUserv�ce area e4F se. the account is fi^a'aled-eut fume ized Any depo§U with interest is applied to the account as credit, and the deposit amount is applied to the final bill. If this results in a credit balance, a check is issued to the customer for that credit amount. ■_ , (This paragraph is to be imoved above) Refund: HUC shall refund the deposit of a Commercial/Industrial customer after 24 consecutive months of on -time payments (no late payment fees). If a customer is late in making payment, then the deposit will be retained, until such time as the customer makes 24 consecutive monthly on -time payments (no late payment fees). Refund at Termination of Service: On termination of Commercial/Industrial service, and if the customer has a deposit with HUC, HUC shall credit the deposit, with accrued interest, to the customer's final bill and return any urerna nng imbalance within 30 days of issuing the final bill. Method of Refund: Any deposit or portion thereof refunded to a Commercial/Industrial customer shall be refunded by check. �.7 -F iqi t�e (This paragraph is to be imoved above with changes) HUTCHINSON UTILITIES COMMISSION�� Board Action Form �'Ylkll'M1'k� Agenda Item: Parallel Generation Contract Presenter: Dave Agenda Item Type: Time Requested (Minutes): 5 New Business Attachments: Yes BACKGROUND/EXPLANATION OF AGENDA ITEM: We have a customer that will be installing a 10.72KW Solar "Net metering" roof -top system. HUC put in place a policy that follows State Statute 216b.1638 for Co -generation and small power production for facilities of 40KW or less. The attached contract is part of this policy and is signed by both parties to ensure that all obligations are met prior to energizing the system. We currently have two 40KW or less "Net Metering" Solar parallel generation contracts in place today. BOARD ACTION REQUESTED: Approval of the Parallel Generation Contract Fiscal Impact: 0 Included in current budget: No Budget Change: No PROJECT SECTION: Total Project Cost: Remaining Cost: UtilitiesHutchinson , Parallel Generation 41 kW or , • Amended February 25, 2015 Effective In All territories served by Hutchinson Utilities Commission (HUC). 2. Availability Available to single-phase and three-phase customers where a part or all of the electrical requirements of the customer are supplied by the customer's generating facilities, where such facilities have a total generating capability of 40 kW or less, where such facilities are connected in parallel with HUC and where such facilities are approved by HUC. The budget payment plan shall not be available to customers with parallel generation. . Rate The customer shall be billed monthly on a net energy basis and shall pay the fixed charge and energy charge as specified in HUC's rate schedule under which the customer is served. If, in any month, the Customer's bill has a credit balance of $100 or less, the amount shall be credited to subsequent bills until a debit balance is reestablished. If the credit balance is more than $100, the utility shall reimburse the customer by check upon request. Monthly credits shall be computed by taking the net excess kilowatt-hours produced times the average annual wholesale cost of power from the previous year. 4. Meterinq and Services Facilities HUC shall utilize an electric meter capable of measuring electric energy in both the forward and reverse direction. 5. Contract Required A contract (Contract for Parallel Generation Facilities (40 KW or Less)) is required between HUC and the customer -owned generation facility. The contract shall specify safety, system protection, and power quality requirements that generators Hutchinson Utilities Commission Parallel Generation (40 M or Less) — Net Energy Billing must comply with. Contracts with customer -owned generation facilities selling energy under the standard (non -negotiated) rate have no specific term or length. 6. Customer Obligation a. Metering Facilities The customer shall furnish, install and wire the necessary service entrance equipment, meter sockets, meter enclosure cabinets, or meter connection cabinets that may be required by HUC to properly meter usage and sales to HUC b. Interconnection Costs The owner of the generating facility shall be required to pay all interconnection costs, incurred by HUC. The owner shall pay said costs prior to the final service connection to the Utility's electrical system C. Insurance Hold Harmless and Government Approval The customer shall keep in force a policy of liability insurance, of at least $300,000.00, against personal or property damage to the utility's system, equipment and personnel arising from the installation, interconnection, and operation of the customer's generating facility. The customer shall provide proof of insurance to HUC on an annual basis with said policy specifically naming HUC as an insured. The customer shall indemnify and hold HUC harmless from all claims of damage whatsoever. The customer is responsible for obtaining all governmental permits and approvals. d. Interconnection and Operational (Safety and Power Quality) Requirements Electric Service to a customer -owned electric generation installation may be disconnected for failure to comply with the following requirements. 1) Interconnection of a generating facility with the HUC system shall not be permitted until application has been made to and approval received from HUC. The Utility may withhold approval only for good reason such as failure to comply with applicable HUC or governmental rules or laws. HUC shall require a contract specifying F Hutchinson Utilities Commission Parallel Generation (40 M or Less) — Net Energy Billing reasonable technical connection and operating aspects for the parallel generating facility. 2) HUC may require that for each generating facility there is provided, between the generator/s and the utility system, a lockable load -break disconnect switch. For installations interconnected at greater than 600 volts, a fused cutout switch may be substituted, where practicable. The switches shall be accessible to HUC for the purpose of isolating the parallel generating facility from the HUC system when necessary. 3) HUC shall require a separate distribution transformer, where necessary, for a customer having a generating facility for reasons of public and employee safety or where the potential exists for the generating facility causing problems with the service of other customers. 4) HUC shall require that each generating facility have a system for automatically isolating the generator from HUC's system upon loss of the HUC supply, unless HUC desires that the local generation be continued to supply isolated load. 5) HUC shall require that the customer discontinue parallel generation operations when it so requests and HUC may isolate the generating installation from its system at times. During such times, HUC shall not be liable for revenue lost by the customer. Parallel generation may be disconnected: a) When considered necessary to facilitate maintenance or repair of HUC's facilities. b) When considered necessary during system emergencies. c) When considered necessary during such times as the generating facility is operating in a hazardous manner, or is operating such that it adversely affects service to other customers or to nearby communication systems or circuits. 6) The owner of the generating facility shall be required to make the equipment available and permit entry upon the property by electric and communication utility personnel at reasonable times for the purpose of testing isolation and protective equipment, evaluating the quality of power delivered to HUC's system and testing to determine 9 .................._ ........ _..........w _- __ .. Hutchinson Utilities Commission W or Less) -- Net Energy Billing ................................ _ �___. Parallel Generation (40 k.,,,,,,_��.� ........_ - whether the local generating facility is the source of any electric service or communication systems problems. 7) The power output of the generating facility shall be maintained such that the frequency and voltage are compatible with normal HUC service and do not cause that HUC service to fall outside the prescribed limits of Commission rules and other standard limitations. 8) The generating facility shall be operated so that variations from acceptable voltage levels and other service impairing disturbances do not result in adverse effects on the service or equipment of other customers, and in a mannerthat does not produce undesirable levels of harmonics in the HUC power supply. The customer agrees to disconnect the generating facility from HUC's distribution system or reimburse HUC for the cost of necessary system modifications if operation of the generating facility causes radio, television, internet, or electrical service interference to other customers, or interference with the operation of HUC's electrical system. 9) The owner of the generating facility shall be responsible for providing protection for the owner's equipment and for adhering to all applicable national, state and local codes. 10) Customer agrees to locate the generating facility so as to not interfere with HUC's distribution system. Customer agrees that the installation shall be in compliance with all applicable electric codes and the generating facility shall be operated only after the installation has been inspected and approved by appropriate authorities. Customer agrees to obtain all required permits, abide by all building and zoning requirements and applicable inspections. 11) The customer agrees to reimburse HUC for any addition, modification, or replacement of distribution components made necessary by the customer's installation. 12) Customer agrees to effectively install grounding and provide surge arrestor protection to prevent lightning damage to HUC's distribution system. G! GenerationHutchinson Utilities Commission Parallel 4! M or . Utility Obligation a. Metering Facilities HUC shall own and install an appropriate meter in order to record all flows of energy necessary to bill in accordance with the charges and credits of the rate schedule. b. Notice to Communication Firms HUC shall notify telephone utility and cable television firms in the area when it knows that a customer -owned generating facility is to be interconnected with its system. This notification shall be as early as practicable to permit coordinated analysis and testing in advance of interconnection. 8. Right to Appeal The owner of the generating facility interconnected, or proposed to be interconnected, with HUC's system may appeal to the Commission should any requirement of HUC's service rules or the required contract be considered to be excessive or unreasonable. Such appeal shall be reviewed and the customer notified of the Commission's determination. Contract for Parallel Generation Facilities (40 kW or Less) This contract is entered into July 13, 2018 , by Hutchinson Utilities Commission (hereafter called "Utility") and Linda Remucal (hereafter called "Customer"). RECITALS Per MN Statute 216B.1611, the Utility shall request the following information for interconnection of distributed renewable generation. 1) The name plate capacity of the facility 10.72 (kW) 2) The pre -incentive installed cost of the generating facility $28,082.00 3) The energy source of the facility Solar (Solar, Wind, etc.) 4) Location of the facility 1075 West Shore Drive SW 55350 The Customer is prepared to generate electricity in parallel with the Utility. The Customer meets the requirements of the Utility's rules on parallel generation and any technical standards for interconnection the Utility has established that are authorized by those rules. The Utility is obligated under Federal and Minnesota law to interconnect with the Customer and to purchase electricity offered for sale by the Customer. AGREEMENTS The Customer and the Utility agree: 1. The Utility shall sell electricity to the Customer under the rate schedule in force for the class of customer to which the Customer belongs. 2. Payment per KWH for energy delivered to the Utility, in excess of energy used by the Customer. $ .054/KWH see #3, Rate, Hutchinson Utilities Commission Parallel Generation (40 kW or Less) — Net Energy Billing policy. 3. The rates for sale and purchase of electricity may change over the time this contract is in force, due to actions of the Utility. The Customer and the Utility agree that sales and purchases shall be made underthe rates in effect each month during the time this contract is in force. 4. The Customer must operate its electric generating facilities within any rules, regulations, and policies adopted by the Utility, which provide reasonable technical connection and operating specifications for the customer (Hutchinson Utility Commission's rules and regulations applicable to parallel generation are attached). 5. The Customer will operate its electric generating facilities so that they conform to the national, state, and local electric and safety codes, and will be responsible for the costs of conformance. 6. The Customer is responsible for the actual, reasonable costs of interconnection which are estimated to be $ 40.00 The customer shall pay the Utility in this manner: Check 7. The Customer shall provide the Utility reasonable access to its property and electric generating facilities in the event the configurations of those facilities do not permit disconnection or testing from the Utility's side of the interconnection. If the Utility enters the Customer's property, the Utility shall remain responsible for its personnel. 8. The Utility may discontinue providing electricity to the Customer during a system emergency. The Utility shall not discriminate against the Customer when it discontinues providing electricity or when it resumes providing electricity. 9. The Utility may discontinue purchasing electricity from the Customer when necessary for the Utility to construct, install, maintain, replace, remove, investigate, or inspect equipment or facilities within its electrical system. The Utility shall notify the Customer prior to discontinuing the purchase of electricity in this manner: Letter or Phone call 10. The customer shall keep in force a policy of liability insurance, of at least $300,000.00, against personal or property damage to the Utility's system, equipment and personnel arising from the installation, interconnection, and operation of customer's generating facility and shall provide annual proof of the insurance to the Utility with said policy specifically naming the Utility as an insured. The customer agrees to indemnify and hold harmless the Utility from all claims whatsoever arising from customer's generating system. 11. This contract becomes effective when signed by the Customer and the Utility. This contract will remain in force until either the Customer or the Utility provides written notice to the other that the contract is canceled. This contract shall be canceled 30 days after notice is given. 12. This contract does not serve as an approval of the Customer's generating system for planning, zoning or permit purposes. The Customer shall have the responsibility to obtain proper approval and permits from the City of Hutchinson or other governmental entities pertaining to the construction and operation of the Customer's generating system. 2 13. This contract contains all the agreements made between the Customer and the Utility. The Customer and the Utility are not responsible for any agreements other than those stated in this contract. THE CUSTOMER AND THE UTILITY HAVE READ THIS CONTRACT AND AGREE TO BE BOUND BY ITS TERMS. AS EVIDENCE OF THEIR AGREEMENT, THEY HAVE EACH SIGNED THIS CONTRACT BELOW ON THE DATE WRITTEN AT THE BEGINNING OF THIS CONTRACT. -DoeuSigned by: Customer �� 4►�� 398D0 40,0417 By Linda Remuca Date: 7/12/2018 8:21:50 AM PDT 3 HUTCHINSON UTILITIES COMMISSION M Date: HUTCHINSON UTILITIES COMMISSION 9"" Board Action Form MENEMENEMENEENUMEM Agenda Item: Approval of Fagen Inc. Contract Presenter: Jeremy Carter Agenda Item Type: Time Requested (Minutes): 5 New Business Attachments: Yes BACKGROUND/EXPLANATION OF AGENDA ITEM: On July 12, 2018 the Commission approved awarding the mechanical installation work on units 6 & 7 to Fagen Inc at $3,667,039. However, as part of the mechanical contractor bids item "O" will be charged back to Caterpillar. Item "O" is $221,650 based on Fagen's itemized bid amount for that portion. Attached is the final contract that has been reviewed by HDR and HUC staff. Staff is recommending approval of the contract by the Commission. BOARD ACTION REQUESTED: Approve Fagen Inc Contract Fiscal Impact: $3,445,389 Included in current budget: Yes Budget Change: PROJECT SECTION: Total Project Cost: $16,886,405 Remaining Cost: SECTION 00 50 00 FORM OF AGREEMENT THIS AGREEMENT is by and between Hutchinson Utilities Commission hereinafter called OWNER, and hereinafter called CONTRACTOR. OWNER and CONTRACTOR, in consideration of the mutual covenants hereinafter set forth, agree as follows: Article 1. WORK CONTRACTOR shall complete all Work as specified or indicated in the Contract Documents for the Project identified herein. Article 2. PROJECT The Project for which the Work under the Contract Documents may be the whole or only a part is generally described as follows: The completion of the installation of Engine Generator Units 6 & 7 in the HUC Plant 1. Engine Generator (EG) supplier will place the EG sets on foundations currently constructed. Contractor shall complete the necessary Structural, Civil, and Mechanical systems installation, including certain equipment and systems furnished by others. The Engine Generator sets are CAT G20CM34 natural gas fueled engines each with a nominal 9.7 MWe capacity. Article 3. ENGINEER The Project has been designed by HDR Engineering, Inc., who is hereinafter called ENGINEER and who is to act as OWNER's representative, assume all duties and responsibilities, and have the rights and authority assigned to ENGINEER in the Contract Documents in connection with completion of the Work in accordance with the Contract Documents. Article 4. CONTRACT TIMES 4.1. Time of the Essence. A. The Work will be substantially completed within _(TBD) days after the date when the Contract Times commence to run as provided in Paragraph 4.01A of the General Conditions, and completed and ready for final payment in accordance with Paragraph 15.06 of the General Conditions within 60 days after the date of substantial . 4.3. Liquidated Damages NOT IMPOSED Article 5. CONTRACT PRICE 5.1. OWNER shall pay CONTRACTOR for completion of the Work in accordance with the Contract Documents an amount in current funds equal to the sum of the amounts determined pursuant to Paragraphs 5.1.A. below: A. Lump Sum 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation FORM OF AGREEMENT 00 50 00 - 1 Article 6. PAYMENT PROCEDURES 6.1. Submittal and Processing of Payments. A. CONTRACTOR shall submit Applications for Payment in accordance with Article 15 of the General Conditions. Applications for Payment will be processed by ENGINEER as provided in the General Conditions. 6.2. Progress Payments; Retainage. A. OWNER shall make monthly progress payments on account of the Contract Price on the basis of CONTRACTOR's Applications for Payment as recommended by ENGINEER, during construction as provided in Paragraphs 6.1.1 and 6.1.2 below. All such payments will be measured by the schedule of values established in Paragraph 2.03A. of the General Conditions (and in the case of Unit Price Work based on the number of units completed) or, in the event there is no schedule of values, as provided in the General Requirements. Prior to Substantial Completion, progress payments will be made in an amount equal to the percentage indicated below, but, in each case, less the aggregate of payments previously made and less such amounts as accordance with Paragraph 15.01 of the General Conditions. a. 90 percent of Work completed (with the balance being retainage). If Work has been 50 percent completed as determined by ENGINEER, and if the character and progress of the Work have been satisfactory to OWNER and ENGINEER, OWNER, on recommendation of ENGINEER, may determine that as long as the character and progress of the Work remain satisfactory to them, Upon Substantial Completion, in an amount sufficient to increase total payments to CONTRACTOR to 95 percent of the Contract Price (with the balance being retainage), less such amounts as ENGINEER shall determine, or OWNER may withhold, in accordance with Paragraph 15.01 of the General Conditions. 6.3. Final Payment. A. Upon final completion and acceptance of the Work in accordance with Paragraph 15.06 of the General Conditions, OWNER shall pay the remainder of the Contract Price as recommended by ENGINEER as provided in said Paragraph 15.06 Article 7. INTEREST 7.1 All moneys not paid when due and as provided for in Article 15 of the General Conditions shall bear interest at the rate of 10 percent per annum, simple interest. Article 8. CONTRACTOR'S REPRESENTATIONS 8.1. In order to induce OWNER to enter into this Agreement, CONTRACTOR makes the following representations: A. CONTRACTOR has examined and carefully studied the Contract Documents (including the Addenda listed in Article 9.) and the other related data identified in the Bidding Documents. B. CONTRACTOR has visited the site and become familiar with and is satisfied as to the general, local and site conditions that may affect cost, progress, performance or furnishing of the Work. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation FORM OF AGREEMENT 005000-2 C. CONTRACTOR is familiar with and is satisfied as to all federal, state and local Laws and Regulations that may affect cost, progress, performance or furnishing of the Work. CONTRACTOR acknowledges that OWNER and ENGINEER do not assume responsibility for the accuracy or completeness of information and data shown or indicated in the Contract Documents with respect to Underground Facilities at or contiguous to the Site. D. CONTRACTOR has obtained and carefully studied (or assumes risk for not doing so) all reasonable additional or supplementary examinations, investigations, explorations, tests, studies, and data concerning conditions (surface, subsurface, and Underground Facilities) at or contiguous to the Site which may affect cost, progress, or performance of the Work or which relate to any aspect of the means, methods, techniques, sequences, and procedures of construction to be employed by Contractor, including any specific means, methods, techniques, sequences, and procedures of construction expressly required by the Bidding Documents, and safety precautions and programs incident thereto. E. CONTRACTOR does not consider that any additional examinations, investigations, explorations, tests, studies or data are necessary for the performance and furnishing of the Work at the Contract Price, within the Contract Times and in accordance with the other terms and conditions of the Contract Documents. F. CONTRACTOR is aware of the general nature of work to be performed by OWNER and others at the site that relates to the Work as indicated in the Contract Documents. G. CONTRACTOR has correlated the information known to CONTRACTOR, information commonly known to contractors doing business in the locality of the Site, information and observations obtained from visits to the site, reports and drawings identified in the Contract Documents and all additional examinations, investigations, explorations, tests, studies and data with the Contract Documents. H. CONTRACTOR has given ENGINEER written notice of all conflicts, errors, ambiguities or discrepancies in the Contract Documents and the written resolution thereof by ENGINEER through issued addendum or addenda is acceptable to CONTRACTOR, and the Contract Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performance and furnishing of the Work. When said conflicts, etc., have not been resolved through interpretation or clarification by ENGINEER, because of insufficient time or otherwise, CONTRACTOR has included in the Bid the greater quantity or better quality of Work, or compliance with the more stringent requirement resulting in a greater cost; and said greater cost is included in the Contract Price. The Contract Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performance and furnishing of the Work. Article 9. CONTRACT DOCUMENTS 9.1. Contents. A. The Contract Documents which comprise the entire agreement between OWNER and CONTRACTOR concerning the Work consist of the following: This Agreement (pages 1 to 6, inclusive). 10059265 Hutchinson Utilities Commission Plant I Units 6 & 7 - Installation FORM OF AGREEMENT 005000-3 2. Bonds, identified as the following Exhibits. a. Performance Bond. b. Payment Bond. 3. General Conditions (pages 1 to , inclusive). 4. Supplementary Conditions (pages 1 to inclusive). 5. Specifications as listed in Table of Contents of the Project Manual entitled Plant 1 Units 6 & 7 - INSTALLATION (dated 12018). 6. Addenda numbers to , inclusive. 7. CONTRACTOR's Bid (Bid Form ) marked Exhibit C. 8. The following which may be delivered or issued after the Effective Date of the AGREEMENT and are not attached thereto: a. Notice to Proceed. b. Field Orders. c. Work Change Directives. d. Change Orders. 9. There are no Contract Documents other than those listed above in this Article 9. The Contract Documents may only be amended, modified or supplemented as provided in Article 11 of the General Conditions. Article 10. MISCELLANEOUS 10.1 Terms. A. Terms used in this Agreement which are defined in Article 1 of the General Conditions will have the meanings indicated in the General Conditions. 10.2. Assignment of Contract. A. No assignment by a party hereto of any rights under or interests in the Contract Documents will be binding on another party hereto without the written consent of the party sought to be bound; and, specifically but without limitation, moneys that may become due and moneys that are due may not be assigned without such consent (except to the extent that the effect of this restriction may be limited by law), and unless specifically stated to the contrary in any written consent to an assignment, no assignment will release or discharge the assignor from any duty or responsibility under the Contract Documents. 10.3. Successors and Assigns. A. OWNER and CONTRACTOR each binds itself, its partners, successors, assigns and legal representatives to the other party hereto, its partners, successors, assigns and legal representatives in respect to all covenants, agreements and obligations contained in the Contract Documents. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation FORM OF AGREEMENT 005000-4 10.4. Severability. A. Any provision or part of the Contract Documents held to be void or unenforceable under any Law or Regulation shall be deemed stricken, and all remaining provisions shall continue to be valid and binding upon OWNER and CONTRACTOR, who agree that the Contract Documents shall be reformed to replace such stricken provision or part thereof with a valid and enforceable provision that comes as close as possible to expressing the intention of the stricken provision. 10.5 CONTRACTOR'S Certifications. A. CONTRACTOR certifies that it has not engaged in corrupt, fraudulent, collusive, or coercive practices in competing for or in executing the Contract. For the purposes of this Paragraph: 1. "corrupt practice" means the offering, giving, receiving, or soliciting of any thing of value likely to influence the action of a public official in the bidding process or in the Contract execution. 2. "fraudulent practice" means an intentional misrepresentation of facts made (a) to influence the bidding process or the execution of the Contract to the detriment of OWNER, (b) to establish Bid or Contract prices at artificial non-competitive levels, or (c) to deprive OWNER of the benefits of free and open competition. 3. "collusive practice" means a scheme or arrangement between two or more BIDDERS, with or without the knowledge of OWNER, a purpose of which is to establish Bid prices at artificial, non-competitive levels. 4. "coercive practice" means harming or threatening to harm, directly or indirectly, persons or their property to influence their participation in the bidding process or affect the execution of the Contract. 10.6. Other Provisions. 11:i07 10059265 Hutchinson Utilities Commission Plant I Units 6 & 7 - Installation FORM OF AGREEMENT 005000-5 IN WITNESS WHEREOF, OWNER and CONTRACTOR have signed this Agreement in triplicate. One counterpart each has been delivered to OWNER, CONTRACTOR, and ENGINEER. All portions of the Contract Documents have been signed, initialed or identified by OWNER and CONTRACTOR or identified by ENGINEER on their behalf. This AGREEMENT will be effective on 2018 (which is the Effective Date of the AGREEMENT). OWNER Hutchinson Utilities Commission CONTRACTOR [CORPORATE SEAL] [CORPORATE SEAL] Attest Attest Address for giving notices: Address for giving notices: 225 Michigan Street SE Hutchinson, MN 55350 License No. NOTE: If CONTRACTOR is a corporation, attach evidence of authority to sign. END OF SECTION 10059265 Hutchinson Utilities Commission Plant I Units 6 & 7 - Installation FORM OF AGREEMENT 005000-6 CONTRACTOR (name and address): OWNER (name and address): CONSTRUCTION CONTRACT Effective Date of the Agreement: Amount: Description (name and location): SECTION 00 61 13 PERFORMANCE BOND SURETY (name and address of principal place of business): BOND Bond Number: Date (not earlier than the Effective Date of the Agreement of the Construction Contract): Amount: Modifications to this Bond Form: None See Paragraph 16 Surety and Contractor, intending to be legally bound hereby, subject to the terms set forth below, do each cause this Performance Bond to be duly executed by an authorized officer, agent, or representative. CONTRACTOR AS PRINCIPAL (seal) Contractor's Name and Corporate Seal By: Signature Print Name Title SURETY Surety's Name and Corporate Seal Bv: Signature (attach power of attorney) Print Name Title Attest: Attest: Signature Signature Title Title (seal) Notes: (1) Provide supplemental execution by any additional parties, such as joint venturers. (2) Any singular reference to Contractor, Surety, Owner, or other party shall be considered plural where applicable. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PERFORMANCE BOND 006113-1 1. The Contractor and Surety, jointly and severally, bind themselves, their heirs, executors, administrators, successors, and assigns to the Owner for the performance of the Construction Contract, which is incorporated herein by reference. 2. If the Contractor performs the Construction Contract, the Surety and the Contractor shall have no obligation under this Bond, except when applicable to participate in a conference as provided in Paragraph 3. 3. If there is no Owner Default under the Construction Contract, the Surety's obligation under this Bond shall arise after: 3.1 The Owner first provides notice to the Contractor and the Surety that the Owner is considering declaring a Contractor Default. Such notice shall indicate whether the Owner is requesting a conference among the Owner, Contractor, and Surety to discuss the Contractor's performance. If the Owner does not request a conference, the Surety may, within five (5) business days after receipt of the Owner's notice, request such a conference. If the Surety timely requests a conference, the Owner shall attend. Unless the Owner agrees otherwise, any conference requested under this Paragraph 3.1 shall be held within ten (10) business days of the Surety's receipt of the Owner's notice. If the Owner, the Contractor, and the Surety agree, the Contractor shall be allowed a reasonable time to perform the Construction Contract, but such an agreement shall not waive the Owner's right, if any, subsequently to declare a Contractor Default; 3.2 The Owner declares a Contractor Default, terminates the Construction Contract and notifies the Surety; and 3.3 The Owner has agreed to pay the Balance of the Contract Price in accordance with the terms of the Construction Contract to the Surety or to a contractor selected to perform the Construction Contract. 4. Failure on the part of the Owner to comply with the notice requirement in Paragraph 3.1 shall not constitute a failure to comply with a condition precedent to the Surety's obligations, or release the Surety from its obligations, except to the extent the Surety demonstrates actual prejudice. 5. When the Owner has satisfied the conditions of Paragraph 3, the Surety shall promptly and at the Surety's expense take one of the following actions: 5.1 Arrange for the Contractor, with the consent of the Owner, to perform and complete the Construction Contract; 5.2 Undertake to perform and complete the Construction Contract itself, through its agents or independent contractors; 5.3 Obtain bids or negotiated proposals from qualified contractors acceptable to the Owner for a contract for performance and completion of the Construction Contract, arrange for a contract to be prepared for execution by the Owner and a contractor selected with the Owners concurrence, to be secured with performance and payment bonds executed by a qualified surety equivalent to the bonds issued on the Construction Contract, and pay to the Owner the amount of damages as described in Paragraph 7 in excess of the Balance of the Contract Price incurred by the Owner as a result of the Contractor Default; or 5.4 Waive its right to perform and complete, arrange for completion, or obtain a new contractor, and with reasonable promptness under the circumstances: 5.4.1 After investigation, determine the amount for which it may be liable to the Owner and, as soon as practicable after the amount is determined, make payment to the Owner; or 5.4.2 Deny liability in whole or in part and notify the Owner, citing the reasons for denial. 6. If the Surety does not proceed as provided in Paragraph 5 with reasonable promptness, the Surety shall be deemed to be in default on this Bond seven days after receipt of an additional written notice from the Owner to the Surety demanding that the Surety perform its obligations under this Bond, and the Owner shall be entitled to enforce any remedy available to the Owner. If the Surety proceeds as provided in Paragraph 5.4, and the Owner refuses the payment or the Surety has denied liability, in whole or in part, without further notice the Owner shall be entitled to enforce any remedy available to the Owner. 7. If the Surety elects to act under Paragraph 5.1, 5.2, or 5.3, then the responsibilities of the Surety to the Owner shall not be greater than those of the Contractor under the Construction Contract, and the responsibilities of the Owner to the Surety shall not be greater than those of the Owner under the Construction Contract. Subject to the commitment by the Owner to pay the Balance of the Contract Price, the Surety is obligated, without duplication for: 7.1 the responsibilities of the Contractor for correction of defective work and completion of the Construction Contract; 7.2 additional legal, design professional, and delay costs resulting from the Contractor's Default, and resulting from the actions or failure to act of the Surety under Paragraph 5; and 7.3 liquidated damages, or if no liquidated damages are specified in the Construction Contract, actual damages caused by delayed performance or non-performance of the Contractor. 8. If the Surety elects to act under Paragraph 5.1, 5.3, or 5.4, the Surety's liability is limited to the amount of this Bond. 9. The Surety shall not be liable to the Owner or others for obligations of the Contractor that are unrelated to the Construction Contract, and the Balance of the Contract Price shall not be reduced or set off on account of any such unrelated obligations. No right of action shall accrue on this Bond to any person or entity other than the Owner or its heirs, executors, administrators, successors, and assigns. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PERFORMANCE BOND 006113-2 10. The Surety hereby waives notice of any change, including changes of time, to the Construction Contract or to related subcontracts, purchase orders, and other obligations. 11. Any proceeding, legal or equitable, under this Bond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located and shall be instituted within two years after a declaration of Contractor Default or within two years after the Contractor ceased working or within two years after the Surety refuses or fails to perform its obligations under this Bond, whichever occurs first. If the provisions of this paragraph are void or prohibited by law, the minimum periods of limitations available to sureties as a defense in the jurisdiction of the suit shall be applicable. 12. Notice to the Surety, the Owner, or the Contractor shall be mailed or delivered to the address shown on the page on which their signature appears. 13. When this Bond has been furnished to comply with a statutory or other legal requirement in the location where the construction was to be performed, any provision in this Bond conflicting with said statutory or legal requirement shall be deemed deleted herefrom and provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein. When so furnished, the intent is that this Bond shall be construed as a statutory bond and not as a common law bond. 14. Definitions 14.1 Balance of the Contract Price: The total amount payable by the Owner to the Contractor under the Construction Contract after all proper adjustments have been made including allowance for the Contractor for any amounts received or to be received by the Owner in settlement of insurance or other claims for damages to which the Contractor is entitled, reduced by all valid and proper payments made to or on behalf of the Contractor under the Construction Contract. 14.2 Construction Contract: The agreement between the Owner and Contractor identified on the cover page, including all Contract Documents and changes made to the agreement and the Contract Documents. 14.3 Contractor Default: Failure of the Contractor, which has not been remedied or waived, to perform or otherwise to comply with a material term of the Construction Contract. 14.4 Owner Default: Failure of the Owner, which has not been remedied or waived, to pay the Contractor as required under the Construction Contract or to perform and complete or comply with the other material terms of the Construction Contract. 14.5 Contract Documents: All the documents that comprise the agreement between the Owner and Contractor. 15. If this Bond is issued for an agreement between a contractor and subcontractor, the term Contractor in this Bond shall be deemed to be Subcontractor and the term Owner shall be deemed to be Contractor. 16. Modifications to this Bond are as follows: 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PERFORMANCE BOND 006113-3 SECTION 00 61 14 PAYMENT BOND CONTRACTOR (name and address): SURETY (name and address of principal place of business): OWNER (name and address): CONSTRUCTION CONTRACT Effective Date of the Agreement: Amount: Description (name and location): BOND Bond Number: Date (not earlier than the Effective Date of the Agreement of the Construction Contract): Amount: Modifications to this Bond Form: ❑ None ❑ See Paragraph 18 Surety and Contractor, intending to be legally bound hereby, subject to the terms set forth below, do each cause this Payment Bond to be duly executed by an authorized officer, agent, or representative. CONTRACTOR AS PRINCIPAL SURETY (seal) Contractor's Name and Corporate Seal By: Signature Print Name Title Attest: Signature Surety's Name and Corporate Seal Bv: Signature (attach power of attorney) Print Name Title Attest: Signature Title Title (seal) 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYMENTBOND 006114-1 Notes: (1) Provide supplemental execution by any additional parties, such as joint venturers. (2) Any singular reference to Contractor, Surety, Owner, or other party shall be considered plural where applicable. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYMENTBOND 0061 14 - 2 1. The Contractor and Surety, jointly and severally, bind themselves, their heirs, executors, administrators, successors, and assigns to the Owner to pay for labor, materials, and equipment furnished for use in the performance of the Construction Contract, which is incorporated herein by reference, subject to the following terms. 2. If the Contractor promptly makes payment of all sums due to Claimants, and defends, indemnifies, and holds harmless the Owner from claims, demands, liens, or suits by any person or entity seeking payment for labor, materials, or equipment furnished for use in the performance of the Construction Contract, then the Surety and the Contractor shall have no obligation under this Bond. 3. If there is no Owner Default under the Construction Contract, the Surety's obligation to the Owner under this Bond shall arise after the Owner has promptly notified the Contractor and the Surety (at the address described in Paragraph 13) of claims, demands, liens, or suits against the Owner or the Owner's property by any person or entity seeking payment for labor, materials, or equipment furnished for use in the performance of the Construction Contract, and tendered defense of such claims, demands, liens, or suits to the Contractor and the Surety. 4. When the Owner has satisfied the conditions in Paragraph 3, the Surety shall promptly and at the Surety's expense defend, indemnify, and hold harmless the Owner against a duly tendered claim, demand, lien, or suit. 5. The Surety's obligations to a Claimant under this Bond shall arise after the following: 5.1 Claimants who do not have a direct contract with the Contractor, 5.1.1 have furnished a written notice of non- payment to the Contractor, stating with substantial accuracy the amount claimed and the name of the party to whom the materials were, or equipment was, furnished or supplied or for whom the labor was done or performed, within ninety (90) days after having last performed labor or last furnished materials or equipment included in the Claim; and 6. If a notice of non-payment required by Paragraph 5.1.1 is given by the Owner to the Contractor, that is sufficient to satisfy a Claimant's obligation to furnish a written notice of non-payment under Paragraph 5.1.1. 7. When a Claimant has satisfied the conditions of Paragraph 5.1 or 5.2, whichever is applicable, the Surety shall promptly and at the Surety's expense take the following actions: 7.1 Send an answer to the Claimant, with a copy to the Owner, within sixty (60) days after receipt of the Claim, stating the amounts that are undisputed and the basis for challenging any amounts that are disputed; and 7.2 Pay or arrange for payment of any undisputed amounts. 7.3 The Surety's failure to discharge its obligations under Paragraph 7.1 or 7.2 shall not be deemed to constitute a waiver of defenses the Surety or Contractor may have or acquire as to a Claim, except as to undisputed amounts for which the Surety and Claimant have reached agreement. If, however, the Surety fails to discharge its obligations under Paragraph 7.1 or 7.2, the Surety shall indemnify the Claimant for the reasonable attorney's fees the Claimant incurs thereafter to recover any sums found to be due and owing to the Claimant. 8. The Surety's total obligation shall not exceed the amount of this Bond, plus the amount of reasonable attorney's fees provided under Paragraph 7.3, and the amount of this Bond shall be credited for any payments made in good faith by the Surety. Amounts owed by the Owner to the Contractor under the Construction Contract shall be used for the performance of the Construction Contract and to satisfy claims, if any, under any construction performance bond. By the Contractor furnishing and the Owner accepting this Bond, they agree that all funds earned by the Contractor in the performance of the Construction Contract are dedicated to satisfy obligations of the Contractor and Surety under this Bond, subject to the Owner's priority to use the funds for the completion of the work. 10. The Surety shall not be liable to the Owner, Claimants, or others for obligations of the Contractor that are unrelated to the Construction Contract. The Owner shall not be 5.1.2 have sent a Claim to the Surety (at the liable for the payment of any costs or expenses of any address described in Paragraph 13). Claimant under this Bond, and shall have under this Bond no obligation to make payments to or give notice on 5.2 Claimants who are employed by or have a direct behalf of Claimants, or otherwise have any obligations to contract with the Contractor have sent a Claim to Claimants under this Bond. the Surety (at the address described in Paragraph 13). 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYMENTBOND 0061 14 - 3 11. The Surety hereby waives notice of any change, including 6. The total amount earned by the Claimant for changes of time, to the Construction Contract or to related labor, materials, or equipment furnished as of subcontracts, purchase orders, and other obligations. the date of the Claim; 7. The total amount of previous payments 12. No suit or action shall be commenced by a Claimant under received by the Claimant; and this Bond other than in a court of competent jurisdiction in 8. The total amount due and unpaid to the the state in which the project that is the subject of the Claimant for labor, materials, or equipment Construction Contract is located or after the expiration of furnished as of the date of the Claim. one year from the date (1) on which the Claimant sent a Claim to the Surety pursuant to Paragraph 5.1.2 or 5.2, or 16.2 Claimant: An individual or entity having a direct (2) on which the last labor or service was performed by contract with the Contractor or with a anyone or the last materials or equipment were furnished subcontractor of the Contractor to furnish labor, by anyone under the Construction Contract, whichever of materials, or equipment for use in the performance (1) or (2) first occurs. If the provisions of this paragraph of the Construction Contract. The term Claimant are void or prohibited by law, the minimum period of also includes any individual or entity that has limitation available to sureties as a defense in the rightfully asserted a claim under an applicable jurisdiction of the suit shall be applicable. mechanic's lien or similar statute against the real property upon which the Project is located. The 13. Notice and Claims to the Surety, the Owner, or the intent of this Bond shall be to include without Contractor shall be mailed or delivered to the address limitation in the terms of "labor, materials, or shown on the page on which their signature appears. equipment" that part of the water, gas, power, Actual receipt of notice or Claims, however accomplished, light, heat, oil, gasoline, telephone service, or shall be sufficient compliance as of the date received. rental equipment used in the Construction Contract, architectural and engineering services 14. When this Bond has been furnished to comply with a required for performance of the work of the statutory or other legal requirement in the location where Contractor and the Contractor's subcontractors, the construction was to be performed, any provision in and all other items for which a mechanic's lien may this Bond conflicting with said statutory or legal be asserted in the jurisdiction where the labor, requirement shall be deemed deleted herefrom and materials, or equipment were furnished. provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein. When 16.3 Construction Contract: The agreement between so furnished, the intent is that this Bond shall be construed the Owner and Contractor identified on the cover as a statutory bond and not as a common law bond. page, including all Contract Documents and all changes made to the agreement and the Contract 15. Upon requests by any person or entity appearing to be a Documents. potential beneficiary of this Bond, the Contractor and Owner shall promptly furnish a copy of this Bond or shall 16.4 Owner Default: Failure of the Owner, which has permit a copy to be made. not been remedied or waived, to pay the Contractor as required under the Construction 16. Definitions Contract or to perform and complete or comply with the other material terms of the Construction 16.1 Claim: A written statement by the Claimant Contract. including at a minimum: 16.5 Contract Documents: All the documents that 1. The name of the Claimant; comprise the agreement between the Owner and 2. The name of the person for whom the labor Contractor. was done, or materials or equipment furnished; 17. If this Bond is issued for an agreement between a 3. A copy of the agreement or purchase order contractor and subcontractor, the term Contractor in this pursuant to which labor, materials, or Bond shall be deemed to be Subcontractor and the term equipment was furnished for use in the Owner shall be deemed to be Contractor. performance of the Construction Contract; 4. A brief description of the labor, materials, or 18. Modifications to this Bond are as follows: equipment furnished; 5. The date on which the Claimant last performed labor or last furnished materials or equipment for use in the performance of the Construction Contract; 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYMENTBOND 0061 14 - 4 SECTION 00 61 13 PERFORMANCE BOND CONTRACTOR (name and address): SURETY (name and address of principal place of business): Fagen, Inc. Liberty Mutual Insurance Company 501 W. Highway 212 175 Berkeley Street Granite Falls, MN 56241 Boston, MA 02116 OWNER (name and address): Hutchinson Utilities Commission 225 Michigan Street S.E., Hutchinson, MN 55350 Effective Date of the Agreement: July 18, 2018 Amount: $3,677,039.00 (Three Million Six Hundred Seventy -Seven Thousand Thirty -Nine and No/100) Description (name and location): Hutchinson Utilities Commission Plant 1 Units 6 & 7 -Installation Hutchinson, Minnesota BOND Bond Number: 190040269 Date (not earlier than the Effective Date of the Agreement of the Construction Contract): July 18, 2018 Amount: $3,677,039.00 (Three Million Six Hundred Seventy -Seven Thousand Thirty -Nine and No/100) Modifications to this Bond Form: XX None ❑ See Paragraph 16 Surety and Contractor, intending to be legally bound hereby, subject to the terms set forth below, do each cause this Performance Bond to be duly executed by an authorized officer, agent, or representative. CONTIACTOR AS PRINCIPAL Print Name Title Attest: Si4gnfa t=u r (of�a4 . . Titley...w.w.w.w._._._._._._._._._._._._._.. — --------------------------- SURETY Liberty Mutual Insurance Company (seal) Surety's Nam „ ` ,deal Signature (attach power of attorney) Lin Ulven Print Name Attorney- -- -Fact ______-._.w._.-w------------------------------------------------- .____w._._._._._._._._._._._._._._.. Title - - - - Attest Signature Surety Account Representative Title Notes: (1) Provide supplemental execution by any additional parties, such as joint venturers. (2) Any singular reference to Contractor, Surety, Owner, or other party shall be considered plural where applicable. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PERFORMANCE BOND 0061 13 - 1 l The Contractor and Surety, jointly and severally, bind themselves, their heirs, executors, administrators, successors, and assigns to the Owner for the performance of the Construction Contract, which is incorporated herein by reference. 2. If the Contractor performs the Construction Contract, the Surety and the Contractor shall have no obligation under this Bond, except when applicable to participate in a conference as provided in Paragraph 3. I If there isnoOwner Default under the Construction Contract, the Surety's obligation under this Bond shall arise after: 3.1 The Owner first provides notice oothe Contractor and the Surety that the Owner isconsidering declaring aContractor Default. Such notice shall indicate whether the Owner is requesting a conference among the Owner, Contractor, and Surety to discuss the Contractor's performance. If the Owner does not request conference, the Surety may, within five (S) business days after receipt ofthe Owner's notice, request such a conference. If the Surety timely requests a conference, the ovvne, shall attend. Unless the Owner agrees otherwise, any conference requested under this Paragraph 3.1 shall be held within ten (10) business days of the Surety's receipt of the Owner's notice. If the Owner, the Contractor, and the Surety agree, the Contractor shall be allowed a reasonable time to perform the Construction Contract, but such anagreement shall not waive the Owner's right, if any, subsequently todeclare a Contractor Default; 3.2 The Owner declares a Contractor Default, terminates the Construction Contract and notifies the Surety; and 3.3 The Owner has agreed to pay the Balance of the Contract Price inaccordance with the terms ofthe Construction Contract »nthe Surety o,»oacontractor selected ooperform the Construction Contract. 4. Failure on the part of the Owner to comply with the notice requirement in Paragraph S1shall not constitute afailure tmcomply with acondition precedent tvthe Surety's obligations, orrelease the Surety from its obligations, except to the extent the Surety demonstrates actual prejudice. S. When the Owner has satisfied the conditions ofParagraph 3,the Surety shall promptly and at the Surety's expense take one of the following actions: 5.1 Arrange for the Contractor, with the consent of the Owner, to perform and complete the Construction Contract; 52 Undertake uzperform and complete the Construction Contract itself, through its agents or independent contractors; 5.3 Obtain bids or negotiated proposals from qualified contractors acceptable to the Owner for a contract for performance and completion of the Construction Contract, arrange for a contract to be prepared for execution by the Owner and a contractor selected with the Owners concurrence, tobesecured with performance and payment bonds executed byaqualified surety equivalent to the bonds issued onthe Construction Contract and pay to the Owner the amount of damages asdescribed inParagraph 7inexcess ofthe Balance o{ the Contract Price incurred by the Owner as a result of the Contractor Default; or 5.4 Waive its right toperform and complete, arrange for completion, or obtain a new contractor, and with reasonable promptness under the circumstances: 5.4.1 After investigation, determine the amount for which it may be liable to the Owner and, as soon as practicable after the amount isdetermined, make payment tothe Owner; or S�Z Deny liability inwhole minpart and notify the Owner, citing the reasons for denial. B. If the Surety does not proceed as provided in Paragraph S with reasonable promptness, the Surety shall bedeemed to be in default on this Bond seven days after receipt ufan additional written notice from the Owner to the Surety demanding that the Suretyperform its obligations under this Bond, and the Owner shall be entitled to enforce any remedy available tothe Owner. |fthe Surety proceeds as provided inParagraph 5.4,and the Owner refuses thepaymentorthe Surety has denied liability, inwhole orinpart, without further notice the Owner shall be entitled toenforce any remedy available tothe Owner. 7. If the Surety elects toact under Paragraph S.1,S.2, orS.3, then the responsibilities ofthe Surety to the Owner shall not begreater than those cf the Contractor under the Construction contract and the responsibilities of the Owner to the Surety shall not be greater than those ofthe Owner under the Construction Contract. Subject to the commitment by the Owner to pay the Balance of the Contract Price, the Surety isobligated, without duplication for: 7.1 the responsibilities ofthe Contractor for correction of defective work and completion of the Construction Contract; 7.2 additional legal, design professional, and delay costs resulting from the Contractor's Default, and resulting from the actions orfailure toact ofthe Surety under Paragraph S;and 7.3 liquidated damages, or if no liquidated damages are specified inthe Construction Contract, actual damages caused by delayed performance or non-performance of the Contractor. 8. If the Surety elects toact under Paragraph 5.1,S.3,mS/kthe Surety's liability is limited to the amount of this Bond. 9. The Surety shall not be liable tothe Owner orothers for obligations of the Contractor that are unrelated to the Construction Contract, and the Balance of the Contract Price shall not be educed or set off on account of any such unrelated obligations. No right of action shall accrue on this Bond to any person orentity other than the Owner or its heirs, executors, administrators, successors, and assigns. 1005926Hutchinson Utilities Commission Plant I Units o&7'Installation PERFORMANCE BOND 10. The Surety hereby waives notice of any change, including changes of time, to the Construction Contract or to related subcontracts, purchase orders, and other obligations. 11. Any proceeding, legal or equitable, under this Bond may be instituted in any court of competent jurisdiction in the location in which the work or part of the work is located and shall be instituted within two years after a declaration of Contractor Default or within two years after the Contractor ceased working or within two years after the Surety refuses or fails to perform its obligations under this Bond, whichever occurs first. If the provisions of this paragraph are void or prohibited by law, the minimum periods of limitations available to sureties as a defense in the jurisdiction of the suit shall be applicable. 12. Notice to the Surety, the Owner, or the Contractor shall be mailed or delivered to the address shown on the page on which their signature appears. 13. When this Bond has been furnished to comply with a statutory or other legal requirement in the location where the construction was to be performed, any provision in this Bond conflicting with said statutory or legal requirement shall be deemed deleted herefrom and provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein. When so furnished, the intent is that this Bond shall be construed as a statutory bond and not as a common law bond. 14. Definitions 14.1 Balance of the Contract Price: The total amount payable by the Owner to the Contractor under the Construction Contract after all proper adjustments have been made including allowance for the Contractor for any amounts received or to be received by the Owner in settlement of insurance or other claims for damages to which the Contractor is entitled, reduced by all valid and proper payments made to or on behalf of the Contractor under the Construction Contract. 14.2 Construction Contract: The agreement between the Owner and Contractor identified on the cover page, including all Contract Documents and changes made to the agreement and the Contract Documents. 14.3 Contractor Default: Failure of the Contractor, which has not been remedied or waived, to perform or otherwise to comply with a material term of the Construction Contract. 14.4 Owner Default: Failure of the Owner, which has not been remedied or waived, to pay the Contractor as required under the Construction Contract or to perform and complete or comply with the other material terms of the Construction Contract. 14.5 Contract Documents: All the documents that comprise the agreement between the Owner and Contractor. 15. If this Bond is issued for an agreement between a contractor and subcontractor, the term Contractor in this Bond shall be deemed to be Subcontractor and the term Owner shall be deemed to be Contractor. 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PERFORMANCE BOND 006113-3 PAYMENT BOND CONTRACTOR (name and address): SURETY (name and address of principal place of business): Fagen, Inc. Liberty Mutual Insurance Company 501 W. Highway 212 175 Berkeley Street Granite Falls, MN 56241 Boston, MA 02116 OWNER (name and address): Hutchinson Utilities Commission 225 Michigan Street S.E., Hutchinson, MN 55350 CONSTRUCTION CONTRACT Effective Date of the Agreement: July 18, 2018 Amount: $3,677,039.00 (Three Million Six Hundred Seventy -Seven Thousand Thirty -Nine and No/100) Description (name and location): Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installatiion Hutchinson, Minnesota BOND Bond Number: 190040269 Date (not earlier than the Effective Date of the Agreement of the Construction Contract): July 18, 2018 Amount: $3,677,039.00 (Three Million Six Hundred Seventy -Seven Thousand Thirty -Nine and No/100) Modifications to this Bond Form: SN None ❑ See Paragraph 18 Surety and Contractor, intending to be legally bound hereby, subject to the terms set forth below, do each cause this Payment Bond to be duly executed by an authorized officer, agent, or representative. CONTRACTOR AS PRINCIPAL SURETY Fagen, Inc. (seal) Liberty Mutual Insurance Company (seal) ontra r s Dame an Corpora te Seal Sur s Name and date Seal „ By,�.� ' BY• �� ......__.. .. Signature Signature (attach power of attorney) Print Name Title Attest: X... Signature Title Lin Ulven Print Name Attornev-in-Fact Title Attest: Signature Surety Account Representative Title 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYMENTBOND 0061 14 - 1 Notes: (1) Provide supplemental execution by any additional parties, such as joint venturers. (2) Any singular reference to Contractor, Surety, Owner, or other party shall be considered plural where applicable. 10059265 Hutchinson Utilities Commission Plant I Units 6 & 7 - Installation PAYMENT BOND 0061 14-2 6. If a notice of non-payment required by Paragraph 5.1.1 is 1. The Contractor and Surety, jointly and severally, bind given by the Owner to the Contractor, that is sufficient to themselves, their heirs, executors, administrators, satisfy a Claimant's obligation to furnish a written notice of successors, and assigns to the Owner to pay for labor, non-payment under Paragraph 5.1.1. materials, and equipment furnished for use in the performance of the Construction Contract, which is 7. When a Claimant has satisfied the conditions of Paragraph incorporated herein by reference, subject to the following 5.1 or 5.2, whichever is applicable, the Surety shall terms. promptly and at the Surety's expense take the following actions: 2. If the Contractor promptly makes payment of all sums due to Claimants, and defends, indemnifies, and holds 7.1 Send an answer to the Claimant, with a copy to the harmless the Owner from claims, demands, liens, or suits Owner, within sixty (60) days after receipt of the by any person or entity seeking payment for labor, Claim, stating the amounts that are undisputed and materials, or equipment furnished for use in the the basis for challenging any amounts that are performance of the Construction Contract, then the Surety disputed; and and the Contractor shall have no obligation under this Bond. 7.2 Pay or arrange for payment of any undisputed amounts. 3. If there is no Owner Default under the Construction Contract, the Surety's obligation to the Owner under this 7.3 The Surety's failure to discharge its obligations Bond shall arise after the Owner has promptly notified the under Paragraph 7.1 or 7.2 shall not be deemed to Contractor and the Surety (at the address described in constitute a waiver of defenses the Surety or Paragraph 13) of claims, demands, liens, or suits against Contractor may have or acquire as to a Claim, the Owner or the Owner's property by any person or except as to undisputed amounts for which the entity seeking payment for labor, materials, or equipment Surety and Claimant have reached agreement. If, furnished for use in the performance of the Construction however, the Surety fails to discharge its Contract, and tendered defense of such claims, demands, obligations under Paragraph 7.1 or 7.2, the Surety liens, or suits to the Contractor and the Surety. shall indemnify the Claimant for the reasonable attorney's fees the Claimant incurs thereafter to 4. When the Owner has satisfied the conditions in Paragraph recover any sums found to be due and owing to 3, the Surety shall promptly and at the Surety's expense the Claimant. defend, indemnify, and hold harmless the Owner against a duly tendered claim, demand, lien, or suit. 8. The Surety's total obligation shall not exceed the amount of this Bond, plus the amount of reasonable attorney's 5. The Surety's obligations to a Claimant under this Bond fees provided under Paragraph 7.3, and the amount of this shall arise after the following: Bond shall be credited for any payments made in good faith by the Surety. 5.1 Claimants who do not have a direct contract with the Contractor, 9. Amounts owed by the Owner to the Contractor under the Construction Contract shall be used for the performance 5.1.1 have furnished a written notice of non- of the Construction Contract and to satisfy claims, if any, payment to the Contractor, stating with under any construction performance bond. By the substantial accuracy the amount claimed Contractor furnishing and the Owner accepting this Bond, and the name of the party to whom the they agree that all funds earned by the Contractor in the materials were, or equipment was, performance of the Construction Contract are dedicated furnished or supplied or for whom the to satisfy obligations of the Contractor and Surety under labor was done or performed, within this Bond, subject to the Owner's priority to use the funds ninety (90) days after having last for the completion of the work. performed labor or last furnished materials or equipment included in the 10. The Surety shall not be liable to the Owner, Claimants, or Claim; and others for obligations of the Contractor that are unrelated to the Construction Contract. The Owner shall not be 5.1.2 have sent a Claim to the Surety (at the liable for the payment of any costs or expenses of any address described in Paragraph 13). Claimant under this Bond, and shall have under this Bond no obligation to make payments to or give notice on 5.2 Claimants who are employed by or have a direct behalf of Claimants, or otherwise have any obligations to contract with the Contractor have sent a Claim to Claimants under this Bond. the Surety (at the address described in Paragraph 13). 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYENTOND 006114-3 11. The Surety hereby waives notice of any change, including 6. The total amount earned by the Claimant for changes of time, to the Construction Contract or to related labor, materials, or equipment furnished as of subcontracts, purchase orders, and other obligations. the date of the Claim; 7. The total amount of previous payments 12. No suit or action shall be commenced by a Claimant under received by the Claimant; and this Bond other than in a court of competent jurisdiction in 8. The total amount due and unpaid to the the state in which the project that is the subject of the Claimant for labor, materials, or equipment Construction Contract is located or after the expiration of furnished as of the date of the Claim. one year from the date (1) on which the Claimant sent a Claim to the Surety pursuant to Paragraph 5.1.2 or 5.2, or 16.2 Claimant: An individual or entity having a direct (2) on which the last labor or service was performed by contract with the Contractor or with a anyone or the last materials or equipment were furnished subcontractor of the Contractor to furnish labor, by anyone under the Construction Contract, whichever of materials, or equipment for use in the performance (1) or (2) first occurs. If the provisions of this paragraph of the Construction Contract. The term Claimant are void or prohibited by law, the minimum period of also includes any individual or entity that has limitation available to sureties as a defense in the rightfully asserted a claim under an applicable jurisdiction of the suit shall be applicable. mechanic's lien or similar statute against the real property upon which the Project is located. The 13. Notice and Claims to the Surety, the Owner, or the intent of this Bond shall be to include without Contractor shall be mailed or delivered to the address limitation in the terms of "labor, materials, or shown on the page on which their signature appears. equipment" that part of the water, gas, power, Actual receipt of notice or Claims, however accomplished, light, heat, oil, gasoline, telephone service, or shall be sufficient compliance as of the date received. rental equipment used in the Construction Contract, architectural and engineering services 14. When this Bond has been furnished to comply with a required for performance of the work of the statutory or other legal requirement in the location where Contractor and the Contractor's subcontractors, the construction was to be performed, any provision in and all other items for which a mechanic's lien may this Bond conflicting with said statutory or legal be asserted in the jurisdiction where the labor, requirement shall be deemed deleted herefrom and materials, or equipment were furnished. provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein. When 16.3 Construction Contract: The agreement between so furnished, the intent is that this Bond shall be construed the Owner and Contractor identified on the cover as a statutory bond and not as a common law bond. page, including all Contract Documents and all changes made to the agreement and the Contract 15. Upon requests by any person or entity appearing to be a Documents. potential beneficiary of this Bond, the Contractor and Owner shall promptly furnish a copy of this Bond or shall 16.4 Owner Default: Failure of the Owner, which has permit a copy to be made. not been remedied or waived, to pay the Contractor as required under the Construction 16. Definitions Contract or to perform and complete or comply with the other material terms of the Construction 16.1 Claim: A written statement by the Claimant Contract. including at a minimum: 16.5 Contract Documents: All the documents that 1. The name of the Claimant; comprise the agreement between the Owner and 2. The name of the person for whom the labor Contractor. was done, or materials or equipment furnished; 17. If this Bond is issued for an agreement between a 3. A copy of the agreement or purchase order contractor and subcontractor, the term Contractor in this pursuant to which labor, materials, or Bond shall be deemed to be Subcontractor and the term equipment was furnished for use in the Owner shall be deemed to be Contractor. performance of the Construction Contract; 4. A brief description of the labor, materials, or 18. Modifications to this Bond are as follows: equipment furnished; S. The date on which the Claimant last performed labor or last furnished materials or equipment for use in the performance of the Construction Contract; 10059265 Hutchinson Utilities Commission Plant 1 Units 6 & 7 - Installation PAYMENTBOND 0061 14 - 4 CountyState of Minnesota of corporation,On this day of Lia before me appeared ifGmr��' Caq0P/)S&15 �-/—If i�2*9 to me personally known, who, beAg b�me duly sworn, did say that he/she is the .......... -CEaL— foregoing instrument is the corporate seal of said corporation, and that said instrument w s execu behalf of said corporation by authority of its Board of Directors, and that said f . 7�0�&rnd ZZ; acknowledged said instrument to be the free act and deed of said corporation. Notary tPublic ` County, My commission expires LJ.n31 J2023 r, SURETY ACKNOWLEDGMENT State of Minnesota ) ss County of Hennepin ) On this 18th day of July 2018 , before me appeared Lin Ulven„e w to me personally know, who being by me duly sworn, did say that (s)he is the Attorney -in -Fact of_______ Libert Mutual Insurance Com any , a corporation, that the seal affixed to the foregoing instrument is the corporate seal of said corporation and that said instrument was executed in behalf of said corporation by authority of its Board of Directors; and that said acknowledged said instrument to be the free act and deed of said corporation. ..................... ,.. ,. ,-- �w :..�n_...,,,.... Notary Public Hennepin County, Minn, , pa • - • THIS POWER OF ATTORNEY IS NOT VALID UNLESS IT IS PRINTED ON RED BACKGROUND. This Power of Attorney limits the acts of those named herein, and they have no authority to bind the Company except in the manner and to the extent herein stated. Certificate No, 81262 1 Liberty Mutual Insurance Company The Ohio Casualty Insurance Company West American Insurance Company POWER OF ATTORNEY at of the 6ty of state of .... MN ...................................... . .... I ........ . ... each midividualiy if ffiere� be more gian om sane married, its true arid lawfull attorney -in -fact to make, execute, seal, acknowledge . and deliver", for, and on its beharf as surety and as its act and need, any and all urridertakings, bonds, recqnizances and other- surety obligabons, in pursuance of these presriis aiid shall be as binding upon the Companies as if they Ihave been duly signed by the president and attested by the secretary of the Companies in their own proper persons IN Wl i'NESS W't lEREOF, this Flower of Attorney has been subscribed by wi af.ithuized officer or offiaal of the Comparues and the corporate seats of the Cornpames have been I ffiereto this 14,th _,-day of June 1 2018 I N 4 N3, iH S 7It — sif l� 1� < fa rr�1) 9 STAI E OF PENNSYLVANIA as COUNTY OF MONTGOMERY The Ohio Casualty Insurance Company Liberty Mutual Insurance Company West American insurance Company By. Z David W Carey-,Assstart Secretary On this 14(h.......... day of June . � , � 2018 , before me personally appeared David M. Carey, who acknowledged himself to be ffie Assistant Secmtary of ...flberty Mutual insurance ....................... .. . ............. - Cormmny, The Ohio Casualty Company, and West American insurance Company, and that he, as such, being authorized so to do, execute the foregomg instrument for the purposes therein contained by signing on behalf of the corporations by himself as a dthly authorized officer. IN WiTNESS WHEFRIEOF, t have hereunto subscribed my rain sand affixed my notarial seat at King of Prussm, Pennsylvania, onthe day and year - first albovewfitten, COMMONWEALTH OFF111ENNSYLVANIA NotanA Seal ro e5a I lasicia, NaUwy Public lByt . .... . ... ..... ......... or Jilrall Mmlail rimpresa goofbiresa FlasWh, Notary Public My Uninfission Exs Mnrch 26 2021llftni�on i1,,nnsyivneiahon of Notwws This Power of Attorney is made and executed pursuant t and by authority of the fo0owing 13y.-laws and Authorizations of The Ohio Casijahy ftisurance Comparly, Liberty Mutual Insurance Company, and West American MsIi.rance Company whiich resolutions are now In full force and effect reading as follows - ARTICLE iV- OFF110ERS - Section 12. Flower of Attorney Any officer or other official of the Corporation authorized For that purpose m writing by the Chairman or the [:'resident, and subject to such limitation as the Chairman or the President may prescribe, shall appoint such attonreirs-in-fact, as may tie necessary to act in behalf ofthe Corporation to make, execute, seat, acknowledge and deliver as surety any and ati undertakings, bonds, reciagmzances and other surety obligations Such attorneys -in -fact, subject. to the limitations set forth in their respective powers of attorney, shall have full power to bind the Corporation by their signature and execubon of any such instruments and to attach thereto the seat of the Corporation. When so executed, such instruments shall be as binding as if signed by the president and attested to by the Secretary. Any power or authority granted to any representatwe or attorney-m-fact under the provisions of this article may be revoked at any time by the Board, the Chairman, the President or by the officer or officers granting such power or authority ARTiCLE Xill - Execution of Contract!, -- SECTION 5. Surety Bonds and Undertakings, Any officer of the Company authorized for that purpose in wrifing by the chairman or the president, and subject to such limitations as the chairman or the president may prescribe, sha0 appNnt such attomeys-in-fact, as may be necessary to actim behalf of the Company to make, execute, seal, acknowledge and deliver as surety any and all undertakings, bonds, recognizances and other surety obligations, Such attorneys -in -fact subject to the limitations set forth in their respective powers of attorney, shall have full power to bind the Company by their signature and execution of any such irstrurnents and to attach thereto the seal of the Company. When so executed such instruments shall be as binding as if signed by the president and attested by the secretary, Certificate of Designation - The President of the Company, acting pursuant to the Bylaws of the Company, authorizes David M. Carey, Assistant Secretary to appoint such attorneys -in - fact as may be necessary to act on behalf of the Company to make, execute, seal, acknowledge and deliver as surety any and all undertakings, bonds, recognizances and other surety obligations, Autho0zabon - By unaminous consent of the Company's Board of Directors, the Company consents that facsimile or mechanically reproduced signature of any assistant secretary of the Company wherever appearing upon a certified copy of any power of attorney issued by the Company in connection with surety bonds, shall be valid and Irinding upon the Company with the same force and effect as though manually affixed, 1, Renee C Llewellyn, the undersigned, Assistant Secretary, The Ohio Casualty insurance Company Liberty Mutual Insurance Company, and WestArrierican Insurance Company do hereby certify that the original power of attorney of which the foregoing is a full, true and correct copy of the Power of Attorney executed by said Companies, is in full force and affect and has not been revoked IN TESTWONY WHEREOF, I have hereunto set my hand and affixed the seals of said Companies this 18 th day of ....................................................... Ju.,y ...... . ............. 20..118 1-77--% C 99 1 lSy: ......... . ...... . ... .... .... . . ...... Reirlee C. Uevv - -etary Xisistant Seci I MS— 12873 022017