09-27-2006 HUCM
Regular Meeting
Septem ber 27, 2006
Members present: President Craig Lenz; Vice President Don Walser; Secretary David
Wetterling; Commissioner Steven Cook; Commissioner Dwight Bordson; General
Manager Michael Kumm; Attorney Marc Sebora.
President Lenz called the meeting to order at 3:00 pm.
General Manager Kumm reported on items that were asked of him at last month's
meeting:
. Answered the questions Commissioner Cook had on the payment to the League
of MN Cities
. Fencing for our building next door (old Consolidated Freightway building) is in
next years budget
. Answered the question President Lenz had on railroad licenses - we paid for 2
years' worth so the number in the financials is accurate. Each Commissioner has
a progress report on the natural gas expense as it relates to the pipeline.
. GM Kumm asked Commissioner Cook if the Tree Power Resolution was
approved by the City Council, and it was.
. GM Kumm asked Attorney Sebora to draft a letter to NNG regarding stopping
payments on the Carlton Obligation.
Secretary Wetterling made a motion to approve the minutes of the August 30, 2006
Regular Meeting. Commissioner Bordson seconded the motion and it passed
unanimously.
Vice President Walser asked about the payment to Glencoe Light & Power Comm -
Material for McLeod Sub. This is the payment in its entirety. The power is not turned on
as of yet because of contractual difference but it does not affect us.
Commissioner Cook asked about the payment to MMUA Municipal Utilities Assn -
Registration. This is supervisory training; it's a two year program with three employees
graduating this November, three employees are one session behind, and two
employees will be starting the training.
Commissioner Bordson asked about the payment to Minneapolis Consulting Group -
lAM Implementation. This is not an on-going fee, it's just spread out over a period of
time. And he asked about the payment to Ulteig Engineers Inc - Engineering Services.
This is for changing out transmission poles because of the Highway 7 reconstruction
project.
Vice President Walser made a motion to ratify the payment of bills in the amount of
$4,519,096.54 (detailed listing in payable book). Secretary Wetterling seconded the
motion and it passed unanimously.
GM Kumm presented the financial statements/budget year to date for approval. We
received some customer complaints regarding the power cost adjustment. As a
consequence, we are going to increase the range in electric and gas rate stabilization
funds to 'fill' the fund over the course of the winter.
Our medical insurance premium would have to double to clean up the $200,000 deficit.
Jan Sifferath reported that quotes have come in for our medical insurance plan and her
belief is that we should go with a fully funded plan. GM Kumm reported that we will keep
evaluating what we're doing but with a sense of urgency. We will present a
recommendation at the October meeting as to what plan we want to go with.
The deviation in the operating revenue - New Ulm transportation is because the
capacity sale fell through.
Secretary Wetterling made a motion to approve financial statements/budget year to
date. Commissioner Cook seconded the motion and it passed unanimously.
GM Kumm presented the Power/Gas Supply - Section 7 - Strategic Management
Process. He discussed with the board the strategies that have already been
accomplished or are in the process of being completed for both the electric power
supply as well as the natural gas supply.
President Lenz asked about becoming a transmission owning member of MISO. An
analysis has been done, and at that time it looked like we would become a transmission
owning member in 2009. Money has been placed in 2007 budget for additional analysis
to see if we could do something with MRES in this regard.
Commissioner Cook asked about meeting with 3M as it relates to our gas contract. At
our last quarterly meeting with them we presented a 2-page natural gas contract. It
might be finalized by the end of the year. Good ideas were exchanged, they are easy to
work with, but it's a long process.
It was the consensus of the board that the review of the Power/Gas Supply - Section 7
is good.
Dave Hunstad presented requisition #001970 for 7,500' Conductor 500MCM for
approval. After discussion Vice President Walser made a motion to approve requisition
#001970 for 7,500' Conductor 500MCM from Border States Electric for $33,627.38.
Secretary Wetterling seconded the motion and it passed unanimously.
Dave Hunstad presented requisition #002078 for 1) 1500 KVA Padmounted
Transformer and 1) 2500 KV A Padmounted Transformer for approval. The 1500 KV A
transformer is for stock. The 2500 KVA transformer is for Warrior Mfg and they want to
be running by March. After discussion Commissioner Cook made a motion to approve
Requisition #002078 from B & B Transformer Inc for $50,055 for 1) 1500 KVA
Padmounted Transformer, and 1) 2500 KVA Padmounted Transformer. Commissioner
Bordson seconded the motion and it passed unanimously. Commissioner Cook asked if
we have a history on rebuilt transformers. Dave reported that the longevity is good on
rebuilt transformers, and we have good history with the ones we currently have. If we
were to order new ones, it's a 34-week lead time. Secretary Wetterling asked if this is in
our budget. It is in next year's budget. Commissioner Bordson asked if we should order
a new one now because of the long wait. Dave explained that we meet with City officials
regularly and we discuss what the future needs are.
Randy Blake presented requisition #002122 for Control and Monitoring System for Unit
1 Heat Tracing for approval. The current system is old and should have been replaced
in 1993 but never was. This is the same company that provided the original one.
Commissioner Cook made a motion to approve Requisition #002122 for Control and
Monitoring System for Unit 1 Heat Tracing from Applied Thermo Systems for
$38,553.78. Commissioner Bordson seconded the motion and it passed unanimously.
GM Kumm presented the Operation and Maintenance Agreement for approval. There is
a sense of urgency in getting this signed as we have been working on this for 1 % years
and it is now done. There is a meeting tomorrow (September 28th) at Elk River and Dan
Lang will talk to them about some inconsistencies in the language of the contract.
Attorney Sebora has reviewed the contract and feels it is acceptable under state law.
Vice President Walser made a motion to approve authorization for staff to Sign
Operation and Maintenance Agreement for McLeod Substation between HUC, Glencoe
Power and Light, and Northern States Power Company with changes to wording if
needed. Secretary Wetterling seconded the motion and it passed unanimously.
GM Kumm presented the Credit Card Policy with attaching it to the Purchasing Policy
for approval. Our auditors have requested we draft a policy on credit card purchasing.
Commissioner Cook asked if the commissioners make credit card purchases.
Commissioners can make purchases when traveling but they're used very little. It was
the consensus of the board to cancel the Commissioners' credit cards. Secretary
Wetterling made a motion to approve the Credit Card Policy and Attach it to the
Purchasing Policy with the elimination of the Commissioners having authorization to use
HUC credit cards. Commissioner Bordson seconded the motion and it passed
unanimously.
GM Kumm presented the Bid Letting Policy to be rescinded. The bid letting is already a
part of the amended Purchasing Policy. Secretary Wetterling made a motion to Rescind
the Bid Letting Policy. Vice President Walser seconded the motion and it passed
unanimously.
Division Reports
Business - Jan Sifferath
RFP's on other insurances ie: vehicle, building
Gas - John Webster
Pipeline Safety Audits taking place
Integrity Management meeting next week
Electric - Randy Blake
We are now fully staffed - cross training at both plants
Starting process on new foundation for plant 2
President Lenz asked if we could get the students in grades 4 or 5 involved in our open
house on October 5th. We will check with the schools to see what age level would get
the most benefit from our tours/open house. We also will be going to the schools with a
presentation on energy and safety and will hand out light sticks for Halloween.
Commissioner Cook mentioned a complaint by a customer because of an outage. We
have had problems with feeder 22 failing. We were planning on rebuilding this in three
phases. Phase one and two were completed this year, and phase three will be built next
year.
Attorney Sebora was had communication with the Army Corp of Engineers. We will
provide service to them without a meter deposit. Attorney Sebora will contact them.
Old Business
None
New Business
None
Secretary Wetterling made a motion to adjourn the meeting at 4:31 p.m. Commissioner
Bordson seconded the motion and it passed unanimously.
David Wetterling, Secretary
ATTEST
Craig Lenz, President
Regular Meeting
September 27, 2006
Members present: President Craig Lenz; Vice President Don Walser; Secretary David
Wetterling; Commissioner Steven Cook; Commissioner Dwight Bordson; General
Manager Michael Kumm; Attorney Marc Sebora.
President Lenz called the meeting to order at 3:00 pm.
General Manager Kumm reported on items that were asked of him at last month's
meeting:
• Answered the questions Commissioner Cook had on the payment to the League
of MN Cities
• Fencing for our building next door (old Consolidated Freightway building) is in
next years budget
• Answered the question President Lenz had on railroad licenses — we paid for 2
years' worth so the number in the financials is accurate. Each Commissioner has
a progress report on the natural gas expense as it relates to the pipeline.
• GM Kumm asked Commissioner Cook if the Tree Power Resolution was
approved by the City Council, and it was.
• GM Kumm asked Attorney Sebora to draft a letter to NNG regarding stopping
payments on the Carlton Obligation.
Secretary Wetterling made a motion to approve the minutes of the August 30, 2006
Regular Meeting. Commissioner Bordson seconded the motion and it passed
unanimously.
Vice President Walser asked about the payment to Glencoe Light & Power Comm —
Material for McLeod Sub. This is the payment in its entirety. The power is not turned on
as of yet because of contractual difference but it does not affect us.
Commissioner Cook asked about the payment to MMUA Municipal Utilities Assn —
Registration. This is supervisory training; it's a two year program with three employees
graduating this November, three employees are one session behind, and two
employees will be starting the training.
Commissioner Bordson asked about the payment to Minneapolis Consulting Group —
IAM Implementation. This is not an on -going fee, it's just spread out over a period of
time. And he asked about the payment to Ulteig Engineers Inc — Engineering Services.
This is for changing out transmission poles because of the Highway 7 reconstruction
project.
Vice President Walser made a motion to ratify the payment of bills in the amount of
$4,519,096.54 (detailed listing in payable book). Secretary Wetterling seconded the
motion and it passed unanimously.
GM Kumm presented the financial statements /budget year to date for approval. We
received some customer complaints regarding the power cost adjustment. As a
consequence, we are going to increase the range in electric and gas rate stabilization
funds to 'fill' the fund over the course of the winter.
Our medical insurance premium would have to double to clean up the $200,000 deficit.
Jan Sifferath reported that quotes have come in for our medical insurance plan and her
belief is that we should go with a fully funded plan. GM Kumm reported that we will keep
evaluating what we're doing but with a sense of urgency. We will present a
recommendation at the October meeting as to what plan we want to go with.
The deviation in the operating revenue — New Ulm transportation is because the
capacity sale fell through.
Secretary Wetterling made a motion to approve financial statements /budget year to
date. Commissioner Cook seconded the motion and it passed unanimously.
GM Kumm presented the Power /Gas Supply — Section 7 — Strategic Management
Process. He discussed with the board the strategies that have already been
accomplished or are in the process of being completed for both the electric power
supply as well as the natural gas supply.
President Lenz asked about becoming a transmission owning member of MISO. An
analysis has been done, and at that time it looked like we would become a transmission
owning member in 2009. Money has been placed in 2007 budget for additional analysis
to see if we could do something with MRES in this regard.
Commissioner Cook asked about meeting with 3M as it relates to our gas contract. At
our last quarterly meeting with them we presented a 2 -page natural gas contract. It
might be finalized by the end of the year. Good ideas were exchanged, they are easy to
work with, but it's a long process.
It was the consensus of the board that the review of the Power /Gas Supply — Section 7
is good.
Dave Hunstad presented requisition #001970 for 7,500' Conductor 500MCM for
approval. After discussion Vice President Walser made a motion to approve requisition
#001970 for 7,500' Conductor 500MCM from Border States Electric for $33,627.38.
Secretary Wetterling seconded the motion and it passed unanimously.
Dave Hunstad presented requisition #002078 for 1) 1500 KVA Padmounted
Transformer and 1) 2500 KVA Padmounted Transformer for approval. The 1500 KVA
transformer is for stock. The 2500 KVA transformer is for Warrior Mfg and they want to
be running by March. After discussion Commissioner Cook made a motion to approve
Requisition #002078 from B & B Transformer Inc for $50,055 for 1) 1500 KVA
Padmounted Transformer, and 1) 2500 KVA Padmounted Transformer. Commissioner
Bordson seconded the motion and it passed unanimously. Commissioner Cook asked if
we have a history on rebuilt transformers. Dave reported that the longevity is good on
rebuilt transformers, and we have good history with the ones we currently have. If we
were to order new ones, it's a 34 -week lead time. Secretary Wetterling asked if this is in
our budget. It is in next year's budget. Commissioner Bordson asked if we should order
a new one now because of the long wait. Dave explained that we meet with City officials
regularly and we discuss what the future needs are.
Randy Blake presented requisition #002122 for Control and Monitoring System for Unit
1 Heat Tracing for approval. The current system is old and should have been replaced
in 1993 but never was. This is the same company that provided the original one.
Commissioner Cook made a motion to approve Requisition #002122 for Control and
Monitoring System for Unit 1 Heat Tracing from Applied Thermo Systems for
$38,553.78. Commissioner Bordson seconded the motion and it passed unanimously.
GM Kumm presented the Operation and Maintenance Agreement for approval. There is
a sense of urgency in getting this signed as we have been working on this for 1 Y2 years
and it is now done. There is a meeting tomorrow (September 28th) at Elk River and Dan
Lang will talk to them about some inconsistencies in the language of the contract.
Attorney Sebora has reviewed the contract and feels it is acceptable under state law.
Vice President Walser made a motion to approve authorization for staff to Sign
Operation and Maintenance Agreement for McLeod Substation between HUC, Glencoe
Power and Light, and Northern States Power Company with changes to wording if
needed. Secretary Wetterling seconded the motion and it passed unanimously.
GM Kumm presented the Credit Card Policy with attaching it to the Purchasing Policy
for approval. Our auditors have requested we draft a policy on credit card purchasing.
Commissioner Cook asked if the commissioners make credit card purchases.
Commissioners can make purchases when traveling but they're used very little. It was
the consensus of the board to cancel the Commissioners' credit cards. Secretary
Wetterling made a motion to approve the Credit Card Policy and Attach it to the
Purchasing Policy with the elimination of the Commissioners having authorization to use
HUC credit cards. Commissioner Bordson seconded the motion and it passed
unanimously.
GM Kumm presented the Bid Letting Policy to be rescinded. The bid letting is already a
part of the amended Purchasing Policy. Secretary Wetterling made a motion to Rescind
the Bid Letting Policy. Vice President Walser seconded the motion and it passed.
unanimously.
Division Reports
Business — Jan Sifferath
RFP's on other insurances ie: vehicle, building
� f
Gas — John Webster
Pipeline Safety Audits taking place
Integrity Management meeting next week
Electric — Randy Blake
We are now fully staffed — cross training at both plants
Starting process on new foundation for plant 2
President Lenz asked if we could get the students in grades 4 or 5 involved in our open
house on October 5th. We will check with the schools to see what age level would get
the most benefit from our tours /open house. We also will be going to the schools with a
presentation on energy and safety and will hand out light sticks for Halloween.
Commissioner Cook mentioned a complaint by a customer because of an outage. We
have had problems with feeder 22 failing. We were planning on rebuilding this in three
phases. Phase one and two were completed this year, and phase three will be built next
year.
Attorney Sebora udas had communication with the Army Corp of Engineers. We will
provide service to them without a meter deposit. Attorney Sebora will contact them.
Old Business
None
New Business
None
Secretary Wetterling made a motion to adjourn the meeting at 4:31 p.m. Commissioner
Bordson seconded the motion and it passed unanimousW\
ATTEST __....w....__
raig L6nz, Pr ident "
ng, Secretary
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Amended July 28, 2004
Amended April 28, 2006
Amended July 26, 2006
Amended September 27, 2006
POLICIES
POLICY ON PURCHASING
State Statute 471:345
Hutchinson Utilities Commission hereby adopts a general policy on the purchasing of
equipment, supplies and services.
All purchases shall require supervisor permission. Emergency situations may require a
deviation from this policy to insure 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 seen.
When a tie exists between low bids, preference will be given to a local supplier.
For purchases when the estimate is more than $50,000:
1. The Hutchinson Utilities Commission will request 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 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 $15,000 and $50,000:
1. The Hutchinson Utilities Commission staff will solicit written, informal quotations
from at least three (3) suppliers and tabulate the results.
2. Staff will recommend acceptance of the lowest responsible quote.
3. Hutchinson Utilities Commission will approve the quote.
For purchases between $1,000 and $15,000:
1. The Hutchinson Utilities Commission staff will solicit written, informal quotations
from at least two (2) suppliers and tabulate the results.
2. Staff will recommend acceptance of the lowest responsible quote to the General
Manager for approval.
For purchases of $1,000 or less:
Directors are authorized to approve requisitions via the WINS Software System for
purchases requiring a purchase order number.
If purchase order numbers are not required each Division may use their assigned credit
card.
1. Division Director /Manager will approve all item requests prior to purchasing the
item.
2. Receipts will be given to each Division Director /Manager 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 Division 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 Accounting.
CREDIT CARDS
A purchase by credit card must comply with all statutes and rules applicable to
Hutchinson Utilities Commission (HUC) purchases. 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
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 purchases on behalf of HUC:
General Manager
Electric Division Director
Natural Gas Division Director
Business Manager
Electric Distribution Manager
Production Manager
Technical Services Manager
One Purchasing Agent
Company purchases up to $1,000 are allowed to be made with a credit card. No
personal purchases are to be made with the credit card. Receipts will be given to each
Division 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 accountant.
The accountant will keep a file for each Division until monthly credit card statements are
received and reconciled. The accountant 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. Multiple
assets whose cost is less than $5,000 but the aggregate requestor
total is $5,000 or more are capitalized.
(3) The cost of repairing or renovating the asset is $5,000 or more and
prolongs the life of the asset.
HUC will regard the purchase of software programs as fixed assets subject to the above
capitalization policy, and will amortize over an estimated useful life of 3 years. Costs
associated with 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
40 -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
10 years
Vehicles
3 -5 years
Office Equipment
3 -5 years
Computer Equipment
3 -5 years
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Adopted March 28, 1988
Rescinded September 27, 2006
Hutchinson Utilities Commission
Policies
Bid Letting Policy
The following procedure shall be followed when sealed bids are required
pursuant to the Uniform Municipal Contracting Law.
Specifications shall be prepared and submitted to the Commission for approval.
If approved, the Commission shall:
1. Set the time and date for bid opening;
2. Designate which employees and consultants shall open, review
and evaluate the bids;
3. Set the manner in which the solicitation for bids will be published;
and
4. Determine bond requirements.
The employees and consultants designated by the Commission shall:
1. Open the bids;
2. Review them to determine compliance, and;
3. Evaluate and make a recommendation to the Commission.
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