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09-28-2011 HUCMRegular Meeting September 28, 2011 Members present: President Robert Hantge; Vice President Paul Nordin; Secretary Dwight Bordson; Commissioner Donald H. Walser; Commissioner Craig Lenz; Attorney Marc Sebora; General Manager Michael Kumm President Hantge called the meeting to order at 3:00 p.m. The minutes of September 13, 2011 special meeting were reviewed. A motion was made by Commissioner Lenz, seconded by Secretary Bordson to approve the minutes as written. Motion was unanimously carried. The August 2011 payables were discussed. A motion was made by Vice President Nordin, seconded by Secretary Bordson to ratify the payment of bills in the amount of $2,897,986.02 (detailed listing in payables book). Motion was unanimously carried. GM Kumm presented a summary and background for the Great River Energy settlement term sheet. GM Kumm explained four of the five agreements will be drafted by mid - October for HUC's transition to MISO. Those four agreements will need to be approved at the October's regular commission meeting. Attorney Sebora presented an Amendment to Hutchinson Utilities Commission By -Laws to allow the General Manager to serve as attorney -in -fact for the Hutchinson Utilities Commission. Attorney Sebora explained this was a follow -up to the August commission meeting, where the Board recommended granting the General Manager general power of attorney to effectuate transactions Hutchinson Utilities Commission has already approved by a resolution of the Commission. A motion was made by Secretary Bordson, seconded by Commissioner Lenz to approve the Amendment to Hutchinson Utilities Commission By -Laws to allow the General Manager to serve as attorney -in -fact for the Hutchinson Utilities Commission. Motion was unanimously carried. (Amendment attached.) Attorney Sebora presented Resolution No. 1007 appointing Michael Kumm, General Manager, as attorney -in -fact of the Hutchinson Utilities Commission. Attorney Sebora explained this document formally appoints Michael Kumm as attorney -in -fact of the Hutchinson Utilities Commission. Attached to the Resolution No. 1007 is the actual General Power of Attorney which gives Michael Kumm the ability to act on behalf of Hutchinson Utilities Commission to complete transactions which have already been Commission approved of by resolution. A motion was made by Commissioner Lenz, seconded by Secretary Bordson to approve the Resolution No. 1007 appointing Michael Kumm, General Manager, as attorney -in -fact of the Hutchinson Utilities Commission. Motion was unanimously carried. (Resolution No. 1007 attached.) GM Kumm presented the August 2011 financial statements /budget year -to -date. After discussion, a motion was made by Vice President Nordin, seconded by Commissioner Walser to approve the financial statements /budget year -to -date. Motion was unanimously carried. GM Kumm presented the R. W. Beck rate study proposal handout. The last rate study was done in 2005 and Hutchinson Utilities Commission has a study done every five years. GM Kumm explained a rate study is more like a management study. After discussion, a motion was made by Commissioner Walser, seconded by Vice President Nordin to approve the R.W. Beck rate study proposal. Motion was unanimously carried. (R.W. Beck rate study proposal attached.) A motion was made by Vice President Nordin, seconded by Secretary Bordson tc declare the HUC Open House scheduled for October 6, 2011, as an open meeting. Motion was unanimously carried. GM Kumm presented changes to the policies and requirements booklet, sections: terminating electrical /natural gas service by customer; definition of your bill; and errors in billing. The only changes are to section: definition of your bill, due to past practice. Suggested verbiage reads: "2.75% of your payment is transferred to the City of Hutchinson for use in its General Fund." After discussion, the Board recommended adding the dollar amount which is already reflected in that sentence on the bill. Therefore, the sentence shall now read: "2.75% or $XX.XX of your payment is transferred to the City of Hutchinson for use in its General Fund." A motion was made by Vice President Nordin, seconded by Commissioner Lenz to approve changes to the policies and requirements booklet. Motion was unanimously carried. (Changes attached.) GM Kumm presented changes to exempt and non - exempt handbooks, sections: family and medical leave (FMLA); and parental leave. Recommended changes were made due to past practice and for clarification. After discussion, a motion was made by Vice President Nordin, seconded by Secretary Bordson to approve changes to the exempt and non - exempt handbooks, sections: family and medical leave (FMLA); and parental leave. Motion was unanimously carried. (Changes attached.) GM Kumm reported on the following: • A Michigan utility made national news regarding the amount of conservation dollars consumers spent over the last five years. HUC encourages their customers to spend conservation dollars locally. GM Kumm is working with Jon Guthmiller on gathering information about dollars consumers paid for conservation items locally of which will be shared at the HUC /City of Hutchinson Joint meeting. The Board also suggested sharing this information at the HUC Open House and posting it on the HUC web site. • Meeting with United Farmers Coop in a couple weeks; proposal sent to them for new natural gas system • Meeting in a couple weeks with MMUA regarding Mahnomen, Minnesota and their interest in natural gas service in their community; HUC might have a role in this project. • Meeting in a couple weeks with Senator Newman and Representative Shimanski at McCormick's to discuss national and EPA concerns. • HUC asked to be a featured utility in an MMUA video being created to present the benefits of public power. • The McLeod County Historical Museum will be displaying HUC donated items starting November 1, 2011 for a length of 3 months. They will also be publishing information regarding the HUC display in the McLeod County Historical Society October newsletter and submitting a news release to the Leader. Division Reports Electric — Steve Lancaster • MPCA Public Notice on Draft /Proposed Air Emission Facility Permit published in the Hutchinson Leader today for a 30 -day public review period. The permit action is for modification and operation of the facility at 44 4t" Avenue NE. • Received three internal applications for the crew chief position. Finance — Jared Martig • Nothing to report Legal Update Nothing to report Unfinished Business • Joint Action Agency — Nothing to Report • City of Hutchinson IT Position — Ideas were discussed with a decision to have a follow -up meeting to discuss viable solutions. • Green Rate — Nothing to Report • Natural Gas Feasibility — GM Kumm discussed this does not make business sense at this time as: 1) need more vehicles available to run on natural gas, only one at this time, and 2) need more public fill stations. Also, people would need to drive at least 15,000 to 16,000 miles per year to see a return after installing a vehicle conversion kit. New Business • Electronic File Access for Commissioners — Vice President Nordin asked the Commission of their opinion of a better way to store, access and share packets, policies, and update information. The possibility was discussed of IT staff setting up file access similar to what the City Council uses. Vice President Nordin will research this further and report back to the Board. There being no further business, a motion was made by Secretary Bordson, seconded by Vice President Nordin to adjourn the meeting at 4:35 p.m. Motion was unanimously carried. ATTEST: Robert Hantge, President Dwight Bordson, Secretary HUTCHINSON UTILITIES COMMISSION SUMMARY OF CLOSED MEETING PROCEEDINGS GENERAL MANAGER INTERIM PERFORMANCE REVIEW SESSION August 31, 2011 On August 31, 2011, the Hutchinson Utilities Commission went into closed session on a motion made by Dwight Bordson and seconded by Paul Nordin, at 2:05 p.m. to conduct the interim performance review for the General Manager, Michael Kumm. Individuals present included Commissioners Robert Hantge, Paul Nordin, Dwight Bordson, and Don Walser. Commissioner absent was Craig Lenz. Others present were Michael Kumm, General Manager and Marc Sebora, City Attorney. The Hutchinson Utilities Commissioners reviewed with Mr. Kumm his performance for the period of January 1, 2011, to the present. The Commissioners referred to previous reviews and reviewed Mr. Kumm's benefit package. The Commissioners noted that past reports have been very favorable of Mr. Kumm. Mr. Kumm performs many job duties that other general managers in the private industry do not or are not responsible for. Mr. Kumm was not rated on specific competencies or categories due to this being an interim review. The Commissioners also provided feedback on the review process and concurred that a new model of review should be initiated. This model is considered a "360" program which allows for subordinate input and comments on a supervisor's performance. This type of model is used frequently in private industry. Paul Nordin and Dwight Bordson will be working on this initiative for Mr. Kumm's regular review to be held in November /December of 2011. Commissioner Hantge commented on issues pertaining to the funding of Mr. Kumm's salary. Mr. Kumm's salary is reaching the state - mandated salary cap for government employees. The Commissioners discussed various ways to handle this matter. Motion by Bordson, second by Nordin, to recess the closed meeting to provide more time to review the performance review and to discuss Mr. Kumm's competencies. HUTCHINSON UTILITIES COMMISSION SUMMARY OF CLOSED MEETING PROCEEDINGS GENERAL MANAGER INTERIM PERFORMANCE REVIEW SESSION October 26, 2011 On October 26, 2011, the Hutchinson Utilities Commission went into a closed session on a motion made by Craig Lenz and seconded by Dwight Bordson, at 2:24 p.m. to continue to conduct the continued interim performance review for the General Manager, Michael Kumm. Individuals present included Commissioners Robert Hantge, Dwight Bordson, Craig Lenz and Don Walser. Commissioner absent was Paul Nordin. Others present were Michael Kumm, General Manager and Marc Sebora, City Attorney. The Commissioners continued to review with Mr. Kumm his performance since January 1, 2011. Items of discussion and review included the direction of the organization, Mr. Kumm's excellent performance in his job achievements and the generation program. The Commissioners concurred on their satisfaction with Mr. Kumm's accomplishments so far this year. A brief discussion was held on Mr. Kumm's salary cap and various ways to handle any increases to his salary based on his exceptional performance. A formal annual review will be given to Mr. Kumm in November or December of 2011. Motion by Bordson, second by Lenz, to adjourn. ATTEST: Robert Hantge, President Dwight Bordson, Secretary Regular Meeting September 28, 2011 Members present: President Robert Hantge; Vice President Paul Nordin; Secretary Dwight Bordson; Commissioner Donald H. Walser; Commissioner Craig Lenz; Attorney Marc Sebora; General Manager Michael Kumm President Hantge called the meeting to order at 3:00 p.m. The minutes of September 13, 2011 special meeting were reviewed. A motion was made by Commissioner Lenz, seconded by Secretary Bordson to approve the minutes as written. Motion was unanimously carried. The August 2011 payables were discussed. A motion was made by Vice President Nordin, seconded by Secretary Bordson to ratify the payment of bills in the amount of $2,897,986.02 (detailed listing in payables book). Motion was unanimously carried. GM Kumm presented a summary and background for the Great River Energy settlement term sheet. GM Kumm explained four of the five agreements will be drafted by mid - October for HUC's transition to MISO. Those four agreements will need to be approved at the October's regular commission meeting. Attorney Sebora presented an Amendment to Hutchinson Utilities Commission By -Laws to allow the General Manager to serve as attorney -in -fact for the Hutchinson Utilities Commission. Attorney Sebora explained this was a follow -up to the August commission meeting, where the Board recommended granting the General Manager general power of attorney to effectuate transactions Hutchinson Utilities Commission has already approved by a resolution of the Commission. A motion was made by Secretary Bordson, seconded by Commissioner Lenz to approve the Amendment to Hutchinson Utilities Commission By -Laws to allow the General Manager to serve as attorney -in -fact for the Hutchinson Utilities Commission. Motion was unanimously carried. (Amendment attached.) Attorney Sebora presented Resolution No. 1007 appointing Michael Kumm, General Manager, as attorney -in -fact of the Hutchinson Utilities Commission. Attorney Sebora explained this document formally appoints Michael Kumm as attorney -in -fact of the Hutchinson Utilities Commission. Attached to the Resolution No. 1007 is the actual General Power of Attorney which gives Michael Kumm the ability to act on behalf of Hutchinson Utilities Commission to complete transactions which have already been Commission approved of by resolution. A motion was made by Commissioner Lenz, seconded by Secretary Bordson to approve the Resolution No. 1007 appointing Michael Kumm, General Manager, as attorney -in -fact of the Hutchinson Utilities Commission. Motion was unanimously carried. (Resolution No. 1007 attached.) GM Kumm presented the August 2011 financial statements /budget year -to -date. After discussion, a motion was made by Vice President Nordin, seconded by Commissioner Walser to approve the financial statements /budget year -to -date. Motion was unanimously carried. GM Kumm presented the R. W. Beck rate study proposal handout. The last rate study was done in 2005 and Hutchinson Utilities Commission has a study done every five years. GM Kumm explained a rate study is more like a management study. After discussion, a motion was made by Commissioner Walser, seconded by Vice President Nordin to approve the R.W. Beck rate study proposal. Motion was unanimously carried. (R.W. Beck rate study proposal attached.) A motion was made by Vice President Nordin, seconded by Secretary Bordson to declare the HUC Open House scheduled for October 6, 2011, as an open meeting. Motion was unanimously carried. GM Kumm presented changes to the policies and requirements booklet, sections: terminating electrical /natural gas service by customer; definition of your bill; and errors in billing. The only changes are to section: definition of your bill, due to past practice. Suggested verbiage reads: "2.75% of your payment is transferred to the City of Hutchinson for use in its General Fund." After discussion, the Board recommended adding the dollar amount which is already reflected in that sentence on the bill. Therefore, the sentence shall now read: "2.75% or $XX.XX of your payment is transferred to the City of Hutchinson for use in its General Fund." A motion was made by Vice President Nordin, seconded by Commissioner Lenz to approve changes to the policies and requirements booklet. Motion was unanimously carried. (Changes attached.) GM Kumm presented changes to exempt and non - exempt handbooks, sections: family and medical leave (FMLA); and parental leave. Recommended changes were made due to past practice and for clarification. After discussion, a motion was made by Vice President Nordin, seconded by Secretary Bordson to approve changes to the exempt and non - exempt handbooks, sections: family and medical leave (FMLA); and parental leave. Motion was unanimously carried. (Changes attached.) GM Kumm reported on the following: • A Michigan utility made national news regarding the amount of conservation dollars consumers spent over the last five years. HUC encourages their customers to spend conservation dollars locally. GM Kumm is working with Jon Guthmiller on gathering information about dollars consumers paid for conservation items locally of which will be shared at the HUC /City of Hutchinson Joint meeting. The Board also suggested sharing this information at the HUC Open House and posting it on the HUC web site. • Meeting with United Farmers Coop in a couple weeks; proposal sent to them for new natural gas system • Meeting in a couple weeks with MMUA regarding Mahnomen, Minnesota and their interest in natural gas service in their community; HUC might have a role in this project. • Meeting in a couple weeks with Senator Newman and Representative Shimanski at McCormick's to discuss national and EPA concerns. • HUC asked to be a featured utility in an MMUA video being created to present the benefits of public power. • The McLeod County Historical Museum will be displaying HUC donated items starting November 1, 2011 for a length of 3 months. They will also be publishing information regarding the HUC display in the McLeod County Historical Society October newsletter and submitting a news release to the Leader. Division Reports Electric — Steve Lancaster • MPCA Public Notice on Draft/Proposed Air Emission Facility Permit published in the Hutchinson Leader today for a 30 -day public review period. The permit action is for modification and operation of the facility at 44 4th Avenue NE. • Received three internal applications for the crew chief position. Finance — Jared Martig • Nothing to report Legal Update Nothing to report Unfinished Business • Joint Action Agency — Nothing to Report • City of Hutchinson IT Position — Ideas were discussed with a decision to have a follow -up meeting to discuss viable solutions. • Green Rate — Nothing to Report • Natural Gas Feasibility — GM Kumm discussed this does not make business sense at this time as: 1) need more vehicles available to run on natural gas; only one at this time, and 2) need more public fill stations. Also, people would need to drive at least 15,000 to 16,000 miles per year to see a return after installing a vehicle conversion kit. New Business • Electronic File Access for Commissioners — Vice President Nordin asked the Commission of their opinion of a better way to store, access and share packets, policies, and update information. The possibility was discussed of IT staff setting up file access similar to what the City Council uses. Vice President Nordin will research this further and report back to the Board. There being no further business, a motion was made by Secretary Bordson, seconded by Vice President Nordin to adjourn the meeting at 4:35 p.m. Motion was unanimously carried. ATTEST: 0� �- � Dwight Bordson, Secretary SECTION - 10 TERMS OF COMMISSIONERS The appointment and length of service of each Commissioner shall be set forth in the Hutchinson City Charter. Each Commissioner's term shall expire on December 31St of the last year of that Commissioner's appointed term except, Commissioner shall continue in office until their successor has been appointed and qualified. ARTICLE IV Appointive Officers of Hutchinson Utilities Commission SECTION - 1 GENERAL MANAGER A. The General Manager shall be the chief executive officer of Hutchinson Utilities Commission. He /she shall be chosen by the Commission on the basis of their executive and administrative qualifications for the supervision and direction of all operations and business of Hutchinson Utilities properties. All other things being equal, the Commission shall appoint as General Manager a person with experience in construction, operation and management of public utilities. No member of the a Commission shall, during the time for which appointed or within two years thereafter, be chosen as General Manager. In case of absence or disability of the General Manager, the Commission shall designate an appropriate replacement to perform the duties of the office during such absence or disability. B. The General Manager shall have full charge and control of the construction of all work under the jurisdiction of the Commission, the maintenance and operation thereof, and the administration of the business affairs of the Commission. The powers of the General Manager shall be: 1. To see that these By -Laws and all rules and regulations of the Commission are enforced. 2. To see that the operation, construction and maintenance of the Hutchinson Utilities properties conform to all provisions of the City Charter. 3. To see that all supplies and materials are purchased according to the policies on purchasing. 4. To attend all meetings of the Hutchinson Utilities Commission, to submit reports of the affairs of the Hutchinson Utilities Commission and to participate in the discussion of all matters coming before the Commission. 5.) To serve as the Attorney -in -Fact of the Hutchinson Utilities Commission pursuant to any general or specific Power of Attorney or other agency document adopted by the Hutchinson Utilities Commission by a resolution of the Commission. 6. To keep the Commissioners advised as to the financial condition and future needs of the department, and to prepare and submit an annual budget, and to furnish quarterly budgets to the Commission. 7. To prepare or cause to be prepared, all plans and specifications for the construction of the works of the Commission. 8. To devote his entire time to the business of the Commission. 9. To prepare or have prepared for presentation to the Commission for its consideration, approval, rules and regulations as follows: A. Information and requirements for electrical service. B. Information and requirements for natural gas service. C. Management policy in relation to employees compensation. D. Manual of accounting instructions. 7 10. To perform such other and additional duties as the Commission may require. SECTION - 2 The duties of all other appointees and employees shall be prescribed from time to time by the General Manager with approval of the Commission. ARTICLE V Certain Rules, Regulations and Procedures of Hutchinson Utilities Commission SECTION - 1 ACCOUNTING A. The books and accounts of the Commission shall be kept in so far as practicable in conformity with the uniform system of accounts as prescribed by the Federal Energy Regulatory Commission and so as to facilitate the annual reporting of all transactions of the Commission funds. 1. The present value of the electric system shall be taken as the actual historical cost of the property in use and useful in the production and distribution of electrical energy. 0 Resolution No. 1007 A RESOLUTION APPOINTING MICHAEL KUMM, GENERAL MANAGER, AS ATTORNEY -IN -FACT OF THE HUTCHINSON UTILITIES COMMISSION BE IT RESOLVED BY THE HUTCHINSON UTILITIES COMMISSION OF THE CITY OF HUTCHINSON That Michael Kumm, General Manager, is hereby appointed as attorney -in -fact of Hutchinson Utilities Commission as indicated through the attached General Power of Attorney instrument and is thereby vested with those powers contained therein and he shall retain those powers until such time as the Power of Attorney document is modified or revoked. Adopted by the Hutchinson Utilities Commission this 28th day of September ,2011. RdM'AJKntge President ATTEST: AL Dwight Bor on Secretary GENERAL POWER OF ATTORNEY Know All Men by These Presents, that the Hutchinson Utilities Commission, an enterprise fund of the City of Hutchinson, a Minnesota municipal corporation, a corporation duly organized under the laws of Minnesota, and having its principal place of business in Hutchinson, does hereby make, constitute and appoint Michael Kumm, General Manager, its true and lawful attorney, for it, and in its name, place and stead to implement, effectuate and discharge all resolutions of the Hutchinson Utilities Commission, giving and granting to its attorney full power and authority to do and perform all and every act and thing whatsoever, requisite, necessary and proper to implement said resolutions, as fully, to all intents and purposes, as it might or could do, with full power of substitution and revocation, hereby ratifying and confirming all that its attorney shall lawfully do, or cause to be done, by virtue hereof. In recognition of the foregoing, the Hutchinson Utilities Commission has caused its corporate name to be subscribed hereto by its president, and its corporate seal to be affixed, attested by its secretary, this September , 2011 28th day of HUTCHINSON UTILITIES COMMISSION By: ATTEST: Name: Robert Hantge Name: Dwight Bordson Title: President SEAL Title: Secretary August 18, 2010 An SA #C Company Mr. Mike Kumm General Manager Hutchinson Utilities Company 225 Michigan St. SE Hutchinson, MN 55350 Subject: Proposal for Electric and Natural Gas Rate Study Dear Mike: In response to your request, we are sending you this letter proposal to perform a cost -of- service and rate design study for the Electric and Gas Divisions (Divisions) of Hutchinson Utilities (Hutchinson). The design of new retail electric and gas rates will be based on two principal components of the study. The first is the examination of the revenue requirements for both Divisions. This will be performed to determine any overall revenue adjustments that are necessary. The second component of the study, the cost of service analysis, is performed to determine the allocated cost of providing service to each class of customers in the two Divisions. The results of the cost of service study are used to determine the relative levels of revenues collected from each class of customers as well as for designing individual components of the retail rates. These components will be utilized in the electric and gas rate design. Our proposal also includes performing an analysis to unbundle the costs of each Division. In this analysis, costs will be broken into components to reflect such cost categories as gas /power supply, transmission, distribution and customer services, or other categories as will be determined. These unbundled costs will provide utility management with information that is useful in assessing how changes in the industry could potentially affect Hutchinson. R. W. Beck personnel involved in this project will primarily include Mr. David Berg, Project Manager, and Ms. Theresa Kervin, Rate Analyst. We look forward to the prospect of continuing our working relationship with Hutchinson. Please do not hesitate to call me if you have any questions regarding this proposal. Scope of Services R. W. Beck, upon authorization from Hutchinson Utilities Commission (Commission), will perform a cost of service and unbundled rate study for the Electric Division and the Gas Division. The services provided in connection with this assignment will include the following tasks for both Divisions: analysis of historical operating results, development of future revenues and revenue requirements, a cost -of- service analysis, an evaluation of the unbundled cost of serving each customer classification and the design of proposed new rates. The proposed Study Period for this project is 2010 -2015. Business Development I Rates Proposal.docx Mr. Mike Kumm August 18, 2010 Page 2 Task 1 Data Compilation Upon authorization to proceed we will provide an initial list of data necessary to develop a projection of revenue requirements and to perform the analysis to determine allocation factors, cost of service and rate design. This list will allow Hutchinson staff to begin locating and compiling the necessary data to move the Study along smoothly. Upon receipt of this data, R. W. Beck will organize the material and create computer files that will be used in the various types of analyses needed in this study. Revenue Requirements Development of the revenue requirements will include review of annual historical and budgeted operating expenses, the cost of additions to the system anticipated by the Division and any other financial obligations of the Commission, such as return on investment and dividend and the impact on transfers to the City. The data, to be provided by the Divisions and reviewed by the Project Team, shall cover the most recent five years (the most recent year is considered the "Test Year "). Allocation Data The data required to complete the study includes monthly billing and accounting data related to the Divisions' retail electric and natural gas operations: peak demand, monthly sales volumes by class (kWh or MCF) and number, size and type of customers for each retail rate class and data related to any contract customers. Task 2 Project Kick -Off Meeting and Data Review R. W. Beck will spend one day in Hutchinson at its office to participate in a project kick -off meeting. During this meeting, R. W. Beck and Hutchinson staff will discuss: • The goals of both Divisions for their services and retail rates. • Information provided to R. W. Beck from Task 1. • Project approach to meet each Division's goals regarding philosophy of service offerings, overall pricing, large customer issues and Fuel Cost or Power Cost Adjustment calculations. • Approach to developing a gas transportation rate for use of Hutchinson's gas pipeline to transport fuel for electric generation purposes. • Understanding of Hutchinson's capital improvement plans including details of financing the capital additions. • Reflection of Hutchinson's new power purchase arrangement with Missouri River Energy Services. Task 3 Develop Pro Forma R. W. Beck will develop pro forma operating results and cash reserves showing each Division's forecasted revenues and expenses for the current year plus an additional 5 year study period ( "Study Period "). These pro formas will reflect our forecast of purchased gas or purchased/generated power and transportation expenses, which will be based on our forecast of retail sales. We will also forecast other operating expenses and capital improvements, based on Business Development I Rates Proposal.docx Mr. Mike Kumm August 18, 2010 Page 3 historical expenses and discussions with Hutchinson staff. Revenues will reflect forecasted sales at current rates plus revenues anticipated under the Gas Division's Fuel Cost Adjustment or the Electric Division's Power Cost Adjustment rates. The pro formas will be created to examine each Division's return on net assets. Task 4 Perform Cost-of-Service Analysis For each Division, R. W. Beck will analyze Test Year expenses and classify them into appropriate categories. The service characteristics of the customer classes will be used as the basis for allocating the classified costs to each class. Allocated costs by class will be compared to the Test Year revenues by class to determine the adjustments needed to match revenues from each class to the costs of providing service to that class. Task 5 Develop Unbundled Costs and Revenues For each Division, Test Year expenses by class will be unbundled into different functional categories. Typical functional categories are: gas or power supply, transmission, distribution and customer services. Functional categories most appropriate for each Division will be determined after discussion with Division staff. Examination of unbundled costs will provide additional information as we work with the Divisions to design new rates. Task 6 Prepare Initial Report R. W. Beck will prepare an initial report of the findings to date and submit it to Hutchinson staff for review. Task 7 Planning Meeting with Staff R. W. Beck will meet with Hutchinson staff to review the study results to date and to identify what, if any, changes are to be made to existing retail electric and gas rates. Task 8 Design Rates and Rate Comparison Based on the results of the above meeting, R. W. Beck will design proposed new electric and gas rates for each customer rate class and prepare a presentation comparing typical monthly bills under existing and proposed rates for customers in each rate class. R. W. Beck will identify changes that enhance each Division's financial integrity and recover costs in an equitable manner. Street light rates will be developed that recover the cost of supplying electricity to the ( ity owned .street lights. i� {�nrJ v Lrgy will be reviewed and updated, and the benefits of establishing a Gas Rate Stabilization Fund will be discussed. The Power Cost Adjustment will be examined in a similar manner. Task 9 Prepare Preliminary Report R. W. Beck will prepare a written report describing the planning and analyses undertaken in the study. The report will include recommended new rates for each rate class in the Electric and Gas Divisions, as necessary. Estimated operating results at proposed rates will be shown for each Business Development I Rates Proposal.docx Mr. Mike Kumm August 18, 2010 Page 4 Division. R. W. Beck will provide an electronic copy (PDF form) of this preliminary report to Hutchinson for review and comment. Five hard copies will also be provided, if requested. Task 10 Present Preliminary Report to Utilities Commission R. W. Beck will meet with representatives of Hutchinson and the Utilities Commission and, if requested, participate at the same time in a Public Informational Meeting to present the preliminary report and to answer any questions regarding the study. Task 11 Submit Final Report Based on comments received from Hutchinson staff and from the meeting with the Utilities Commission, R. W. Beck will finalize the report and submit 10 copies to Hutchinson. Task 12 Present Final Report to Utilities Commission R. W. Beck will meet with representatives of Hutchinson and the Utilities Commission to present the final report and to answer any questions regarding the study. Task 13 Present Final Report to City Council R. W. Beck will meet with the City Council and, if requested, participate at the same time in a Public Informational Meeting to present the final report and to answer any questions regarding the study. Meetings This scope includes up to five meetings in Hutchinson with the two Divisions: • Task 2 — Project Kick -Off with Hutchinson personnel • Task 7 — Planning Meeting with Hutchinson personnel • Task 10 —Preliminary Study Presentation to Utilities Commission • Task 12 — Final Study Presentation to Utilities Commission • Task 13 — Final Study Presentation to City Council Additional Services Any other requested services not included in the Scope of Services described above will be provided based on the actual cost of labor and expenses. Schedule A chart outlining the tasks to be completed has been included on the following page. If a more expedited schedule is needed, we can adjust our project schedule to accommodate your needs, providing the information we need to complete the study is made available on an expedited basis. Business Development I Rates Proposal.docx Mr. Mike Kumm August 18, 2010 Page 5 Project Milestones (weeks following authorization to proceed) Kick -Off Meeting 1 week Planning Meeting 7 weeks Submit Preliminary Report 10 weeks Present Preliminary Report to Commission 12 weeks Present Final Report to Commission 13 weeks Present Final Report to City Council 15 weeks Compensation We propose that, upon submission of monthly invoices, Hutchinson pay R. W. Beck, Inc. an amount equal to the actual hours of services furnished multiplied by R. W. Beck's current hourly rates. Additionally, Hutchinson will reimburse R. W. Beck monthly, at cost or then current rates for all expenses directly chargeable to services furnished. R. W. Beck proposes to provide the scope of services outlined above for a total compensation not to exceed $49,000. If this proposed scope of services meets with your approval, we can perform these services under the signed Professional Services Agreement (PSA) between Hutchinson Utilities and R. W. Beck, dated July 7, 2004. There is an approval signature block below for you to authorize R. W. Beck to provide these services. Please return one signed copy of this authorization to me. Please contact me if you have any questions. Sincerely, R. W. BECK, INC. David A. Berg, E. Senior Director Approved: Hutchinson Utilities Commission Business Development I Rates Proposal.docx Definition of Your Bill Your bill provides: • Account number /Customer number • Due date • Payment due • Pre - authorized payment to be drawn from your bank on due date • Budget amount due if on the budget plan • Name /mailing address • Service address • Electric and fuel cost adjustments, if any • Reading dates • Days used • Previous and current readings • Usage • Previous balance • Payments made and date paid • Electric and /or gas meter charges • Amount charged to each meter • Sales tax • Any miscellaneous /trip charges • Account balance • Perforated top stub to remit with payment for timely and proper posting • The statement "2.75% or $ of your payment is transferred to the City of Hutchinson for use in its General Fund" Meters are read approximately every 30 days. Estimated readings may also be taken if access to the meter is not possible or the meter has stopped working. EXEMPT FAMILY AND MEDICAL LEAVE (FMLA) Pursuant to the Family and Medical Leave Act, employees are allowed up to 12 weeks unpaid leave during a 12 -month period for the following reasons: • Birth or care of the newborn child of the employee • Placement with the employee of a child for adoption or foster care • Serious health condition of the employee that makes the employee unable to perform the functions of the position of such employee • In order to care for an employee's dependent child, spouse, or parent suffering from a serious health condition • Any qualifying exigency arising out of the fact that the spouse, or a son, daughter or parent of the employee is on active duty, or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation. Up to twenty -six (26) weeks of protected leave per twelve (12) month period will be granted to all eligible employees for the following reasons: • An eligible employee who is the spouse, son, daughter, parent, or next of kin of a covered service member shall be entitled to a total of 26 workweeks of leave during a twelve (12) month period to care for the service member. The leave described in this paragraph shall only be available during a single twelve (12) month period. • A covered service member is defined as a member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness. The term "serious injury or illness ", in the case of a member of the Armed Forces, including a member of the National Guard or Reserves, means an injury or illness incurred by the member in the line of duty on active duty in the Armed Forces that may render the member medically unfit to perform the duties of the member's office, grade, rank, or rating. Spouses employed by HUtGhinsen UtilitiesHUC, both in regular positions, are jointly entitled to a combined total of 12 work weeks of family leave for the birth and care of a newborn child, for placement of a child for adoption or foster care, and to care for a parent who has a serious health condition. Spouses are entitled to a combined total of 26 weeks during a single twelve (12) month period to care for an eligible service member. During the single twelve (12) month period, an eligible employee shall be entitled to a combined total of 26 work weeks of total leave allowed under the FMLA. To be eligible for FMLA leave, the employee must have worked at least one year for the Wtitity HUC and worked at least 1,250 hours during the previous 12 months. In order to receive the FMLA leave, the employee must request the leave by providing the employee's Director, Manager or Supervisor 30 -days notice prior to the requested starting date of the leave. If 30 -days notice is not possible, the employee must provide the Director, Manager or Supervisor as much notice as possible. The Director, Manager or Supervisor will inform the Gil Customer /HR Manager of the request as soon as possible. The General Customer /HR Manager will provide the employee a "Medical Certificate" which must be filled out by the employee's physician and returned to the GeneFalCustomer /HR Manager. Upon receipt of the necessary medical information, the General Manager will determine whether the employee will receive the FMLA leave. Pursuant to the FMLA, the HUC may request a second opinion from another medical provider at t"° "mss - HUC's expense. If the second opinion is different from the employee's physician's opinion, 11 111-1, HUC will seek a third opinion at the ms's -RUC's expense. The third opinion shall prevail. The "'HUC may require that a request for leave related to active duty or call to active duty be supported by a certification issued by the health care provider of the service member being cared for by the employee. The 12 weeks of available FMLA leave extend over 12 months. To determine whether the employee has any FMLA leave remaining, the General Manager will look back over the 12 months preceding the request for FMLA leave. An employee may use the 12 weeks of FMLA leave intermittently over the 12 -month period if necessary and may take the leave in increments of one hour or more. An employee on FMLA leave for serious illness of the employee, the employee's spouse, dependent child or parent will be required to use vacation or sick leave concurrent with the FMLA leave. The Utility-HUC will continue to pay its contribution toward health insurance while an employee is on FMLA leave. At the end of FMLA leave, an employee shall be returned to his /her former position or an equivalent position. For more information on FMLA leave, see the R, soness Customer /HR Manager. EXEMPT PARENTAL LEAVE Pursuant to the Minnesota Parental Leave Act, employees who have worked for the Ut HUC for at least 12 months and average forty (40) hours per week may take six (6) weeks unpaid leave for the birth or adoption of a child. This leave must begin within six weeks after the birth or adoption. Eligible employees must provide thirty (30) days written notice to the General Manager of their desire to take parental leave. Employees may use their paid leave banks, such as sick leave or vacation, but they are not required to do so. If the employee is also eligible for FMLA leave, the parental leave under this section and the FMLA leave will run concurrently. NON - EXEMPT FAMILY AND MEDICAL LEAVE (FMLA) Pursuant to the Family and Medical Leave Act, employees are allowed up to 12 weeks unpaid leave during a 12 -month period for the following reasons: • Birth or care of the newborn child of the employee • Placement with the employee of a child for adoption or foster care • Serious health condition of the employee that makes the employee unable to perform the functions of the position of such employee • In order to care for an employee's dependent child, spouse, or parent suffering from a serious health condition • Any qualifying exigency arising out of the fact that the spouse, or a son, daughter or parent of the employee is on active duty, or has been notified of an impending call or order to active duty) in the Armed Forces in support of a contingency operation. Up to twenty -six (26) weeks of protected leave per twelve (12) month period will be granted to all eligible employees for the following reasons: • An eligible employee who is the spouse, son, daughter, parent, or next of kin of a covered service member shall be entitled to a total of 26 workweeks of leave during a twelve (12) month period to care for the service member. The leave described in this paragraph shall only be available during a single twelve (12) month period. • A covered service member is defined as a member of the Armed Forces, including a member of the National Guard or Reserves, who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness. The term "serious injury or illness ", in the case of a member of the Armed Forces, including a member of the National Guard or Reserves, means an injury or illness incurred by the member in the line of duty on active duty in the Armed Forces that may render the member medically unfit to perform the duties of the member's office, grade, rank, or rating. Spouses employed by H tGhinson UtilitiesHUC, both in regular positions, are jointly entitled to a combined total of 12 work weeks of family leave for the birth and care of a newborn child, for placement of a child for adoption or foster care, and to care for a parent who has a serious health condition. Spouses are entitled to a combined total of 26 weeks during a single twelve (12) month period to care for an eligible service member. During the single twelve (12) month period, an eligible employee shall be entitled to a combined total of 26 work weeks of total leave allowed under the FMLA. To be eligible for FMLA leave, the employee must have worked at least one year for the Utility- HUC and worked at least 1,250 hours during the previous 12 months. In order to receive the FMLA leave, the employee must request the leave by providing the employee's Director, Manager or Supervisor 30 -days notice prior to the requested starting date of the leave. If 30 -days notice is not possible, the employee must provide the Director, Manager or Supervisor as much notice as possible. The Director, Manager or Supervisor will inform the Gene al Customer /HR Manager of the request as soon as possible. The �'�al- Customer /HR Manager will provide the employee a "Medical Certificate" which must be filled out by the employee's physician and returned to the General Customer /HR Manager. Upon receipt of the necessary medical information, the General Manager will determine whether the employee will receive the FMLA leave. Pursuant to the FMLA, + "tili+ HUC may request a second opinion from another medical provider at +� Utility's-RUC's expense. If the second opinion is different from the employee's physician's opinion, the " -HUC will seek a third opinion at the Utilityrs -RUC's expense. The third opinion shall prevail. The Utility HUC may require that a request for leave related to active duty or call to active duty be supported by a certification issued by the health care provider of the service member being cared for by the employee. The 12 weeks of available FMLA leave extend over 12 months. To determine whether the employee has any FMLA leave remaining, the General Manager will look back over the 12 months preceding the request for FMLA leave. An employee may use the 12 weeks of FMLA leave intermittently over the 12 -month period if necessary and may take the leave in increments of one hour or more. An employee on FMLA leave for serious illness of the employee, the employee's spouse, dependent child or parent will be required to use vacation or sick leave concurrent with the FMLA leave. The Uti'HUC will continue to pay its contribution toward health insurance while an employee is on FMLA leave. At the end of FMLA leave, an employee shall be returned to his /her former position or an equivalent position. For more information on FMLA leave, see the Bps Customer /HR Manager. NON - EXEMPT PARENTAL LEAVE Pursuant to the Minnesota Parental Leave Act, employees who have worked for t-4e Utility HUC for at least 12 months and average forty (40) hours per week may take six (6) weeks unpaid leave for the birth or adoption of a child. This leave must begin within six weeks after the birth or adoption. Eligible employees must provide thirty (30) days written notice to the General Manager of their desire to take parental leave. Employees may use their paid leave banks, such as sick leave or vacation, but they are not required to do so. If the employee is also eligible for FMLA leave, the parental leave under this section and the FMLA leave will run concurrently.