December 12, 2017 - Elk River

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ELK RIVER MUNICIPAL UTILITIES REGULAR MEETING OF THE UTILITIES COMMISSION HELD AT UTILITIES CONFERENCE ROOM December 12, 2017 Members Present:

Chair John Dietz; Vice Chair Daryl Thompson; Commissioners Al Nadeau, Mary Stewart, and Matt Westgaard ERMU Staff Present: Troy Adams, General Manager; Theresa Slominski, Finance and Office Manager; Mark Fuchs, Electric Superintendent; Mike Tietz, Technical Services Superintendent; Eric Volk, Water Superintendent; Tom Sagstetter, Conservation & Key Accounts Manager; Michelle Canterbury, Executive Administrative Assistant; Jennie Nelson, Customer Service Manager; Tom Geiser, Assistant Electric Superintendent; Scott Thoreson, Lead Lineworker; Zac Johnson, Lead Lineworker Others Present: Peter Beck, Attorney

1.0

GOVERNANCE

1.1

Call Meeting to Order The regular meeting of the Utilities Commission was called to order at 3:30 p.m. by Chair Dietz.

1.2

Pledge of Allegiance The Pledge of Allegiance was recited.

1.3

Consider the Agenda There were no additions or corrections to the agenda. Moved by Commissioner Nadeau and seconded by Commissioner Stewart to approve the December 12, 2017, agenda. Motion carried 5-0.

2.0

CONSENT AGENDA (Approved By One Motion) Moved by Commissioner Westgaard and seconded by Commissioner Thompson to approve the Consent Agenda as follows:

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Regular Meeting of the Elk River Municipal Utilities Commission December 12, 2017

2.1 2.2 2.3 2.4 2.5 2.6 2.7

November Check Register November 14, 2017 Regular Meeting Minutes 2018 Official Depository 2018 Official Newspaper 2018 Utilities Commission Meeting Schedule LS Cable & System U.S.A., Inc. Extended Product Warranty Otsego Street Lights

Motion carried 5-0. 3.0

OPEN FORUM No one appeared for open forum.

4.0

POLICY & COMPLIANCE

4.1

Delegation to Management Policies Mr. Adams presented for consideration the remaining Delegation to Management policies that consultant John Miner had developed: G.4i1 Investments; G.4i2 Financial Reserves; G.4i3 Debt Issuance and Payment; G.4i4 Procurement; G.4j1 Rates and Charges for Electric Service; and G.4j2 Rates and Charges for Water Service. For the Procurement policy, Mr. Adams pointed out the $10,000 threshold that was being proposed for item number two and three, and reached out to the Commission for further discussion on whether that dollar value was still appropriate as it had been established quite some time ago. After discussion, Commissioner Stewart proposed raising the threshold from $10,000 to $25,000. Attorney Beck recommended the Commission approve the change to the dollar thresholds by motion. Moved by Commissioner Stewart and seconded by Commissioner Nadeau to change the dollar threshold in the Procurement Policy from $10,000 to $25,000 in item number two and three. Motion carried 5-0. Moved by Commissioner Westgaard and seconded by Commissioner Thompson to adopt the Delegation to Management Policies. Motion carried 5-0.

4.2

Performance Metrics and Incentive Compensation Policy Per our policy, the metrics for measurement of the designated year need to be determined before the start of the designated year; this allows for changes to be made and communicated

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Regular Meeting of the Elk River Municipal Utilities Commission December 12, 2017

timely before performance measurement begins. Ms. Slominski presented the proposed Performance Metrics and Incentive Policy Score Card. No changes were being recommended for 2018. Ms. Slominski shared that staff has identified a few changes to incorporate and will be working on those in 2018 to finalize for measurement in 2019. Moved by Commissioner Thompson and seconded by Commissioner Stewart to approve the Performance Metrics and Incentive Compensation Score Card for 2018. Motion carried 5-0. 5.0

BUSINESS ACTION

5.1

Financial Report – October 2017 Ms. Slominski presented the October 2017 financial report. For the Electric Department, Chair Dietz had a few questions in regards to the increase in expenses for the Landfill Gas Plant, Distribution, and Maintenance line items. Staff responded. Moved by Commissioner Thompson and seconded by Commissioner Stewart to receive and file the October 2017 Financial Report. Motion carried 5-0.

5.2

Wage & Benefits Committee Update Chair Dietz presented the Wage & Benefits Committee (W&BC) update, as outlined in the memo, along with the proposed recommendations. On the topic of an adjustment to the 457 deferred compensation employer contribution for the management pay group, the Committee made a verbal recommendation of 2.5%. Chair Dietz shared that all of the proposed changes would be effective January 1, 2018, with the exception of the 457 deferred compensation benefit change for all of the pay groups and the management pay group, as that benefit period runs from June 1, 2017 to May 31, 2018. The W&BC had one additional item to add for consideration; the reclassification of the Inventory Person position from Field Group Pay Grade 6 to Field Pay Grade 8. Chair Dietz provided some background on the position, and stated that the employee we currently have in the position has given notice. There was discussion. Mr. Adams shared that after review of the difference in responsibilities from the origin of this position to current actual practice, and the impact to pay grade points, the W&BC is recommending the reclassification of the position from the Field Pay Grade 6 to 8. The financial impacts of the reclassification were discussed. Moved by Commissioner Nadeau, and seconded by Commissioner Stewart to approve the following: • Eliminate the percent criteria of the employer contribution for the 457 deferred compensation benefit and increase the match cap from $2,000 to $2,500 for all pay groups

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Regular Meeting of the Elk River Municipal Utilities Commission December 12, 2017

• 2018 cost of living adjustment of 2.5% for all pay plan groups • Additional 0.5% market adjustment for the Lineworkers Pay Group • Additional 2.0% market adjustment for the Customer Service Representative position • The addition of a 2.5% employer contribution to the 457 deferred compensation benefit for the Management Pay Group. • Unused vacation time to be deposited into Health Care Saving Plan upon retirement in lieu of being paid out • Reclassify the Lead Bore Rig Operator position from Field Group Pay Grade 8 to Field Pay Grade 9 • Reclassify the Inventory Person position from Field Group Pay Grade 6 to Field Pay Grade 8 Motion carried 5-0. 5.3

2018 Business Plan/Budget: Budget and Rates In November, the preliminary 2018 budget and rates were presented to the Commission. Ms. Slominski noted that there had been several changes due to finalizing of projects and expenses, as well as some new accounts created and amounts redistributed. The changes were noted on the Revenue and Expense Budgets in the notes and explanations section, with the prior items presented in November in blue. Ms. Slominski presented the 2018 budget and reached out to the Commission to see if they had any questions. Commissioner Stewart had a few questions regarding the $50,000 increase to the consulting fees line item for the new bond’s bond counsel and whether it could be amortized over the life of the bond. Staff responded. Mr. Adams spoke to the new IT position that was being budgeted for in 2018, and how the timing of hiring for the position would be tied in with our cyber security audit. Although the position will most likely not be filled for 3 to 6 months, Mr. Adams stated that staff had budgeted for the full year. There was discussion on the shared IT services with the city. Chair Dietz inquired as to how the proposed electric and water increases would impact customers. Staff responded that the 2018 electric rates result in increases of 1% or less for typical customers in all rate classes, and water rates result in a blended increase of 1.85% to the monthly meter charge and first tier water use, and no rate increase to the second and third tier water use rates. Mr. Sagstetter also touched on the $1/kW demand credit that would be going away in 2018, and how that would impact customers on the demand electric service rate; the estimated rate increase for those customers will range from 3 to 6%. There was discussion. Moved by Commissioner Thompson and seconded by Commissioner Stewart to adopt the 2018 Business Plan/Budget. Motion carried 5-0.

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Regular Meeting of the Elk River Municipal Utilities Commission December 12, 2017

5.4

2018 Tariffs Mr. Sagstetter presented the 2018 rates and tariff sheets. Mr. Sagstetter explained that the tariffs had also been updated to accommodate for the multiple billing cycles beginning in 2018, specifically the language regarding the timeframe for the summer and winter rates had been changed to correspond with the monthly billing periods. The Commission had a few questions. Staff responded. Moved by Commissioner Westgaard and seconded by Commission Nadeau to approve the 2018 Rates and Tariff Sheets. Motion carried 5-0.

6.0 BUSINESS DISCUSSION 6.1

Staff Updates Ms. Slominski stated in her staff report that letters have been created for the four billing cycles we’ll be moving to as we implement multiple billing cycles in January. There are four separate letters, one for each cycle, that depicts their new billing and due dates, and gives specifics for the first bills to be received in January. As some cycles will have two weeks in their first bill and some will have five weeks, we’re letting the customers know what to expect. The letters will go out with the December 20 billing. Chair Dietz inquired as to how the change in due dates will affect people on automatic bank pay. Staff responded, and shared that specific details relating to this will be covered in the letters as well. Mr. Fuchs had nothing additional to add to his staff report. Chair Dietz had a question on when we would be acquiring Connexus Areas 5&6. Mr. Fuchs stated that that the plan is to acquire Areas 5&6 in September of 2018, Area 7 in 2019, and Area 8 in 2020. Mr. Tietz indicated in his staff report that the power plant staff performed the monthly engine run on November 29, and that all engines ran well with no problems. There was discussion on the purpose of the monthly engine run and the importance of keeping them in good working order should we need them for emergency purposes only. At the request of Chair Dietz, Mr. Volk provided a recap on a scheduled water shut-off that recently took place, and how it affected the commercial businesses in the area. Due to a disgruntled business owner who voiced concern over the service interruption and notification process for doing so, staff has been evaluating the process that’s currently in place. There was discussion. Mr. Sagstetter announced the winners of the holiday lighting contest and thanked the Commission for helping with the final judging. He also acknowledged Customer Service Representative Jessica Rahn who had put together detailed route directions to aid in finding the homes. The winners along with the rest of the participants will be published in the December 16 edition of the Star News.

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Regular Meeting of the Elk River Municipal Utilities Commission December 12, 2017