5.1. ERMUSR 04-12-2011 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 37, 20L0 AND 2009 Note 4: OTHER INFORMATION A. Territorial acquisition agreement The Utilities has entered into an agreement [o transfer ownership of electric plant and electric service to customers in certain areas curzently receiving electric service from Anoka Electric Cooperative, Inc. (AEC). The cost of property purchased from AEC will be net book value. The Utilities will also pay AEC for loss of revenue for each area acquired based on a formula outlined in the agreement. In addition, the Utilities will compensate AEC for the loss of revenue from the future sale of electricity to electric customers in the areas acquired from AEC for a period of [en years from the date of sale of each individual area. During 2010 and 2009, the Utilities paid $110,662 and $9,469, respectively, under [his agreement, including $8,107 and $9,489 in 2010 and 2009, respectively, for loss of revenues. All amounts paid are included in property and equipment. B. Risk management The Utilities is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters for which [he Utilities carries commercial insurance. The Utilities obtains insurance through participation in the League of Minnesota Cities Insurance Trust (LMCIT), which is a risk sharing pool with approximately 800 other govemmen[al units. The Utilities pays an annual premium to LMCIT for its workers compensation and property and casualty insurance. The LMCIT is self-sustaining through member premiums and will reinsure for claims above a prescribed dollar amount for each insurance event. Settled claims have not exceeded the Utilities' coverage in any of the past three fiscal years. Liabilities are reported when it is probable that a loss has occurred and the amount of [he loss can be reasonably estimated. Liabilities, if any, include an amount for claims that have been incurred but not reported QBNRs). The Utilities' management is not aware of any incurred but not reported claims. C. Commitments The Utilities has received notice from their power supplier regarding the existing all requirements power contract exercising their right to give ten years notice to cancel the contract. The cancellation date would be effective September 30, 2018. The process has begun to renegotiate [he existing contract, or contract with another power supplier. -48-