4.2. ERMUSR 10-09-2012 - Laserfiche WebLink

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Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager John Dietz—Chair Daryl Thompson—Vice Chair Al Nadeau—Trustee MEETING DATE: AGENDA ITEM NUMBER: October 9, 2012 4.2 SUBJECT: Diesel Power Plant Capacity Credit Agreement BACKGROUND: Included in our current interconnection agreement with United Power Association (UPA), now Great River Energy (GRE), is a power transaction agreement to purchase the generating capacity from ERMU's Diesel Power Plant. This power transaction agreement has been modified since the original agreement, most recently in 2003. The revisions to the agreement occurred on October 31, 2003. These revisions established the agreement to be on an "evergreen" basis with an October 31 termination date and an April 1 termination notice date. The agreement established the capacity credit at $2.75/kW month. Typically our agreement with GRE results in capacity credit payments of approximately $350,000 annually. On March 28, ERMU received notice that GRE wanted to reevaluate the current agreement's fixed capacity credit. Due to continuing and progressive discussions with GRE, both parties agreed to and executed an additional extension establishing a new termination date of November 1, 2012. DISCUSSION: The November 1 deadline established was determined by the Midwest Independent Transmission System Operator's (MISO) Module E for Resource Adequacy reporting requirement that GRE would need to meet to register ERMU's generation. There is a change this year with MISO where this generation would need to be registered for the "year ahead." This would require ERMU to commit to GRE by November 1 for the next MISO Planning Year for resource adequacy that would run through May 2014. On May 22, 2012, the Environmental Protection Agency (EPA) signed proposed amendments to the National Emission Standards for Hazardous Air Pollutants (NESHAP) for stationary Reciprocating Internal Combustion Engines (RICE). The proposed rule changes do not become effective until EPA issues a final regulation including any final changes. This final ruling may change some of the emission retrofits ERMU's generation would require to be registered on the MISO's Module E for resource adequacy. � : IMBED 81 �3 Page 1 of 2 �NATUR Reliable Publica Power Provider PoweeEo To SERVE