5.4. ERMUSR 05-14-2013 - Laserfiche WebLink

Home Browse Search

Missouri River Energy Service(MRES), and Minnesota Municipal Power Agency(MMPA). Around this time,Connexus and GRE had also expressed interest in resigning ERMU to a power contract. ERMU began an analysis comparing the options of renegotiation with Connexus, entering into an agreement directly with GRE, or joining a municipal power agency. The high level results of this analysis helped to establish the criteria most important to ERMU for a wholesale power supplier: competitive rates, stability and positioning for reduced risk associated with regulation, sharing of information and advocacy,and ability to have control of our future. Late in 2012 with these criteria in mind, ERMU narrowed the options to focus on down to three: GRE,MRES, or MMPA. DISCUSSION: There has been concern with the limitation of ERMU's current power supply agreement with Connexus/GRE that there is not always"like interests." In addition to the differing interest associated with the current agreement, ERMU has no board seat or vote at GRE. ERMU is at the mercy of the member cooperatives that do not always have the same interests. This puts ERMU in a position where we cannot influence the direction of our power supply but are rather captive customers. This is an important issue to address. These realizations caused ERMU to be forthcoming with Connexus and GRE about our desire to have a say in our future and a need to have"like interests." Connexus and GRE both communicated that these concerns could be addressed if ERMU where to sign an extension to the current power sales agreement. To satisfy ERMU's other interests,GRE would need to allow ERMU to have a board seat that is eligible to vote. This would not completely address the concern of"like interests." This repeatedly comes up when GRE's interests do not align with ERMU's because the makeup of our customer base is different than that of the typical electric cooperative member of GRE. MRES and MMPA both offer advantages compared to GRE with respect to this issue. Because the memberships are made up of municipal utilities and not cooperative electric utilities,the interests are more likely to align. MRES has 61 members and there is no guarantee of a board seat for ERMU. MMPA has 11 members and ERMU would have a guaranteed board seat. MMPA, however, has strict guidelines establishing separation between governance and operations. So ERMU would have a vote on the MMPA board,but would not be involved in the day to day operation of the agency. Another concern with our current power supply agreement is competitive rates. ERMU currently receives the same rate signal that the other GRE non-fixed cooperative electric members receive. This rate is currently and historically higher than other options being considered. Although there is no guarantee for the future,historically MRES and MMPA have the ability to maintain rates lower than GRE. One of the greatest exposures to risk with our current power supply contract is potential carbon regulation. GRE is deeply invested in coal. MRES serves members who have WAPA hydroelectric allocations with the balance of their power supply coming primarily from coal generation. MMPA is in the best position to mitigate the risk associated with carbon regulation because of their generation portfolio. This puts MMPA at a significant advantage compared to GRE and MRES for providing competitive rate into the future. Based on the criteria established for the analysis, MMPA stands out as the top choice. Although there is no way to guarantee the future,a rate analysis indicated significant saving in power costs compared to GRE. MMPA has positioned themselves well to protect their members from the risk of carbon regulation. This regulation may never come, but if it does, MMPA will be able to adapt quickly without extreme volatility in rates. The size of the MMPA board,the guaranteed board seat with voting privileges, and the similar sized municipal utility members indicate that ERMU would have the ability to provide input towards decisions involving our future with a greater level of influence with results. And PBuEREB B1 Page 2 of 3 INATURE Reliable Public Power Provider POWERED To SERVE