4.4. SR 08-17-1998 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES 322 King Avenue Elk River, Minnesota 55330 Phone (612) 441-2020 Fax (612) 441-8099 To: Elk River Municipal Utilities Commission George Zabee John Dietz Jim Tralle July 28, 1998 From: Bryan C. Adams Subject: Electric Generation Capacity UPA is in the process of studying the addition of electric generation facilities in our area due to load growth and increased system reliability. I have suggested to UPA that ERMU build this generation in the form of more diesels at our power plant or a gas turbine at one of our substations. Staff is becoming increasingly concerned with generation and transmission capabilities in the MAPP area. In case of a system wide failure, it is desirable to have generation capabilities in Elk River large enough to carry Elk River's electric load. These items we discussed at our July 9, 1998 Commission meeting. The results of our July meeting was to proceed with upgrading our power plant substation and continue to pursue adding generation capacity with UPA. Attached for your review is a letter from UPA exploring our interest in participating in a gas turbine generation project. ERMU owns the land around our West Substation complex. See the attached map. This land is zoned light industrial and is sufficient in size to support this facility. Northern Natural Gas' transmission pipeline and UPA's 69 Kv transmission lines are both directly adjacent to this property, which is critical to a project of this nature. This proposed project has the potential of solving some of my concerns for ERMU. As staff has stated earlier, there is little question that we will experience an electric transmission/generation failure due to wholesale wheeling and lack of adequately sized transmission/generation facilities. Appropriately sized electric generation on our systems solves this issue. This proposed project gives ERMU the opportunity to resolve our 10 year rolling all requirements power purchase contract with AEC/UPA. This proposed project also allows us to make a small margin on the order of approximately $250,000~ year, (shared savings from Property Tax deletion). This will go a long way in helping to reduce our electric rates. The pros and cons for this type of project are as follows: PROS CONS 1) Secure source of Power in case of system failure 2) Opportunity for $250,000 ± annual margin 3) Opportunity to resolve AEC/UPA Power Contract 4) Good Cooperative effort between Coop and Municipal 5) No added personnel required 1) Large debt ($15,000,000 ± ) 2) ERMU responsible if UPA defaults (minimal risk)