2.4 ERMUSR 12-17-2013 - Laserfiche WebLink

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The bonding related to this project does not impact the City's bond rating or ability to issue municipal general obligation bonds. Also, the bonding associated with this project does not require the Utilities, through bond covenants, to have dedicated reserves. The Utilities' obligation for repayment on this bonding appears as an expense line item. And by design, the revenue that ERMU will receive will exceed the expense of the bond repayment creating a positive cash flow for the life of the asset. The amount of this cash flow will not be finalized until the value of the asset is determined at the time it is put into service. This will likely be in 2015. Shortly thereafter Delano Municipal Utilities (Delano), another participant in this project through CMMPA, elected to transfer their allocation of this project to ERMU and five other municipal utilities. Because of savings in the overall project, this increase to ERMU's percent ownership in the project did not cause the investment amount to exceed the previously approved investment amount. This allocation change was also approved in 2011 by the Commission and Council through resolutions. DISCUSSION: The next phase of the CAPX2020 Brookings/Twin Cities Project was an extension from Brookings to Big Stone. This is a significantly smaller project yet required all the same amount of legal work associated with the Federal Energy Regulatory Commission (FERC) filings. Because of the size of the project, the CMMPA Board of Directors elected to not extend an invitation to a nonmember like ERMU to invest in their $2.5M eligible share of this project. Because of the amount of work for such a small investment, CMMPA and the other upstream investors have agreed to swap the investment rights for the Big Stone transmission project for an increase in the Brookings project. The decision to swap creates a requirement for CMMPA to offer ERMU, and other nonmembers participating in the Brookings project through CMMPA, the opportunity to increase their Brooking project allocations based on their current entitlement share. The current ERMU entitlement share of the 3.6% CMMPA share of the Brookings project is 18.890%. This current project forecast is for ERMU's share to have a $4,649,874 value, well below the approved not to exceed amount. The ERMU eligible allocation increase to the Brookings project due to the Big Stone project swap would be $472,250. If approved to accept the swap and increase our Brookings allocation, this would increase our current forecasted Brookings transmission investment to $5,122,124. This is still well below the approved not to exceed amount. To approve the swap and allocation increase, ERMU will need a resolution appointing a representative on the Transmission Project Coordinating Committee and authorize the representative to vote in favor of the change in allocation. A similar resolution will be needed from City Council authorizing the same representative and authority. The action request for the City Council was requested on December 16, 2013. 1 ME Reliable Public Poway Provider Page 2 of 3 41 P6WEREO 81 (NAME P.w E P EO TO S.0.VE