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~i <br />Eli River <br />~Vluniei~al Utilities <br />13069 Orono arkway phone: 763.441.2020 <br />Elk River, MN 55330 fax: 763.441.8099 <br />June 25, 2009 <br />To: Elk River City Council and Elk River Municipal Utilities Commission <br />From: Troy Adams <br />Subject: Ut111t1eS' Electric Resource Planning Opportunities Follow-Up <br />At the June 15th j oint City Council and Elk River Municipal Utilities Commission meeting Central <br />Minnesota Municipal Power Agency (CMMPA) and utility consulting firm R.W. Beck made <br />presentations to the Council and Commission regarding an opportunity for Elk River Municipal Utilities <br />(ERMU) to participate in the Big Stone II (BSII) coal power plant project. There is a project deadline of <br />July 15th to sign a letter of intent (LOI) to participate in BSII. No action was taken at the June 15th joint <br />Council and Commission meeting. Per the Council, ERMU staff was directed to provide information <br />for an alternative to participation in BSII, the sale of the ERMU. Specifically requested, ERMU was to <br />provide information regarding the benefits of the City having a municipal utility. (For supporting <br />information specific to the BSII project, please refer to the June 15th Council Packet and R.W. Beck <br />study. If an additional copy of the packet or study is needed, please contact me at (763) 441-2020.) <br />In addition to these two extremes, other opportunities are still feasible. On June 19th, ERMU staff met <br />with Connexus Energy staff to inform them of ERMU's interest in BSII. Also discussed was the option <br />of renegotiating an all requirements power purchase contract from them. Connexus had given <br />termination notice for the current 10-year rolling all requirements power purchase contract in September <br />2008. One of the reasons for the termination of the contract was pressure from Great River Energy <br />(GRE). The energy supplied from GRE to Connexus for the ERMU load was sold to Connexus at a 5% <br />discount from GRE's wholesale rate. Connexus then sells this energy to ERMU at the GRE wholesale <br />rate fora 5% profit that is subsidized by the other members of GRE. Connexus would no longer get this <br />5% discount from GRE in any new contract to supply energy for ERMU. Also, Connexus insisted on a <br />moratorium on ERMU territory acquisition from Connexus. This is the recent political stance of <br />Minnesota coops lead by Minnesota Rural Electric Association (MREA). After the termination notice in <br />2008, the early discussions with Connexus regarding renegotiating the all requirements power purchase <br />contract were not favorable to ERMU. However, the recent meeting with Connexus provided a more <br />positive discussion towards negotiating a fair and equitable solution. Connexus does have interest in <br />renegotiating an all requirements contract with ERMU. Also, if ERMU and the City were to participate <br />in BSII, Connexus has interest in negotiating a partial requirements contract to supply the balance of <br />energy needed and the additional ancillary services. (Ancillary services are those associated with the <br />support and maintenance of capacity and reliable transmission of energy between the generation and the <br />