5.2. ERMUSR 07-17-2012 - Laserfiche WebLink

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.4 -- 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: July 17, 2012 5.2 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 the 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. Because of the April 1 termination notice deadline, a 60 day extension to the deadline was agreed upon by both parties. The extension will allow ERMU and GRE to renegotiate the terms of the agreement within the 60 day extension without either party losing their ability to provide notice of termination for next year. A 60 day extension in the termination date was also agreed upon. This extension guarantees the payments through the calendar year regardless of the results of the agreement negotiation. On March 29, ERMU and GRE executive officials executed the Capacity Credit Agreement Notice of Termination Extension letter. Due to continuing and progressive discussions, on May 30 both parties agreed to an additional 60 days extension. This additional extension changes the notice of termination date to August 1, 2012. DISCUSSION: Great River Energy is drafting a revised capacity credit agreement for review and consideration. The revisions include: lowering the payment to reflect the market and GRE's capacity needs; shifting the agreement coverage period to reflect the Midwest Independent Transmission System Operator (MISO) planning year; exceptions for ERMU's emergency operation of the facility; ENATUREJ Page 1 of 2 Reliable Public® Power Provider P O W E R E D T O S E R V E