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Elk River — <br /> M <br /> II <br /> unicipal Utilities <br /> 13069 Orono Parkway <br /> P.O. Box 430 <br /> Elk River,MN 55330 <br /> (763) 441-2020 <br /> UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager <br /> John Dietz—Chair <br /> Daryl Thompson— Vice Chair <br /> Al Nadeau—Trustee <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> June 12, 2012 5.3 <br /> SUBJECT: <br /> Electric Service Territory <br /> BACKGROUND: <br /> In 1974 Minnesota saw legislation pass that established a municipal utility's right to grow with <br /> their city by acquiring electrical service territory as their city annexed additional area. This <br /> historic legislation was supported by both the municipal utilities as well as the cooperative <br /> electric utilities. <br /> This right for a municipal utility to grow with its city allows for increase economies of scale as <br /> the city services expand. These economies of scale impact labor and materials, but also increase <br /> the system load making the utility more attractive when looking for a power supplier. Many <br /> times the cities are dependent upon revenue transfers or payments in lieu of taxes (PILOT) from <br /> their municipal utilities. These PILOTs are often a percentage of applicable sales and would <br /> increase as the municipal utility grows, as is the case in Elk River. So as the city grows, the <br /> municipal utility grows. As the municipal utility grows, the municipal utilities receive additional <br /> revenue from sales. As the municipal utilities' sales grow, the transfer to the city grows. The <br /> additional amount of transfer to the city helps to offset expenses that would otherwise be funded <br /> through taxes. Also, the ability for a city to borrow from their municipal utility can't be <br /> overlooked and larger economies of scale strengthen a utilities' ability to assist. There is history <br /> of ERMU helping the City of Elk River through smaller forms of assistance. For example, in the <br /> mid-1990s, ERMU made a number of donations to the City when they were building their Ice <br /> Arena. The utility and city share a symbiotic relationship where both can be mutually successful <br /> through growth. This is one of many advantages of municipal public power. <br /> RrpA <br /> r- [POWERED B 1 <br /> $ NATURE <br /> Reliable Public <br /> Power Provider o T ■ S ; It <br />