5.4. ERMUSR 05-14-2013 - Laserfiche WebLink

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Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Troy Adams—General Manager John Dietz—Chair Al Nadeau—Vice Chair Daryl Thompson—Trustee MEETING DATE: AGENDA ITEM NUMBER: May 14, 2013 5.4 SUBJECT: Purchase Power Supply and Agency Membership BACKGROUND: Elk River Municipal Utilities currently receives wholesale power from Great River Energy(GRE) through an "all requirements"purchase power agreement with Connexus Energy, one of GRE's 28 member electric cooperatives. In September 2008, Connexus exercised their right to terminate that contract. The provisions of the contract require a ten year notice,effectively establishing the purchase power agreement to end in September 2018. Since the date when Connexus gave notice of termination of this power contract, ERMU has diligently explored options for a future wholesale power supplier. ERMU researched becoming an owner in the Big Stone II power plan through Central Minnesota Municipal Power Agency(CMMPA). The Utilities Commission felt there was too much risk with ownership in a coal power plant. There was also concern that this coal power plant would not be built. Unrelated to ERMU's decision to not participate,the project suffered a significant setback when one of the major participant utilities of this project pulled out. Big Stone II was never built. Looking to fill the future power supply that would have been covered by Big Stone II, CMMPA started a Power Supply Coalition. The Coalition was formed to gain economies of scale for reducing costs associated with a power supply study as well as gain load for purposes of obtaining better power supply prices from a Request For Proposal (RFP). ERMU, along with other utilities,joined CMMPA's Coalition. A full power supply study was completed along with risk analysis. Based on the studies,an RFP was sent out for the Coalition's future power supply needs. Shortly after the bids for the RFP were received, the economy took a downturn. By the time the bids were analyzed,they were no longer competitive with the wholesale power market. ERMU decided not to enter into a purchase power agreement resulting from the Coalition's RFP. ERMU used the results of the study as a basis for future wholesale power supply analysis. In addition to the work with CMMPA, ERMU had also been researching other municipal power agencies. In Minnesota, municipal power agencies are created through Minnesota State Statute 453. One of the benefits of municipal power agencies is their members are other municipal utilities. ERMU had engaged in membership discussion with: CMMPA, Southern Minnesota Municipal Power Agency(SMMPA), 1 R. POWER ( BI Page 1 of 3 INATURE1 Reliable Public Power Provider P o wrRro T o S r•vr