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i <br /> Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager <br /> John Dietz—Chair <br /> Al Nadeau—Vice Chair <br /> Daryl Thompson—Trustee <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> February 10, 2015 4.1 <br /> SUBJECT: <br /> Midwest Municipal Transmission Group and Transmission Ownership Update <br /> BACKGROUND: <br /> In May 2006, the Utilities Commission authorized ERMU joining Midwest Municipal <br /> Transmission Group (MMTG)to explore the potential to obtain ownership in the regional <br /> transmission system. This non-partisan/not-for-profit organization was created to provide <br /> service and assistance to the membership for matters relating to the planning, construction, <br /> ownership/investment, operation and maintenance, and administration and management of <br /> electric transmission and/or power generation facilities. The action to join MMTG represented <br /> ERMU's decision to investigate a change in direction towards ownership instead of renting. <br /> Ownership in the transmission system essentially works as a hedge to mitigate volatility in <br /> transmission costs. ERMU is still a member of MMTG and through proactive participation, <br /> represents their investment and their customers. I am currently past chair of the MMTG board of <br /> directors. <br /> This is a unique type of investment opportunity for a municipal utility. Because of a municipal's <br /> ability to finance with tax exempt bonds, our cost of money is less than investor owned and <br /> cooperative utilities. With the Federal Energy Regulatory Commission(FERC) approval of a <br /> hypothetical capital structure and a guaranteed rate of return on investment, transmission <br /> ownership becomes an incredible advantage for municipal utilities to position themselves with <br /> very competitive rates compared to the investor owned and cooperative utilities. <br /> DISCUSSION: <br /> On January 31, 2015, ERMU received its first payment for our share in the CAPX2020 <br /> Brookings transmission project in the amount of$72,741. This amount represents the margin <br /> above the bond payments. ERMU will continue to receive payments for our ownership in this <br /> transmission project for the 40 year life of the asset. This is a historic moment in ERMU history. <br /> ACTION REQUESTED: <br /> No action is requested at this time. <br /> EN <br /> NEAED ® 1' <br /> WARM 1 of 1 A "UMW <br /> Reliable Public. <br /> Power Provider P 0 W E 0.E D T O S E R V E <br /> 56 <br />