5.6. ERMUSR 05-10-2016 - Laserfiche WebLink

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Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: Elk River Municipal Utilities Commission Tom Sagstetter—Conservation and Key Accounts John Dietz—Chair Manager Al Nadeau—Vice Chair Daryl Thompson—Trustee MEETING DATE: AGENDA ITEM NUMBER: MaylOth, 2016 5.6 SUBJECT: Landfill Gas Plant Engine Repair and Plant Operational Cost Update BACKGROUND: The landfill gas facility was constructed 2002 as a partnership between the City of Elk River, Sherburne County,Waste Management(WM),and ERMU. The operational expenses of the plant have been an area of concern in recent years due to a drastic increase in maintenance costs above and beyond these covered under the maintenance contract with WM. For their plants,WM is implementing new standard maintenance schedules that involve installing new piston rings and main bearings on a scheduled basis. The new maintenance schedule is intended to decrease the likelihood of catastrophic failures. ERMU has experienced two catastrophic failures in the last 3 years; one in 4th quarter 2013,and the second was in March 2016. This proposed new maintenance schedule would be above and beyond what is included under the maintenance contract and would come with additional costs. The landfill gas plant received the repaired engine#4 on April 25th and was running at full production on April 26th. We have not received final costs or progress on any warranty reimbursement as of yet. ERMU staff has also been in contact with the League of Minnesota Cities on the third party coverage for equipment breakdown insurance policy for landfill gas plant equipment. As previously presented to the Commission the cost estimate was $112,000 for the repair of engine#4. The work included in this repair included; new crank shaft,re-ring parts and labor,new pistons,new heads,block machining, transportation, and crane services. DISCUSSION: ERMU receives the revenue for the energy sales and all incremental expenses over contracted amounts. WM is under contract to perform standard maintenance as outlined in the service agreement and for services above contracted work they charge ERMU cost for the additional parts and labor. The proposed changes in the operation and additional costs would be the sole responsibility of ERMU. The drastic changes in the maintenance schedule, cost of parts being replaced, and labor are significant. Staff has expressed great concern over the increase in the standard maintenance and the impacts to the financial viability of the facility with Waste Management and Sherburne County. Under the current operating structure of the plant and the contracts associated with it, ERMU is solely responsible for the incremental charges. EN rOWEAED Dr Page 1 of 2 NATURE Reliable Public Power Provider P O W E R E D T o S ERV E 216