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______________________________________________________________________________ <br /> <br />Page 1 of 1 <br /> <br /> <br /> <br /> <br /> <br />UTILITIES COMMISSION MEETING <br /> <br />TO: <br />ERMU Commission <br />FROM: <br />Theresa Slominski – General Manager <br />MEETING DATE: <br />May 11, 2021 <br />AGENDA ITEM NUMBER: <br />4.1 <br />SUBJECT: <br />Payment in Lieu of Taxes and Other Donations to the City of Elk River <br />ACTION REQUESTED: <br />Adopt Revised Commission Policy G.2a1 Payment in Lieu of Taxes and Other Donations to the <br />City of Elk River. <br /> <br />BACKGROUND: <br />At the April 13 Commission meeting the Transmission Transformed Service Rate (TTSR) was <br />adopted. In reviewing the Payment in Lieu of Taxes (PILOT) and Other Donations to the City of <br />Elk River Policy there was a great deal of discussion on a fair transfer amount related to the <br />TTSR. There were also discussions of how to handle the additional fees (franchise and <br />stormwater) that ERMU collects on behalf of the City. <br /> <br />DISCUSSION: <br />The TTSR is for customers that are comfortable with the risks and responsibilities associated <br />with market-based rates in the Midwest Independent System Operator (MISO). The customer <br />will be responsible for managing all the MISO requirements along with the costs associated <br />with transmission, capacity, and energy by working directly with Minnesota Municipal Power <br />Agency (MMPA). Customers on the TTSR will essentially have the real-time MISO pricing passed <br />through to them with a charge added to those real-time MISO prices for MMPA and ERMU to <br />split evenly. The “charge” is to cover the dispatch, billing, and administrative costs incurred by <br />MMPA and ERMU. Given the charge is so small, and split between MMPA and ERMU, it is not <br />feasible to pay 4% of total revenue when the wholesale power costs are pass through costs to <br />the customer, not revenue to ERMU or MMPA. <br /> <br />This proposed policy modification would simply add a second methodology to the PILOT <br />calculation for the customers on the TTSR. The existing policy states that ERMU shall pay 4% of <br />revenues for electric customers within the corporate boundaries of the City of Elk River. The <br />proposed change to the policy provides an additional PILOT calculation for the TTSR customers <br />that states ERMU shall pay 4% of the margin. This change is needed to ensure that ERMU <br />receives enough margin to cover administrative and regulatory costs. <br /> <br />ATTACHMENTS: <br />• Revised – Commission Policy – G2a1 - Payment in Lieu of Taxes (PILOT) and Other <br />Donations to the City of Elk River <br />97