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Elk River ^- <br />MUrilClpa.1 Ut111t1eS ~ <br />13069 Orono Parkway • PO. Box 430 ~ Phone: 763.441.2020 <br />Elk River, MN 55330-0430 Fax: 763.441.8099 <br />July 5, 2007 <br />To: Elk River Municipal Utilities Commission <br />Jerry Takle <br />Jerry Gumphrey <br />Jim Tralle <br />From: Bryan Adams <br />Subject: Power Plant Insurance <br />We maintain two different insurance policies for our power plants. They are boiler and machine <br />insurance and property insurance. The boiler and machine insurance through AIG/Hartford <br />Steam Boiler covers repair costs due to major equipment failure with very high deductibles <br />($50,000 minimum and $150,000 maximum). Our substation transformers are also covered <br />under this policy. We previously discussed self insuring the power plant generating units for <br />boiler and machine insurance and this is still under investigation. <br />The property insurance thru the League of Minnesota Cities Insurance Trust (LMCIT), covers all <br />of our properties for property damage including vehicle and equipment. Attached for your <br />review is the property insurance schedule. One issue that continues to be a problem is the <br />replacement value of the old generation equipment at our power plant. If the building was <br />destroyed and generation equipment damaged beyond repair what is its value and how would it <br />be replaced. The equipment in question is as follows. <br />2 - SSOKW Worthington Units constructed 1947 <br />1 - 3000KW Cooper Unit constructed 1961 <br />1 - SOOOKW Worthington Unit constructed 1971 <br />Replacement parts for this equipment are becoming very difficult to find. <br />The LMCIT is proposing using high speed caterpillar units as replacements for the four above <br />listed generation units and have assigned values per the attached schedule. What we are really <br />doing is fixing a maximum financial limit on this portion of the policy. These values must be <br />reviewed on an annual basis to keep them current. <br />This appears to be a reasonable approach for the property insurance portion of the generation <br />equipment. Staff recommends this approach. <br />