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March 27, 2023

1/27/2023 12:34:00 PM
Water & Light not in favor of electric conditions

The North Branch City Council unanimously tabled a vote on terminating the city’s power purchase contract with SMMPA earlier this month; opting to wait and see how the five Water & Light utility commissioners would vote.  (See city council story Press Jan 12.)

The Water & Light commissioners,  meeting Jan 18,  defeated a motion to proceed on ending the SMMPA power purchase contract.  The vote was 2-3.  The item is still expected to be  taken off the table for continued discussion at the North Branch City Council meeting this week.

This power purchase contract is one of multiple actions necessary to close the deal to sell the North Branch municipal electric distribution operation to East Central Energy, a regional co-operative.  

ECE buys its power through Great River Energy, hence the need to sever the SMMPA contract.

City Administrator Renae Fry explained to the utility commissioners their action is more of a courtesy,  and that the city council actually has the final say over switching to Great River Energy as the contract-holder.

Water & Light Chair Nathan Keech described the item as a “nod of approval”  and council might weigh Water & Light’s stance when it votes and might not.  

Keech and James Baxter cast the yes votes on the contract.  The three no votes were due as much to discomfort with the entire utility sale journey, as  they were attributed to worry about what happens next.  

Water & Light Commission member and City Council member Peter Schaps said,  “...for an indefinite time the utility is still going to have to generate power”  with several diesel-powered generators under on-going electric grid Quick Start agreements.  The agreements are separate from the power purchase contract.
This is “one of the biggest decisions facing (the city) and we want to be sure we get it right,” Schaps argued.

Water & Light Commission member Phil Carlson stated he couldn’t vote yes because he felt  “misled.” 

He pointed out a few concerns:  in the outside valuation  of a justifiable ECE sale price, the rate base (estimated revenue) was reportedly assumed to be “frozen” for five years in making the calculations,  but language now calls for freezing the existing-only residential customer rates for three years.  Presumably, Carlson felt if analysts had relied on a greater revenue projection it would have impacted the sale price. He asked what happened to those other two years?

Carlson also did not feel the city’s future expenses, especially those tied to the generators which North Branch citizens must keep on-line for the grid,  have been fully vetted.

There will be costs for on-call pay for generator operators, for the replacement of a remote data gathering and monitoring system (SCADA) estimated at $300,000 approximately, plus there’s a service contract with Ziegler-Caterpillar for certain generator mechanicals.  Future roof and ventilation projects are identified...not to mention the cost to replace a generator itself runs $1 million, Carlson noted.

Schaps said the Water & Light Commission had no legal representation during the deal-making and that ECE legal counsel was the name he mostly recognized in reports and memos.  The utility never had input from a utility-versed attorney representing Water & Light’s interests, he declared.

City Administrator Fry noted this is the “first we are hearing of this” concern in a Water & Light utility meeting.  

She said, if the commission desired hiring another consultant during the last year or so, she said, somebody should have made a motion and authorized staff to retain one.

Commissioners asked  city attorney Christopher Hood, participating on the Internet for this session,  for advice on what Carlson called, “a way out.”

Hood advised that terms were approved by both the utility and by city council officially last summer. Conditions have been met and the city and utility are legally bound to close.   He added his role as city attorney was to draft documents to “effectuate” decisions.  He confirmed he wasn’t involved in talks developing this deal.

(Meantime— the Quick Start contract remains in effect with SMMPA through an independent agreement concerning peak demand needs on the midwest grid. This is where upkeep and operating of the diesel-powered generators comes in.)

Commissioner Baxter supports ending the power purchase agreement  through SMMPA, noting there is “not much the utility commission can do legally.”

Carlson disagreed and felt there are legal avenues to pursue.  “It won’t be the end of the world if we fight,” he declared.

As a side note:  Water and light commissioner positions appear to have expired.  

In response to questions from the Press about the make-up of this appointed group—the new mayor sent an e-mail after last week’s Water & Light meeting, explaining he plans to discuss Water & Light with full council, at their meeting this week.

In a special session June 30, 2020 the utility commission went from three to five members, appointed by the full city council.  The state legislature granted enabling legislation to increase the size of the commission.

Four of the five Water & Light members, except Keech, have resigned and were replaced since June 2020. The terms had a published end date of December 31, 2022— with the exception of whomever replaced Chris Bibeau,  as his term stayed in the old three-member commission rotation after he left.


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