Members Present: Mr. Hunziker, *Mr. Jibben, **Mr. Utz, Mr. Landwehr, Ms. Parker

Absent: None

Also Present: Mr. Adkins, City Attorney


Board President Landwehr called the meeting to order at 4:03 p.m.


1. Ms. Parker moved to approve the minutes of the October 30, 2003 meeting, seconded by Mr. Hunziker. All voting "AYE"


*Mr. Jibben entered the meeting at this time.


2. Mr. Hunziker moved to approve the accounts payable report, seconded by Mr. Jibben. All voting "AYE"


3. Mr. Landwehr opened the meeting for comments from the public.


a. Ms. Gail Entrikin, 1508 28th St. SW, asked what the RPU plan was for the Minnesota Pollution Control Agency's Citizens Board. Mr. Koshire, RPU General Manager, informed her that RPU staff had just completed a conference call with MPCA to confirm RPU's presentation on December 16. He also stated that RPU did not plan to release information prior to that presentation.

b. Mr. Norm Erickson, 1303 NE 5th Avenue, made some suggestions for revising the RPU Partners Program to achieve several goals including increasing the amount of controllable load during energy demand peak periods for increased system reliability and energy cost reduction, increasing residential and small commercial participation percentages, and making the Partners Program self funding and independent of Conservation Improvement Program (CIP) dollars by making the Partners Program mandatory for new service installations. The Board took no action on these recommendations. Mr. Walters, RPU Manager of Marketing and External Services, said he would send Mr. Erickson a copy of RPU's proposal for CIP spending in 2004. Mr. Koshire stated that RPU's CIP spending plan for 2004 would also be discussed with the RPU Board.


4. The Board discussed the proposed Letter Agreement with Minnesota Municipal Power Agency (MMPA). Mr. Koshire informed the Board that the Agreement was the result of mediation between RPU and MMPA over billing correction issues and the coal inventory. Mr. Jibben announced that he would abstain from voting because the Mayo steam project was listed in the Agreement. Mr. Hunziker moved to approve the Agreement, seconded by Ms. Parker.



3 voting "Aye" (Mr. Landwehr, Ms. Parker, Mr. Hunziker)

1 Abstain (Mr. Jibben)

Motion Carried


BE IT RESOLVED by the Public Utility Board of the City of Rochester, Minnesota to approve a Letter Agreement dated November 7, 2003 with Minnesota Municipal Power Agency which memorializes:


Agreements Between the Parties Covering

Coal Inventory, Resolution of the Schechter Dokken Financial Review,

and Future Mediation/Discussions.


5. Mr. Hunziker moved that the RPU Utility Board receive and place on file the R. W. Beck study dated October 2003 entitled, "Analysis of Existing & Potential Regulatory Requirements & Emission Control Options for the Silver Lake Power Plant." Mr. Landwehr asked if there were any other comments on the study from the public. Hearing none, Mr. Koshire told Ms. Entrikin that RPU was working on an action plan which will be provided to the MPCA Board. He also said that the plan would have schedules. Ms. Parker seconded the motion. All voting "AYE"


** Mr. Utz entered the meeting at this time.


6. The preliminary budgets for 2004 were discussed and reviewed with the Board. The Board is scheduled to approve the budgets at their December 30 meeting. The Council will be asked to approve the budgets at their first meeting in January. Mr. Koshire informed the Board that staff is requesting electric and water revenue increases with the budget approval this year due to strong growth in the community and the requirements to provide electric and water infrastructure to satisfy this growth. Also driving the budget is the significant spending required for utility re-routings for the highway projects in the Rochester area.


Mr. Koshire said that the Board also needs to look at cash reserves with respect to power supply in the future. Cash reserves are also being depleted due to customer growth. Mr. Kraft, Director of Administration, stated that it costs RPU approximately $1,300 for each new customer. RPU collects $300 of that amount as a connection fee, but uses its cash reserves for the remaining amount. Also when new lots are added, feeder lines to substations are required and these are not part of our rate structure. Mr. Koshire said the Fitch Rating Agency recently said they could not raise RPU's bond rating because of the Southern Minnesota Municipal Power Agency's (SMMPA) wholesale power costs and because RPU's cash reserves were not as high as Fitch thought they should be.


Various scenarios for revenue increases were discussed with the Board. It was the consensus of the Board to notice the public that the Board would consider up to a 3% electric rate increase and up to up to a 5% water rate increase at its December 30, 2003 meeting. Ms. Parker asked for additional rate scenarios to review.


7. The General Manager provided the following report to the Board:

a. The formation of TRANSLink is on hold and probably will not occur.

b. There were not enough votes to pass the Energy Bill, so it will not be enacted this year.


8. The financials were discussed.


9. Mr. Hunziker moved to adjourn the meeting, seconded by Mr. Jibben. All voting "AYE" The meeting was adjourned at 6:20 p.m.


Approved by the Board: December 30, 2003