Members of the Granite Falls Utility Commission as well as a representative of city bond consultant, Ehlers and Associates, of Roseville, attended Monday’s city council meeting to discusss the feasibility of replacing a pair of turbines at the Granite Falls Dam. A final decision on the expenditure is expected to be made at the council’s meeting on April 2.
In February of last year, the city contracted with Barr Engineering, of Minneapolis, to perform a detailed inspection and evaluation of the dam’s two primary hydroelectric turbines as well as related equipment at a cost of $5,000. In those inspections it was determined that the pair of turbines were in imminent need of either replacement or repair, although the latter has proved to be less cost effective.
According to City Manager Bill Lavin, the Utilities Commission reviewed the report by Barr, which estimated the replacement of turbines to run $1.2 million for the set, and expressed concerns as to whether the payback on the investment would be worth it if the hydropower efficiency was not increased. The life of the units is said to be about 40 years.
The city’s power purchasing agent, Central Minnesota Municipal Power Agency (CMMPA) was asked to complete an economic feasibility study relative to repairs. This was completed and presented to the Utilities Commission on December 26 of last year.
During that presentation it was shown that the replacement of the turbines was economical except at low cost Midwest Independent System Operator (MISO) price forecasts. At MISO’s medium price forecast, the breakeven payback period was to be from 20 - 30 years, but the low forecast scenario projected a payback period to be greater than 40 years––or, more than the expected lifespan of the units.
In a letter by CMMPA Senior Engineer Shankar Karki, it was stated that a main factor causing the low MISO price scenario to be unviable was high operations and maintenance (O&M) cost projections that are based on existing O&M expenses.
As a result, CMMPA suggested that since fixed costs would remain the same, only marginal O&M expenditures should be included. In this scenario, based on a low MISO rate and low marginal O&M costs, a payback period of 30 years is projected wherein the net revenue from energy sales after 40 years would be $302,000.
If the revenue is supplemented by market capacity sales as well, however, the breakeven payback period is reduced to 23 years and the net revenue from both capacity and energy sales after 40 years becomes a projected $720,000.
Ehlers and Associates’ Senior Financial Analyst and Vice President Todd Hagen informed the city council that bond rates were still very favorable and that by adjusting the bond to be bottom heavy, it would only increase the city’s yearly debt obligation by $45,500 per year, meaning the city could possibly avoid raising electrical rates in order to pay for the turbine replacements.
Page 2 of 3 - Based on the CMMPA’s analysis, and a recommendation to move forward by the Utilities Commission, the council looks set to go ahead with the purchase. However, the city representatives stopped short of voting on the subject in order to inquire into the costs of replacing its existing Supervisory Control and Data Acquisition (SCADA) Systems. The current SCADA system utilized by the city has become obsolete after recent upgrades made to software utilized by city hall. It is important because it collects data needed from various substations, the diesel generating plant and hydro plant.
Hagen’s time in front of the city council was split between discussing the turbine financing as well as the proposed utility and street improvement projects, for which the city council held public hearings at the previous council meeting.
During the hearing there was a small degree of opposition expressed toward storm sewer work in the industrial park, which according to Lavin was supplemented by additional opposition that, after conversations with affected parties, has led to the council dropping a component of the improvements.
In order to meet statutory requirements, this required that council also postpone a water main looping project.
Changes to the utility project eliminates the portion of the industrial park storm sewer project north of Winter Drive, while the 9th Street watermain loop project is expected to be included in a future project.
Total costs of the utility projects was reduced from $585,000 to $405,000, with $109,500 of the project being assessed to impacted property owners.
A vote by the council to change the city’s existing assesment policy allowed for this particular cost split. Council members voted unanimously to change storm sewer project assesment rates for commercial and industrial as well as governmental properties from 90 percent to 60 percent of the total cost.
Again, Hagen said that the bond market remained very favorable and that the city should expect incur approximately $20,000 in additional yearly debt obligation, which would be offset to a degree by assessments.
The council moved ahead and called for plans and specs that will allow it to call for project bids.
In other news:
•Property owner Ted Thull addressed the council and requested that the city consider different options for contacting property owners regarding possible violations of city ordinances in reagrd to the clean up of property.
Thull was cited for refuse on his property, which was later thrown out in court.
Thull said that he did not receive letters mailed to the property in a timely manner as it is not his primary residence and at times he might go significant lengths of time without checking his mail.
Page 3 of 3 - The city pushed back and asserted that other ways of reaching out to property owners would potentially be expensive and overly arduous––and if the property had been maintained in the first place there wouldn’t be an issue. Plus, it was said that it is his responsibility to check his mailbox in a timely manner.
Thull said he had no ill will toward the city and just wanted to bring up the matter so that another individual did not have to experience the inconveniences and expenses that the citation caused him.
He suggested that if he had been alerted to the issue a bit sooner he could have addressed the property complaints before it became a more cumbersome issue.
•Council renewed a dog kennel lease agreement with Nancy Aus. Originally Aus was paid $40 per month, plus a daily charge of $12 per day for dogs or cats, and $15 a day or rabid animal holds. Changes made to agreement increased the monthly rate paid to the kennel owner to $50 and the daily charge to store animals to $15, regardless of rabies.
•Council members approved the renewal of city building inspector Darin Haslip’s contract at rates unchanged since the original contract he entered into in 2007. The amount earned varies depending on the nature and amount of work performed for the city.