Good afternoon.

It's four o'clock, and we will call this meeting of the Rochester Public Utilities Board to order.

A quick reminder as we uh get going.

This meeting is recorded.

A recording will be available on the city's website.

And the first item of business on the agenda today is the approval of the agenda.

There will be one change to the order of the informational items, item 6B, the Cascade Creek Gas Turbine 1 recovery.

It'll be taken up before item 6A.

Tim, do you want to speak a little bit to the adjustment?

We just have a fifth and sixth grade band concert tonight that we'd like to let somebody get to.

So if you don't mind, we'll do that agenda item first.

I'll move approval with the minor adjustment.

Perfect.

We have a motion and a second.

Second.

Moved and approved.

Any discussion?

If not, all in favor, say aye.

Aye.

Aye.

Any opposed.

The agenda is approved.

Next, we have our safety moment with director of power resources, Mr.

Bill Bullock.

Good afternoon.

Now May is when construction really gets uh geared up, and we do have a lot of construction projects in the work here.

So there's the Cascade Creek GT1 recovery that Tony will be uh giving more detail on later.

There's the Mount Simon peaking plant.

There is there are two batteries, one at the Zumbro Station and one here at the service center.

And then we have uh communications integrations with our uh wind PPAs that we're setting up in Adams and Dog Center and eventually in Howard County.

Um so in addition to these projects, we also have the normal power delivery and and water operations uh crews that are engaged in uh ongoing seasonal improvements.

Um with this level of activity, our primary safety focus is managing risks across the entire portfolio, um, and key areas of uh continuous mitigation include um you know ensuring heavy equipment operations and contractor coordination is done on a regular basis, excavation and uh underground utility hazards are identified, um, energized electrical work and a lockout tag out procedures are followed.

Um, all of our new construction projects will be on the site of uh of existing active um power generation facilities.

So it'll be important to do those log log lockout tag out procedures.

Um then there's also weather related risks, um, including heat stress and unstable ground conditions.

Um and then having the proper uh protective uh personal equipment is is very important.

Um we mitigate that also with daily job briefings, doing hazard assessments, um, giving every um team member stop work authority if they see something unsafe happening.

Um strong communications are essential to um to keeping safety in in work zones.

Um for our board members and the public, um uh there are also some simple and important ways to uh support safety uh during this busy construction season and when you're visiting some of these construction sites.

Um slow down and stay alert in work zones.

Um the construction cones seem to bloom like flowers this time of year.

Um follow all the posted uh traffic control and detour signs.

Uh avoid distractions on your mobile devices, especially when driving near near crews.

Um give utility and construction workers extra space um when driving uh by barricades.

Um and then, of course, report any unsafe uh conditions that you might see.

Um safety is a shared responsibility, and community awareness plays an important role in protecting uh workers and the public alike.

And you'll say no project milestone is more important than um protecting people.

So safety is always very important.

Thank you.

Thank you so much, Bill.

Good reminders.

Appreciate that.

The next up uh is our consent agenda.

Uh this is item number three, and it's items 3A through 3E.

And very quickly, these are minutes from the April 28th meeting, review of accounts payable, the annual Cayenne software maintenance, uh collective bargaining agreement 26 through 28 with uh the IBEW inside group, capital expenditures for the Ponderosa Pines Booster Station improvements.

Do I have a motion to approve the consent agenda as presented?

I I moved to approve the consent agenda as you presented it.

Second.

Thank you.

Motion and a second, any further discussion.

If I might, I just wanted to highlight item 3E there on the consent agenda.

This connects back to a rejection of bids that the board supported back in December of 2025.

If you recall, the initial bids came in high for this project, and we have worked on a path to self-perform and design to build this pumping station ourselves.

We believe this is feasible within the budget.

And so this is an appropriation for the board to authorize us to move forward and self-perform on this project internally.

And just to clarify, I believe this project is in the capital expenditure budget, and it is also supported by the um the development of the new hoses for about 25% of the project.

Exactly right.

104,000 was collected from uh the most recent development, and then RP was funding the balance.

And this is representative of the budgeted amount to allow us to self-perform on this project.

We've started ordering materials within delegated authority, but to complete the project.

We wanted board authorization.

So just wanted to give some context on this consent item.

No, I'm glad to be able to support this today.

Any other discussion?

If not, um, all in favor of approving the consent agenda, items 3A through 3E.

Please signify by saying aye.

Aye.

Aye.

Aye.

Any opposed?

The consent agenda is approved.

Next, we move to the open public comment period of our meeting.

Uh total comment period is limited to 20 minutes.

Each person will have two minutes to speak, and any speakers not having the opportunity to be heard tonight will be the first to present at the next board meeting.

Is there anyone signed up for open public comment?

There isn't anyone signed up.

Thank you so much.

The next item on the agenda is item number four, consideration of bids.

This is item 4A, which is an award of bid for the 2026 lead service line replacement project.

And this item will be presented by assistant general manager of operations, Mr.

Todd Blomstrom.

To um introduce uh agenda item 4A.

This will be the second year of the construction process for our lead service line replacement program.

So I have some information to share on the general status of the program itself.

Get to the right slide here, and um then talk about both the project location, the funding source, and sort of how we structured the bids this year.

It's a little bit um uh unique based on our funding sources.

So um one thing that we have accomplished uh at a staff level is we've developed a dashboard, and this really helps us to track uh where we're at in terms of lead count and unknown, and it's updated regularly.

Um, and the current status as of the printing of our agenda last week.

We had 228 lead services that represents about half of 1% of our of all our water services, galvanized services, 226, again, about half of 1%.

Unknown services, so these are the services for which we know where they're located, um, but historical records just do not indicate what type of material was used when they were initially installed.

Uh, those are about 1900 or 4.4% of all of our services and the remaining services uh of about 40,786 uh or almost 95% are have been confirmed as non-led and non-galvanized services.

So that uh gives a general overview.

Um, if you are particularly in tune with how many total services we have, you might see a little bit of an odd math equation there.

That is because we're required to track unknown services both on the house side and street sides separately.

Uh, those represent about 1,300 properties.

So when you do that adjustment, uh we come out to about 40, a little over 42,000 services, where it is where we should be.

One of the biggest changes from last year.

So if we were looking at this table last year, um you would see 2500 unknown services.

Uh so we have invested a lot of staff time over the last year to dig through uh old plumbing records and service records and as built to verify about 600 services.

Most of those were determined to be non-LED.

So we made great progress on that.

We continue to test for lead as we're required to through the Federal Safe Drinking Water Act.

And we remain in compliance with the action level of 15 parts per billion.

So we're in good shape there.

We also feed a polyorthophosphate into our water supply system for a big part of that is corrosion protection and corrosion control to limit any lead that may be leaching from those lead services that we do have in our system.

And new for this year is the state and federal level.

We are being much more closely monitored and mandated to remain within certain thresholds of our feed rate.

Essentially, the state and EPA want to ensure that systems that are feeding corrosion protection for lead are doing it wisely and maintaining good feed rates, and we are in compliance with that.

And then the last thing I'll mention, we got a late start last year because we were trying to get this program lifted off and get a contract led.

We were successful.

This board led a contract in September last year, which is late to start construction.

The contractor made good progress and they are scheduled to wrap up that project here next month.

I pulled up the dashboard just before coming in here.

And the 228 lead services have dropped to 223 lead services, and we've completed one galvanized service.

So those numbers just drop by the week, and there's a few more to go, and we'll transition right in from last year's project.

If you award this contract into an extension with a new contract this year.

So things are going well as we get the project underway or the program underway.

So in terms of funding, uh we received a grant for 1,450,000.

That comes from the public facilities authority.

It's under the same general grant agreement that this board approved last year.

There are a number of expenses involved with the program.

There's planning and there's design, uh, engineering, uh, contract documents, construction administration, there's post-installation lead testing that we have to do.

All that being said, we have an allocation of 1,060,000 for construction work for this construction contract through that grant.

Um the numbers uh are below.

Uh we had uh three bids, which are good.

Uh it's it's difficult to get contractors to bid on this work, um, but we structured it in a way that we could maximize every dollar of the grant.

We don't want to leave any money on the table.

We want to put all of that to good use and replacing lead and galvanized services in the system.

But at the same time, we also have to bid a project where we know we can get a bid that'll come in under the grant amounts so that we don't have to reject bids and start over.

Um, and so we structured it with a base bid of 33 lead services.

We knew that we could get bids under the grant amount, uh, and we were successful at 674,000.

But we also included an alternate bid, and that is to scale the project up if money is allowed, if uh the funding allows.

So that alternate bid included another 40 uh lead service replacements and 87 unknown services.

So these are service investigations for which we cannot determine even reviewing records, and we actually have to excavate and visually verify the material.

Um that added another 972,000 for a total of one on 1,676,730, which is over the 1,060,000 that we have for a grant.

But the way we structured it is that it is a unit price contract.

So we're able to award on the base bid and then scale it right up to uh the money that we have available on the grant.

Um, and so that that I think is the ideal way that we can maximize use of the grant um and and conduct a competitive public bidding process here, and it's it was successful.

Got a good start.

Um, we're early in the construction season this year, and um, we had good competitive bids, and the average price for replacement this year is a little over 18% less than last year.

So it's also been very uh economical for us too.

The project area that you can see on the map, uh, just to the east of the Zumborough River and Broadway, to the west of 18th Avenue Northeast, north of 4th Street, southeast, and south of 14th Street Northeast.

It is really trying to clear out that whole purple area.

Um, seems like an odd shape for a project, but we work through census blocks as you recall.

We prioritize these based on census data.

So this is the census block that we're focused on this year and trying to clear out all of the services in that census block.

It also includes a few lead services along East Center Street, which the city council awarded that contract.

Um and so we are also clearing those lead services uh as part of that project too.

So good results, competitive bids uh and it's structured in a way uh, like I said, we can maximize the grant funding that's available.

So the action that we're requesting tonight uh is to approve the resolution that's within your packets to award a bid uh to A1 excavating in the amount of 674,196, that is the base bid uh for the 26 lead service line replacement project, but also to authorize the project manager to direct additional work up to 385,804 in project contingency, which seems like a large amount in proportion to the base bid, but then that allows us to scale up the construction contract all the way up to the 1,060,000.

So with that, I'm happy to answer any questions that you may have.

Sure.

Could um if you guys don't mind, could I get a motion and a second uh to approve item four as presented before moving to discussion?

I'll make a motion to move.

Thank you.

Second.

Moved and seconded.

Any discussion?

Councilmember Keene.

I just a couple of questions.

First, um, I I might have been reading it wrong, but you we went from 2500 to unknowns to 1900.

So we moved 600 off the books.

I made the mistake of looking at your other numbers and saying 200 of those were led, but it's a much, much lower ratio that we're finding of the unknowns.

The the unknowns almost uh a vast majority of them become on uh non-led.

Yeah, they become non-led service.

It's is that serendipity in a certain area of town, or do you think that's going to continue with the 1900?

Uh I think it'll be variable as we get into the older parts of downtown.

It we might see a higher uh lead determination in there, but as we kind of working around the outer perimeter slightly newer homes, they tend to be much less likely to be lead services.

Okay, that's good to hear.

I I I appreciate what we're doing today.

I like the way we structured this, but I am still a little like trying to do the first year, second year.

I'm looking at the number like the 254, that's sort of our target.

We're talking about attacking 30 of them.

So we're in that, you know, 7, 8% of what we have.

I don't know exact numbers from 2025, but the I as you we've updated us before, we're not getting the funding we thought we might when we were first getting involved in this.

But do you think we're on a range towards attacking, I'm gonna make this up 20% of our services?

And at the end of our funding, will our 1900 be down to all known?

Or are we really taking the idea of like we have 200 that we really should spend our money on getting rid of those as opposed to improving the unknowns?

That is an excellent question and some internal discussions that we've had here this week.

Um, we do have a project meeting with A1 contracting uh tomorrow and to work through what is the strategy of of how we scale this up.

I'm just gonna jump to the next screen.

We could add uh we could use that extra 300,000 and invest it purely in lead replacement lines.

Um there is some advantage of eliminating unknowns because if we don't get through all of it this year, every unknown that we determine in this zone, we have more clarity in what we bid next year.

And so I think it's probably going to be a combination of the two uh as we work through the details.

Yeah.

Okay.

Good.

And I appreciate you mentioning the Center Street project, and that we're kind of working that's street replacement.

We already had that.

So it should help, although I cringe about thinking of commingling the different money.

Yes.

Uh so the on the house side, this is where it does get interesting.

There are contractors on city projects that are happy to replace lead services in the right of way as part of the street project.

Right.

They are typically far less comfortable going out into private property because there's not easements and it's it's um if you have state and federal funding, there's extra requirements about working outside public right-of-way or easements.

So this contractor would come in and do the house side replacements on east center street, and then the actual street contractor would do the replacements in the right-of-way.

So we're still paying the full freight of the cost through the um through the grant.

We're not getting a benefit from it, the street being torn up at the same time.

Oh, we are.

Okay, so it is that's what I was hoping for.

There is an economy of scale there that we enjoy, yes.

All right, good.

Yeah, I appreciate again.

I went through this stuff in advance, and um like Luke talking about how he goes through the different uh the dollar amounts, but um I still am trying to come away with the idea that by when this is done, we're going to know what we have left, and it's going to be documented, or we're just it's like normal utility work, we're just chipping away at what we can, and there's still work left to do.

Yeah, my hope is that we would get 50 services replaced this year under the contract.

And and as you see those numbers, you start to drop below 200, you get to fraction of a percentage, 0.4%.

Yep.

And we just keep wearing away at those numbers.

Um, and doing everything we can on the office side to eliminate as many unknowns.

It is so far cheaper to eliminate unknowns based on an office review than doing an excavation in a free.

So I'm hopefully to come we can come back next year and maybe we'll be below 200 on the lead and galvanized and maybe below 1500 at this time next year.

It's my goal.

Very good.

Appreciate it.

Thank you.

I could add just a little context to that as well.

One of the things that concerns me is all of this is private infrastructure, even the street side of the water service line.

Our customers own all the way up to the water main.

And so this is grant funded from federal and state sources.

Um, there's a requirement at the federal level to replace all of these services within 10 years, but that's all private infrastructure.

So as much as we can get done with grant funding is great because at some point in the future, if the regulations at the federal level hold, this could become a future liability for our customers or the utility as well, depending on how that the federal guidance is interpreted and how it's enforced.

So strike while the iron is hot, is what we're trying to do here and leverage it.

The state put up 15 more million dollars in the bonding bill.

That is uh a drop in the literal bucket compared to the liability that's out there as well.

So that's I was just gonna ask that question.

What is it?

What have you heard for the state and how much they're gonna put towards this next year?

Yeah, I I mean the the estimate is two billion statewide.

So 15 million is a nice little issue.

But I mean, every every part is appreciated, but we keeping it and then when it's that limited, are they gonna start looking at?

I mean, how are they gonna pick who who to give to?

I mean, is they are they looking at tightening that up more as well?

Have you heard?

Well, and I think they took drastic action last year.

So this was almost an open foot race, so to speak.

That first come, first serve, you apply, you take it, you get as much grant money as you can and deliver as many services, and they realize that's overcame the whole program financially.

And so they are metered in a way that I would say that probably on a pace to at least sustain five years, but after that, new federal funding, new state funding is going to be required, or there they will run out of funding at PFA.

Thanks.

If I could make one more note, I stand here and present this stuff, but Luke Ping back there uh does a lot of the work to keep this program running.

So we appreciate his help.

Any other questions or comments?

Hearing none, all in favor of approving the resolution on uh board packet page 62.

Please signify by saying aye.

Aye.

Aye.

Aye.

Any opposed item 4A is approved.

Next on the regular agenda, uh, we have item 5A, which is the election of officers.

This is for the election of board president, vice president, and the appointment of the board secretary.

Myself and vice president Wendy Turry recommend the appointment of myself, Malachi McNeilis as board president and Wendy Turi as vice president, and Aaron Henry Loftus as board secretary.

May I have a motion to approve these appointments?

I would make a motion for that slate of officers.

Thank you.

We have a motion.

Do we have a second?

I'll second any discussion or hard questions.

It is difficult with a small five-person board to do this, and I really appreciate the leadership we've had.

So um I'm glad you're able to uh step up for another year.

Thank you.

Any comments or questions?

I'm mostly just grateful.

Thank you.

Thank you.

All in favor of board president McNeilis, board vice president Tory, and board secretary Henry Loftus.

Please signify by saying aye.

Aye.

Aye.

Any opposed.

Item 5A is approved.

Next, we'll move to the informational section of our meeting.

First item is 6B, the Cascade Creek Gas Turbine One Recovery, which will be presented by manager of power resources, Mr.

Zube.

This is an exciting update.

So thank you.

And I appreciate you moving me up in the agenda today.

I've got to get my to my daughter's band concert.

They mastered the two-note Jaws theme in the fall.

So I'm expecting Tchaikovsky tonight.

So I'm here to talk a little bit about the gas uh gas turbine number one Cascade Creek recovery.

I stood in front of the board last August, I believe, and uh was given funding to start the recovery.

I'm sorry, the um uh discovery phase of this project.

And I got a few slides to kind of talk about that.

So just a quick uh refresher.

Uh we had a fire out on June 1st last year, and that damaged a lot of the equipment inside the turbine enclosure.

So any any piping uh motors, fans, uh uh wiring, all that was was really uh damaged to uh point where it cannot be repaired.

Uh one of the goals of this discovery phase was to see if we could uh repair the equipment.

So is there anything there that would prevent us from uh moving forward with the repair phase?

So the board gave a uh staff two million dollars to do this recovery or to do this discovery, and that's kind of what this busy slide shows.

The dashboards, I know you've seen these before.

Um, but this talks a little bit about uh what we've done so far.

You can see we spent about 1.7 million of the two during this uh discovery phase to figure out what the next step is.

Um we have a few things left to do.

Um, you can see unit inspection there is about 90% and recovery plan is about 75.

So I'll talk a little bit more about that in future slides.

So what have we done so far?

Uh we had some environmental cleanup, we had a little bit of oil spill.

So any soils out there at Cascade Creek, you have to dig up, dispose of properly and replace with clean clean soil.

Uh inside the turbine enclosure, you've got soot, you've got burned and damaged equipment.

So to be able to actually inspect the machine, uh walk around without getting all dirty.

Um, you have to get some of that stuff out of there.

That was done last fall.

We brought the OEM or the original equipment manufacturer in uh to do a disassembly of the unit that started in December.

Uh we were hoping to get it all done in 2025, uh, but we were unable to.

Uh when you have a fire like this on a unit, things don't come apart as easily.

Things are not where you thought they would be.

It's very cold in December.

Um, all the people we had up that came and did this were from the south.

They did a fantastic job, uh, but it's just a different environment for them.

So that slowed us down a little bit.

Uh, we got most of the stuff, um, most of the equipment disassembled, uh, except for the major portions in December.

And we brought them back, the same company back in February to finish the job.

And they did get the turbine, the generator, the starting package, and the exciter all disassembled.

The roof was removed, uh, major equipment was was uh removed, and I do have some pictures of that uh in the future.

Um no major component damage has been found yet.

So there is obviously damage, but nothing that would stop the recovery pro phase of the project, which would be phase two.

So we do still have the generator inspection.

It's actually happening this week.

Um we've got a different company out at SLP today.

They're looking at some um equipment.

I'll tell you why I said SLP in a minute, too.

Uh, but they're looking at that generator to clean it, uh inspect it, and then give us a report to say is can the generator be put back in service.

Again, we don't see anything yet that would stop this process.

Uh, we are kind of unfortunately waiting for final reports from the December-February disassembly.

Uh, we were hoping to have those by now, uh, but we should have them very soon.

Um, we are holding back a little bit of money with that company to make sure we get those.

So we should have them shortly.

That's kind of the last step that and the generator inspection will be the last step of the discovery phase.

Then we can determine if we move on.

Uh we hired an engineering firm to give us a budgetary budgetary estimate and timeline for the uh return to service phase.

And this company, they this is kind of what they do.

They take a generation asset and move it from one state to another, one country to another, whether it's just someone else bought it or if it's been damaged, that's what they specialize in.

We asked them to give us a high level lead time and budgetary estimate.

They gave that to us about a month or two months ago of around 10 million.

None of that is finalized yet.

They still have some inspections to do.

Like I said, the generator still needs to be looked at, but that's a ballpark of where we're at.

So and that that fits kind of what we were expecting moving forward.

Pictures, always the fun part.

Maybe not in this situation, but still fun.

You can see some structure damage.

So this is from the roof.

Well, the roof is gone of the turbine enclosure, but I'm taking the picture right next to it.

And on the right is the turbine casing, and then on the left, you can kind of see the bowed uh wall panels and uh on the on the top and the bottom.

You can see how it kind of bows in there.

That needs to be removed and replaced.

So that's one of the things that still needs to be done, which we would uh hopefully get approved soon and move forward with that project.

On the very top, uh where that the top ladder rung is, you can see there's some perforated metal behind there.

That's all around the entire enclosure for heat insulation and sound attenuation.

That'll need to be removed and replaced.

Uh remover of the removal of the generator field or the generator rotor.

So that large piece of equipment that's kind of popping out of the picture there, that is the field or the rotor.

It's about 27 feet long, 33,000 pounds.

And to remove that, it's a really neat process, uh, but it's very precise.

Uh they have about an inch of clearance around the outside to get that thing out of there.

You can't move it up and down or side to side, or you're gonna wreck something.

So they have a uh very talented crew on site that does this.

They have a crane that you can't see right now that would be hooked to one end, and then looking on the other end, this is taking about the same time.

This is the other end of that rotor, and that sits on a bearing shoe or a removal shoe, which is a little piece of wood, you can kind of see it there underneath.

That supports one side while the crane supports the other side, and they slide the whole thing out, making sure it doesn't go up and down or side to side.

They put a metal plate in there and a bunch of slippery goo on there, so it slides right out.

Um, and then they have a chainfall there to control the removal of it.

So it's about a six-hour process to do this.

Once you start, you can't stop.

You have to finish it.

You can't let it sit there overnight.

So we got this out about maybe six o'clock at night, and then we put it onto a trailer and brought it to SLP.

Uh, we have a large storage facility, the coal garage, we call it out at SLP.

It's uh weather controlled, it's got big heaters in it.

Uh, so when we are testing this, which the generator testing company is doing today, uh, they go out there and they test this.

It has to be clean, it has to be dry, so that their electrical tests uh are successful, or at least uh accurate.

So it may not look as big, but that's a 52-foot trailer at least.

So there's your your generator field and your exciter package.

Uh on to the turbine.

So we're starting to remove the uh large metal casing pieces on top of the turbine.

There's about five or six pieces on there, all very heavy, tons a piece.

And you can see the first ones removed, and there are the uh compressor blades there, the beginning of the compressor section, which is the air inlet to the turbine, and then they just keep going down the line and removing and removing and removing until the entire turbine is exposed.

Now you've got the turbine sitting in the lower half of the of the um enclosure or the casing.

That gray beam there, I believe we've had that since 1974 when we bought the unit.

When we always put it somewhere, don't ever get rid of it.

So we used it, they hook a crane up to it, and then uh this is a very kind of a tense moment.

Everyone, they have a really neat toolbox chat beforehand.

Everyone has ability, like Bill said has ability to stop the work at any time if you see something that isn't uh right.

So it again it can't move axially, it can't move up and down.

Um, otherwise those blades will scrape on veins and and seals and wreck something.

So this is about a about a four-hour process, and we had to repick it three times, which is fine.

You go up and something's not quite right, set it back down, start over.

We don't want to wreck anything.

Crew did a great job.

The person on the right, um, he was a a uh he was who removed the turbine in 21 and reinstalled it in 22.

He was the foreman for that project.

RPU brought him back as a customer rep.

He's done this thousands of times.

We've done it twice or three times.

So we brought him back to kind of oversee this company and say, are they doing the right thing?

Are they doing what they have to do for the contract?

Um, they're really representing RPU as an expert in the field.

So he was uh very useful.

Once the turbine's removed, you can see other stuff.

One of those is the bearings.

Uh the bearing may not look this is the bearing right here.

It's hard to see.

It's actually in good shape.

We weren't sure what it would look like uh when we took it apart.

Uh, there's some scrapes on there, but that's somewhat normal normal bearing wear.

Uh, but we think we can reuse bearings uh up above that a little bit towards the top of the picture.

You can see some uh charring up there.

That's probably some liquid fuel or lube oil uh that uh was burned during the um during the fire.

But again, no major equipment damage.

And my last slide is the turbine being put onto the stand.

So that is the turbine spindle.

Uh it's set on the stand, and then we hired a party tent um group in town to put a tent over it.

No parties, but you got a turbine spindle in there.

Uh, but you gotta keep any weather off of it off of it from you that you can.

In the back, you can see we got a 30 by 60 uh foot tent back there.

That's where all the rest of the parts are.

Keep all the weather off and keep people from running a forklift into it or some issues.

So what do we have next?

I talked a little bit about the generator inspection or cleaning inspection.

We'll get a report soon.

That'll give us the condition of it.

Uh, we hope to receive the final inspections for the disassembly from the OEM shortly.

Uh, we'll get a final, we'll get a full engineering scope and budget uh soon.

Um, and I expect to come back.

My hope is to come back next month in June and ask for uh board approval for the entire recovery project.

So once we get all these things back, get some little bit better uh estimates on things, um, then I'm hoping we can get that project approved.

Our goal is to get it back by summer season, summer run season next year in 27.

Uh anything before that would be great, but uh before June of 27 is our kind of our drop dead goal.

And with that, I'd entertain any questions.

Perfect.

Any questions or comments?

Councilmember Keene.

Yeah, yeah, I appreciate uh seeing this.

I'm sitting here as a board member with two different things.

There's the idea of we have an asset that was in a fire and we're trying to see if we can recover it, but I'm also looking at it from the our our our uh production capacity in the future.

The problem I'm having is this is a 30, 40-year-old piece of equipment.

Yeah, yeah, 50 year old, and I'm comparing it to prices of buying new capacity.

And I don't think I should be doing that.

So the the repair of this is less expensive than buying a new unit, right?

Um, and uh much quicker.

So those are kind of two of the main things to not go down the demo it and put a new unit in there.

I don't know if I can speak to capacity prices, um, but getting this back two years before um a new unit or a brand new unit in there has a huge impact in capacity.

I want to say it's around three million dollars a year, give or take to have this not in the market for capacity.

So that's kind of a measuring stick we use to say, should we repair it or should we have a new one?

New units would be a little more efficient, really not a lot, uh, but it would be more efficient, but it would might be three to four years out.

Um but when I'm getting it back into that capacity that this utility owns, is it reasonable that someone's gonna look back five years from now saying, like, well, it's 55 years old, six years old now.

We can't keep running this.

Or how does that what can I do the age thing on it and just be comparing it to full replacement cost?

Because it feels like I should have a more complicated algorithm.

I'll take a shot at that one, Tony.

We look back today on the decisions to build West Side and think very favorably about investing in West Side to build that station.

And in hindsight, we should have built three of them instead of one.

And I believe that we will look back on this decision in five years with an even tighter capacity market in the 29 or 30 time frame and look back very favorably on the recovery option here for both the cost and the timeline that Tony described, getting this capacity back in our portfolio will be a very good thing financially to retain our capacity credits there.

So I it's my professional belief that this is the right pathway to go for a recovery here, even if it is a short-term capacity, just to span us into the early 2030s that we can look at replacement of this asset into the future as well, especially when we have the option that we're trying to leverage of an insurance recovery on the replace the repair of this unit as well.

So I think for our ratepayer sake, it makes a lot of sense.

I appreciate that.

But just before just to what is the capacity here we're talking about?

Is this a this can generate about 35 megawatts?

Okay.

So this is and it is it is that or it's it's very it's very uh binary that way.

That's when it runs it's this, but this would probably get dispatched less into the marketplace because of the efficiency of the older equipment, or just as often.

It gets dispatched less because of the inefficient or the less efficient than our newer units, but just having it available for it gives us our capacity every day of the year, as long as we're available.

So this is the quickest path to get it back.

And like Tim said, it's more self-control of now.

We can choose when to get rid of this unit instead of it's dropped on our lap, and now we have to start a new project.

Yeah, I know I really appreciate this.

And I and the idea of doing the update in May, informational, I really appreciate that too, because it gives us early eyes to what's gonna be coming up.

Um, but I guess I am I would like some insight into the idea that uh a refurbished um lower use piece of equipment like this is reasonably extending 20 years or something.

I'm made up that number.

But um I I have I am trying to, you know, like look out 10 years from now and saying like it wasn't that expensive, but we still have it.

It's it's a risk that we're running.

We really need to address that.

And did we spend our money wisely?

And and I really do think we are, because I still have the side of this as the fire, and we're trying to react to that as opposed to building capacity for the future.

And those are in my view, two different things, but it's the same project.

Can I just add to that?

Yeah, um, you you brought up the age.

In my experience, these turbines like this.

You rebuild them every so often.

And they are like new.

I mean, in my mind, they're almost like new once you rebuild them.

So there are turbines out there much older than this one that have that are still um very reliable for many years to come.

So that's just Tony.

Correct me if I'm wrong, but no, you're right.

This is done, it's almost like a we're getting it back to new again.

Yeah, I mean, the overhaul uh is is as bad as this buyer is as bad as it was the incident.

The turbine's still good.

I mean, we've still got an overhauled turbine to Brett's point.

We've got a lot of this has gone through most of the major components are going to be good.

Now we're gonna get a new control system instead of a in a you know, we upgrade it in 2001.

You know, how quickly do computers go out of date?

You know, we're gonna have a brand new control system.

We're gonna have new field equipment, we're gonna have new motors and new wiring.

Um, we'll have almost a brand new new commissioned unit.

Uh I I think the reliability, when the re liability is going to go up.

Um, efficiency isn't going to change much, but again, this unit, I believe, really impacts capacity more so than operating for margin.

No, that's that's helpful.

And I and I I was looking for that sort of thing that a renovation is like adding 20 years to it as opposed to uh, you know, it's not like just taking a 50-year-old piece of equipment and helping it limp along, like doing like some cars you try to keep putting money into them, but there's always things going wrong.

So and the the company that we had give us a budgetary estimate.

Um, they've actually done a couple of 250 ones, same as GT1.

And to your point, Brett, they've done some older than that fairly recently.

I forget the frame unit it is or the model number, but it's older than ours.

There's an entire market happening right now on refurbishing and extending the life of turbines of this vintage that are out there because the supply chains for ordering new or replacement capacity are so tight and out so far.

We're not unique in trying to retain an asset of this caliber and this vintage.

I I talked like we might consider this in five years looking at a replacement, but we have a viable asset here.

It's very much uh a possibility that we would look at putting something next to it and not replacing this per se, retain the capacity that we have, very low hours runs as available capacity.

It's a great value during outage type events or winter storm fern events when we have local generating capacity here.

These are valuable things for us to have for local resiliency as well.

So I I do think that we will look back favorably on this decision in the future.

Thank you.

Thank you.

Good discussion.

Any other questions or comments?

Otherwise, thank you.

Thank you.

Okay.

And next we'll move to informational item 6A, the 2027 budget assumptions, which will be presented by general manager of administration, Peter Hogan.

Hi, Peter.

That's going to be a hard act to follow follow.

I don't have any of those cool pictures or anything like that to talk about.

Um, but I do get to incorporate what Tony just told you into the um the budget uh projection uh or budget assumptions for the upcoming uh 2027 uh budget update.

So uh I think I've said this a number of times over over the years that any time you look at a budget, the first thing you want to look at is the assumptions because everything else just goes from that.

And if you've got concerns, again, first place to go is to the assumptions to have a look at that.

So with that in mind, that's where we're starting here today.

And somebody already got me an order.

Thank you.

Uh so uh the summary that is up on the screen at present is what the budget assumptions were in 2025 when we were doing the 26 and 27 budget.

So uh a number of these uh changing a little bit.

Uh I did go in and adjust the uh labor inflation ones because we've got a couple of union contracts updated, so we've able to do that.

We do expect our number of uh service points.

If you look in there, we've got um essentially uh just under 1% on water and just under 2% on electric.

So we are seeing, and you've we've come to the board a number of times with um you know requests for additional investments uh for the uh so we're looking at a rate of growth of some of the new uh services there.

So we're expecting that number is going to go up a little bit.

Uh the other part down the very bottom there, which I think is something you always like to hear, is uh we're not planning any change in the already approved rate uh that were approved for two years last year.

Uh and so there are a number of changes that uh we're going to have to incorporate, but the plan is to make sure that we uh stay within the already approved budget from a rate standpoint.

So with that, I can touch a little bit on the electric capital.

And uh the I started with the the positive one at the top, which uh Tony was informing us of is if you look at the the uh Cascade Creek, a reduction in the expected uh borrowing by about 50 million dollars in capital investment uh for that.

So we had 60 million dollars in the budget uh in the 27 approved budget for uh is over a number of years, but on the capital side for a potential replacement of uh Cascade Creek.

Um the second part there uh is Mount Simon.

We're still watching a number of variables, and I'll touch on this a little bit and on the uh subsequent screen too.

But um we're looking at the balance of plant on that one, also coming in potentially uh less than what we had uh budgeted.

So uh if you're if you're doing the math there, we had 241 million in our budget for uh capital in uh January of 2027.

Uh when you take about 100 million off of that, that's going to have a significant impact on interest costs and uh carrying costs over the and the life of those those bonds.

So those will be incorporated.

That that was the good news.

So then we can move on to the other ones here.

Uh we're seeing um, you know, we uh adopted the enterprise uh resource uh software uh last year in uh December.

That's adding about 3.5 million to our um implementation costs here over 26 and 27.

Uh the uh the next one there is really a dollar neutral one, but it is going to show up.

Um we uh came to the board and used some of the funds that were approved on the uh Mount Simon project, uh roughly about uh it's going to end up being about 2.6, 2.7 million dollars.

Um those funds are going to be uh re or recovered through a state grant and also through uh tax credits, basically.

So uh in the 27 budget, we're going to recommend uh putting that money back into the Mount Simon project that we can kind of repurposed uh to be able to take advantage of the grants that were out there.

So it's essentially a dollar neutral.

Uh the uh the last couple of the uh both are uh additional projects that weren't in the original budget.

And then the last one uh we came to the board, I believe was last month, uh, talking about the additional uh new services, transformer costs, and I fully expect that uh when I get those numbers from the operating divisions this for the 27 update that similar numbers are going to show up in the in the budget there as well.

Oh, jumped too many there.

Uh on the water side, um a little bit of a um a similar story.

Uh I guess I'm jumping ahead here.

So the ERP uh project has not been in um it's essentially being uh done by the electric utility at present.

There will be a charge that needs for the proportionate share that uh needs to be charged the water utility.

So that will be incorporated in 27 update.

Uh we also had um talked a little bit last month about uh all this additional capital that's needed in the water utility in particular, and we're going to be looking at doing some short-term borrowing in the six to ten million dollar range.

So uh that's going to obviously put some additional uh price um or rate pressure on the uh water utility.

And a couple of the projects below the uh the oversizing Kalma Township booster and the country club road uh projects are some of the projects that we talked about last week or last month uh in the uh reimbursement resolution, and we'll be coming back to the board with uh uh more requests on that here in the next uh month or so as well.

On the operating side, there we've had some interesting um updates here as well.

I think the first one, uh the you know the one of the largest numbers on our uh income statement is our cost of wholesale power.

It's roughly 100 million dollars a year.

Uh, we were looking at reductions in 26, 27, and 28 because of the the retirement of the debt on Sherco.

And the the plan is to retain those funds to offset the um interest cost or the capital costs of borrowing the additional funds for the uh Mount Simon.

So those numbers have changed a little bit.

You can see the timing is a little bit uh anticipated larger reduction in 27, but then an increase in 28.

So uh we still have to do the numbers to figure out what that looks like.

There's a number of moving parts with uh the amount being borrowed going down, but also the some of these uh other funds that we were counting on also changing as well.

The cost of service one there is just a change.

Uh, we went from doing a three-year to a four-year to align with the two-year budget cycle.

So that the cost of service study for the electric utilities moved out of 26 into 27.

And then we have some analysis work, and this may change as well.

There's um there's a number of things on the power resource side.

Uh, so we've got the debt service coming down on Mount Simon, the timing of the wind PPAs, uh, waiting for permits and stuff like that.

We expect could get pushed back.

And so that that's also going to push back some of that prepaid analysis work as well.

So we're expecting there's going to be some moves there.

And then we're also going to be going out uh here uh this year for RFPs for the additional assumptions for the 100 megawatt capacity that we're still short in our uh resource plan.

So and obviously GT1 also figures into this uh as well.

So there's there's a number of moving parts, uh especially on that um you know the the power cost side.

Peter, yes.

Uh I'll interject there.

We've been monitoring the simple wholesale power changes.

Uh you'll see, I think in my report from May, there's some cost pressures that Simpa's experiencing in the wholesale market.

So I would hold that 14% projected rate decrease on the wholesale side with uh a grain of salt there.

Um we've seen in the past high gas prices and other wholesale market moves cause wholesale pressures.

So that's not a locked-in number there that we might experience the 14% decrease.

That's just a projection at this point as well.

December of last year.

It was December of last year, and it's been a very challenging first six months of the year in the wholesale markets.

Winter storm fern being one of those Simpa experienced about a 10 million dollar negative variance in wholesale costs.

We saw that come through the ECA, but a portion of that was absorbed.

So it's probably more likely than not that that wholesale rate projection would probably adjust um closer to this year.

We have a rate workshop at Simpa coming up in early September.

And so we're playing with as we approach this 27 budget.

We need to keep a close eye on some of those bigger movers there as we approach the end of the year in the final recommendation.

So just want to cast maybe a little bit of doubt on that number because it's a it's a moving number right now in the global energy markets and really what Simpa is experiencing experiencing as well.

Um so just wanted to put that out there.

On the water operating side, we have uh a few uh similar uh items here.

Uh the big one is uh what Todd was uh talking about a little earlier, the reduction in the lead service line uh grants that are available uh from what we had originally forecast in the uh the budget, the 2627 budget.

Uh we're looking at reductions of uh 10.5 million, 6.8 million there uh in the the next couple of years.

Those essentially become a dollar neutral from our uh financial statement, but it does uh speak to what uh Todd was talking about as far as the uh the funding that is available and how many um you know services we can get replaced in that time.

Uh the other one is a couple of the uh looking at the comprehensive plan that's being done on the water side, and we'll have to come back uh around in the early part of 27, do some um rate analysis around uh around that plan as well.

And then the other one putting a placeholder number in for uh debt uh interest expense on roughly six million dollars around four percent.

So that's that additional two forty is on the bottom there.

Uh on the uh uh staffing standpoint, we're we're really looking to stay with what was in the budget, uh, and which is the two positions in in the electric utility in 27 and no additional ones in water.

We typically, from a growth standpoint, are adding one um position in water every other year, and usually two in the electric side.

The limited term positions um uh not quite all filled at present.

I think we've got one left to to fill right now, but that project is in in process and we have a number of those positions in place already.

Uh the last part there is really going to be dependent on um the notice so far as uh end of this year as to when uh the operations on the steam side are expected to wind down.

Then uh that first line item up there uh is more than likely going to get pushed back to to probably outside of the 27 into the 28 or 29 time frame.

Uh looking at the uh water available availability fee, that's going to be based on what happens with the water comprehensive plan and looking at uh different water sources there.

And then the last three are really kind of they're very much tied into our resource plan and the demand side management, some of those those items there, but they're also tied into the doing the electric cost of service.

So those will be uh in the first half.

Usually we're we're winding up the cost of service, usually in about that August September time frame uh to coincide with the the budget recommendations for the the subsequent year 28-29.

Then uh just this is this is actually the same slide that I used last year.

We're obviously working to maintain our fiscal discipline and the strategy of making sure that we're uh both doing the maintenance of what we already have as well as looking at some of the um the needs that we have and the the from the inflation side as well as the actual growth within the community, uh, but also making sure we uh stay focused on maintaining our core levels of service and support.

So with that, I can uh answer any question.

Or I guess I did forgot about this is the timeline of uh some of the uh uh additional items.

I think a couple of those there'll be additional updates on the operating side coming for both the electric and water in the in June and July there.

And then we're looking at the uh the budget process basically when you um we do the presentation recommended budget on August 4th, and then going through uh to the approval in December, uh, which would be after the the board has made their recommendation that goes to the the council for the final approval.

So with that now I am ready for any questions.

Any questions or comments on the projections.

Yeah, I guess right off the top on page 18.

I was surprised that the labor inflation rate was as high as it is.

I thought I remember doing this when we had the high inflation peaks, but I thought that is generally stabilized.

So it's it looked high, and those are the numbers that we had the assumptions for.

This is the 2025 was 4.5 and and was it 3.4?

So actually those I believe I updated those with the current contracts.

So we're in the you're doing the contracts, not we actually, and so you're getting not just the the uh like within the contract, there's like uh an inflation adjustment that is for the whole grid, but within those grids, people are moving lanes as well, too.

So there's more so you were doing what was in the labor contracts, not that's what we normally do.

A number of those weren't settled uh when we're doing the budget in 25, which I've uh some have been settled, some are not complete.

Yeah, but no, yeah, I'm not trying to get into the operating.

So we do actually we actually do by person, we actually budget by position, basically for that.

So yeah, it's it's uh pretty accurate as to what we can expect.

So they're not really inflation numbers, they're the changes we're projecting.

It's our expected increase in labor costs year over year.

Okay.

And and I I'm just struggling with the term inflation as opposed to this is what arrangements we're entering into because I'm looking at and saying you could use a different word there, definitely.

We could call it labor cost adjustment or uh labor projections, but that's for our internal labor based off of approved or contracts that are on their way to approval.

Because I'm looking at like inflation rates this year in a 2027 going down even more.

So um, but now I understand better.

This is really have to do with our our labor contracts.

Yeah.

Right.

Thank you.

Are you talking overall inflation going down in 27?

Uh yeah.

When I look at that, that the the assumptions and it talked about inflation.

That's what I was looking at.

And once you make that like a 4.5 labor assumption, then you're gonna put into your things, things are going to get more expensive.

That's just uh hard number.

And I think in RPU, we're not as labor intensive as other businesses, but but then you have the general inflation number there too.

Yeah, and even that one is quite challenged at present with the yeah, uh the cost of with this industry, yeah.

Yeah, with resources and contracting.

Yeah, uh, we're seeing that um just the availability.

So yeah, we're we're seeing a lot of uh pressure, I would say, on on the on the right side then.

Thank you.

Good.

Any other questions or comments?

If not, thank you, Peter.

Thank you.

Appreciate it.

Okay, now we move to the board policy review section of tonight's meeting.

Uh next is the board policy review, which I'll just turn over to General Manager McCullough.

No change from the last month.

Uh would highlight that the city council, I believe, is scheduled to consider the city finance financial policies on May 27th.

And we're kind of walking in parallel there with an RPU um companion to that.

So depending on the feedback from city council there, we will continue to make progress on the financial policy review as well, targeting June or July for bringing the the first review to this board after uh talking with the ad hoc group that we've been working with.

Right.

Any questions or comments?

Well, we'll move right away then to the general manager's report.

I'll handle this on an exception basis if there's anything that you saw in my report that you have specific questions on or would like to take a deeper dive into uh the reports in front of you.

Um it's getting long, but there is a lot of major things happening right now and a lot of developments, even in the last 30 days that I would recommend that you take some time to look into.

Any questions on the general manager's report?

I didn't have questions, just comments.

Um, I just wanted to say I went to the water, whatever the thing last Friday, I think, or two Fridays ago, what was it called?

Anyways, I just wanted to say it was um it just made me realize how dedicated and professional all the staff were.

So it was just really good.

So and then um the other thing was I just saw that you were looking at doing the outbound customer call process, and I just wanted to say I thought that was a really good idea.

So that's all.

I'm yes.

Um I'm supportive.

I'm also cautious on this one as well.

I don't like receiving automated calls personally, but the volume of calls that we are trying to make with our customers, this is a test to see how receptive our customers are to receiving that, and everyone will be given the option to press one and connect directly to a human.

Um, and I'm also cautious about the amount of spam and spoofing that happens out there as well.

So we're approaching it cautiously, very supportive of it, but um I like the human touch that we have as our customer service, and that's the thing that I think we're approaching in the right way, and I'm hopeful that we'll find some success on this one as well.

Any other comments or questions?

Yeah, just that it is a very thorough general manager report.

It it's not uh an executive summary.

Yeah, but thank you for pulling it together.

Point taken.

Thank you.

That's great.

Okay.

Hearing no other questions or comments, we'll move now to division reports and metrics, which is item number nine uh for May of 2026.

Are there any questions or discussion from the board on division reports and metrics?

Hearing none, we'll move on to other business.

Is there any other business to come before the board tonight?

Hearing none, I'll entertain a motion to adjourn the regular meeting and convene a closed session pursuant to Minnesota statute section 13d point zero fivision 3b to discuss potential litigation related to the CapEx 2020 transmission lines.

Could I get a motion and a second?

I'll move uh to our adjournment for that adjournment.

We have a motion, second.

I'll second.

Moved and seconded.

All in favor say aye.

Aye.

Aye.

The regular meeting is adjourned, and the board will now convene in closed session in the uh boardroom.