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Record of Proceedings

Rochester Public Utility Board Meeting - August 5, 2026: Supplemental Budget Review and Power Supply RFP Ad Hoc Group

Boards and Commissions — Wednesday, August 5, 2026
BodyRochester, Minnesota
SessionBoards and Commissions
DateWednesday, August 5, 2026
StatusFILED
Video Record
0:00 / 1:22:00

Original source
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0:01

Good evening.

0:01

It's four o'clock, and this meeting of the Rochester Public Utilities Board is now called to order.

0:07

As a reminder that this meeting is recorded and a recording will be available on the city website.

0:14

The first item on the agenda tonight is the approval of the agenda.

0:19

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

0:23

And everyone should have a copy in front of them.

0:25

I'll move approval.

0:26

Thank you so much.

0:27

It's been moved.

0:28

Second.

0:29

Been moved and seconded.

0:31

All in favor, please signify by saying aye.

0:33

Aye.

0:34

Aye.

0:35

Any opposed?

0:37

Agenda is approved.

0:39

Next, we move to the consent agenda is item number two.

0:43

And we have item two A and two B.

0:45

Two A is the minutes from the July 22, 2026 meeting.

0:49

And 2B is the minutes of the July 28, 2026 meeting.

0:54

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

0:58

I'll move approval.

1:00

Thank you.

1:01

Second.

1:01

It's been moved and seconded.

1:04

Any further discussion?

1:06

Hearing none.

1:07

All in favor of approving the consent agenda.

1:09

Items 2A and 2B, please signify by saying aye.

1:12

Aye.

1:12

Aye.

1:13

Aye.

1:14

Any opposed.

1:16

The consent agenda is approved.

1:19

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

1:24

Total comment period is limited to 20 minutes.

1:27

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

1:36

Is there anyone signed up to address the board tonight?

1:39

There isn't anyone signed up.

1:42

Thank you so much.

1:44

Next, we move to the informational item section of the agenda.

1:48

And this is item 3A, which is a 2027 recommended supplemental budget.

1:54

Our director of finance, Judy Anderson, will present the water budget, and assistant general manager of administration, Mr.

2:01

Peter Hogan will present the electric budget.

2:26

Thank you.

2:28

Welcome.

2:28

And this evening, uh, we're going to be reviewing the 2027 uh supplemental electric and water budgets.

2:36

Uh as I'm sure all of you are aware, we have a uh a two-year budget that's already been approved for 26 and 27.

2:43

So this is uh updating for the new information that's become available uh since the budget was done about a year ago.

2:49

So with that starting um any starting out budgets, we always uh look at and consider our strategic alignment, which is really highlighted by our five R's, which I know the board is also familiar with the reliability, rights, responsibility, reputation, and relationships.

3:07

And then the key within the budget is uh, you know, even though rates fits nicely with budget, the budget's purpose is really to supply the resources to support all of these um strategic initiatives.

3:21

So within the the uh that structure then, there's also a financial strategy, which is really driven or governed by the city charter and also the uh the policies of the board.

3:34

So the city charter really speaks to the first section there about um maintaining cost-based rates and the reduction of cross-subsidization or the minimization of cross-subsidization between right classes.

3:48

The um board policy is the one that expands a little bit more on the uh financial uh stability one there, and really talking about reducing subsidies within right classes, and that's done by aligning fixed and variable costs with fixed and variable rate components of of our rates.

4:07

Uh the next uh large area that we're uh concerned about or uh focus on is being regionally competitive.

4:15

And uh we will get to talking about that a little bit more.

4:18

Uh we've got good news and bad news on that one.

4:20

So, and then uh as I talked about on the previous one, uh the purpose of the the budget process here is to provide the resources uh needed to support all of the strategic initiatives of the organization.

4:35

And we'll touch on a number of those as we go through this as well.

4:39

With that, I will turn the uh to Judy to cover the water utility.

Discussion Breakdown — Share of Meeting
Energy Independence█████████████████████████25%
Water And Wastewater Management█████████████████17%
Budget Equity Analysis███████████████15%
Fiscal Sustainability█████████████13%
Public Works█████████9%
Procedural████████8%
Public Engagement██████6%
Capital Projects████4%
Public Utilities██2%
Summary of Proceedings

Rochester Public Utility Board Meeting - August 5, 2026

Note: The agenda and minutes indicate the meeting was held on August 4, 2026, but the instructions specify August 5, 2026. This summary uses the provided date.

The Rochester Public Utility Board met on August 5, 2026, at 4:00 p.m. to review the 2027 Supplemental Water and Electric Utility Budgets and to form an ad hoc group for the upcoming power supply RFP. The board approved the consent agenda and adjourned unanimously.

Consent Calendar

  • Approval of Agenda: Approved unanimously.
  • Consent Agenda (Items 2.A and 2.B): Approved the minutes of the July 22, 2026, and July 28, 2026, meetings of the RPU Board. Motion by Patrick Keane, seconded by Wendy L Turri, carried unanimously.

Public Comments & Testimony

  • No members of the public spoke during the open comment period.

Discussion Items

  • 2027 Supplemental Water Utility Budget (Presented by Judy Anderson, Director of Finance):

    • Key assumptions: Interest earnings rate dropped from 3% to 1.5% due to conservative inflation outlook; salary expenses increased based on settled union contracts and updated health insurance costs; no change to the previously approved 9% general rate adjustment; CCF sales forecast revised to a slight decrease from 2026 based on normal weather.
    • Board member Malachi McNeilus expressed concern that assumptions (interest rates vs. salary) moved in different directions, reducing budget rigor. Staff noted salary costs are driven by contractual obligations and position-by-position rigor.
    • Capital spending: Advanced Metering Infrastructure (AMI) project (~$18M over 5 years) deferred routine water main replacement; lead service line replacement reduced to ~$1.5M per year due to state grant scaling back; new projects include Kelmar booster station ($1M in 2027, total $2.2M) and Meadow Lake sewer extension ($300K in 2027, total $1.2M).
    • Operating income forecast: Total revenues increasing due to rate changes; interest expense rising from short-term borrowing (up to $10M authorized previously); Payment in Lieu of Taxes (PILOT) methodology shifting from commodity-based to 6.5% of retail revenues, phased in over 2028-2030.
    • Cash flow: Intentional cash burn in 2026-2027 due to AMI and development costs, with cash rebuilding in 2028-2031 to address deferred water main replacements.
    • Rate comparison: Rochester water rates remain well below regional averages (e.g., residential average ~$20/month). Board member Kelsey Vaszily noted that future water treatment could increase costs.
    • Recommendation: No change to the 9% rate adjustment for 2027; average residential impact ~$1.78/month.

  • 2027 Supplemental Electric Utility Budget (Presented by Peter Hogan, Assistant General Manager of Administration):

    • Key assumptions: Debt issuance reduced from $241M to $141M due to lower capital needs: GT1 rebuild (~$16-20M, mostly insurance-covered) vs. $60M placeholder; grid interconnect improvements no longer needed ($20M placeholder removed); no change in full-time equivalent staffing.
    • Power resource plan: 180 MW of wind delayed from 2028 to 2029 due to permitting; still targeting 100% net renewable electricity by 2030. Remaining third of capacity and energy to be secured via an RFP. Board discussed the uncertainty of 2030 and 2033 projections.
    • Business risks: Power supply plan is the largest risk; material cost inflation moderating; legislative impacts on tax credits for wind.
    • Capital spending: ERP project ($3.5M delta approved in 2026); GT1 rebuild; Grid North transmission project ($31M, pulled forward); CapX David Arms project ($2.7M in 2027-2028, recoverable through transmission revenues).
    • Debt issuance: Refunding of 2017 bonds could save ~$5.5M; total new debt request expected ~$141M (plus refunding ~$225M total).
    • Rate comparison: RPU electric rates now slightly above Xcel Energy (residential ~3% higher, small general service ~6.9% higher). Board member Patrick Keane expressed preference to be on the lower side.
    • Financial projections: 4% effective rate recommended for 2027 (down from previously approved 6%) via power cost adjustment; customer impact reduced from $6.12/month to $5.17/month. Days cash on hand projected at 426 in 2031, providing a buffer for potential wholesale market exposure in 2029-2030.
    • Board member Keane requested better visibility into transmission investment benefits. Staff agreed to bring back financial cases showing net present value. Keane also suggested improved communication on carbon reduction progress.

  • Ad Hoc Group for Power Supply RFP:

    • General Manager Timothy McCollough requested two board members to serve on an ad hoc group to provide input during the RFP process (shortlisting, feedback). Board members Patrick Keane and Kelsey Vaszily volunteered. The group will consult with management without decision-making authority.

Key Outcomes

  • Votes:
    • Approval of agenda: Unanimous.
    • Approval of consent agenda (minutes): Unanimous.
    • Adjournment: Moved by Patrick Keane, seconded by Kelsey Vaszily, unanimous.
  • Decisions:
    • No formal action on budgets; the informational item was presented for discussion. The board will consider final approval in September/October 2026.
    • Ad hoc group formed for power supply RFP: Patrick Keane and Kelsey Vaszily appointed.
  • Next Steps:
    • City council study session on RPU budget (summary presented).
    • Public hearings on proposed supplemental budget.
    • September 2026: Board to discuss power cost adjustment and tariff changes.
    • October 2026: Board approval of budget.
    • December 7, 2026: Council approval.
    • Power supply RFP: Staff to solicit offers and work with ad hoc group through early 2027.

Meeting Transcript

Good evening. It's four o'clock, and this meeting of the Rochester Public Utilities Board is now called to order. As a reminder that this meeting is recorded and a recording will be available on the city website. The first item on the agenda tonight is the approval of the agenda. Do I have a motion to approve the agenda as presented? And everyone should have a copy in front of them. I'll move approval. Thank you so much. It's been moved. Second. Been moved and seconded. All in favor, please signify by saying aye. Aye. Aye. Any opposed? Agenda is approved. Next, we move to the consent agenda is item number two. And we have item two A and two B. Two A is the minutes from the July 22, 2026 meeting. And 2B is the minutes of the July 28, 2026 meeting. May I have a motion to approve the consent agenda as presented? I'll move approval. Thank you. Second. It's been moved and seconded. Any further discussion? Hearing none. All in favor of approving the consent agenda. Items 2A and 2B, please signify by saying aye. Aye. Aye. Aye. Any opposed. The consent agenda is approved. Next, we come to the open public comment period of our meeting. 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 will be the first to present at the next board meeting. Is there anyone signed up to address the board tonight? There isn't anyone signed up. Thank you so much. Next, we move to the informational item section of the agenda. And this is item 3A, which is a 2027 recommended supplemental budget. Our director of finance, Judy Anderson, will present the water budget, and assistant general manager of administration, Mr. Peter Hogan will present the electric budget. Thank you. Welcome. And this evening, uh, we're going to be reviewing the 2027 uh supplemental electric and water budgets. Uh as I'm sure all of you are aware, we have a uh a two-year budget that's already been approved for 26 and 27. So this is uh updating for the new information that's become available uh since the budget was done about a year ago. So with that starting um any starting out budgets, we always uh look at and consider our strategic alignment, which is really highlighted by our five R's, which I know the board is also familiar with the reliability, rights, responsibility, reputation, and relationships.

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