A REGULAR MEETING OF THE PUBLIC UTILITIES COMMISSION OF THE CITY OF VIRGINIA, MINNESOTA, WAS HELD AT THE OFFICE OF THE DEPARTMENT OF PUBLIC UTILITIES ON MONDAY, MARCH 10, 2008, AT 4:30 P.M.

Commission President Bloomquist called the meeting to order at 4:30 p.m.

Present: Commissioners Bloomquist, Lucarelli, Petroskey, Raukar, and Sipola.

Absent: None.

Also Present: Terry Leoni, General Manager; Bill Hafdahl–Director-Finance & Administration; Lorraine Ilminen, Supervisor-Materials Management; Customers Ralph Thiel, Paul Staudahar, Joy and Mikell Ruedebusch, Robert Tekautz; Councilor Dennis Lindberg; Mayor Steve Peterson; Mesabi Daily News Chuck Ramsey.

Mr. and Mrs. Mikell Ruedebusch addressed the Commission regarding a required utility deposit on 728 North 13^th Street. They explained that they moved out on October 02, 2007 and the property is to be sold by the end of April or early May. They apologized for the untimely paid utility bills over the past three months. They explained that they have been under some financial difficulties with one income, two houses, and six children. The Ruedebusch’s requested the Commission consider waiving the utility deposit for 728 North 13^th Street, as the property will be sold in a short time. Mr. Leoni explained the Utility Review Committee met to consider their request to waive the required deposit. Based on the history of their account, it was decided they would be required to pay the deposit as requested. In addition, the Committee allowed them to pay the deposit on three equal monthly payments with the first payment due March 5, 2008. If the property were sold, the deposit would be immediately refunded to the Ruedebusch’s. After further discussion, it was moved by Sipola and supported by Lucarelli to extend the required utility deposit to May 31, 2008, contingent the Ruedebusch’s stay current on their utility bills as promised; if the property at 728 North 13^th Street is not sold by May 31, 2008, the deposit is required to be paid. Motion carried.

Mr. And Mrs. Mikell Ruedebusch mentioned that had they not moved out of their house at 728 North 13^th Street, they would have never been aware of the water usage due to a basement toilet leaking. The problem was resolved by the beginning of February but they were still concerned by the last high utility bill. Arrangements were made for Mr. And Mrs. Ruedebusch to meet with Mr. Hafdahl regarding their February bill.

Mr. Paul Staudahar asked for clarification on fuel adjustments. Mr. Leoni explained fuel adjustments are not new to the Utility and have been in effect since before 1985. The fuel adjustments cover incremental costs for coal, labor to unload coal, above our base steam cost of purchasing natural gas and coal. Today fuel adjustments are roughly 25% of the base rate. However, in comparison to other communities and their rates, the City of Virginia’s rates are still low.

Mr. Paul Staudahar asked why the biomass boiler is not operating. Mr. Leoni explained the Utility lost a gearbox motor on one of the conveyors. A new motor is on order.

Mr. Paul Staudahar commented everyone is facing hardships and asked if he could meet with Mr. Leoni about some ways he sees the Utility could cut costs. Mr. Leoni agreed to meet with Mr. Staudahar. In addition, the Commission and Mr. Leoni reviewed some savings the utility has realized such as trucking coal versus railway (savings of approximately $500,000 annually), long term contracts for purchasing electric and natural gas, and a reduction in Management personnel.

Carried forward

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Mr. Robert Tekautz questioned the plant boilers going down so often. Mr. Leoni reported in November 2007 No. 9 boiler was down for maintenance and the coal grate system was rebuilt, then No. 10 boiler went down when the Oxygen Sensor stopped working, No. 9 boiler was put back on line. Then a coal shipment containing a number of steel chunks was delivered to the Utility and the steel chunks jammed and damaged part of the coal grate system. Today a tube blew on No. 9 boiler, so No. 10 boiler was put back on line. Mr. Tekautz mentioned preventative maintenance should be done in the summer and you should run two boilers in the winter. Mr. Leoni answered that is being done but when a boiler comes down unexpectedly, we lose 170,000 pounds of steam to the distribution system. We have to keep the plant running warm a minimum amount of electricity and steam to keep numbers 5 and 6 turbine/generators running so that you don’t have a cold start in the plant. As a result, the steam pressure in the distribution system is reduced until another boiler is brought back on line. Today, it took all of No. 7 boiler to keep peripheral equipment running in the plant. It takes a while to warm up a boiler before it can start producing steam to the distribution system.

Mr. Leoni reported that at the end of March, customers will be receiving a cover letter along with brochure on home steam operation and rate brochure of services the Utility provides the City of Virginia.

Mr. Thiel mentioned the Utility cut off parts of the steam distribution system and asked where did the steam go. Mr. Leoni responded it went into electric production and we now have steam capacity to meet the current demand.

Moved by Sipola and supported by Petroskey that financial Resolution #5124 authorizing the payroll dated February 28, 2008 in the amount of $101,926.89, checks #45402 through #45423, and direct deposits #11715 through #11767; and bills dated February 25, 2008 through March 10, 2008 in the amount of $420,382.52, checks #77123 through #78698 (noting checks #78126 through #17600 were destroyed due to changes in MICR coding), and wire and electronic transfers in the amount of $283,660.45 be adopted and the minutes of the regular meeting held on February 25, 2008 be approved as presented. Motion carried.

The February 2008 Monthly Injury Summary Report was reviewed.

Commissioner Petroskey asked the status on the hospital contract negotiations. Mr. Leoni reported they have been trying to get back to the negotiation table but telephone calls are not being returned so the VRMC agreement has not yet been finalized.

Mr. Leoni reviewed the status of the Hibbing and Virginia biomass operating air permit compliance with MPCA. They are still negotiating with MPCA. Foster Wheeler is honoring their warranty and providing technical and monetary support. MPCA has agreed the original permit parameters were tight and new data has shown there may have been a flaw in the database used in setting the original permit’s parameters. The Utilities are close to resolving the permit issues and will need a permit modification in order to do so. Through a settlement agreement with Foster Wheeler, they have agreed to reimburse the Utilities for costs incurred.

Carried forward

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Brought forward

Mr. Hafdahl reported to facilitate purchasing and inventorying natural gas for the 2008 through 2009 heating season, he will need to purchase the natural gas for storage in the beginning of April. Mr. Hafdahl requested authorization to obtain quotes for a short-term line of credit for $700,000 to cover the purchase of natural gas for storage rather than liquidating long-term investments. The line of credit is expected to be fully utilized by October 2008 and will be paid off by March 2009. Non-passage would cause usage of roughly $700,000 of higher interest rate long-term investments and ultimately cause them to become short-term; this would be an estimated impact of $14,000. Moved by Sipola and supported by Raukar to authorize Management to obtain quotes for a short-term line of credit for $700,000 to cover purchase of natural gas storage for the 2008 through 2009 heating season. Motion carried.

A travel request was presented to the Commission for approval. Authorization was requested for Don Rindfuss and Ron Cackoski to attend the Minnesota Office of Pipeline Safety’s 2008 Educational Conference to be held on April 02-04, 2008, in Alexandria, Minnesota, for an estimated cost of $1,151.93 (cost will cover registrations, mileage, and lodging for three nights). This conference will include introduction of any new laws, regulations or rules and the reasons with explanations. Moved by Sipola and supported by Petroskey to authorize two personnel to attend the Minnesota Office of Pipeline Safety’s 2008 Educational Conference to be held on April 02-04, 2008, in Alexandria, Minnesota. Motion carried.

Management presented lists of the 2008 water valve and hydrant priorities, and water main projects. Also a prefabricated versus cast-in-place tunnels cost and manpower comparison for 2008 steam main projects was presented and reviewed. In conclusion, the Utility will be utilizing the prefabricated tunnels on steam replacement projects, while the small isolated repairs will be completed to match the existing pipe/tunnel construction.

Because expected ground temperatures are to remain below normal in March and April, Management requested authorization to extend the waterline freeze prevention system deadline to the end of April 2008 (for one month). The Utility has had to extend this deadline for the past two years, with this making it the third year. Moved by Petroskey and supported by Sipola to authorize the water line freeze prevention system shut off deadline to be extended to April 30, 2008. Motion carried.

A brief status report was held on diversion piping and pumping to Sauntry Creek and Silver Lake. An agreement and permit will be necessary.

Moved by Sipola and supported by Petroskey that there being no further business to come before the Commission, that this meeting is adjourned. Motion carried.

Adjournment was at 5:44 p.m.

ATTEST: APPROVED:

____________________________ ____________________________

Matt Raukar, Secretary Quentin Bloomquist, President