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, JUNE 26, 2006 AT 4:30 P.M.

Commissioner Sipola called the meeting to order at 4:35 p.m.

Present: Commissioners Bloomquist, Muskovitz, Park, Raukar, and Sipola.

Absent: None

Also Present: Terry Leoni, General Manager; Bill Hafdahl, Director-Finance & Administration; Connie Larson, Director-HR/Safety; Doug Ganoe, Director-Operations Production; Dennis Lindberg, City Councilor.

Moved by Park and supported by Raukar that financial Resolution No. 5082 authorizing the payroll dated June 22, 2006 in the amount of $93,829.08, checks #44263 through #44291, and direct deposits #9380 through #9432; and bills dated June 12, 2006 through June 22, 2006 in the amount of $746,448.62, checks #73930 through #74023, and wire and electronic transfers in the amount of $143,502.70, and the minutes of the regular Commission meeting held on June 12, 2006 be approved as presented. Motion carried.

General Manager Terry Leoni and Director-Operations Production Doug Ganoe updated the Commission on the construction phase of the Biomass Project. The large crane needed to set the boiler was delayed three weeks but is working today. All tie-ins are complete and the roof drain system is almost done. Parts delivery has remained on schedule. Wiring and concrete work continues. The coal truck delivery route has been changed and trucks will be using the east gate. Contractors have been notified that the scheduled date of October 6, 2006 for the hydro has not changed and they have to get back on schedule. “First fire” is scheduled for the beginning of November and commercial operation should start December 22, 2006.

Councilor Lindberg asked if the recent transformer vandalism had any affect on the Biomass construction. General Manager Leoni explained that the damage was done to transformers for the hospital and other smaller transformers and the vandalism does not affect the Biomass project. Spare transformers are being built. Mr. Leoni noted that the vandalism claim is around $36,000 and it appears the vandals were stealing copper.

General Manager Leoni noted that additional funding for the Biomass project will be received in July and August from the IRRRB and other grants. The grant for the gas plant was closed out and there is money outstanding on the steam grants but will not be completed until 2007. Leoni stated that Phase 1 construction on the wood yard should be complete by September 1, 2006. He explained that wood ash will also be stored at the site and, through a partnership with the Minnesota Extension Service, have beneficial use on farm lands. This will reduce landfill fees for the Utility. It is also expected that 50% coal ash will be used for the same purpose in the future.

General Manager Leoni requested authorization for himself and one management employee to attend the MMUA summer meeting, August 14-16, 2006, in Alexandria, Minnesota. He also suggested that the Commission should consider attending. Moved by Bloomquist and supported by Park to approve attendance at the MMUA summer meeting, August 14-16, 2006, in Alexandria, Minnesota, by the General Manager, another management employee, and interested Commissioners. Motion carried.

Moved by Park and supported by Bloomquist to authorize attendance at the annual Caselle conference, October 16-20, 2006, in Las Vegas for Tracy Peterson and Mary Johnson at an estimated cost of $2,283.78. Motion carried. General Manager Leoni noted that he may request that three employees attend in 2007.

Moved by Park and supported by Bloomquist to authorize attendance at the Minnesota Public Employer Labor Relations Association seminar, August 16-18, 2006, in Duluth, Minnesota for the Director-HR/Safety at an estimated cost of $535.20. Motion carried.

City of Virginia

Public Utilities Commission

Meeting Minutes

June 26, 2006

Page 2

Commission President Sipola noted that the Finance Committee as a Committee of the Whole had met prior to the regular meeting and reviewed the 2005 Audit report. They approved the audit for distribution to City Council, Mayor, and City Clerk/Finance Director.

General Manager Leoni reported that the financial reports looked good but pointed out that water unaccountable had increased due to a water break in February. Management is investigating the calculations. He also noted that warmer weather has affected steam consumption. Director-Finance & Administration Bill Hafdahl noted up to 25% less consumption. Management is closely watching coal costs, which have increased.

There being no further business to come before the Commission, Commission President Sipola declared the meeting adjourned at 5:07 p.m.

ATTEST: APPROVED:

_______________________ ___________________________

Matt Raukar, Secretary Dr. Don Sipola, President