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, AUGUST 25, 2008, AT 4:30 P.M.

Commission President Bloomquist called the meeting to order at 4:32 p.m.

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

Absent: Commissioner Raukar.

Also Present: Terry Leoni – General Manager; Bill Hafdahl – Director-Finance & Administration; Sue Lalli – Public Relations / Customer Service Supervisor.

Mr. Leoni reviewed the invitation to attend Minnesota Power’s Annual Municipal Customer Meeting to be held on September 24, 2008 in Grand Rapids. Mr. Leoni will be attending and Commissioners Bloomquist and Lucarelli also plan to attend. The half-day meeting will review information regarding Minnesota Power’s determination of Formula-Based Rates and Fuel Adjustment for 2009 along with an update on Minnesota Power’s Operations and industry news.

Moved by Sipola and supported by Petroskey that financial Resolution #5131 authorizing the payroll dated July 31, 2008 in the amount of $107,594.51, checks #45672 through #45699, and direct deposits #12328 through #12385; and the payroll dated August 14, 2008 in the amount of $108,010.00, checks #45700 through #45727 and direct deposits #12386 through #12444; and bills dated July 28, 2008 through August 25, 2008 in the amount of $1,745,534.36, checks #79594 through #79805, and wire and electronic transfers in the amount of $762,182.01 be adopted; and the minutes of the regular meeting held on July 28, 2008 be approved as presented. Motion carried.

The Agenda for the August 25, 2008 LEA Meeting; Minutes from the July 22, 2008 LEA Meeting; LEA Cash Flow Reports; and an August 13, 2008 News Article on Wood Boilers and the Slump in the Housing Market included in the Commissioners’ packets were reviewed. Mr. Leoni noted that it is anticipated the biomass boilers will burn approximately 112,000 tons of wood in 2008, about the same as in 2007. The agenda for the LEA meeting today will address more aggressive wood procurement as well as the review of areas under consideration to provide biomass. In addition, several loggers should be increasing the tons of wood they provide to LEA in the future.

The July 2008 Monthly Injury Summary Report was reviewed. Management and employees continue to make a conscious effort to reduce future on-the-job injuries.

Moved by Petroskey and supported by Lucarelli to approve the Utility’s 2007 Audit. Motion carried.

Currently customers have the option to make utility payments at one of five remote locations in Virginia - Queen City Federal’s main branch - five pickups a week; Wells Fargo Bank - five pickups a week; US Bank - one pickup a week; Northern State Bank - one pickup a week; and the north side location of Super One - one pickup a week. The Department pays bank charges of approximately $300 a year to maintain an account at Wells Fargo Bank solely to provide this service for customers. A Department employee picks up payments at the five remote locations at an approximate cost to the Department of $900 a year. During July 2008 a total of 125 payments were made at all remote locations – 64 at Queen City; 15 at Wells Fargo; 13 at US Bank; 23 at Northern State Bank; and eight at the north side location of Super One Foods. In some cases there is a five to seven day delay between receipt of a customer’s payment at the remote location and the posting of the payment to the customer’s account casing late penalty charges to be incurred. After discussion and review of the limited number of customers utilizing this service, it was moved by Lucarelli and supported by Petroskey that Management be authorized to discontinue accepting customer payments at all remote locations in Virginia except at Queen City Federal. Customers are to be given notification prior to the date payments will no longer be accepted at the remote locations. Motion carried.

Carried forward

City of Virginia

Public Utilities Commission Page 2

Minutes of August 25, 2008 Meeting

Brought Forward

Mr. Leoni reviewed the new five-year Electric Service and Steam Service Agreements effective July 1, 2008 with the Virginia Independent School District #706 and the Department. The electric rate in the Agreement more closely relates to the rate charged to residential customers and should provide approximately $160,000 more revenue annually to the Department. Moved by Sipola and supported by Lucarelli to approve the five-year Electric Service and Steam Service Agreements effective July 1, 2008 between the Department and the Virginia Independent School District Number 706 as presented. Motion carried.

Mr. Leoni distributed a rough draft of proposed rate changes for review by the Commission’s Finance Committee. A meeting of the Commission’s Finance Committee, a meeting of the Committee of the Whole, was set for Wednesday, September 10, 2008 at 4:30 p.m. to review utility rates for the 2009 budget and other items of concern.

Mr. Leoni noted all insurance claims resulting from the July 29, 2006 plant fire have been settled with the final letter yet to come from the Insurance Company.

A review of the water being pumped into Silver Lake since July 27, 2008 shows a two to three degree drop in water temperature and an increase of five megawatts on the production end.

Commission President Bloomquist noted the System Innovation Award presented on August 19, 2008 to the Department by the Minnesota Municipal Utilities Association in recognition of the Department’s leadership and innovation in Customer Service, Energy Efficiency, Renewable Energy or Technology Use, which has improved service to its community and enhanced Public Power’s Prestige.

There being no further business to come before the Commission, Commission President Bloomquist declared the meeting adjourned at 5:20 p.m.

ATTEST: APPROVED:

____________________________ ____________________________

James Petroskey, Vice President Quentin Bloomquist, President