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, SEPTEMBER 11, 2006 AT 4:30 P.M.

Commissioner Sipola called the meeting to order at 4:30 p.m.

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

Absent: None.

Also Present: Terry Leoni, General Manager; Bill Hafdahl, Director-Finance & Administration; Doug Ganoe – Director, Operations Production; Sue Lalli, Supervisor-Public Relations / Customer Service; Dennis Lindberg and Rob Raplinger, City Councilors.

Commissioner Bloomquist noted an error in the minutes presented for the August 28, 2006 Commission Meeting for approval – on page two, paragraph one – the name Marks should be replaced with Muskovitz. Moved by Raukar and supported by Muskovitz that financial Resolution No. 5086 authorizing the payroll dated August 31, 2006 in the amount of $102,765.34, checks #44406 through #44432, and direct deposits #9649 through #9702; and bills dated August 25, 2006 through September 11, 2006 in the amount of $763,438.08, checks #74429 through 74539, and wire and electronic transfers in the amount of $72,962.88 and the minutes of the regular Commission Meeting held on August 28, 2006 be approved as amended. Motion carried.

The General Manager, Terry Leoni, reported the Department's current Wholesale Power Agreement with Minnesota Power will expire the end of 2006. Other power suppliers have been contacted and it appears that Minnesota Power is the only supplier interested in entering into a Wholesale Power Agreement with the Virginia Utilities. Negotiation for the new agreement has already started. The new contract will reflect many changes from contracts in previous years. The changes will be reflected in the costs of power to the Utilities’ customers.

The Director, Operations Production, Doug Ganoe, updated the Commission on the Biomass Project. The new boiler stack has been completed; the new boiler building, the #11 boiler, now has lighting through the first six floors; the Hydro date is set for October 16, 2006; and work is still on schedule. Mr. Leoni noted the wood yard will not be ready for another three weeks.

Moved by Bloomquist and supported by Raukar that Resolution #5087 authorizing the update of records on the investment account with Miller Johnson Steichen Kinnard be approved. It was further resolved that the Director of Finance and Administration of the City of Virginia Department of Public Utilities be fully authorized and empowered to open a brokerage account, transfer, endorse, sell, assign, set over and deliver any and all shares of stock, options, bonds, debentures, notes, evidences of indebtedness or other securities (including short sales) now or hereafter standing in the name of or owned by this Utility, to purchase stocks, bonds, debentures, notes, evidences of indebtedness and other securities (on margin or otherwise), and to make, execute, and deliver, under the Seal of this Utility any and all written instruments necessary or proper to effectuate the authority hereby conferred. Motion carried.

Moved by Raukar and supported by Muskovitz that attendance be authorized at PERA training to be held on September 28, 2006 in Grand Rapids, Minnesota, for two employees at a total estimated cost of $73.40. Motion carried.

Moved by Park and supported by Muskovitz to accept the resignation of a Power Plant Operator I, Jim Current, due to retirement effective September 28, 2006 and to authorize Management to post for the position of Power Plant Operator I. Motion carried.

The General Manager reviewed an item covered at the last City Finance Committee Meeting as attended by the Director of Finance and Administration as it pertained to a Utility rate increase. Mr. Leoni explained that it is hoped that the Utility does not have to increase rates and at this time there are no plans or discussions underway to raise any Utility rates.

Carried forward

City of Virginia

Public Utilities Commission

Meeting Minutes

September 11, 2006

Page 2

Brought forward

Councilor Lindberg expressed concern that many of the last utility billings were estimated and some of the last utility billings were for a time period of much less than thirty (30) days. The General Manager explained that many of the last Utility billings were estimated due to two regular Meter Readers being out for medical leave and the Department’s inability to free up other employees from their work areas to perform the meter reading required. Also noted was the letter sent to customers affected by the Department’s conversion to an Automated Meter Reading system and the affect the conversion would have on the length of billing cycles.

After a brief discussion on the video tape requested from the MMUA on Retail Rates, it was decided that once the video tape is received, Mr. Leoni would make arrangements to attend a Virginia Council Finance Committee Meeting to review the items presented on the video tape.

Mr. Leoni reviewed the vandalism that took place at the Department’s Pit Pump location during the night of September 8, 2006. The Plant Operators found that the Pit Pump was not operating correctly at approximately midnight September 8, 2006 and called out a Customer Serviceman and Management immediately. The police were also sent to the location when the vandalism damage was discovered and a police report was filed. Vandals had attempted to obtain copper from the Pit Pump house and the temporary generator. A reward of $500 has been offered for information leading to the apprehension of the vandals involved. A copy of the notice to be run in the Mesabi Daily News and over both local cable access channels was reviewed with the Commission.

Mr. Leoni reported that representatives from the Department’s insurance carrier were on site Thursday, September 7, 2006, to review the claim filed as a result of the Power Plant fire that occurred on July 29, 2006. Plant maintenance personnel continue work on the temporary repairs in the Plant due to the fire.

There being no further business to come before the Commission, Commission President Sipola declared the meeting adjourned at 5:03 p.m.

ATTEST: APPROVED:

_______________________________ _______________________________

Matt Raukar, Secretary Dr. Don Sipola, President