City Council - workshop

He's looking to get one.

I'll have to find him first to get you one.

We're going to get started with our study session July 27th. We've got two topics, RPU, first water system master plan, and then we've got the RPU power supply plan. So it's RPU all the time. So Mr. Tim McCullough. I will kick it off.

And thank you for coming to the RPU show this afternoon. I would argue that these two study session topics that you'll hear this afternoon are probably two of the larger pieces of planning and resource work that's happening across the city right now related to power and water supply. And I don't mean that lightly. These are significant pieces of work that are happening. This will be your first introduction as the council to the work that's happening in our water system master plan. And I would like to introduce again to you Todd Blomstrom, our assistant general manager of maintenance for RPU and Todd has been with us almost two years now. And Todd and his team, as well as some consulting groups are well underway into this effort and they have brought considerable WORK TOGETHER HERE FOR THIS INTRODUCTION. THIS IS A LONG ROAD. TODAY IS ONLY THE INTRODUCTION AND I'LL KIND OF JUMP TO THE END HERE AT THE BEGINNING. WE HAVE ABOUT A YEAR AHEAD OF US OF FURTHER PLANNING WORK, SO YOU WILL PROBABLY BE LEFT WITH A FEW MORE QUESTIONS THAN ANSWERS THIS AFTERNOON, AT LEAST ON THE WATER SYSTEM MASTER PLAN. SO WITH THAT INTRODUCTION, I WILL TURN IT OVER TO TODD AND ALLOW HIM TO TAKE IT FROM HERE.

Well, thank you, Tim. Good afternoon, and thank you for making time on the work session agenda today. We're here to give you an update on the Water System Master Plan, as Tim described. Any information we have to share with you today is primarily focused in three areas. One of them is the challenges that we're encountering with the water system today. They are not unique to Rochester and not uncommon for other cities that have strong economic development and growth in their communities. The second thing is we wanted to give a general overview of the technical process underway, and I don't want to get down too much into the weeds with the technical piece, but it's important to illustrate that there is a process for identifying and evaluating alternatives, in finding the path forward that's best for the city. And so the other thing is we wanted to talk about that this is not just a growth issue. Water systems are highly regulated. We'll talk more about that. And just remaining compliant with both water distribution requirements and water quality requirements is becoming more challenging for all utilities across the country. So with that, I'm sure everyone on the council understands that RPU is part of the overall city. We serve 42,000 customer accounts and about 61,000 electrical accounts. And that number grows each year. We've seen steady growth over the last 40 years. It has been manageable in a very even and strong pace. With that, we have some core responsibilities when we manage particularly the water system. First and foremost is water quality. We have to ensure that the water we're producing and delivering to customers is safe and that it is compliant with all state and federal regulations. And water systems, as I mentioned, are very regulated and for good reason. Making wholesale changes or large scale changes to a water system takes time. It takes usually years. And so we're constantly trying to forecast what our future water demand is and how the system is expanding and then making sure that we're securing enough source water so that we have enough water to provide to customers. With that, though, it's not just purely securing water. We have to make sure that we're doing it in an environmentally responsible way. We're talking about 5 billion gallons a year that is being withdrawn and served to customers, and we need to also be very cognizant of the environmental protections that we need to comply with. And then lastly, all of the infrastructure. And from a technical standpoint, we maintain two computational models. So one model is to evaluate the overall distribution system, and then over the last five years, we have developed a groundwater model so that we can understand as we're extracting water from the aquifers that we're doing it in the best way possible. So with that, there is a graph on the right, and this shows a 20 year history of our water demand, and then a 40 year projection out through 2065. And so it is a rather unusual shape, a bit hard to see, but there is a little dash trend line there. And typically in a city like Rochester that has had very long sustained steady growth, that water demand continually increases over the years. It ebbs and flows because it's mainly dependent on precipitation for a given year. So we'll have high pumping years and lower pumping years. But invariably there is a trend. What is unusual for Rochester is one, we have put a lot of effort into conservation and that's an important element and I think that has certainly helped us over the years. But we have seen changes in industrial land use here in the city over the last 20 years and it has lowered the overall water demand for the city. that's good because it created margin for us to sustain that growth with some manageable water demand. But I think we've essentially consumed that margin and now the population growth is really going to drive us on more of what would typically be expected for a growth in water demand. I show here the projections. I want to emphasize and not lose track that these projections are for dry year seasons. When we plan water systems, when we design water systems, we do not do that on an average year. We have to plan for dry years and drought conditions. And so, these estimates are based on that. And today, we're just slightly under 5 billion gallons a year. 2023 was kind of a classic drought year here in Rochester, and we reached approximately 5 billion gallons that year. And the projections out through 2065 increase that up to a little over 8 billion gallons a year. So a fair increase.

Can you hold a minute? Council Member Miller. Yeah.

So I just want to ask this question up front and I think it applies to both power and water and I sent this email earlier and had a chance to talk with General Manager McCullough but in the charter in the board powers enumeration subdivision four of the chapter says the board is authorized and required to restrain and prevent so far as possible any and all waste of water electricity heat power and any other public utility service provided by the board. I guess that I'm curious about how conservation is driving this projection and what assumptions really go into it when paired with what we know about our changing climate for this region, we would also expect more infrequent but higher water precipitation into the region. So I'm curious about the assumption for only focusing on drought years and also how this relatively flat ebb and flow over the last 20 years begins to climb quite dramatically, almost doubling in that projection.

Sure, I appreciate the question, and it is an important question. One, just looking at the trend lines, if we were to extrapolate 2023 as a drought year, it would pretty well align with how the projections are starting to build. You see that jump upward, and that is us transitioning from historical pumping to projected drought year pumping, so that explains that, but in terms of the question, there is a whole portion of this study that is dedicated not just to conservation but reuse. And as we navigate through this process, and we will have to do that through the Department of Natural Resources, the state agency, they are going to require that we implement more aggressive conservation measures. There is already assumptions built into these numbers that we are going to achieve greater conservation than we are today. That is already built in. When we come back, hopefully in October, we're going to have a whole section to address water conservation and reuse. There will be a matrix and options and how much conservation those strategies can achieve and the cost of implementing those strategies. So there is more work to be built into the process, but we're already assuming that we are going to increase the conservation levels that we have today.

And so a follow up question would be when is the last time that this water demand forecast would have been provided? Would it have covered the period of 2005 to 2025? And how would we compare? I just bring this up because I think about traffic models. They're always wrong. Any model is always wrong. But we often assume more demand than ever shows up.

Yes.

and oversupply. And I guess I'm just curious how we're really testing that assumption and the underlying assumptions showing quite this much demand growth.

Yeah. So while this graph looks simple, there is probably two months of work that went into this. And that involved us closely coordinating with community development. So the assumptions that are built into the comprehensive plan were the assumptions that we brought into these projections. We also were looking at past studies from Public Works with the wastewater master planning process and the assumptions that were built into that. as well as the county and ROCOG and their transportation models. And it feels maybe odd on the surface that we're looking at those studies to build a water plan, but it's important that all of these studies are starting to coalesce to a common set of assumptions in terms of land use and growth and population projections. We validated that with the state demographic office and what they were assuming for Olmstead County and Rochester. And then we also, these estimates were based on two methodologies. There's two different methods for estimating water demand. And we went back and forth with those methods so they calibrated. But to answer your question, what was the projections before, I wish I had them. I'm not sure that Rochester has done this more extensive approach to planning in the past than we are doing today, so. Well good, so this is where we're at today. These numbers might refine somewhat, and again, as we're working on further conservation reuse measures, but it's set the baseline for planning in the future. But water demand is not our only challenge, as I mentioned before. Water quality requirements and regulations are becoming far more stringent, and all utilities are struggling to comply with them. Looking at our source water and our long-term infrastructure needs also builds into this study process. In really looking at not just what infrastructure needs to be built, this study will also estimate the cost and how that's phased in and how we can finance the future cost demands on the system. So I wanted to get into specifics of sort of the challenge that we're facing today. And I would start by the figure in the upper right. That is a diagram of the surficial geology, bedrock geology of Olmstead County. And if there was a cross-section cut across the county directly from west to east and that cross-section passed through Rochester and it was turned on its end, that would give you the diagram on the bottom of the screen. And that is a cross-section of the geologic formations that exist below the ground surface. And those different layers have different properties. Some of them are very dense, non-porous. There are not a lot of water in those formations, nor does a significant amount of water pass through either horizontally or vertically. Other layers are very porous. They're either unconsolidated or fractured bedrock. They contain large volumes of water. Those water-bearing formations are what we call aquifers. And so... In the past for Rochester, every time we hit a point where we needed more water supply, we would go ahead and drill a new well. And we would drill the well into that upper yellow layer, the bright yellow layer, and that is the Jordan aquifer. That is where most of our wells are drilled into is the Jordan aquifer. Water quality is generally good. Water yield is very good. And it has been a very stable water source for Rochester for 100 years. And like I say, most of our wells are drilled in there. In 2024 was the last time we constructed a new well here in Rochester, and that was also drilled into the Jordan. And to do that, we need to get permits through the state and the Department of Natural Resources is the agency that administers those rules for the state. The DNR did eventually give us a permit for Well 24, but it came with some fairly strict requirements. And while the wording is a little awkward, I took this almost verbatim from the notification that we are prohibited from constructing new water supply wells in the Jordan until we've reviewed alternative sources, and those sources need to be other aquifers or looking at potential surface water sources. And I don't fault the DNR. They are responsible for managing the resources of the state. It is their job and they have concerns that the growth and even the past growth of Rochester could be reaching the yield limit of the Jordan Aquifer. And as a utility, we also have a responsibility to make sure that we have a long-term sustainable source, and so we share some of those concerns. They went on to indicate that we need to demonstrate that additional groundwater withdrawals, if we're gonna stay with just a purely groundwater system, would not result in any unacceptable environmental impacts, and they would be consistent with sustainable yield capacity. That's a lot. And you may ask, well, what exactly does that mean? And it seems very broad. But thankfully, there's some good guidance already in place. And it really comes from three sections of the Minnesota statute. The first section that I have listed there is the safe yield requirements under 103G. And so that talks about looking at the amount of water that's being extracted from a specific aquifer and is that depleting the volume of water in that aquifer and drawing down the static levels of that given aquifer. The second one really focuses on surface waters, and in that cross-section that I showed, as there's a substantial amount of pumping out of a lower aquifer, that can actually lower the water levels in upper layers of the strata, including up to the surface, and start to impact base flows in streams. And so there's also a section on 103G that describes how we have to avoid and minimize that. And then the last criteria that we're working with is the statutory protections on what's called calcareous fens. So if you're not familiar with that, it's a special type of wetland. that is highly dependent on groundwater. The ecology of the wetland is sensitive to changes in groundwater levels, and so there are very clear and rather strict requirements on calcareous fens. So that's a great foundation. That is the basis. Those three criteria is what drove us into the master planning process, and for which we need to find a solution that complies with those three requirements. The baseline is set. In terms of that second paragraph on the previous slide, it talks about alternative water sources. For groundwater, we are primarily in the Jordan. We're gonna analyze what it looks like in terms of complying with these three requirements if we continue to add additional wells and additional pumping in the Jordan. And that would be our baseline conditions is continuing the process as we're doing it today and evaluate what impacts that might be. But there are alternatives to remaining a groundwater system and advantages of remaining a groundwater system. There's the Mount Simon aquifer. That is the lowest aquifer that was shown on that cross section. The Jordan is typically four to 500 feet below the ground surface. The Mount Simon is about 1,100 feet below the ground surface. Advantages of being in that, it's highly protected. It's deep, it has a lot of protective layers on top of it, and it is for the most part reserved only for municipal domestic use. And so that is certainly a good option for us. There are intermediate layers though also, the Wanawak, Tunnel City are two intermediate aquifers and we're going to look at those aquifers too in terms of the analysis that we do. The challenge is that not all aquifers are the same. In general sense, to produce the same amount of water in the Tunnel City or Wanawak would take twice as many wells as in the Jordan or probably the Mount Simon. So these aren't just pick your depth and you get the same results. The other challenge is that the water quality in each one of these are different. Doesn't mean they're contaminated, but when water is in these water bearing formations for decades or centuries, it adopts the material which it's in contact with. So minerals and properties of the soil in bedrock become some of the constituents there in the water that you withdraw. And we are also required to evaluate surface waters, sources from the DNR. That is not... That is a typical progression for cities that are growing. If you look at Minneapolis becoming a surface water system wholly. St. Paul, nearly wholly a surface water system. St. Cloud, Duluth, those are all cities that converted from being a groundwater system to a surface water system many, many years ago. The advantage they have is they're all next to a very large and dependable surface water source. It's a bit more scarce here in Olmstead County. We're looking at the South Fork of the Zumbro River. A lot of people say the Silver Lake not necessarily has to draw from the Silver Lake, but we're looking at upstream of 37th Avenue, and that is just the South Fork of the Zumbro.

Waterflow is intermittent.

We can't dry up the river just for the sake of having a source water. So the limited yield from that is not great to be blunt. We're moving downstream. So we're getting downstream of the confluence of the South Fork and Middle Fork, really at Lake Zumbrill, much larger watershed, more base flow, more opportunity to yield from that source, but still somewhat limited and variable in dry years. it's important that we have a dependable source. And lastly, we have to evaluate the Mississippi River. I know that's a long distance from Rochester. There are cities that have gone long distances to secure source water, and so that option would be looking at pumping raw water from the Mississippi into Olmstead County as a source for our potable drinking. I wanted to just touch on the model that we're using. So the diagram you see on the right, it looks like shading, but it's actually a grid. And so the groundwater model that's being developed is a three-dimensional model, and each one of those little squares is a data point. And so it's looking at all of those aquifer formations vertically and then horizontally, all of the demand that's being put on here, not just Rochester's municipal demand, all of the cities and all of the private wells are being loaded into the model and so that we can simulate what the outcomes are for the increased demand over the next 40 years. Looks like darker shading around Rochester in these streams, but it is the grid getting very dense and fine so that we have very dependable and accurate analysis on the areas that are part of those three criteria that I described before. Study area is large. It goes from Dodge Center all the way out past St. Charles and from Mazepa and Zambroda to the north all the way down to Fountain in the south, so about 1,500 square miles. And we feel that to get dependable results, we need to have a very good model, and this is a very good model. Just a little bit more detail on that second criteria about impacting stream base flows. The model, and you can see this correlates with those very dense mesh in the previous slide. These are all the tributaries and reaches of the streams that would be part of the analysis. The red are those streams that are designated as trout streams, are even more sensitive than others. And the blue are the non-trout stream. If you look closely, there's some purple squares. And those purple squares are the stream monitoring stations that have been maintained for decades by the DNR and the USGS. And so that is the data for which we will determine what stream base flows are and what impacts there could be. And then if you also look closely, there are yellow triangles. And those are calcareous vents. Fairly rare. We are blessed to have almost 15 of them in. in Olmstead County, which is nice from an ecological standpoint. It is another layer of complexity in protecting those as part of our future water supply planning. Sure. calcareous fens. So those are a special type of wetland that are really dependent on groundwater as maintaining the ecology of the wetland versus maybe more common wetlands that are really runoff supported. And so any variation in groundwater can really highly impact calcareous fens. So I'm not gonna go through the details of this table, but I just wanted to put it up for illustration purposes that each one of those purple squares we have through a lot of data crunching and data analysis, we have determined what is called the August median base flow at each one of those points. That is what will likely determine the most on what alternatives we evaluate will be the ones that are most acceptable to avoid environmental impacts. So we have a water demand projection, we have criteria for which to judge it, we have a model built today, and the analysis is starting, so the results are going to become available here over the next two months, and we hope to be back in October with those results. But there is an added layer to this, as I mentioned at the beginning, and that is water quality. Not just in the future, but some of the challenges we're faced today. So in regulatory compliance, we have to comply with primary drinking water standards in the Federal Safe Drinking Water Act. In that standard, there are about 90 compounds that are regulated, and they are tested in all water systems, including our water system. and they have what is typically referred to as a maximum contaminant level. So if any of those 90 compounds that are tested exceed that MCL, we are required to issue a public notice to all our customers. It's good because customers can feel confident that if there's an issue, that utilities are required to be open and transparent about the results. There are also 15 additional compounds that are under the secondary drinking water stacks drinking water standards under the Safe Drinking Water Act. And those aren't necessarily a violation if you exceed them, but they're highly encouraged to comply with those secondary standards. I did not want to give you a list of 90 compounds on a slide, it would be hard to follow, but I did pick six to just highlight. Four of them are primary drinking water standards, two of them are secondary. For example, combined radium and gross alpha. So those are looking at radionuclides in the levels that are in our source water today in the Jordan Aquifer. We are generally low, but we did get a reading of 4.9, and the units are picocuries per liter. That was one-tenth off of the maximum contaminant level, which would have triggered a public notification. Many would argue those MCLs are set very low to make sure the water is safe, but hitting that MCL triggers a public notice, and that was as close as we've come in years. Gross alpha... is another component of that. And we were within one picocurie of hitting the 15 picocuries per liter MCL. So we have some challenges here with our current source. On the bottom are PFAS compounds. Those are the newest addition to the primary drinking water standards. There are several, a couple of them have been sort of parked for a little bit for further analysis, but these two PFOS and PFOA are active. And you do see an exceedance there. I should have put a footnote. We did sample well 20, which we'd taken offline a couple of years ago. That well has not pumped into the system. but the results that we collected from that actually exceed the MCL. So in that case, that well is now essentially decommissioned. Well 12 with the high combined radium, we are curtailing the use of that because we want to make sure we understand that and avoid any primary drinking water violations. So in the last few years we have spent two and a half million dollars to build well 42 and have lost two wells. We have actually gone backwards a bit. The other thing I wanted to highlight here and then I can wrap up the water quality piece is iron and manganese. Iron at levels that you find in groundwater in Minnesota aren't necessarily a significant health hazard. They are very much a nuisance though. That is where you get orange water, Redwater complaints, people complain about staining plumbing fixtures, staining clothes, unsightliness. Manganese, if you've ever seen little black specks at the bottom of a water glass, that's usually oxidized manganese in the water. We as a utility feed chlorine for microbial disinfection to ensure we don't have microbial infections in the water system and we've maintained great compliance. We provide a little bit of fluoride just to meet the state requirements. We're required to have a certain level of fluoride And we have orthophosphate that we feed, and that is a sequestering product, and it's trying to keep iron and manganese in that soluble state. So when you pour a glass of water, it's clear. When it hits insoluble, it gets oxidized, that's when it turns red, you get black specks, it stains plumbing. There's only so much orthophosphate that can be fed to try and sequester it. Our complaint rate for water quality is twice the national average, and it is because of the higher iron and manganese levels. My point about the treatment process is we do not have conventional treatment here in Rochester where we do filtration. And that, frankly, is quite unusual for a city of 100,000. But that is not to say that the water that we deliver to customers meets all the primary drinking water standards. It has some aesthetic challenges for sure. Water treatment is certainly a big part of this study. When we look at water quality in the Mount Simon and those intermediate aquifers, they probably have more significant issues than the Jordan. All of those issues can be addressed with conventional treatment processes, but the idea that we could pump directly from those aquifers is unlikely. I would just say that, so. Next step, coming to the home stretch here, we are actively modeling and looking through all the alternatives. We're gonna go through conservation measures and how we can drive down those future demand projections. We should have results in late October, and that will really start to illustrate the path that we need to go down if we're going to have a sustainable water supply for the city in the future. It will also then, rolling into Q1 of 2027, as I mentioned, they're going to estimate all the infrastructure costs, and we'll have the financial piece of that in the first three months of 27. So, with that, I just wanted to add one other slide, so there's not confusion. This information will be coming late this year and early next year, but there are some items that you'll see on your agenda coming up in the near future. While we do this study, growth does not pause. It's continuing to happen and we've encountered some fairly significant expansions of the water system that have been a capital demand on the water utility. Water utility throughout history has minimized debt. We've tried to operate on cash and not issue a lot of debt, particularly for capital. But we do have some large projects that are coming up and we are going to need some short-term debt to weather through that spike in growth. One of them is trunk water main upsizing. We pay developers and we direct them to build water mains larger than they would otherwise need to build. We need that for transmission capacity to move water around the city. They do that and we reimburse that incremental cost for upsizing the water main. Typically that's about $150,000 to $200,000 a year. Last year it was over $800,000. So we saw a lot of water main go in last year. We have an advanced metering project that will be a great benefit to customers and Water meters need to be replaced every 20 years because the battery dies, so we're just getting into the early stages of implementation on that. It's a large project. Southwest Rochester extension of water and sewer, working closely with Public Works to get a joint project out to bid to extend water and sewer out of Along Country Club Road. And lastly, doesn't happen very often, but once in a while we create a new pressure zone, and that is actually occurring with the Pebble Creek project. It would probably be one of our last major pressure zones to be created, but in order to create that, we need a booster station, and the Kalmar booster station is getting ready to be bid also. All that being said, we need some short-term financing. somewhere in the order of two million a year, up to about 10 million to bridge us to the point where we have this master plan done and we have different financial models in place to carry that. So with that, hopefully not too long winded, but available for any questions that you might have.

I'll start off. So you mentioned that Rochester does not have a traditional filtration system. Can you talk about what kind of system we do have? And then if we don't have a filtration system, how do we treat the water?

Sure. So today at each of the individual 32 wells, we feed chlorine for disinfection. We feed a low amount of fluoride based on state requirements and we feed orthophosphate to try and control the iron and manganese precipitation. That is it. It goes out of the distribution system and goes to customers. There is no centralized plants or treatment process in the system today beyond the chemical feeds that we do Typically for a groundwater system, they are gravity filtration plants. Water comes in, there's some products that are added to make the iron manganese precipitate out and then it goes through filter beds and then it goes through finishing basins and it's pumped out into the system. The advantage of having centralized treatment is you have a facility in place and everything sort of plumb back to a common location. So if new contaminants are detected and new treatment processes are needed, it is something that can be added on to the existing treatment plant.

so if if we were to go with a um something other than the jordan aquifer or surface water would we have to have those plants in order to commingle the water supply is that a necessity we we likely will for the mount simon or those other aquifers they just would not coming out of the ground would

We're collecting a lot of water quality data as part of this study, but the data that I've seen so far, it's unlikely that they could be pumped directly like we are from the Jordan. Surface water requires a very high level of treatment. That is a different type of treatment plant that is needed. And you can treat just about any surface water. It's just a matter of the processes that need to be put in place. But a surface water plant is even more extensive than a groundwater treatment.

So would we have two supplies of water, or would we have to then have a treatment plant for the water that we pull from the Jordan?

There are cities that blend surface water and groundwater. I am still optimistic that we will find a groundwater solution because blending different sources of groundwater is a more manageable process than trying to blend surface water and groundwater. It can be done and is done even in Minnesota. Um, but it is a little bit more tricky and, and, um, I'm hopeful that we will remain a groundwater system. Yeah.

Thank you. Council member wall.

This is absolute hearsay, which is never good. I understand that perhaps a data center nearby was proposing to drill two wells into the Jordan. Is that correct? And how would that be possible given the state's restriction on use by a city?

I'm not avoiding the question I don't know the the gritty details or what I've heard I don't know is fact and so I want to be cautious with that I will say that this study is bringing in all of the cities within that large study area so they are very cooperative we've been having quarterly meetings with all of the cities representing primarily all the high-capacity wells in the study area They have given us their water demand history, and they have helped us develop water demand projections for each one of those communities. So this is not just Rochester, this is the Jordan Aquifer, which nearly all the cities are tapping into. The results that we find are not just going to apply to Rochester, they will likely apply to all cities accessing the Jordan. So we're very much dedicated to working together with them. There are the one-offs of a data center or something that comes in. Until we know specifically what they are and they're willing to sit down at the table with us, we can really only speculate.

Councilmember? Council Member Keene. Yeah, I appreciate you guys being here, but I guess I want to kind of highlight that this is a major change for Rochester. When you say we've been doing groundwater for 100 years, that this would be a big change, not just to the way we source our water and the technology behind it, but also probably in the cost of the water. And I just, I know you're saying this is a regional study, but I do want to understand when you say we're not allowed to drill wells right now, is that a Jordan aquifer rule or a Rochester rule?

That's a great question. And I've asked the DNR. The DNR has stated, and fairly so, they said if someone comes to us, we intend to give them the same response as they gave Rochester. They're not in the business of reaching out and telling people they're in a moratorium. But if a city, whatever city that might be in this area, came and applied for a new well, the DNR has said that they are going to treat everyone equally and they would probably get the same notification. They may get away with one more well, but then they would be in the same channel.

Okay, the reason, my line of questioning really has to do with, is this a tax being levied on to Rochester to figure out for a natural resource that doesn't boundary our city or even our county, or is it something that is regionally significant, both problem and need for a solution?

Yeah, I'll start out by saying it's not unique. It's happened in other parts of the state. Out in southwest Minnesota, they had similar challenges. Many years ago, Burnsville Savage went through this. The East Metro is really struggling with this issue. In fact, to the point of there's been litigation, and that's common knowledge. This is the DNR trying to be responsible managers of the system and intercept issues before they become either crises or lawsuits, to put it clearly. And they have been very supportive of this study. In terms of the cost being burdened at this point, Rochester is... 95% of the volume of the water being drawn out of the Jordan right now. I mean, there are other cities and there are other systems, but all of those systems combined is less than 10% of the overall volume, which we are 90 plus percent of.

And so we have taken the lead on this.

I think there are other opportunities as we find what path is right for everyone. And and those could include some consolidation of wholesale water supply, of treatment processes to adjacent communities and other options, and cost participation in those efforts.

Okay, all right.

Can I also add to that as well? Yes. Todd, I think, understated the regional nature of the planning effort that's happening here as well. Although we are leading the study, we have invited and many surrounding communities have sent their engineering teams, their data, and there's been joint planning efforts together. So a lot of our surrounding communities are actively working with us in providing data, even though they're not financially contributing yet, but we've seen great partnership from them in studying this as a regional issue. And I don't want that to be misstated or understated there. We've seen good participation from our peers around.

Okay, I appreciate that because I do worry sometimes, but your numbers surprised me with the 90% when we're about 80% of the population of Olmstead County and the Jordan Aquifer doesn't, know our boundaries and listen to our political boundaries there. The Jordan Aquifer is much bigger than this. And I'm trying to get my head around this other sort of concept that the population density is what's really stressing groundwater supply. But is there sort of, I know there's how much the $5 billion that we're allowed to take out per year, but how much active return is there to an aquifer every year? Is it, you know, it's healthy to be at 90% returned water? I have no idea how to get my head around that.

That is a great question. You're really cutting to the core of what the groundwater model does. It is, to some degree, a water balance. And that model will not just run out to 2065. It runs out an additional 20 years to make sure that Whatever aquifers we choose have reached a steady state and mean they're not on a downward trend and that the recharge is balancing the withdrawal that is at the core of what the model does is the question you're asking. So it's a very good question.

No, I appreciate this going on, and partially I don't think people appreciate the significance of water until you start getting shortages. I know I do some trips with some friends that live in the southwest, and this is a major political issue all the time that we've been above. But it appears we're on the cusp of getting more into it as a regional issue that has both quality of life issues but also quality of drinking water, but also cost sharing, which can be difficult. So I appreciate the update today.

Thank you. Council Member Doering.

Yeah, I also very much appreciate the update and just have a few questions about infrastructure pricing, right? So I heard you earlier in the presentation talk about maybe tapping the Mount Simon aquifer and that that aquifer sits below basically double the distance below the surface than the Jordan aquifer. So does that mean a double, to drill a well into that aquifer, is that double the cost of a well that goes into the Jordan at this point or? Am I thinking about that the wrong way?

More or less. There's increased costs. I would probably not classify it as double. There's mobilization and getting there to begin drilling. The cost is greater to build the well. The cost to pump on an annual basis is greater from the Mount Simon. So there is a cost-benefit balance that we're going to have to consider in the equations of all these alternatives. not just where can we get the source and how do we ensure it doesn't have environmental impacts, but what is the most reliable, lowest cost option to choose from? And those play into that equation.

Right, and increased treatment is also I heard from the Mount Simon Aquifer. And then in terms of pumping surface level water, Is that a more expensive option than drilling a well to the Mount Simon aquifer because of treatment?

Yeah. I mean, if we're securing a source water from the Mississippi and pumping raw water 40 miles, there's a substantial cost to that. Yep. A water treatment facility for a surface water system would be substantially more than groundwater, to the point where the differential cost for drilling another 500 feet is probably not really in the order of magnitude of what we're dealing with. Cities build surface water treatment plants. It's not impossible, and it's not, I wouldn't classify it as financially devastating, but it is a big investment, and they last 100 years. So the costs would be substantially more for a surface water system.

Yeah, I'm anxious to see the data in a couple months to see both the conservation numbers and how well we're doing there, but also to really look at options. I agree with Council Member Keene that this is disturbing to hear, but I really appreciate the work that has been done to get ahead of an issue before we get into a... a scary situation, I guess.

If I could just add one closing comment to that, and I appreciate that statement. There is a solution. We will find the solution, and we'll make sure that it protects the environment. We will get to that place. It's a matter of time, and we are not in crisis mode today. Five years seems like a short runway, but we're already a year into this. We will get through this without being into a crisis situation.

Councilmember Miller.

Thank you. I really appreciate the analysis. I wanted to bring up another related plan that we've heard about recently, which was the urban three analysis, which included water pipe as one of the utility or infrastructure types. Wasn't the worst one. It's behind where current spending versus needed spending is. It's well behind roads, but it's still showing 17 and a half million dollars annually as a gap between where current spending is and what projected spending would be. So thinking about this and ask for investment, Could you talk about how you're utilizing that analysis in your planning, how it's informing water system planning, and how you're advising us as well on how we think about growth in the comp plan, annexations, new developments, et cetera?

Sure. So in reality, this is a two-part study. There are actually two consulting firms working together on this. A lot of what we talked about is groundwater analysis and water source water, and that is one of the consultants. The other consultant is develop the water demand projections, has to step back to solve the source water issue, and then they will come in in Q4 and Q1 of next year, and they will be the group that will be determining what is the infrastructure just to get the system modernized and functioning correctly, and if treatment plants are needed, how much do they cost? But they will also look at the very information that Urban 3 was identifying, and that is, are we investing enough in the water system so that it is being maintained properly for future generations? So that all plays into the study, yes.

I'm glad to hear that. My second question is about that funding request. And I'm just looking for clarification. It says request council authorization to issue up to $2 million annually. Would those be annual requests or one request over five plus years?

It's a bit of a typo on there. We're estimating about $2 million. So I look at those projects and it depends on how much trunk water main oversizing we have and so forth. It could be two or maybe slightly more, but we do not believe that it will exceed $10 million over the next three years. So I know it seems a little vague, but the Southwest transmission extension is going out to bid here. hopefully in a matter of a couple of weeks. CalMAR is going out to bid in a matter of a couple of weeks. We're going to have to start, we will start getting hard numbers on what those actual costs are.

And from a timing perspective, the study results from the groundwater study should be wrapped up and available come October. How will these funding requests be aligned with the timeline of the study results?

Can I take that one, Todd? Yeah, sure. So I would ask that you think about these two things in two separate buckets. The water system master plan, the groundwater model is really results that we will think about next year and incorporate into the 28 and 29 budget. I don't want to get ahead of the city administrator's recommended budget, but this short-term debt issuance is part of our strategy on navigating the next couple years before those new system assumptions are put in place. This is based off of growth that has already happened, and it is based off of anticipated system expansion that we need in this next year to two years to meet the rate of housing development that that's happening. That's an overall good news item, I would argue, that we're seeing housing growth. The development-related fees for the water utility have funded historically tower storage, but not trunk main oversizing, not new well development, and not new pressure zone development.

Those have historically been rate funded.

So we're in this period of a couple years where we chose intentionally two years ago not to try and change development fees to get ahead of this, knowing that we would be in this situation because we didn't have the planning work done for the basis of the new fees. So debt funding is a strategy. It allows future ratepayers to pay for infrastructure that's needed today. And so we're doing so in a recommendation that fits in with our budget recommendations. We would anticipate coming back to the board with the recommendation to come to council in the next 30 to 60 days for approving this up to 10 million of debt issuance one time that fits in with the pro forma that the council will see very shortly here with the city administrator's recommended budget and the board recommended budget as well.

Okay.

Thank you. Thank you, gentlemen. And as Council Member Doering said, thank you for getting this in front of us now and keeping us updated as it progresses. Moving on to RPU power supply plan update.

Well, this is a plan that I will stay here for and invite Bill Bullock, who I think you all know and has been present here and been carrying a big portion of this work for us. I do have a bit of sadder news for us. Bill will be moving on to another organization and moving back east here shortly. So this will be the last time you get to hear Bill present on this behalf. But I do want to give him significant credit for the progress he and the team that have been working on this um sitting here a year ago there was a bit of uncertainty as to what where we were going in relation to changing tax code and tariffs and we've made a significant amount of progress towards our power supply plan and so i'd like to give bill the opportunity to report out here on where we have come in the last year and then set the stage for the remaining work that's still ahead of us as well so with that i'd like bill to take over and give you an update thank you tim

It's good to be here. I'll give you an update on the power plan. I think you've seen this before. Our plan always has been a balance between the reliable capacity that we need to meet a peak day like today when the wind isn't blowing and it's very hot out. and the renewable energy that we need in order to achieve the 100% net renewable goal by 2030. The chart below shows the progress we've made. As you can see, seasonally, summer is when we need the most power. Winter is when we need the least amount. And today, I think we're close to the peak of about 294 megawatts. So as you can see, the hashtag items are things that are not firmed up yet. They're still being firmed up, but we do have a line of sight on them, and we have contracts in place. The same thing on the renewable energy side. We're about 2 thirds of the way there if everything that we assume goes right. So I've kind of compared this process as things ebb and flow to be sort of like playing snakes and ladders is the best analogy I could come up with because the goal is to get to 100%. It's to get to 100% at a reasonable cost. and the path is less straightforward than uh it would be otherwise um in this uh scenario the the ladders are the strategic decisions we've made like in the uh signing up for power purchase agreements um implementing battery storage and uh building our own firm capacity um we've also by acting quickly and with with the help of of the council and our board um have been able to enter into contracts that have safe harbored the tax credits that were canceled last year. And we've been able to use supply diversity, so we have a number of projects. And I think we'll need more in order to meet the 100% goal. Now, the snakes are the same things we talked about as hurdles to our program, and those are tariffs and inflation, the expiration of the tax credits, some permitting issues, and then market accreditation for some of the assets. FIRST, ON THE CAPACITY SIDE, MOUNT SIMON STATION CONTINUES TO BE A GOOD NEW STORY. WE JUST EXECUTED OUR INTERCONNECTION AGREEMENT WITH THE SYSTEM OPERATOR LAST WEEK. That came in at about 25% of the cost we estimated, so we saved about $15 million on the interconnection because we went to a accelerated process with MISO. We did have to pay a little more, but all of that extra went toward the costs of the interconnect. And, you know, Mount Simon is important. Maybe the only sake here is we should have built a bigger ladder and maybe made it a little larger. But it is moving along well and we're prepared to go for the air permit in the coming weeks. We also implemented battery storage, and that was we're doing 20 megawatts, 10 megawatts each at different RPU sites. It's a tolling agreement, meaning we operate the asset, but the developer will charge a toll for us using it. and they'll be responsible for maintaining it. The only, this is mostly the latter, the only snake possible is future accreditation in MISO is uncertain. So because batteries have a limited storage capacity, after four hours you run out of the ability to operate it at full load. So the accreditation you get from MISO for those is at risk in the future, particularly when there are more of those batteries in place. A lot of this plan was put together because we are exiting SIMPA and the Sherco coal plant where we get most of our capacity from is set to retire at the end of 2030. So the blue teal items chart shows where we still need to fill some of that capacity need to meet our needs into the future. So the black line is our capacity obligation, which is basically any... Mr. Bullock, can you hold a minute?

Council Member Doering?

I'm going to let you finish explaining this slide, but I have a question about it first, afterwards.

Okay, just the black line is our capacity obligation in MISO, meaning it's whatever our load is plus any capacity that we've sold to the market.

My question is about the GTI replacement component of this. Is that going to be reliance on fossil fuels there? Is it going to be renewable?

Yes. We, you know, as you know, last year GT1 at Cascade Creek had a fire. we looked at options and Repairing it and returning it to service was the lowest cost option that is mostly covered by the insurance policy on that asset So we are our plan is to replace it extend the life for another six to 10 years and then have a planned retirement of that. And hopefully in that timeframe, the battery technology will have been advanced so that longer term duration storage is available. I think that might be enough time for that to be replaced by something more renewable. Thank you for that clarification.

Council Member Miller.

I have a question about the black line for the capacity obligation. Obviously, today is a hot day. You said the wind isn't blowing too much. It's really hot outside, a lot of cooling. So that's a top hour of use. How many of the, you know, let's say like the top 100 hours per year, how much of that capacity obligation would our top 100 hours per year of demand represent?

It's very close, but we are charged capacity based on MISO's peak day. Our peak day is not always coincident with their peak day, but it's close because it's basically based on the hottest day of the year.

There's a, this chart here represents only the summer season peak hour. So it is one hour that we align with MISO's peak and we have to have enough accredited capacity to meet that peak hour obligation. There's really four of these charts that we plan around. This is the driving season here. And so this is like earlier, we have to plan for droughts. We also have to plan for our peak hours to have sufficient generation to meet our our loads that we use in the market.

And so related to that, demand response was one of the earlier reliable capacity categories. Can you talk about its role in planning for these peaks, planning for the capacity obligation?

Sure. It does help. We do have an existing program, which is mostly thermostats. So we do control thermostats on days like today. It's more useful in the summer, obviously.

What percentage of customers participate in that?

We have about 2,500 devices enrolled.

Roughly 3% of customers are enrolled in our thermostat program today.

And so we've looked at modeling on the water system. Have you modeled what an increase to 10% of customers would represent or increasing that program? I'm also just curious about the time of use rate around electric vehicles, shifting those customers to overnight usage. Have there been conversations modeling of what time of use rates around the peak hours could look like?

Yeah, we do provide an incentive for customers to go on to the time of use rate. So in order to get the incentive when they register their EV with us, they will get automatically enrolled in the time of use rate. But time of use rate is also behavioral because it's like some participants watch their energy usage and their energy bill and then adjust their behavior accordingly. Some do not. They just pay their utility bill. So there is a certain amount of slippage in that people don't necessarily respond to the time of use rate.

They do sign up for it, correct?

They do. They sign up for it. Yes, they do.

And how many people have signed up for the time of use rate? Do you know how many? Or how many customers, I should say.

I will have to get back to you on that number. I looked at it earlier in this year, but I know we've had more. So let me take that as a follow up on the number of time of use electric vehicles. We've had more whole house time of use signups as well. I'd have to look back at some numbers. We're talking in the less than 100, I believe, total for time of use.

And so 100 customers roughly are participating in this time of use rate around electric vehicles. Are there other time of use rates currently available?

We have the electric vehicle only time of use rate and we have the whole house time of use rate as the two options that are voluntary programs. You would have to have an electric vehicle to do the electric vehicle version of that. But whole house time of use is available to all customers and we're hoping to continue to expand that program because it's a passive rate structure and incents the right behavior. It actually saves customers. Ken can save them considerable money and it saves the utility future demand costs as well. Our ability to expand those programs will grow as we finish our advanced metering project as well. The metering technology is a core part of that program's ability to have data to provide to the customers to show what they might save as well. We'll finish our advanced metering project on the electric side by mid-28 and be able to continue to advance those rate structures beyond that timeframe as well.

Then are there assumptions built into these future years of into the 2030s of increasing utilization, increasing subscribership to those rates?

Yeah, you can't see it. It's encompassed in that black line and it is assuming continued and steady growth in our programs. If you looked at our resource plan from a couple years ago and early projections of electric vehicle adoption showed significant demand potential for new electric vehicles. The rate of electric vehicle growth has been fairly moderate compared to some of those projections a couple of years ago. And the demand growth has been fairly moderate as well because of programs like time of use. It is the best program out there for an electric vehicle driver. It will almost immediately save customers money and avoid infrastructure costs to go on to time of use because it's a very simple thing for most to just set it to charge overnight. It doesn't add new demand. It saves on energy costs and it saves not only the utility, but all rate payers the cost of that extra infrastructure. Demand response and conservation are baked into these assumptions as well. What we're really here focusing on is the need on the supply side of our equation because we have such a structural change coming with our wholesale supplier in the next few years. And that's really what the primary focus is. It's not that we're ignoring demand response. It's baked into these assumptions. And maybe to get to the park the next question for the end, what does it mean for the next step? We can talk about that when we get to the end of the presentation.

Anything else? Nope. Nope. Continue.

One of the contracts that we signed last year, there were two renewable energy with a local developer for existing wind projects. One was not operational. One was. They both are operating now. So the risk mitigation of these were that they were already operating, so they didn't need any permitting. They weren't waiting for tax credits. The only issue we came up with with Adams Wind is currently operating at 50%. So about half the turbines are operational now. And the Dodge Center Wind project is currently behind the meter for Excel and Dairyland Power Cooperative. We're working with the developer and those off-takers on a solution where they actually use it as a load-modifying resource. So in order to participate in the market, we need a change to the interconnection of the contract. There is potential for that project. It is a very good price. So it is potential that we could upgrade those units, give us the dispatchable capability that would allow it to be in front of the meter, and we'd still have a good, affordable source of wind energy. The big project we have is a 180 megawatt wind project in Iowa. Again, they safe harbored those tax credits. The expected start date was late 2027. Now it's late 2028. And the big snake that we've hit on this is the permitting is being held up at the federal level. So there is a permit called the determination, Determination of No Hazard, which is issued by the FAA and the Department of Defense or War. There are currently 165 wind projects waiting for that clearance. So they are stalled at this point, but there are the developers of the project as well as many industry groups are working on legislative solutions as well as judicial solutions. And the communities that these are in want these wind projects. They not only provide jobs, but they also provide a tax base. And they are farmers for the most part. So in the current environment where the farming community is suffering economically, it would really help. So I think there are a lot of stakeholders that are trying to get these permits cleared. and then a good news story of city and their utility cooperation is We do have 20 solar projects on city buildings The state was providing an offer that we couldn't refuse it was basically a 70% of the invested cost would be covered by a state grant and We'd still be we'd have accessibility to the investment tax credits, which are 30% of the cost. So basically it's a free solar installations across 20 buildings. They're not huge, but they do help. So it's about 1% of our annual load with a $2.9 million total investment. And this contributes to our renewable energy goal as a city. And these have been easy to implement. So these are being installed. I get invoices every week from the developer that is really working hard to get these installed quickly. So on the game board, this is where we are now. We're about 2 thirds of the way to the goal. Of course, we could hit more snakes if the permit for the 180 megawatt wind project never comes. That's a big hole to fill. You know, if the accreditation on the batteries goes down, we'll need more capacity in the future. So what we need to do is make more rolls of the dice so that we have more chances at securing that 100% goal. And with that, we are undertaking an RFP. We did an RFI a year and a half ago. We got some answers. Then the tariffs inflation came in and big policy changes did change everything during the course of that. So now this RFP will be more solid. It's going out to investors. even more developers and trying to expand the realm of possibilities. I think we call it casting a super wide net. So this will refresh the work we did in 2024. So we should have recommendations by the end of the year, and we'll be able to model that portfolio and come forward with more opportunities to meet that 100% net renewable goal at a a reasonable price within our current rate structure hopefully. So that, I know there.

Can I ask a question about the last slide? So is that in response to the delay with the Northeastern Iowa project? Is that this request for?

It's partially, but it is also filling that third, the third that we don't have yet. So we're hoping that that wind, because wind is the lowest cost in the Midwest, and it is a good contract. So we want it to survive. But, you know, it's out of anyone's control at this point. Well, it's in someone's control.

So a follow-up question to that and using your analogy there. So I saw the snake that was coming, that snake. do you have more ladders that you're, you're looking at just in case? Yes. And that's the idea forward from 66 to a hundred.

Yeah. That's the, the idea of this RFP is it will create more options, find more ladders. And we know that we'll, we will order rank the responses because there is a lot of competition for these resources. If someone can build something renewable right now, if another utility will get it or a data center will try to gobble it up so there is a lot of competition competition for resources right now so we want to create as many and what we found with those other projects that we've already executed is that moving quickly from this process knowing what we're looking for really helps you to nail that down and it really is about contracting efficiency So I think we've got a good, you know, Michael's been very supportive of our efforts there. So we are able to negotiate very quickly with the developers and that speed is our friend on that.

To add maybe to your first question, is this RFP in response to the wind delays? I would say it's another backup plan in case that doesn't come through to find additional renewable supply. But as we left it last year, we had secured about two thirds of our capacity needs for 2030. We still need about 100 plus megawatts of capacity that has not yet been identified. The options in front of us are a large scale battery storage system or a contract with another firm utility that may have supply out there to sell. We do believe there is some. Some of the projects that we had been watching in the market that we had contemplated joining in the last year have disappeared. They're not going to come across the finish line. And so even the landscape has changed a little bit. And part of the RFP response is to see what else is out there. to look at our to further bring the analogy forward, more ladders is what we're looking for here. Also on the renewable energy side, not just because of the delays on the Northeast Iowa project, but we left about a third of our renewable energy supply unsecured. So we still have to meet our 100% by 2030 goal and sustain it. We need about another 100 megawatts of wind energy beyond as well. The pricing has been not very favorable in the last year because of the tax code changes. And so we have time until about 2031 or 2032 to make that decision. This is another test of the market to see what's out there. We do believe if the Northeast Iowa project comes through, we will have secured our goal in 2030 for a couple years, but we need more to sustain that goal well into the next decade beyond.

Thank you. Council Member Wall.

My question has to do with the Howard County wind project as well. The last time we talked about this, I thought perhaps there was actually some concern that it would come on so early that we would have excess power that we would need to try to offload. So I always try to see the positives. Is it okay that it's delayed a year?

That is a positive, though what we were counting on was banking those wrecks so that we could use them in 2030 and comply with the...

WITH THE LAW.

SO DEPENDING ON WHEN IT COMES ON, WE'LL HAVE FEWER RECS IN 2030.

THANK YOU.

Yeah, I appreciate seeing this. And of course, I see it in my other role with, but I want to go back to the reliable capacity chart. And just, and I, again, I just think just to maybe spend a minute on this to make sure what we're talking about here is like our, the capacity that we need to show MISO so that we can come and buy, but these are not reflective of like our real usage. Our usage is dramatically lower than this.

Well, our usage, this is only the peak power on the peak day that we need. And the black, that's what that black line is.

Yeah, and I want to support that. I really understand their goals and why we have to do it. But I don't know if... as someone watching this would understand that we run that maybe a couple of times a year and not, and when you look at the wind they're running, you're getting 40 megawatts of capacity from it, even though it's 220 megawatts. That would cover our capacity most days of the early summer and fall. And I don't think we're communicating that very well with these charts. I wonder if it would be helpful to show some normal days.

I appreciate your question and I think I understand the point that you're making there, and it's a very valid point that not many people, I think, understand about how power generation works. This chart is more like saying I don't have a pickup truck, but if I had a pickup truck, it would probably have 500 horsepower. It's like saying I have a 500 horsepower pickup truck. But it doesn't say anything as to how many miles you actually drive it. This is about the nameplate capacity of our resources on peak days. Our actual generators run 10% to 20% of the time during routine operations during the year. So this is just to meet that peak day of the summer type year. I think that's the point that you're making.

Yeah, I guess as a utility professional, this is what you have to worry about to make sure that we can participate in the thing. So I appreciate that that's there. But as a person trying to understand this and our 2030 goals and our cost that we're driving, I think it's important to understand what the... average business day looks like and not the fact that you guys in my soul really really need to worry about today because this is the day that drives the two hundred and ninety and is probably other parts there so i'd appreciate it but i don't think we're communicating what we want to communicate all the time that that's my point tonight i don't know if if if you tell me like no you don't understand because because i've seen days where we show here at the bottom I might understand that we're always running that dispatch well because it's at the bottom. It's what we build on. We don't run that unless the demand goes up a higher numbers. And I wouldn't get that from this chart. I would get it from trying to throw myself into this over the last couple of years and understand it better.

I have been accused of bringing too many charts and graphs to a session. And so I've opted to back away from those. You're making a great point. And most days, if you would come to our control center and look at the screen, we're operating almost none of our generation in town. It's reserved for peaking days, for very expensive times, because we have to meet that. Largely, we're leaning on grid resources. We'll be leaning on our wind contracts largely into the future. and really what's changing is a coal plant going away, and that is the fundamental problem that we're trying to solve here by the end of this decade, by end of 2030.

Right, and what has also driven this council and the city to come up with this goal towards 2030 and that renewable, and I appreciate we're still 30% away from solving that, and I want to make sure we all understand that, and that ties back to the, we thought we'd solve some of that with the credits we were running through the when we were running in 27, 28, 29, and we're not doing that now. So that's part of it. So I also wanna kind of go back to the state buildings and make sure I understand this. You did this thing about, this is a really helpful thing that 70% of the costs of these are being paid. But I don't see where they help our capacity numbers. I see where they're offsetting or basically solving our demand, but they almost look, from my perspective, they're behind the meter and they're not part of RPU. They're almost part of the city generating its own energy and then selling back too. Do I understand that right or is it?

I would say these are more on the energy side of our resource plan. They're solving part of the renewable energy appetite that we have. Solar in our region on a peak summer day has about 20% contribution to the peak. So if this was 100 megawatts, we would get 20 megawatts of capacity out of it. So it's a much smaller contribution on capacity. But we're bringing both an update on energy and capacity here. And this is not only good from its value it's providing to our renewable energy plan. This is one that will reduce the cost of government in the future as well. And that's one of the reasons we wanted to include it here with the ability to cite this on all platforms. public buildings and take advantage of the grant, it'll reduce future operating costs once the capital's recovered up front. And this cuts across all city operations, fire stations, civic center, utility center, many of our buildings. And so we brought this forward. It's actually 0.1% of our energy.

So it's literally... That's what I was trying to get at. It's very...

It's a drop in the bucket, but it's, I think, more... It's a cost of government and it's a good news item. And this will reduce future tax levy pressure that exists as well because utilities are something that tax levy goes towards on funding government operations.

So I appreciate it on the cost of government. I also appreciate it on the idea that we're providing renewable energy through another source even though it's not rpu but it's very similar to what a lot of our residents are doing by bringing solar to the community uh and again we're not highlighting their thing that helps us offset like almost like a demand management side there either so we're doing it on this government thing i appreciate there but i did want to put it in perspective as like a percent of one percent you're very very correct okay uh and then um as far as the um the RFP for the 2030 renewables. I'm expecting to see, hopefully, that we're gonna see some proposals for renewables. I'm expecting to see some proposals for non-renewables. And I think the fact is we need to consider both because we need to get to that 2030 number Whether it is making it with our renewables or whether it going out and buying capacity because we are holding to the thing that our power purchase thing from Sherco is going away in March of 2030. Do you want to talk about is there other things that are going to be bid in potentially?

Yeah, I think the range of options that we're exploring here will cover what we have already seen with renewable energy contracts, like wind power purchase agreements. We'll be considering probably new bids that look like those for us. And on the other end of the spectrum, we'll look a lot like what the SIMPA contract is today. So we will likely get bids from other utility suppliers, maybe even SIMPA themselves on what a extension of a power supply contract that includes capacity energy and renewables all bundled together might look like I believe we're not in the realm of possibilities of trying to build a new larger power station here in Rochester so everything we will see is going to be a supply contract of a various kind from another counterparty whether that be a renewable energy developer private merchant plant, another traditional like utility demand response aggregator. And so we'll be bringing back a portfolio of options that is solved for lowest cost and also meeting our goals to sustain 100% net renewable electricity. But it'll probably bring some traditional looking power supply contracts in that mix as well.

Thank you. I wanted to bring that into our discussion today. I also, I guess I should preface it and say, I don't find that to be a terrible thing. I think that actually gives our utility some potential to wait for some of this battery technology or other things to mature to the point that it would be a better solution that we could look at in 2031, 2032, depending on what kind of contracts we sign. prior to that. We don't want to make a 30 year commitment to something that we can't get out of, but it is something that we do need to get to that capacity number. So thanks for your work. Council Member Miller.

Could you go back to the reliable capacity graph as well? So I want to ask again the question I asked about the water planning and going to the charter and the utility boards charge to be authorized and required to restrain and prevent so far as possible any and all waste of electricity. How do you interpret that directive in this kind of planning?

That's a big and broad question that I think about a lot. I would start by maybe going back to some of the original. That charter provision has existed since the original charter of preventing and restraining waste. And so I think if you look back, I would argue that it was probably around unrecovered revenue and people who are not paying for electricity as a part of it as well. So part of that is the utilities obligation to recover revenue there. I think a modern interpretation is exactly in line with what our programs are today. We have significant annual investment in conservation program to help find more efficient and using less electricity. We have demand response programs that will likely shave our peak today by up to six megawatts of what it otherwise would be with our thermostat program. So I think what the board's responsibility is on preventing waste of electricity and water is exactly in line with what we're trying to target here as well. provide the energy necessary and to the degree possible, restrain the uncontrolled growth of that, the efficient use of the infrastructure. But we have a core commitment as utilities to deliver the infrastructure and provide electricity when it's needed and provide water when it's needed as well.

And the conservation programs are pretty robust here. So we are investing along with our customers in their own buildings in order to make them more efficient. And overall, that is usually the lowest cost of supply.

Right, which is why I bring it up. It's cheaper to reduce demand rather than build something new to serve those same megawatts. And so I guess I'm curious, when you talk about the thermostat program, for example, having 2,500 of 60,000 customers, I would assume the majority of the 60,000 have air conditioning.

I would assume that as well. Most have air conditioning.

So I guess my question is, when we think about this and think about the opportunity by that gap,

how do we get there how do we get to 50 of customers participating so we move from six megawatts shave to a significantly higher rate well first you need um everyone to buy the same thermostat for their house that can be supported by the platform that we have which is difficult right there are a lot of different options. I mean, the market leaders are, you know, Nest and Honeywell. So you can get a lot of those. But then when you get into, like, the lowest cost, like, thermostats you can buy on Amazon are not going to be compatible with a typical platform. So, you know, it is difficult to wrangle 60,000 customers to all do the same thing.

Does the advanced metering infrastructure give an alternative?

I think as far as I think for identifying waste, the AMI is definitely a good tool because you can see people that are using more than they expect. That's where you can get in and really figure out what their issues are.

Would it be possible to incentivize those customers once those meters are in place with a rebate rather than a time of use or peak rebate?

Yeah, I mean, even right now, customers can go into the portal, see what their daily profile looks like.

Sure, which is great information. And if they didn't spend that, they would spend less on electricity. But I guess to this problem of our capacity obligation being driven by some of our heaviest utilization days, how do we reduce that 294 megawatts?

Sure. You're making... good points in my experience and this has been a twenty year frustrating challenge to try and uh... get more and more active participations from customers in this space not everyone wants a nest thermostat not everyone has the capital to invest in a new furnace that comes with the fancy new thermostat program these are slowly changing dimensions of our housing stock as well so i think there are limits that we recognize of what is the available market and the available capacity we part of our incentive programs and our rebate programs are exactly for this purpose to get more efficient appliances heating systems active control of those and that's built into these assumptions and there's i think an upper limit of scale and pace at which we can do that on a cost-effective manner it's not that we're ignoring those things it's just the scale of the larger problem here is far beyond what can be solved with demand response alone.

It is a very important part of the program.

But for our 20 years of conservation, that black line would be off the chart and you wouldn't even see it. We've reduced the need of our peak demand by over 75 megawatts by 20 years of investing in capacity. It's absolutely worth celebrating. But that big block of blue there of additional capacity needs cannot be solved by demand response alone. It's a key part of that, and we will openly look for options for aggregators and others that can bring those things to the market as well beyond what we have today.

So my last question is about how we might think of other areas of our local jurisdiction in part of this. And I'm curious, we often hear from renters that they wish that they could participate in programs. They would make investments to their housing unit, but for they don't own it. Would RPU consider working with us on programs that would bring up efficiency standards for rentals, especially for electricity and water usage? How might we think about those programs for customers who say, I wish I could do this, but I don't have control over my housing unit?

I WOULD LOVE TO HAVE MORE CONVERSATION ABOUT THAT EXACT OPTION ABOUT HOW WE COULD WORK TOGETHER ACROSS UTILITIES AND PLANNING AND OTHER PARTS OF THE CITY THAT COULD WORK TOGETHER ON THESE. IT'S BEEN PART OF THE WORK THAT I'VE BEEN THAT'S WHY I DO THIS WORK IS BECAUSE GETTING EFFICIENCY INTO HOMES AND LOWER UTILITY COSTS IS A KEY PART OF HOUSING AFFORDABILITY. And that split incentive you describe of I live here, but I don't own it and I can't invest in it is one of the core challenges of this work.

And when should we expect it? Should we expect an update in November on this timeline?

We have a meeting to kick off this RFP later this week. That timeline will adjust based off of the RFP timeline. I would expect we're probably in decision mode in Q1 of next year after we have time to look at the proposals that come in over the next six months.

Great. Thank you. And best of luck, Bill, in your next endeavors.

Council Member Doering.

Yeah, just to follow up with Council Member Miller, I'd be very interested in exploring the possibilities of addressing efficiencies in our rental population here in this community. I have two questions really. Can you talk a little bit about the utilization of the rebate programs? Are they highly utilized in this community or not?

Um, I'm going to make a qualitative judgment here. I would say we have good participation, but there is more opportunity for participation as well. And, uh, It's difficult to capture the market at the point where people replace air conditioners on a day like today when it fails. And so there's very quick decisions that are made. I need it now. And not so many of the decisions are made in the spring when you're not using your air conditioner. And so I think there's opportunities to look at programs in that space as well. But we've had a robust efficiency program. We've met our state goal 20 years running. So in that sense, we have great programs and we've met our goals. But there's many that struggle with utility bills here. And largely that's because there's a lot of intensive use around older housing stock as well. So there's lots of opportunity in that area.

Thank you for that data. You know, I think about the equity built into rebate programs and those who have the capital available to replace older appliances or air conditioning units and how it almost sets up a classism in a rebate program, and that's by no means That's by no fault of having a rebate program. It's just how do you figure out that? My secondary question is I'm really interested in renewable generation. And I'm wondering if there's a public-facing dashboard that talks about how much renewable generation is actually happening in this community and where I might access that.

There is not a publicly available dashboard yet that publishes real-time generation. What I would call people's attention to is the misoenergy.org, which talks about regional power generation. And that really is the core of our supply. Go to misoenergy.org and pull up how much wind is producing right now to meet the demand need. And that's a great real-time resource that's always there.

OK. Thank you so much.

Mayor Norton.

I wanted to just quick follow up based on the last two speakers comments and because I think the only person that was here at the time was Patrick. The Energy Commission at the time actually did a project with our Section 8 housing units and we went in with the permission of the Section 8 housing manager. We went into each of the units there were many of them, and just did simple things like replace LED bulbs, replace the water filters, et cetera. They were things we could do quickly while we were there, and the manager evaluated some of the other needs in some of the apartments as well. And I believe at the end of that study, Kevin Bright was here as our energy person, and I think he's still with Knutson. He might be able to provide a little bit more information about the outcomes. But I think we saved, they said probably just for that one, effort that we did, that the Energy Commission did, it was something like $120 per unit of savings a year, just from that change. And at the time, and things have changed a little bit, but LED bulbs were pretty much more expensive than regular incandescent bulbs, and so people would buy the cheap light bulbs when they went. And, you know, LED bulbs last for like eight years, so that you may pay a little bit more, but you're not spending as much over time. But if you don't have the money at the time, that doesn't matter to you. to the point that you guys are making. So it was my understanding after that, that the county was going to do some more of this work in some of that Section 8 housing. And I know you're talking about even beyond Section 8, but it was a good experience. It was a good outcome. And I think looking at some sort of program, maybe with the county, if it's some of the lower income or HUD homes, or maybe just with an apartment manager to do some of that, it can significantly impact the individual, but it's also good for the system so I think looking at that in the future would be really helpful and if you ever want to talk to Kevin he's out there and He'd share Thank you for sharing mayor councilmember Miller.

Yeah, just building on that I mean I agree that when somebody's furnace or air conditioner goes out and they call a contractor it's a it's an urgent situation and And so I wonder what volumes our major contractors in town are doing on heating and cooling equipment and what that gap, that average gap is between choosing something that's less energy efficient over time versus something that's more in the initial cost. And I know I've brought this up before, Mr. McCullough, but Fort Collins Utilities has a loan program for on-bill financing exactly to address that gap and help people make the more energy efficient choice upfront. And I think the contractors are really those salespeople with the homeowner saying, here's your cost, here are the programs available, and I've had this done too, and they talk about the rebates, but I wonder if maybe our rebates aren't going far enough in helping people choose, and how we might think about structuring financing particularly to help somebody make a more responsible choice, a more productive choice for the grid and our peak demand over time, but at that point of urgency and needing to replace an appliance.

Yeah, and we do do programs to educate people about the options that are available so that when they...

But if somebody can't afford it, they can't afford it, right? Yeah. If it's $1,000 cheaper to install a traditional air conditioning unit than a heat pump, and that person says, I don't have an extra $1,000, I'll choose the less energy efficient appliance. Is there something beyond education that we could understand a benefit, and particularly looking at on-bill financing, which spreads the cost, even with interest, to a more manageable monthly budgetable amount, I think could be quite consequential. I mean, it's how people think about housing. It's how people think about transportation. If this is a significant use of energy, as we know it is, in addition to transportation, building energy use, it seems like it would be in line with our Responsible environmental stewardship goals and even in that waste reduction directive to the board Thank you anything else Thank you gentlemen.

Good luck. Mr. Bullock. Thank you.

Just the shortest item of the meeting I So your upcoming study session schedule is on the screen. You have four, I guess they're sort of meaty, but sort of not that meaty of items so far. What I've seen in study session materials aren't super long, maybe similar to what was here today, but with less charts. So the much awaited JATO operating model, BETTER PUBLIC MEETINGS UPDATE AND THEN THE FIVE-YEAR UPDATE FROM DIRECTOR MOTELA AND THEN A ALTERNATE SIDE PARKING DISCUSSION. I DON'T KNOW IF YOU CAN DO THAT IN 30 MINUTES BUT WE DID LEAVE 15 MINUTES AVAILABLE JUST IN CASE. AND THEN THE TRANSIT SERVICE AND FINANCIAL UPDATE, ACADEMIC MOBILITY UPDATE AND SOME MORE WONDERFUL DISCUSSION OF THE BUDGET FORTHCOMING ON THE 24TH OF AUGUST. the rest of the study session calendar is in your packet.

Thank you. We are adjourned.