91-1956 �1G��� r �r� ,
� � � Council File # l/1/' /���0
_�.�_,�..
Green Sheet # %�j 7
RESOLUTION
OF SAINT PAUL, MINNESOTA -
Presented y
Referred To Committee: Date � �
WHEREAS, District Energy Services, Inc. has filed with the
City Clerk the First Uniform Amendment to the Distric't Cooling
Service Agreement ("the Agreement") containing amendments to
�Articles VI, XV and XXI of the Agreement; and
WHEREAS, these amendments will facilitate the financing of
the district cooling system for �downtown Saint Paul; and ' _
WHEREAS, District Energy Services, Inc. has provided the
documentation to support the reasonableness of these changes to
the agreement; and
WHEREAS, Section . 11(f) of the district cooling franchise
(Ordinance 17816) requires that amendments to Articles VI and XXI
of the Agreement be approved by the City Council by resolution;
NOW, THEREFORE, BE IT RESOLVED that the amendments to
Articles VI and XXI of the Agreement, contained in the First
Uniform Amendment as filed with the City Clerk on September 6,
1991, are hereby approved.
ti
�—-- � —
Y� Nays Absent Requested by Department of:
imon
oswztz �
on
P acca ee �
ettman
une —�
i son —T BY'
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0 CT 8 19�, Form Approved by City Attorney
Adopted by Council: Date
Adoption C ifi by Council�ecr tary gY:
BY= Approved by Mayor for Submission to
Council
Approv d Ma or: Date
� gy;
By:
P�IISNED FE� W � `92
i�
I �����
DEPARTMENT/OFFICE/COUNpL OATE INITIATED
couNCZL GREEN SH�ET No. 75�'1�
CONTACT PER90N d PHONE INITI DATE I ITI. ATE
THUNE 2$8-5679 � ❑�PARTAAENT DIHECTOR �cm oouNCi�
N��� �CITY ATTOHNEY �CITY CLERK
MUBT BE ON COUNpL AOENDA BY(DATE) ROUTq10 �BUDOET�RECTOR � �FIN.8 MOT.SERVIf�S DIR.
�MAYOR(OR A881STANT) i ❑
TOTAL#�OF SIQNATURE PAGiES (CLIP ALL LOCATIONS FOR 81GNATVR� '
ACTION RECUE8TE0: il
Approval of First Uniform Amendment to the District ,Cooling Service Agreement.
�ooMMENOnrOws:�vwow tN o►�1� COUNCIL COMMI7TlEf�M REPORT
_PIANNIN�COA�IMISSION _pVIL SERVK�COMM188101�1 ANALYST , PFIW�E NO.
_GB COMMRTEE
_STAFF _ OOAAMENTS:
—D�8TFi1C'T COUHT _
SUPPORTS WMIGI COUNGL OBJECTIVE9
IIWIIATINf3 PROBLEM.188UE.OPPOR7UN(TY(VYho�What�WMn.Whsro.WhY).
Amendment needed to facil�tate the District Cooling
system for powntown Saint Paul. '
i
II .
ADVMfTAQE8 IF APPROYED: '
Progress can be made on district cooling system. '
i
i
DISADVMITAOES IF APPROVED: �
NONE. i
'
i
DISADVANTA(iE8 IF NOT APPROVED: I
District Cooling will not proceed. �
I
a -
TOTAL AMOUNT OF TRAN8ACTION a C08T/REYENUE dUD�ETlD(CI�CLE�) YES NO
FUNDINO SOURCE ACTIVITY NUMSER
FlNANpAI INPDRMAT�ON:(EXPWN)
�
I
�
, . . _. ._
�. -
��
NOTE: COMPLETE DIiiECI'ION311RE INCIUDED IN THE OREEN SHEET IN8TRUCTIONAI
MANUAL AVAILABLE IN THE PURCHA81Ni3 OFFICE(PHONE NO.�).
ROUTINGi ORDER:
8elow are proferrod routi►�s for the ffvs most frequsnt types of documsnts:
CONTRACTS (aswm�auihorized COUNqL RE3QLUTION (Amand, &lflts.l
bud�st sxists) Accept.CiraMs)
1. Outafde/►�sncy 1. DepartmeM DireCtor
3. t�ty A�ttom��t 3. City�Attomey
4. AAayor 4. MayoN/�ssietsnt
5. Fineux:e d�MprM Svc�. Dirrctor 5. City Councit
6. Flnancs 14xouMinp 6. t�ief AcxouuntaM,Fln d�Nl�mt Svcs.
ADMINISTRATIVE OFtOER (I�, COUNCIL RESOLUTION ����N�
�i
t. ��� t. Inkiatlrq Dspertm�nt Director
2. DsparttnsM AccountaM �• �Y�naMY
3. p�KmsM arocta 3. MayoNAUfetaM
4. Budge�Dir�etor 4. Cfty Cotlflcil.
5. City de�ic
6. C�isf Accountant,Fin d�Mgmt Svcs.
ADMINISTRATIVE ORDERS (all od�en)
1. Initiating Dspertmrnt
2. qry Attomey
4. dt�Clsrk
TOTAI NUMBER OF SK�INATURE PAOE8
indic�ts the#�of pag�s on which signsturos ars roquired end pap�rcliP
each of the�e pa�.
ACTION REOUE3TED
De�ibs wn.t tns projecvr«�u.a asks to�complish�n sknsr cr�ronaogi-
cal oM�r or ordsr af imporMr�w.wh�hewr Is moa appropriate for the
issus. Do not w�ite complste�eM�e. Beqin each Rsm in your Ifst with
a wrb.
REOOMMEN�ATIONS
Comphts if th•fesus in queNion ha bssn pre�sMed b�ore arry body,pubiic
a p�ivats.
SUPPORT$WHICH COUNqI OBJECTIVE?
IndicaM which Council obj�c.�fivr(�)your project/roq�t supports by IiNlny
the key word(s)(HOU31N0, RECREATION, NEIaHBORHOOD5, ECONOMIC DEVEIOPMENT,
BUD(3ET, SEVVER SEPARATION).(3EE COMPLETE U3T IN IN3TRUCTIONAL MANUAL.)
OOUNqL COMMITTEE/RESEARCH REPORT-OPTIONAL AS REGIUE8TE�BY COUNqL
INITIATINCi PROBLEM, ISSUE,OPPORTUNITY
Expl�in the situation or conditl�s that creWed a nsed for your project
or requeN.
AOVANTACiES IF APPROVED
Indicate whethsr this is simply an annwl budg�t prowdure required by law/
chartsr or wNstMr tl�ra us sp,cif� in which Ms Gty�af SeiM Paul
and its citizs�u will bsnaM irom thk pro�t/actlOn.
DISADVANTACiE81F APPROVED
V1�st nepatiw sffscts or major dwqea to existing or past process�might
this proj�ct/requsst produa M it is paaeed(e.g.,tnttfa deleys� raiae,
tax increa�s w asssanNnb)?To Whom?V1lhsn?For hoMr bng?
DISADVANTA(iES IF NOT APPROVED
What wlll b•ths nspaHw conapuencos N the promi�ed aciion is not
epproved?Inabflky to dNiver asrvice7 Continued hi�hh traffic, noiae,
acddeni rats?Loes of rovenue't
FlNANCIAL IMPACT
AltFwuph you must Wlor ths infamation you provids here to the isaus you
aro addroesinp,M�sn�ral you mu�anawer t�wo qusstions: How much is it
9a�9 to oost4 Who fs yOinp tc PaYt
��-��y,�
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C�` � . � � � --�
�- District Energy Services, lnc. ',� r
�
76 West Kellogg Boulevard
St. Paul, MN 55102-1611
(612) 297-8955
FAX(612) 221-0353 RECEIVEp
SEP � 6 1991
CITy C�ER�
September 6, 1991
Ms. Molly O'Rourke
City Clerk
City of Saint Paul
386 City Hall
St. Paul, MN 55102
Re: Amendment to District Cooling Service Agreement
Dear Ms. O'Rourke:
Pursuant to Section . 11(f) of the district cooling franchise
(Ordinance 17816) , the attached amendments to the District
Cooling Service Agreement are filed herewith.
The required approval by the City Council for amendments to
Articles VI, VII and XXI will be requested in connection with
pending actions on the district cooling financing.
Sincerely,
1 �
Rudy Br olf n
Vice President
cc: Richard Gehrman - Director of Finance and Management Svcs.
� Tom Weyandt, James Hart - Office of City Attorney
William M. Mahlum - Mahlum and Associates
Richard H. Martin - Briggs and Morgan
\rab\dcamdfil.ltr
�qi-i��.�
FIRST AMENDMENT TO ARTICLE I
of the
DISTRICT COOLING SERVICE AGREEMENT
by and between
District Energy Services, Inc. ("District Services")
and
("Customer")
WHEREAS, the parties have executed a District Cooling Service Agreement dated
, 1991; and
WHEREAS, certain changes in Article I of the Agreement are requireii to more accurately
reflect plans for the initial District Cooling System;
NOW THEREFORE, the parties do, in consideration for the mutual promises, acts and
actions set forth hereafter, agree as follows:
Article 1.6 of the Agreement is amended to read as follows:
1.6 On or before September 30, 1991, District Services shall deliver to Customer a financial forecast
of the operation of the district cooling system through fiscal year 2001, examined by an independent
accounting firm, together with the Cost Allocation Agreement containing the allocation procedures
referred to in Sections 6.7 and 7.3. If, in Customer's sole judgment, the rates in such forecast
constitute an unacceptable increase from the Demand Rates set forth in Article VI as amended for
Fiscal Years 1993, 1994 and 1995, Customer shall have ten (10) business days from receipt of said
forecast, not including day of receipt, to notify District Services, in writing, that Customer terminates
Customer's obligations under this Agreement. Failure of Customer to provide timely notice of
termination shall preclude Customer ftom terminating this Agreement pursuant to this Paragraph 1.6
and Customer shall continue to be bound hereby, provided that the total Initial Contract Demand of
all customers who do not submit notices of termination, together with the effective Contract Demand
represented by the Payment Assurance Agreement is at least 4,AAA 3.394 tons. District Services
acknowle�ges that Customer will rely upon the written forecast of Demand Rates, as delivered, in
determining whether or not to provide a notice of termination. Customer acknowledges that,
subsequent to the expiration of the ten (10) day notice of termination, District Services, its
mortgagees, lenders, contractors, vendors and others shall be acting in reliance on the fact that
Customer has not terminated this Agreement and shall be bound hereby. Following expiration of the
ten day period for customers to review District Services' financial forecast pursuant to Section 1.6
and prior to completion of the sale of any bonds to finance the District Cooling System, District
Services shall confirm to Customer in writing that the total Initial Contract Demand of all customers
who have executed the District Cooling Service Agreement and who have not submitted notices of
termination pursuant to Section 1.6, toQether with the effective Contract Demand represented by the
Payment Assurance Agreement is at least 4;�AA 3.394 tons.
1
�qi-<�'��
IN WITNESS WHEREOF, Customer and District Services have executed and delivered this
Amendment as of the day of September, 1991.
CUSTOMER: DISTRICT ENERGY SERVICES, INC.:
By By
Please Print/Type Name Please Print/Type Name
Its Its
By
Please Print/Type Name
Its
2
_ ��i���
FIRST U1�IIFORM AMENDMENT
TO THE DISTRICT COOLING SERVICE AGREEMENT
WHEREAS, the District Cooling Service Agreement provides for Uniform Provisions which
shall be identical for all customers and which may be amended pursuant to Article XIX; and
WHEREAS, District Energy Services has been requested and has agreed to propose certain
changes in the Uniform Provisions which are beneficial to customers;
NOW THEREFORE, it is agreed by Customer that as of October 8, 1991, or upon adoption
by the Saint Paul City Council of a resolution of approval as required under the district cooling
franchise ordinance, whichever is later, the District Cooling Service Agreements by and between
District Energy Services, Inc., and its customers shall be amended as follows:
1. Fixed Demand Rate for FY 1995.
Amend the table of fixed demand rates in Section 6.2 to read:
Applicable Rate Period Demand Char�gRate
9et�94�A ril 199 -Sept. 1993 $18.14 per ton per month
Oct. 1993-Sept. 1994 $18.81 per ton per month
Oct. 1994-Sept. 1995 $19.58 en r ton per month
2. W�iver of 30-Day Notice Period upon Demolition of Building.
Amend Subsection 15.2(a) to read:
"(a) Customer's building is permanently abandoned, destroyed, or demolished�the 30_
day period does not apply to destruction or demolition� or substantially destroyed or
demolished for which rebuilding or substantial repairs are not undertaken or planned
within six (6) months following such destruction;"
3. Deletion of Expansion Reserve Surcharge.
Amend Subsection 21.1(2) to delete the phrase "and any advances from the Expansion Reserve fund
established below," and delete Subsections 21.2 through 21.4 in their entirety.
APPROVED BY CUSTOMER
By Date
Please Print/Type Name
Its
\cab\dceamend
September 6, 1991
� ,
� ��.� � ���� %�jp/J�i
. � � 4
i
�. 10/1/91 RATIFICATION OF ASSESSMENTS: For the APPROVED 4-
. . C1 evel and/Magoff i n Area Storm Sewer `gl�./�'�j'�p
Project.
J
10. 10/1/91 RATIFICATION OF ASSESSMENTS: For the APPROVED 4-0
storm sewer installation affecting
Lots 12, 13 and 14, Block 1, Lane
Norton's Addition as a part of the
Cleveland/Magoffin Area Storm Sewer
Project.
11. � 9/24/91 RATIFICATION OF AWARD OF DAMAGES: For APPROVED 4-0
acquisition of a temporary easement for
part of Lot 12, Block 2, Lane Norton's �
Addition. Part of the Cleveland/ -
� Magoffin Area Storm Sewer Project.
12. 9/24/91 AMENDED FINAL ORDER: Acquiring APPROVED 4-0
permanent utility easement on, under
and across Burlington Northern RR
right-of-way for the Prosperity/Ivy
Area Storm Sewer Project.
13. Petition of residents in the vicinity APPROVED 5-0
of Mississippi, Case, and Westminister
Streets requesting a stop sign or
school zone sign. (Referred to
Committee 8/13/91)
14. RESOLUTION - 91-1739 - Approving APPROVED 4-0
Phase II of the University of
Minnesota bus transit system plans
between the Saint Paul and Minneapolis
Campuses. (Referred to Committee 9/17/91)
15. Other business.
J ^ RESOLUTION - 91-1735 - Authorizing proper APPROVED 4-0
�/a� City officials to enter into a joint powers
agreement to provide for signal maintenance
to the City of Cottage Grove. (Referred to
Committee 9/17/91)
RESOLUTION - 91-1736 - Authorizing proper APPROVED 4-0
City officials to enter into a joint powers
- � ��� agreement to provide for signal maintenance
to the City of Woodbury. (Referred to
Committee 9/17/91)
Letter of District Energy Saint Paul , Inc. LAID OVER
transmitting amendment to Hot Water 2 WEEKS
Delivery Agreement. (Referred to Committee
9/17/91)
Letter of District Energy Services, Inc. APPROVED 4-0
ID�3 transmitting amendment to District Cooling
� Service Agreement. (Referred to Committee
, ��
9/17/�
�
�l, � �,� �r�� �i 1
��` 9 � .��.�`' °`�`�1
�i-��-�.-,qs�
' �. 10/1/91 RATIFICATION OF ASSESSMENTS: For the APPROVED 4-0
' Cleveland/Magoffin Area Storm Sewer
Project.
10. 10/1/91 RATIFICATION OF ASSESSMENTS: For the APPROVED 4-0
storm sewer installation affec�ting
Lots 12, 13 and 14, Block 1, Lane
Norton's Addition as a part of the
Cleveland/Magoffin Area Storm Sewer
Project.
11. 9/24/91 RATIFICATION OF AWARD OF DAMAGES: For APPROVED 4-0
acquisition of a temporary easement for
part of Lot 12, Block 2, Lane Norton's
Addition. Part of the Cleveland/
Magoffin Area Storm Sewer Project.
12. 9/24/91 AMENDED FINAL ORDER: Acquiring APPROVED 4-0
permanent utility easement on, under
and across Burlington Northern RR
right-of-way for the Prosperity/Ivy
Area Storm Sewer Project.
13. Petition of residents in the vicinity APPROVED 5-0
of Mississippi, Case, and Westminister
Streets requesting a stop sign or
school zone sign. (Referred to
Committee 8/13/91) .
14. RESOLUTION - 91-1739 - Approving APPROVED 4-0
Phase II of the University of
Minnesota bus transit system plans
between the Saint Paul and Minneapolis
Campuses. (Referred to Committee 9/17/91)
15. Other business.
RESOLUTION - 91-1735 - Authorizing proper APPROVED 4-0
�/a� City officials to enter into a joint powers
agreement to provide for signal maintenance
to the City of Cottage Grave. (Referred to
Committee 9/17/91)
RESOLUTION - 91-1736 - Authorizing proper APPROVED 4-0
City officials to enter into a joint powers
�/a,�, agreement to provide for signal maintenance -
to the City of Woodbury. (Referred to
Committee 9/17/91)
Letter of District Energy Saint Paul , Inc. LAID, OVER �
transmitting amendment to Hot Water 2 WEEKS
Delivery Agreement. (Referred to Committee
9/17/91)
� � Letter of District Energy Services, Inc: APPROVED 4-0
,GI/ transmitting amendment to D�str�ct Cooling
� , � 7 Service Agreement. (Referred to Committee
9/17/91)
C�� �'``�
� Disfricf Energy Services, lnc.
76 West Kellogg Boulevard
St. Paul, MN 55102-1611 RECEIVED
FAX(612)22150353 �CT 0 3 �gg�
CITY CLERK
October 3, 1991
Molly O'Rourke
City Clerk
3rd floor City Hall
St. Paul, MN 55102
Re: October 8 - City Council Actions on District Cooling
Dear Ms. O'Rourke:
In connection with the district cooling financing due to close
shortly, the City Council is being requested to take two actions
on October 8, 1991:
(1) to approve certain amendments to the District Cooling
Service Agreement pursuant to Section 11(f) of the district
cooling franchise ordinance, and
(2) to acknowledge the Cost Allocation Agreement and Payment
Assurance Agreement between District Energy St. Paul, Inc. ,
and District Energy Services, Inc. , as requested by the
parties to the financing.
Regarding the first item, we are advised that a resolution will
be introduced on October 8 in connection with agenda item #32 .
The second item is not on the October 8 agenda but has been laid
over from October 3 to that date, and we are requesting that it
be taken up in conjunction with item #32 . Resolution 91-1879,
introduced by Council President Wilson on October 1, contains the
basic provisions required; an amended version will be offered on
October 8 to include changes requested by HRA staff, the City
Attorney's office, bond counsel, and District Energy.
This letter is to provide evidence in support of these requested
actions, including the bound materials on the Cost Allocation
Agreement and Payment Assurance Agreement which were provided to
City Council members and rate review staff on October 2, 1991.
By copy of this letter, we are calling the attention of Council
members to those materials, as requested by Assistant City
Attorney Tom Weyandt. Further information is provided below.
October 8 District Cooling Actions
October 3, 1991
Page 2
1. District Cooling Service Aqreement amendments.
These amendments were filed with the City Clerk on
September 6, 1991, and approved by the Public Works Committee on
September 18, 1991. A proposed resolution expressing this
approval is attached as Exhibit 1.
Attached as Exhibit 2 is a copy of the letter to signed
district cooling customers describing the benefits of the
amendments and requesting customer approval. To date, customers
representing 92 percent of total signed demand have responded,
and all have approved the amendments. The amendments are now
binding on all signed district cooling customers, except for the
requested City approval.
2 . Cost Allocation Agreement and Payment Assurance Aareement.
Exhibit 3 , previously provided to City Council members and
rate review staff on October 2, is the compilation of information
about these agreements, including evidence of their
reasonableness. Included therein at tab 1 is amended resolution
language in substantially the form which will be offered on
October 8.
Sincerely,
1�ti t
�
Rudy B ol s�on
Vice President
Attachments:
1. Resolution approving District Cooling Service Agreement
amendments.
2 . Letter provided to district cooling customers.
3 . Compiled information on Cost Allocation Agreement and
Payment Assurance Agreement. [City Clerk only; previously
distributed to others]
cc: City Council members
Richard Gehrman, Thomas Weyandt, James O'Leary
James Snyder, Lori Lee, Bruce Hoheisel
Hans O. Nyman, William M. Mahlum
Joyce Anderson, Andrew Kasid
\rab\orourke.ltr
Exhibit 1
City Council Resolution
Approvinq District Coolinq Service Aqreement Amendments
WHEREAS, District Energy Services, Inc. has filed with the
City Clerk the First Uniform Amendment to the District Cooling
Service Agreement ("the Agreement") containing amendments to
Articles VI, XV and XXI of the Agreement; and
WHEREAS, these amendments will facilitate the financing of
the district cooling system for downtown Saint Paul; and
WHEREAS, Section . 11(f) of the district cooling franchise
(Ordinance 17816) requires that amendments to Articles VI and XXI
of the Agreement be approved by the City Council by resolution;
NOW THEREFORE BE IT RESOLVED that the amendments to Articles
VI and XXI of the Agreement, contained in the First Uniform
Amendment as filed with the City Clerk on September 6, 1991, are
hereby approved.
September 30, 1991
Exhibit 2 / �- � �`��
�-� District Ene�gy Services, Inc.
�
76 West Kellogg Boulevard
St. Paul, MN 55102-1611
(612)297-8955
FAX(612)221-0353
September 10, 1991
Miles McGinley
CHA Building Superintendent
City Hall Annex Property Management
225 City Hall Annex
St. Paul, rIlJ 55102
Dear Mr. McGinley:
In our letter of June 19, 1991, we told you that the design and
financing of the initial district cooling system were moving
ahead based on the 2,900 tons of committed customer demand.
We're happy to report that the system design is now complete, and
bid packages have been issued for the chillers, plant renovation
work, and chilled water distribution system construction.
Drafting of financial documents continues on schedule, with the
target date for the first bond closing set for mid-October.
Eight District Cooling Service Agreements have been signed to
date. In addition, on August 20 the Ramsey County Board approved
execution of the Agreement for the City Hall/Courthouse.
Together with a demand increase requested by the Ordway Music
Theatre, this will bring initial signed demand to over 3,000
tons. A recent study confirmed that there is significant
potential for further demand growth within the next few years.
In the meantime, an effective 3,400 tons will be ensured through
the deferral of certain cost-sharing payments by District Energy
St. Paul under the Payment Assurance Agreement.
Enclosed documents. As part of the final approval process
leading up to the system financing, two documents are enclosed
for your approval and signature. One amends Article I of the
District Cooling Service Agreement to bring the pre-financing
review process into line with current system plans. The other
makes several requested amendments in the Uniform Provisions of
the Agreement.
1. Amendment to Article I. To confirm that current district
cooling system plans are agreeable to all signed customers, the
Amendment to Article I of the District Cooling Service Agreement
changes the required total Initial Contract Demand from 4,000
September 10, 1991
Page 2
tons to an effective 3,394 tons. (This is the figure set by the
Ramsey County Board as the basis for its approval. ) Based on
reductions in system cost and adjustments to the financing, the
lower initial demand results in similar customer rates compared
to earlier projections, which were based on a larger system with
a higher initial demand. The Amendment to Article I is effective
upon execution and will govern the final financial forecast
review process. (A separate letter accompanying the preliminary
accountant's report provides further information. )
2. First Uniform Amendment. The First Uniform Amendment to the
District Cooling Service Agreement contains changes which the
County requested be made to the Uniform Provisions of the
Agreement before they would approve it. As these changes are
beneficial to all district cooling customers, and all district
cooling Agreements must be identical, we have agreed to the
changes and offer them for your approval. The three proposed
changes include: (1) the addition of a fixed demand rate for
FY 1995; (2) waiver of the 30-day notice period upon destruction
or demolition of a building; and (3) elimination of the Expansion
Reserve. Following majority customer approval, the First Uniform
Amendment will become effective upon approval by the Saint Paul
City Council on or about October 8, 1991.
Because of the short time remaining until the scheduled bond
closing, we would appreciate it if you could sign the enclosed
amendments and return them to our office in the postage-paid
envelope (or call us to have them picked up) so we can receive
them by Wednesday, September 25.
The extensive work which has been done in the past year has
confirmed our judgment that the district cooling system as
proposed will bring significant economic and operating benefits
for cooling customers as well as broader benefits for the
St. Paul community. We thank you for your continued support and
look forward to serving your cooling needs by April 1993 .
Sinc ely,
�
/,'�^. �v�,
Hans O. Nyma
President
Enclosures: Amendment to Article I of the DCSA
First Uniform Amendment to the DCSA
- -; ,� ., � �/-� 9s ,�
FIRST AMENDMENT TO ARTICLE I
of the
DISTRICT COOLING SERVICE AGREEMENT
by and between
District Energy Services, Inc. ("District Services")
and
("Customer")
WHEREAS, the parties have executed a District Cooling Service Agreement dated
, 1991; and
WHEREAS, certain changes in Article I of the Agreement aze require� to more accurately .
reflect plans for the initial District Cooling System;
NOW THEREFORE, the parties do, in consideration for the mutual promises, acts and
actions set forth hereafter, agree as follows:
Section 1.6 of the Agreement is amended to read as follows:
1.6 On or before September 30, 1991, District Services shall deliver to Customer a financial forecast
of the operation of the district cooling system through fiscal year 2001, examined by an independent
accounting firm, together with the Cost Allocation Agreement containing the allocation procedures
referred to in Sections 6.7 and 7.3. If, in Customer's sole judgment, the rates in such forecast
constitute an unacceptable increase from the Demand Rates set forth in Article VI as amended for
Fiscal Years 1993, 1994 and 1995, Customer shall have ten (10) business days from receipt of said
forecast, not including day of receipt, to notify District Services, in writing, that Customer temunates
Customer's obligations under this Agreement. Failure of Customer to provide timely notice of
termination shall preclude Customer from terminating this Agreement pursuant to this Pazagraph 1.6
and Customer shall continue to be bound hereby, provide�that the total Initial Contract Demand of
all customers who do not submit notices of termination. together with the effective Contract Demand
represented by the Pavment Assurance Agreement is at least 4;8AA �.394 tons. District Services
acknowledges that Customer will rely upon the written forecast of Demand Rates, as delivered, in
determining whether or not to provide a notice of termination. Customer acknowledges that,
subsequent to the expiration of the ten (10) day notice of termination, District Services, its
mortgagee,s, lenders, contractors, vendors and others shall be acting in reliance on the fact that
Customer has not terminate� this Agreement and shall be bound hereby. Following expiration of the
ten day period for customers to review District Services' financial forecast pursuant to Section 1.6
and prior to completion of the sale of any bonds to finance the District Cooling System, District
Services shall confirm to Customer in writing that the total Initial Contract Demand of ail customers
who have executed the District Cooling Service Agreement and who.have not submitted notices of
termination pursuant to Section 1.6. to�ether with the effective Contract Demand represented by the
Payment Assurance Agreement is at least 4;AA8 3,394 tons.
1
IN WITNESS WHEREOF, Customer and District Services have executed and delivere� this
Amendment as of the day of September, 1991.
CUSTOMER: DISTRICT ENERGY SERVICES, INC.:
By By
Please Print/T�rpe Name Please Print/T'ype Name
Its Its
By
Please Print/Type Name
Its
2
. q� - i9s�
FIRST UNIFORM AMENDMENT
TO THE DISTRICT COOLING SERVICE AGREEMENT
WHEREAS, the District Cooling Service Agreement provides for Uniform Provisions which
shall be identical for all customers and which may be amended pursuant to Article XIX; and
WHEREAS, District Energy Services has been requested and has agreed to propose certain
changes in the Uniform Provisions which aze beneficial to customers;
NOW THEREFORE, it is agreed by Customer that as of October 8, 1991, or upon adoption
by the Saint Paul City Council of a resolution of approval as required under the district cooling •
franchise ordinance, whichever is later, the District Cooling Service Agreements by and between
District Energy Services, Inc., and its customers shall be amende� as follows:
1. Fixed Demand Rate for FY 1995.
Amend the table of fixed demand rates in Section 6.2 to read:
Applicable Rate Period Demand Charge Rate
oe�99�A ril 1 3-Sept. 1993 $18.14 per ton per month
Oct. 1993-Sept. 1994 $18.81 per ton per month
Oct. 1994-Sept. 1995 �19.58 per ton per month
2. Waiver of 30-Day Notice Period upon Demolition of Building.
Amend Subsection 15.2(a) to read:
"(a) Customer's building is permanently abandoned, destroyed, or demolished th� e 30_
dav neriod does not apply to destruction or demolition) or substantially destroyed or
demolished for which rebuilding or substantial repairs aze not undertaken or planned
within six (6) months following such destruction;"
3. Deletion of Expansion Reserve Surcharge.
Amend Subsection 21.1(2) to delete the phrase "and any advances from the Expansion Reserve fund
established below," and delete Subsections 21.2 through 21.4 in their entirety.
APPROVED BY CUSTOMER
BY Date
Please Print/Type Name
Its
�w�..�na
s�c���io, iv�i
'
9'/- /9�-6
' Exhibit 3 to City Clerk
October 3, 1991
District Energy Services, Inc.
'
'
'
' COST ALLOCATION AGREEMENT
AND
' PAYMENT ASSIIRANCE AGREEMENT
' OCTOBER 2, 1991
'
'
'
'
'
,
�
�
, - Districf Ener ST. PAUL �N�.
— gY .
�
�
� 9i- i ���
� -
� Distr�cf Energy ST. PAUL� �N�.
�
' 76 West Kellogg Boulevard
St. Paul, MN 55102-1611
(612)297-8955
' FAX(612) 221-0353
October 2, 1991
'
Saint Paul City Council
' 7th floor, City Hall
St. Paul, MN 55102
' Re: Cost Allocation Agreement and Payment Assurance Agreement
Between District Energy St. Paul, Inc. ("District Heating")
and District Energy Services, Inc. ("District Cooling")
' Dear Council Members:
On today's Public Works Committee agenda in connection with the
' pending district cooling system financing is a proposed
resolution acknowledging the above agreements. The purpose of
this resolution is to provide comfort to the parties to the
' financing that the arrangements negotiated over the past year
regarding the district cooling system are acceptable to the City
Council, in light of its role as the rate regulation authority
' for both District Heating and District Cooling.
At the request of the City Attorney, this letter and the
accompanying materials are provided to document for the record
' that the Cost Allocation Agreement and Payment Assurance
Agreement are reasonable and beneficial to both heating and
cooling customers.
' 1. Pro osed substitu
p te resolution drafted in consultation with
' bond counsel and City Attorney's office.
This resolution makes minor changes to the one introduced on
October 1 by Council President Wilson and adds two new clauses:
' (1) a final "whereas" noting that the Council has received both
oral and written evidence in support of the agreements, and (2)
an added first "resolved" stating a finding by the Council that
' the evidence demonstrates that the agreements will result in
heating and cooling rates which are just, reasonable, and non-
discriminatory.
,
1
'
1
,
Cost Allocation Agreement and Payment Assurance Agreement
' October 2, 1991
Page 2
, 2. Cost Allocation Aqreement.
This is the final draft of the Cost Allocation Agreement,
� amended on September 18, 1991, to incorporate comments received
since circulation of the original draft in February-March 1991.
Copies were previously hand delivered to rate regulatory staff
' and others on September 18-19, 1991.
The agreement allocates joint operating costs between
, District Heating and District Cooling based on factors such as
measured energy use, relative sales, and employee time studies.
Comments from the Minnesota Department of Public Service and
Arthur Andersen and Co. as well as other parties have been
' incorporated into the agreement.
' 3. Payment Assurance Aqreement.
This is the final draft of the Payment Assurance Agreement,
, amended on September 18, 1991, to incorporate comments received
from members of the district cooling financing team, which
includes representatives of the City finance and budget
departments as well as the Department of Planning and Economic
t Development. Copies were previously hand delivered to rate
regulatory staff and others on September 18-19, 1991.
' This agreement governs the timing of cost allocation
payments from District Cooling to District Heating. It benefits
District Cooling customers by assuring them that their demand
rates will be the same with a total initial demand of 2,900 tons
' as they would be at 3,400 tons. (Actual committed demand is
3,004 tons, with an initial connected demand of 2,966 tons. )
' The agreement benefits District Heating customers by
assuring them that district cooling will become a reality. Even
with no growth and continued operation of the Payment Assurance
, Agreement, District Heating will receive some positive cash flow
benefit from District Cooling. As the cooling system grows, this
benefit will increase. The net present value of the expected
cost sharing benefit over 20 years is over $1, 000,000.
,
'
1
,
'
'
Cost Allocation Agreement and Payment Assurance Agreement
' October 2, 1991
Page 3
, 4. Letter reqardinq Cost Allocation Aqreement from Minnesota
Department of Public Service to James A. Snyder dated March 7,
1991.
' This letter responds to a request for input from City rate
regulatory staff to the draft Cost Allocation Agreement. As
' noted, the letter finds that "the cost allocation system
adequately allocates all directly attributable costs" between
District Heating and District Cooling. Comments regarding peak
' demand versus energy were taken into account in the September
1991 amendments to the agreement.
, 5. District heatinq board resolution approvinq concept of
Payment Assurance Aqreement and other measures to support the
development of district coolinq.
' This resolution, passed unanimously by the Board of
Directors of District Energy St. Paul, Inc. on June 13, 1991,
shows their confidence in the benefits and growth potential of
' district cooling and authorizes various measures to support its
development, including the Payment Assurance Agreement.
' 6. Tables showinq impact of Payment Assurance Aqreement on
District 8eatinq demand rates and District Coolinq demand rates.
' The first table shows how forecast District Heating demand
rates will be reduced from what they would otherwise be as a
result or District Cooling cost sharing payments. Even at 2,900
' tons of cooling demand with the Payment Assurance Agreement in
operation there is a slight reduction. At 3,400 tons of cooling
demand, the reduction is greater. As the cooling system grows,
' so will the benefit to heating customers.
The second table shows the impact of the Payment Assurance
t Agreement on District Cooling demand rates. With the deferral of
a share of fixed costs owed to District Heating, the net revenue
requirement to be met by District Cooling customers is the same
at 2,961 tons as it would be at 3,400 tons.
'
'
'
'
'
'
Cost Allocation Agreement and Payment Assurance Agreement
� October 2, 1991
Page 4
' 7. Graphs ahowinq qrowth potential of district coolinq in Saint
Paul and hietoric qroWth records ot district coolinq systems in
other cities.
, District cooling will be successful and will benefit its
customers, district heating customers, and the Saint Paul
' community even if it does not grow substantially. Obviously,
however, the benefits are greater if the cooling system does
grow. The graphs provided show (1) that increasing demand to
' 4,400 tons by 1995 involves a rate of increase substantially less
than that achieved to date; (2) that buildings mandated to
convert from groundwater cooling systems and other downtown
prospects provide substantial growth opportunities for the
' district cooling system; and (3) that the growth of district
cooling systems in other cities has been substantial.
, District Energy respectfully requests your approval of the
resolution acknowledging the Cost Allocation Agreement and the
' Payment Assurance Agreement.
S' cerely,
,
' �
Rudy Br nolf n
' Vice President
cc: City Council Members
' Richard Gehrman, Thomas Weyandt, James O'Leary
,
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' Council File �
Green Sheet $
' RESOLUTION
CITY OF SAINT PAUL, MINNESOTA
' Presented By
Referred To Committee: Date
'
1
' RESOLUTION ACKNOWLEDGING THE COST ALLOCATION AGREEMENT AND THE
PAYMENT ASSURANCE AGREEMENT BETWEEN DISTRICT ENERGY ST. PAUL, INC.
("DISTRICT HEATING") AND DISTRICT ENERGY SERVICES, INC. ("DISTRICT COOLING")
'
' WHEREAS, the City of Saint Paul has adopted the District Cooling Franchise
Ordinance Number 17816 on March 28, 1991 granting a non-exclusive franchise for a
district cooling system to District Energy, Inc. ("District Cooling"); and
' WHEREAS, the City of Saint Paul has adopted District Heating Franchise Ordinance
Number 16947 on July 20, 1982 granting a non-exclusive franchise for a district heating
' system to District Heating Development Company, d/b/a District Energy St. Paul, Inc.
("District Heating"); and
' WHEREAS, District Heating and District Cooling will enter into (i) a Cost Allocation
Agreement dated as of October 8, 1991 (the "Cost Allocation Agreement") allocating
between them certain common costs of operation and maintenance of the facilities serving
' the district heating system owned and operated by District Heating, and the Cooling
System owned and operated by District Cooling, and (ii) a Payment Assurance Agreement
dated as of October 1, 1991 (the "Payment Assurance Agreement") pursuant to which
' District Heating agrees to pay certain amounts to District Cooling in the event the
aggregate contracted customer load being served by the Cooling System is less than
3,400 tons and both such agreements shall be in substantially the form as p�esented and
' attached hereto; and
WHEREAS, the City Council has received both oral and written evidence in support
' of the Cost Allocation Agreement and the Payment Assurance Agreement, including but
not limited to:
' - Oral testimony presented to the City Council and its Committees;
'
now therefore be it �
1
t
'
' RESOLVED that the City Council of the City of Saint Paul finds that said evidence
demonstrates that the execution and implementation of said Cost Allocation Agreement
, and Payment Assurance Agreement will result in rate charges to district heating and
district cooling ratepayers that will be just, reasonable and non-discriminatory; and be it
further,
' RESOLVED that the City Council of the City of Saint Paul, Minnesota that the City,
as the public body with regulatory jurisdiction over the rates and charges of both District
' Heating and District Cooling hereby acknowledges and approves the terms and conditions
of the Cost Allocation Agreement and the Payment Assurance Agreement, in the forms as
attached hereto. Amounts payable by District Cooling to District Heating under the Cost
' Allocation Agreement shall be included in the "Demand Charge" component of the District
Cooling rates and charges. Amounts payable by District Heating to District Cooling
(whether directly or off-set against amounts due from District Cooling to District Heating
' under the Cost Allocation Agreement) shall be included in the "Demand Charge"
component of District Heating rates and charges, and reimbursement of such amounts by
District Cooling to District Heating shall be included in the "Demand Charge" component of
' District Cooling rates and charges. The provisions of this Resolution shall be effective only
as to amount payable under the Cost Allocation Agreement and Payment Assurance
Agreement as in effect as of the date of the closing on the district cooling financing.
Except as contemplated herein, these provisions shall not be construed to apply to any
� changes, amendments or modifications to either agreement unless expressly approved by
the City of Saint Paul through its City Council.
'
'
'
'
' Yeas Navs Absent Requested by Department of:
zmon
oswitz
on
' acca ee
ettman
un e
i son BY�
' Form Approved by City Attorney
Adopted by Council: Date
Adoption Certified by Council Secretary By:
'
BY= Approved by Mayor for Submission to
' Approved by Mayor: Date Council
By: By�
,
1 �i - � �s�
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1
' [DRAFT AMENDED]
'
' COST ALLOCATION AGREEMENT
�
DATED AS OF OCTOBER 1, 1991
'
' BY AND BETWEEN
' DISTRICT HEATING DEVELOPMENT COMPANY, d/b/a
DISTRICT ENERGY ST. PAUL, INC.
' AND
DISTRICT ENERGY SERVICES, INC.
'
,
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'
'
' [DRAFT AMENDED]
[9/18/91]
ICOST ALLOCATION AGREEMENT
' THIS AGREEMENT is entered into as of October 1, 1991 between
District Heating Development Company, d/b/a District Energy St.
Paul, Inc. , a Minnesota non-profit corporation (hereinafter
' referred to as "District Energy" and District Energy Services,
Inc. , a Minnesota non-profit corporation (hereinafter referred to
as "DES") .
' RECITALS
' WHEREAS, in response to a number of environmental and
economic factors, DES proposes the establishment of a district
cooling business to be owned and operated by DES; and
' WHEREAS, District Energy owns, operates and maintains a
heating plant located at 76 West Kellogg Boulevard, Saint Paul,
Minnesota ("Heating Plant") and portions of the Heating Plant
' will be modified by DES to accommodate the necessary equipment
required to operate the cooling business; and
� WHEREAS, DES will finance, construct and own the cooling
production equipment and cooling distribution system and DES will
pay District Energy for use of the required Heating Plant space;
and
' WHEREAS, District Energy will provide to DES the required
operation, maintenance and administration services to operate the
' district cooling business and DES will pay District Energy for
such services; and
WHEREAS, it is necessary for operating, financing, and
' regulatory reasons to define the principles and procedures which
shall govern the allocation of costs for such services between
District Energy and DES and the responsibility for payment of
' such costs;
NOW, THEREFORE, the parties do, in consideration for the
' mutual promises, covenants and agreements set forth herein, agree
as follows:
1. Principles. All costs associated with the district cooling
, operation shall be assessed consistent with this Cost Allocation
Agreement. Costs associated solely with the district cooling
business shall be charged directly to DES. Costs that benefit
' both district heating and district cooling shall be allocated
between the two companies. All allocations shall be just and
' 1
'
'
' equitable to both District Energy and DES. Wherever practical,
the allocation and settlement shall be on a monthly basis.
' 2. Assumptions.
' A. District Energy, the operator of the district heating
system, owns the jointly used plant/office facility and most
equipment contained therein, employs all staff, and pays most
joint operating costs. DES operates the district cooling system
, using both its own equipment and certain resources belonging to
District Energy, including plant, equipment, and employees, and
reimburses District Energy for an appropriate share of joint
' costs.
B. Where costs are solely attributable to the operation of
' district cooling, they shall be billed directly to and paid by
DES. Where costs are shared costs or where DES receives the
benefit of or the use and/or enjoyment of services or assets of
District Energy, cost allocation shall be done pursuant to this
' agreement.
C. The goal of the cost allocation procedure set forth
' herein is to allocate joint costs in a way which is (a) fair to
both heating and cooling customers, (b) simple and clear enough
to administer efficiently, and (c) recognized as just and
' reasonable by customers and regulators.
D. Unless otherwise provided, DES's share of joint costs
will be based on the Cooling Cost Allocation Percentage as
' defined in Section 3 .B. (4) below.
E. The cost allocation procedure will be reviewed annually
' and this agreement shall be amended, if necessary, by mutual
consent of the parties hereto, to better meet the goal stated in
C. above. A copy of this agreement and any amendments thereto
shall be provided to the Director of Finance and Management
, Services of the City of Saint Paul.
3. Allocation Procedures. Set forth hereafter are the
' allocation procedures to be followed by management in allocating
costs incurred while both district heating and district cooling
systems are in operation:
' A. Enerqy. Each month's total plant fuel and energy costs,
less those solely attributable to either company (e.g. , fuel to
hot water boilers) , will be allocated to each company based on
' its use of plant steam output (either directly or as internally
generated electricity) during that month (see chart,
Attachment A) .
' B. Costs for use ot property, plant and equipment. DES
will pay to District Energy a monthly fee for use of property,
' 2
,
'
' plant and equipment owned by District Energy equal to one-twelfth
(1/12) of the Annual Property Use Charge, which shall be
� determined prior to the beginning of each fiscal year according
to the following procedure (see sample calculation,
Attachment B) :
' (1) Compute the percentage of total District Energy
property, plant, and equipment other than the hot water
distribution system (Total PP&E) which is jointly used (the
' Joint Use Percentage) , based on the values thereof in the
latest property appraisal and the cost of items added since
that appraisal. For purposes of this calculation, the value
' of jointly used boilers shall be equal to twice the value of
Boiler ,�1, the primary steam boiler used during the coolinq
season. ---
' (2) From the undepreciated asset value of Total PP&E on
District Energy's books, subtract the amount by which that
value was written up over actual cost on acquisition, i.e. ,
' $3,919,658, to get Adjusted Total PP&E.
(3) Multiply the Joint Use Percentage from Step 1 by the
' Adjusted Total PP&E from Step 2 to get Adjusted Joint Use
PP&E.
' (4) Calculate normalized actual unit energy sales for DES
in the latest 12-month period ending on or about May 31
(which, for purposes of this calculation, shall be equal to
the average tons of demand billed during the period
' multiplied by a standard utilization factor of 900 hours)
and divide by normalized actual unit energy sales for
District Energy and DES combined during the same period
' (using a conversion factor of 1 ton-hour equals 0. 0035
megawatt-hours) to get the Coolinq Cost Allocation
Percentaqe. In determining the Cooling Cost Allocation
, Percentage for fiscal years 1993 through 1994, budgeted
fiscal year unit energy sales (adjusted for 900 utilization
hours) shall be used instead of normalized actual unit
energy sales as described above.
' (5) Multiply the Adjusted Joint Use PP&E from Step 3 by the
Cooling Cost Allocation Percentage from Step 4 to get the
' Allocated Cooling PP&E.
(6) The Annual Property Use Charge shall be the level
amortization payment computed using the Allocated Cooling
' PP&E, an interest rate equal to the weighted average cost of
long term debt budgeted by District Energy for the year in
question, and a term of 20 years.
' C. Operatinq and maintenance expenses. Each month's non-
fuel operating and maintenance expenses, less those solely
, 3
,
1
, attributable to the district heatin s stem or the district
g Y
cooling system, will be allocated to DES based on the Cooling
� Cost Allocation Percentage. (Any joint expenses paid by DES
rather than by District Energy will be allocated back to District
Energy on the same basis and offset against District Energy
' charges. )
D. General and administrative personnel expenses. Salaries
� of general and administrative personnel shown through a periodic
time study to have worked on district cooling activities will be
allocated based on such time study. Payroll taxes and personnel
benefits will be allocated in the same proportions as salaries.
' E. Other qeneral and administrative eupenses. General and
administrative expenses other than personnel, less those solely
' attributable to the district heating system or the district
cooling system, will be allocated to DES based on the Cooling
Cost Allocation Percentage. (Any joint expenses paid by DES
rather than by District Energy will be allocated back to District
, Energy on the same basis and offset against District Energy
charges. )
' F. Costs incurred by District Enerqy on behalf of DEB. The
cost of any capital items, debt service, or operating expenses
paid for by District Energy which are not joint use items but
' rather solely for the benefit of DES shall be billed in their
entirety to and paid by DES.
4. Repayment of Development Costs. Cooling system development
' costs incurred by District Energy shall be repaid by DES
according to the following terms:
' A. Definition. "Development costs" shall mean out-of-
pocket costs incurred by District Energy for preliminary design
work, marketing, communications and legal services, and other
, costs related to the development of the downtown district cooling
system from October l, 1990, through March 31, 1993, other than
engineering design and financing costs paid from the proceeds of
the original district cooling system financing.
' B. Recovery terms:
, (1) Development costs shall accumulate without interest
through March 31, 1993 .
(2) From and after April 1, 1993, simple interest shall
� accrue at 5 percent per annum.
(3) Beginning October 1, 1997, or such later date as
, billable cooling demand equals or exceeds 3,900 tons,
repayment of the total amount due (principal plus accrued
, 4
�
�
' interest) shall be made in accordance with sub ara ha hs 4
P 9 P � �
and (5) of this section 4.B.
' (4) Scheduled amortization shall be over 15 years at an
interest rate of five (5) percent per annum, with monthly
' principal payments proportional to those required on the HRA
district cooling loan. The initial payment schedule shall
be reviewed in connection with any district cooling
expansion financing and may be adjusted as mutually agreed
' by the parties, provided that DES is in compliance with all
terms of the district cooling bond loan agreement and HRA
loan agreement.
, (5) Repayment shall be completed not later than one year
after the retirement of the last of the Series 1991A, 1991B
, and 1991C bonds.
5. Monthly Settlement.
, A. Cost allocations will be determined by District Energy
and billed to DES in the course of producing District Energy's
financial statements each month, and the net amount due shall be
, payable to District Energy within 15 days after the date of such
statements.
' B. Amounts not paid within 30 days shall accrue interest
monthly at the average rate earned by District Energy that month
on funds in its Operating Reserve.
' 6. Resolution of Allocation Issues. In the event District
Energy and DES management personnel are unable to determine the
appropriate treatment for a cost item, the following procedure
� shall be utilized:
A. Management of District Energy or DES shall submit the
issue in writing to the independent public accounting firm
' engaged to perform the annual audit of District Energy,
requesting the auditor's recommendation based upon existing
facts and circumstances regarding that particular item or
� items.
B. The auditor shall present a recommendation for
' management's action. In the event District Energy or DES
elects not to adopt that recommendation, they may seek an
alternative recommendation from the Director of Finance and
Management Services of the City of Saint Paul.
,
,
, 5
'
1
, A roved: A roved: •
PP PP
, DISTRICT ENERGY SERVICES, INC. DISTRICT HEATING DEVELOPMENT CO.
d/b/a DISTRICT ENERGY ST. PAUL,
INC.
'
By: gy.
.
� zts. �ts:
(Per Board Resolution 91- ) (Per Board Resolution 91- )
'
Attachments:
, A. Cost allocation chart
B. Property, plant and equipment allocation example
� \reblcostaloc.2
'
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' 6
'
� Exhibit A
I
' i
FUEL COST ALLOCATION PROCEDURE
'
FUEL
� (3AS/OIL COAL
' M�Mr
C A B
� c�i ai �.i ai co.i
Ha water &eem Ste.m
Bailers Boiler Boilen
i
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' H@et CO-g6neratiOn St9em�ri�/e�
Exchangen Turbine Chillers(firture)
' G v v v ' H
' MWrS V V V WM►E
V V V
< f8lsam< < V T�li1N >
' v
Hot Water v Coolinp
Dietributian S�rstem v Distr(bution System
' v
v
v< < < < < < < < < "'
' v
deneni Plant �ectriCity OecUiC Chiller
Esdmated Produced Eatimated
, Electrical Uae: Oectrical Uee:
>.:;;�_>. >
Tafal B�81ra1 Gre- MtM 7 Ton-Floua Ouqiuf x
� (faalQtrerifwtlon. M J N Kwh/Ta,-Hbui
B�cbb Chwr 1�M) X x x X X x x x
' L P
Hot Water x x x x x x x x Coolinp
Di�tribudan K Diatribudon
, Est.6ecUical Uae: Wm e Est.Oectrical Uee:
77Nrmrl EMr�3�ndout x TMrmal E�r�BbiMart x
��D� EI6CUICItY Pualahy J�b
' PYfCFNYBA
'
� �/ - �9��
Exhibit B
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'
' DRAFT
t
'
'
' PAYMLNT ASSURANCE AGREEN�NT
�
' DATED AS OF OCTOBER 1, 1991
'
' HY AND BETWEEN
'
' DISTRICT ENERGY SERVICES, INC.
' AND
' DISTRICT ENERGY ST. PAUL, INC.
,
'
'
MAHLUM & ASSOCIATES
' A Professional Association
Suite 2222, North Central Life Tower
St. Paul, Minnesota 55101
1
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, PAYMENT ASSURANCE AGREEr�NT
' THIS AGREEMENT is entered into as of the lst day of
October, 1991. The parties to this Agreement shall be District
' Heating Development Company, d/b/a District Energy St. Paul,
Inc. , 76 West Kellogg Boulevard, Saint Paul, Minnesota
55102-1611, (hereinafter referred to as "District Energy") , and
District Energy Services, Inc. , 76 West Kellogg Boulevard,
, Saint Paul, Minnesota 55102-1611 (hereinafter referred to as
"DES") .
' RECITALS
WHEREAS, DES has conceived, developed, promoted and is in
' the process of marketing and financing a district cooling
project in the City of Saint Paul; and
' WHEREAS, DES has prepared and customers have accepted a
uniform District Cooling Service Agreement ("Service
Agreements") providing for cost-based rates; and
' WHEREAS, the financing of said district cooling project is
based upon 3400 tons of Initial Contract Demand as that term is
defined in the Service Agreements; and
' WHEREAS, DES, as of the adoption of this Agreement, has
ezecuted Service Agreements representing 2961 tons of Initial
' Contract Demand; and
WHEREAS, DES has concluded that there is a reasonable
likelihood that the 3400 tons of e$ecuted Service Agreements
' will be received by DES in the marketing of this district
cooling project; and
t WHEREAS, District Energy will secure reduction in its fized
costs as a result of sharing District Energy fized costs with
DES; and
' WHEREAS, DES and District Energy find it desirable to
proceed to conclude the financing and construction of the
district cooling system prior to receipt of ezecuted Service
' Agreements in the aggregate amount of 3400 tons; and
WHEREAS, District Energy has agreed to assure payment of a
' share of the fized costs corresponding to a magimum of 500 tons
' 5625M/5806M (09/18/91)
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' DRAFT
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of DES Demand Charqes for aggregate Initial Contract Demand
' below 3400 tons; and
WHEREAS, District Energy has received assurances from the
City of Saint Paul that the City will allow District Energy
' costs incurred hereunder as costs recoverable from District
Energy customers pursuant to the franchise by and between the
City of Saint Paul and District Energy; and
, WHEREAS, District Energy and DES have mutually agreed upon
terms and conditions of this Payment Assurance Agreement.
'
NOW, THEREFORE, in consideration for the foregoing and the
' mutual promises, covenants and agreements set forth hereafter,
the parties agree as follows:
, 1. Payment Assurance. District Energy shall, under the
terms and conditions set forth hereafter, up to a mazimum of
500 tons, pay to DES a monthly amount equal to the Fized Cost
Portion of the DES Demand Charge Rate representing the
' difference between the Actual Aggregate Initial Contract Demand
(as defined in Paragraph 2) and 3400 tons of Aggregate Initial
Contract Demand, as that Demand Charge Rate is determined
' pursuant to the provisions of Article VI of the Service
Agreements; provided, however, that the District Energy
agreement to pay DES as set forth in this paragraph shall be
subject to the Adjustment and other limitations as set forth
, hereafter. Fized Cost Portion as used herein shall mean the
direct operating costs, city regulatory costs, net debt service
and financing cost and change in working capital cost portion
' of the DES Demand Charge Rate for any fiscal year (see ezample,
Ezhibit A) .
2. Adjustment. District Energy shall be released from one
' ton of Payment Assurance for every one ton of Actual Agqregate
Initial Contract Demand received by DES above 2900 tons.
Actual Aggregate Initial Contract Demand, as used herein, shall
' mean the total of all Initial Contract Demand as set forth in
Paragraph 1.4 of esecuted Service Agreements . The partial
release as set forth heretofore shall be a permanent partial
' release of District Energy of its Payment Assurance obligations
under this Agreement. District Energy shall be fully released
from its Payment Assurance hereunder upon DES obtaining 3400
tons of Actual Aggregate Initial Contract Demand. The parties
� recognize and acknowledge that upon ezecution hereof, DES has
egecuted District Cooling Service Agreements in the aggregate
Initial Contract Demand amount of 2961 tons .
'
' 5625M/5806M (09/18/91)
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' To illustrate the o eration of the Ad'ustment the
P ] .
following ezample is provided: Upon ezecution of
' Service Agreements providing for 3245 of Actual
Aggregate Initial Contract Demand the Payment
Assurance would be adjusted to reflect the fact that
' District Energy remains obligated for a share of the
fized costs corresponding to 155 tons of Demand.
(3400 tons minus 3245 tons equals 155 tons. �
' The adjustment provided herein shall take effect upon the
earlier of the Customer Completion Date or First Service Date,
as defined in the Service Agreements for Service Agreements in
' ezcess of 2900 tons of Aggregate Initial Contract Demand.
3 . First Payment Date. The parties agree that District
� Energy shall not be obligated for Payment Assurance payments
hereunder prior to April l, 1993 .
4 . Method of Payment. Pursuant to the Cost Allocation
' Agreement, DES shall, on an ongoing basis, incur obligations to
District Energy in connection with the providing of the
� premises, goods and services and other costs incurred on behalf
' or for the benefit of DES. The parties contemplate that there
will be an ongoing setoff of obligations for cash payments to
DES from District Energy in an amount sufficient to provide for
' the Payment Assurance to DES as provided herein. In the event
that there is a net cash obligation from District Enerqy to DES
for the Payment Assurance, said cash payment shall be timely
made by District Energy. The Demand Charge Rate to District
' Energy reflecting the Payment Assurance shall reflect a
discount of five percent (5%) consistent with the provisions of
Section 10 . 6 of the Service Agreements. District Energy shall
' be entitled to an Adjustment as set forth in Paragraph 2 herein
at any time during the DES fiscal year.
5. Service Agreements Application. The parties recognize
' and acknowledge that District Energy is not a Customer of DES
and, accordingly, ezcept as e$pressly set forth herein, the
Customer provisions of the Service Agreements do not apply to
� District Energy. Escept as otherwise ezpressly provided
herein, the terms and conditions of the Service Agreements
shall not, directly or indirectly, be obligations of District
Energy. The provisions of Article VI of the Service Agreements
, shall be limited in application to District Energy' s Payment
Assurance to the Demand Charge Rate ezpressed in a sum per ton
per month charged to all DES Customers under the Service
' Agreements . District Energy shall be obligated to pay DES at
such times as all DES Customers are obligated to pay DES for
the Demand Charge Rate.
,
' 5625NL5806M (09/18/91)
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6. Repayment. DES shall be obligated to repay District
' Energy for sums advanced or offset pursuant to the Payment
Assurance. The sums paid or offset shall remain an obligation
of DES to District Energy, but shall not bear interest and
shall not be subject to repayment until the earlier of (a) the
' beginning of the first DES fiscal year in which Customer
Contract Demand eaceeds 4200 tons; or (b) 21 years from the
date of this Agreement. A schedule of repayments shall be
� established with a term not to ezceed ten (10) years or such
earlier term provided that the parties make a finding that the
repayment term will not adversely affect DES' ability to meet
all of its financial obligations during the ensuing fiscal year.
' 7. Effect of this Agreement. The parties agree that
District Energy is not by ezecution hereof, directly or
, indirectly, obligated to DES, its Customers, vendors, lenders,
or others, ezcept as espressly stated herein.
8. Miscellaneous.
' A. Entire Agreement. This Agreement represents the
entire and integrated Payment Assurance Agreement between
' District Energy and DES.
B. Not a Joint Venture. The parties hereto agree that
' it is not their intention to create nor does this Agreement
create or constitute a joint venture between the parties
and the parties shall not, in any way, be construed as
being joint venturers.
' C. Effect of Waiver. Whenever any act or failure to
act by one party is waived by the other party, directly or
' indirectly, such waiver shall be limited to the particular
act or failure to act and shall not be determined to waive
any other agreement, covenant, obligation, requirement or
other promise or breach under this Aqreement.
, D. Governing Law. This Agreement is made under and
shall be construed and enforced in accordance with the laws
' of the State of Minnesota.
E. Severability. The unenforceability or invalidity of
' any provision or provisions of this Agreement shall not
render any other provision or provisions herein
unenforceable or invalid.
' F. Eaecution Counterparts. This Agreement may be
simultaneously ezecuted in several Counterparts, each of
which shall be an original and all of which shall
' constitute but one and the same instrument.
' 5625M/5806M (09/18/91)
4
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' DRAFT
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G. Amendments. The parties agree that any and all
, amendments hereto shall not be deemed to be of force and
effect unless and until said amendments shall have the
written consent of the Housing and Redevelopment Authority
of the City of Saint Paul and the Trustee identified under
' financing documents to be ezecuted contemporaneous with the
ezecution of this Agreement and providing for the financing
of the district coolinq system project.
' G. Notices. Notices shall be directed as follows :
District Energy St. Paul, Inc.
' 76 West Kellogg Boulevard
Saint Paul, Minnesota 55102-1611
Attention: President
, District Enerqy Services, Inc.
76 West Kellogg Boulevard
Saint Paul, Minnesota 55102-1611
' Attention: President
' IN WITNESS WF�:REOF, District Energy and DES have executed
this Agreement. This Agreement shall be effective on the date
first above written.
� District Energy Services, Inc. District Energy St. Paul, _Inc.
IBY� BY:
Its Its
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, 5625M/5806M (09/18/91)
5
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� Exhibit A
'
PAYMENT ASSURANCE AGREEMENT EXAMPLE
-----------------------------------
' (Hypothetical Future Year Coste)
� 3,400 2,961
Total demand-related costs Tons Tons
-------------------------- -----
' Direct operatinq costs $85,592 $85,592
City regulatory costs 24,153 24,153
Net debt service and fin. cost 463,426 463,426
Change in working capital 124,224 124,224
' Fixed costs subtotal 697,395 697,395
Payment Assurance Amount* 0 (90,046)
------- -------
' Net fixed coste charged to customers 69'7,395 607,349
Allocated joint operating costs 176,809 153,980
' Total demand revenue requirement $874=204 $761,329
' Demand Charge rate calculation ($/ton/mo. )
------------------------------------------
' Fixed costs before Payment Assurance $17.10 $19.63
Payment Assurance credit 0.00 -2.53
Allocated coats 4.33 4.33
' Demand Charge rate $21_43 $21_43
, -----------------------------------------------------------------
3400 - 2961
' Payment assurance amount = ---------------- X $697,395
3400
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NIINNESOTA
� --� De artment of
...;:;� p . .
�=��� Publ�c Service �
�
�90 �� c«�t�
' 150 East Kellogg Boulevard
St. Paul, Minnesota 55101•1496
(612)296-7107
March 7, 1991 FAX (612)297-1959
t
��CEIVE�
' Mr. James A. Snyder
Chief Accountant MAR 11 1991
' City of St. Pau! .
Dept. of Finance & Management Services ��"I'j� A'�"�'0����
Division of Accounting
' 234 City Hall �
St. Paul, Minnesota 55102
' Dear Mr. Snyder:
Thank you for giving me a chance to look at District Energy's proposed cost
' allocation system.
The cost allocation s stem ade uatel allocates all directl attributable costs
' between DE and DE . Also, energy costs not so e y attri uta s to one company
(e.g., fuel to hot water boilers) are appropriately allocated to each company based on
use of plant steam output.
` As always, the most difficult task in a cost allocation system is to allocate joint
costs, the costs of property, plant and equipment used by both companies. The
proposed cost allocation system uses a pure energy allocator to allocate the joint
' costs of property plant and equipment (PP & E). That is, each Company will bear
these costs in direct proportion to its share of total energy sales for both companies.
' In general, we do not use a pure energy allocator to allocate the costs of
property, plant and equipment. Rather, we use a mixed allocation, dependent on
energy use and on contribution to peak demand. Since generation equipment must
' be built to meet demand at its lightest level, users ofi energy during peak periods are
causing generation costs. _
' I suggest you gather information on DE's and DES's peak period sales. You
can then use this information to develop a peak demand allocator� to be used with the
pure energy allocator to allocate PP & E. Perhaps, a combined allocator, half peak
' demand and half pure energy. can be used to allocate PP & E.
'
' AN EQUAL OPPORTUNITY EMPLOYER
Printed on Recycled Paper to Save Energy
�.eos
� -,� - .
Mr. Snyder
' March 7, 1991
Page 2
,
Other expenses, such as operating and maintenance and other general and
' administrative do not require a peak demand allocator. These expenses are not
related to peak demand.
' I hope these comments help you evaluate the proposed cost allocation system.
If you need additional help, please feei free to cali me at 296-7132.
, Sincerely,
�1�s
. .(/='L'G`'n"---� �/
' �
ALLEN KRUG
' STATISTICAL ANALYST
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' DISTRICT ENERGY ST. PAUL, INC.
RESOLUTION 91-3
' Support for District Cooling Development
' WHEREAS, encouraging long range environmental benefits through
appropriate use of energy is an important part of the company's
mission; and
, WHEREAS, statutory deadlines for phasing out groundwater use
create a need for cooling alternatives in downtown St. Paul; and
' WHEREAS, there are opportunities for significant expansion of
the district cooling system beyond the initial phase and the
economics of such expansion appear favorable; and
' WHEREAS, proceeding with district cooling will bring
substantial cost sharing benefits to district heating customers as
, well as capital and operating benefits to cooling customers; and
WHEREAS, those benefits would be lost and the company's
credibility damaged by not proceeding with district cooling;
, NOW, THEREFORE, BE IT RESOLVED that appropriate officers are
authorized to negotiate an agreement with a design engineer for the
' completion of district cooling pre-construction design services at
a cost not to exceed $412 , 500, which cost shall be advanced and/or
guaranteed by District Energy St. Paul to the extent necessary; and
' BE IT FURTHER RESOLVED that in agreeing to guarantee funding
for cooling design, the Board recognizes the potential need for,
and gives interim approval to, a guarantee by District Energy
' St. Paul of payment of the debt service and other fixed costs
associated with 500 tons of district cooling demand (estimated at
$90,000 in FY 1994) from bond closing until such time as additional
' customers totaling such demand are added to the system; and
BE IT FURTHER RESOLVED that the Board further recognizes the
likely need to defer recovery of district cooling development costs
' other than for design and gives preliminary approval to deferral of
such costs on terms similar to the subordinated City loan, provided
that the City loan remains at the approved amount of $3, 000, 000.
'
' \Us\coolresl
June 13, 1991
'
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19-Sep-91
' DISTRICT HEATING DEMAND RATE COMPARISON
(FORECASTED 1994)
'
WITHOUT WITH WITH
' DISTRICT COOLING AT COOLING AT
ITEM CALC. COOLING 2900 TONS 3400 TONS
�. TOTAL DEMAND-RELATED COSTS a7,400,890 $7,400,890 $7,400,890
B. NET COST ALLOCATION PMTS FROM COOLING 0 97�685 111,568
�. PAYMENT ASSURANCE DEFERRALS 0 (77�973) 0
D. NET COOLING CONTRIBUTION B-C 0 19�712 111,568
�. DEMAND REVENUE REQUIREMENT A-D $7,400,890 57,381,178 $7,289,322
AGGREGATE DEMAND (KVV) 141,000 141,000 141,000
�
G. DEMAND RATE($/KW/MO) E/ F/ 12 $4.37 $4.36 $4.31
'
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' DISTRICT COOLING
PAYMENT ASSURANCE AGREEMENT EXAMPLE
-----------------------------------
' (Hypothetical Future Year Costs)
' 3,400 2,961
Total demand-related coets Tons Tons
-------------------------- -----
, Direct operatinq costs $85,592 $85,592
City regulatory costs 24,153 24,153
Net debt service and fin. coat 463,426 463,426
Change in workinq capital 124,224 124,224
' Fixed costs aubtotal 697,395 697,395
Payment Assurance Amount* 0 (90,046)
' Net fixed costs charged to customers 697,395 607,349
Allocated joint operating costs 176,809 153,980
' Total demand revenue requirement $874,204 $761,329
------- -------
' Demand Charge rate calculation ($/ton/mo. )
------------------------------------------
' Fixed costs before Payment Assurance $17.10 $19.63
Payment Assurance credit 0.00 -2.53
Allocated costs 4.33 4.33
, Demand Charqe rate $21.43 $21.43
, -----------------------------------------------------------------
' __-3400___2961
Payment asaurance amount = -- X $697,395
3400
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