At the monthly meeting of the Board of Water, Electric, and Communications Trustees,
Muscatine Power and Water (MPW) leadership shared the Utility’s active response plan in
anticipation of energy-related Capacity Emergency Declarations issued by the Midcontinent
Independent System Operator (MISO) this summer.

The increase in renewable, non-dispatchable energy coupled with the decommissioning of fossil
fuel units in the MISO footprint has created gaps between available capacity and electricity
demand. Capacity Emergency Declaration events are issued by MISO when there is a concern
about having sufficient supply of electricity to meet demand. The frequency of declaration
events has increased considerably over the last few years, which increases the risk that
electricity load-serving entities, like MPW, may need to initiate load-shed protocols.

Load-shed is the process used to reduce electricity usage, at times when it exceeds available
supply, to maintain the stability of the bulk electric system (BES) and avoid cascading outages.
While load-shed events would be difficult for customers, they are intended as a last step to help
avoid a widespread blackout event, which would be much more difficult from which to recover.
MPW is a member of MISO because without being able to rely on the BES, it would need
greater redundancy in its local generation portfolio and would not be able to optimize its
generation output by selling and buying electric energy and capacity into the MISO market. In
other words, customer costs would be higher without MISO membership.

“Every utility across the country has load-shed protocols,” shared General Manager, Gage
Huston. “Although load-shed is a last resort measure, MPW is obligated to comply with MISO’s
directive to protect the integrity of the grid.”

Huston further stated while MPW has never experienced a load-shed event, MISO did issue a
Capacity Emergency Declaration on Thursday, May 12. The event prompted staff to initiate the
Utility’s maximum generation operations team to discuss first steps in the load-shed protocol if
the situation continued to deteriorate. Fortunately, it did not.

“Our team has been conducting practice drills to ensure everyone knows their roles and
expected duties,” shared Huston. In addition to drills, the Utility is creating customer education
materials intended to instruct MPW customers on what to expect if MPW is required to load-shed
during a maximum generation emergency event.

Considering the forecasted increase in Capacity Emergency Declarations, MPW leadership
requested the Trustees to re-evaluate Plant 1’s retirement at this time.

“The importance of MPW’s Plant 1 operations for grid stability is underscored by the Capacity
Auction results and the anticipated increase in Capacity Emergency Declarations,” stated
Huston. “The forecasted electricity supply in MISO is potentially inadequate to meet customer
demands this summer. As a utility that currently has extra reserves of installed generation
capacity, retiring these units during a time of grid reliability concerns and high market prices
would just increase the risk to MPW customers. Keeping this capacity available will best ensure
Muscatine’s system remains reliable during these very uncertain times.”

Deferring Plant 1’s retirement will allow time to review keeping the units on as “peaking units”,
which means limiting operations to times of high energy demand and grid instability.

“Utilities across the country are in a precarious position,” shared Huston. “While it’s known that
renewable energy is part of the future, the intermittent nature of renewable resources is going to
cause challenges in the shorter term. To maintain grid reliability and stability, dispatchable
generating units such as Plant 1 are depended on to meet customer demand. The further
development of transmission infrastructure and energy storage advancements will help alleviate
these concerns, but at this time, dispatchable generation must be available to keep the system
reliable.”

The Board of Trustees approved a restructure of internet packages, reflecting industry best
practices while optimizing the customer experience. Beginning July 1, the new service level
structure will bring down the price of the Utility’s highest internet speeds while consolidating
some of the lower speed tiers.

“MPW internet service rates have not increased since 2012,” said Erika Cox, director of
technology and customer experience. “A lot has changed in those 10 years. Customers have
more connected devices for streaming, gaming and downloading – all which gobble up
bandwidth. This plan is a right-sizing of our internet tiers.”

The restructure is in alignment with a national trend among internet service providers (ISPs) to
offer customers fewer but better speed options. Under the new plan, MPW will lower the
monthly rates for 1 gigabit, 250 megabit per second (Mbps) and 100 Mbps services and add a
new 500 Mbps service. On the lower speed end, a new 50 Mbps service will also be added to
consolidate current 25 Mbps and 40 Mbps services. Cox noted impacted customers will receive
communications from MPW in June about service and price changes effective July 1.

Cox explained fewer customers are taking the lower speeds and more call to upgrade to higher
bandwidth packages when they notice buffering and slow downloads because they are maxing
out their current connection. “They are trying to do more than what their internet package is
designed for – it makes for a frustrating experience and it doesn’t have to be. This restructure
will resolve some of that,” she noted.

At some point, even 50 Mbps will not be able to keep up with projected user device growth.
State and federal authorities now consider 100 Mbps to be the new minimum standard for
3 household broadband connectivity. “We have a plan for 100 Mbps to be our entry product, this
change is considered Phase 1 of a multi-year plan,” concluded Cox.

MPW paused its electricity Energy Adjustment Clause (EAC) effective August 1, 2019. The EAC
line has continued to be displayed on customers’ bills, but it has been zero since that time. With
the increased volatility in energy markets, MPW will be reactivating the EAC effective July 1, 2022. The structure will be more favorable to customers by creating thresholds within which there will be no EAC charge. Costs below the lower threshold will result in a credit to customers, while costs above the higher threshold will result in a charge to customers. Mark Roberts, director of finance and administrative services, noted “reactivation of the EAC in this revised manner is important during this time of high wholesale (MISO) electricity prices while being cognizant of ongoing cost pressures on MPW customers.”

Roberts also reviewed the April financial results for the Utility. MPW had net income for the
month of $372k, which was $719k better than the loss that was budgeted for the month. The
Electric, Water and Communications utilities all performed better than budget. Although the
Electric Utility had a $15k loss, it was much better than the $420k loss budgeted. The Water and
Communications utilities each substantially exceeded budget, with net incomes of $152k and
$234k, respectively. Roberts said, “part of the reason for good results was the timing of
expenses, with some costs expected to be recognized later in the year, but in other cases we
are seeing lower expenses that will continue through the year.”

MISO market prices are extraordinarily high this year driven largely by high natural gas prices,
which for the month roughly averaged $6.60 per million Btu. Prices at that level are more than
double prices in April 2021. Because natural gas is a fuel for many power generation units,
higher fuel costs drive higher wholesale electric prices. “While MISO prices are high, MPW has
managed the risks well and having owned and available generation to hedge MPW customers’
electricity needs has been extremely important,” according to Roberts.

In other business the Board:

• Approved payment for the April 2022 expenditures and transactions.
• Approved the revised Project Summary Form for the West Hill Sewer Separation Project
• Water Main Replacement – Phase 5A with a total cost of $354,900.
• Approved the recommended Commercial II Irrigation rates effective May 1, 2023 and related Electric Rate Tables.
• Approved the advance purchase of construction materials for NOFA #6 and NOFA #7 broadband expansion projects in the total amount of $1,027,234.