Jordahl: These must be Mike Boyer and John Fuelling of the Mid-American Energy Company. And Pat Langenberg perhaps accompanying them. We earlier had 3 chairs at this table. We might do it again.

Mid-American Energy Representative Mike Boyer: So you'd like us to sit here?

Lacina: Please.

Boyer: I saw this sign that said don't play with this mike, it's not a toy. I might be in trouble already.

Jordahl: We didn't invite you to play with the microphone. You might want to center that microphone so you that you have an equal distribution of volume.

Lacina: You have good eyes.

Boyer: I brought some copies. Can I hand those out to you.

Jordahl: Yes. And anybody else that may be interested present here in the audience.

Lacina: Casie, you've got the names for the record, right?

Stutsman: Do you want to have them introduce themselves again. We're not sure which name belongs...

Boyer: I'm with the Mid-American Energy. I'm out of the Davenport office. Would you like one of these?

Jordahl: I've got to hear how you pronounce your name.

Energy Consultant John Fuelling: Fuelling.

Jordahl: Hey I did it.

Fuelling: I'm John Fuelling. I'm an energy consultant. I'm based here in Iowa City and I often work with Pat on service related issues for the County, electric and gas service related issues. I think we were here about a year ago to chat about an opportunity that Mid-American Energy was going to bring to the County. We're finally back with that opportunity. Mike's going to explain it.

Boyer: First off, thanks so much for letting us come and talk to you today. This is a proposal for the County. Long term electric agreement, an option that will allow you to reduce your electric rate. Before I actually got into the discount itself, I just want to give a little background on deregulation. I'll be as brief as you'd like me to be or as expansive as you'd like me to be. Are you pretty familiar with deregulation of the electric utility industry?

Stutsman: Yes.

Lacina: Yes.

Boyer: Probably about as familiar as I am. I've been in the business for about 8 or 9 years. That doesn't mean I know a lot, but I've been around a little bit. First off, with the Department of Energy, this first sheet here with the map. The electric utilities are separated into regions. For example, Iowa is part of the Mapp Region. The Mapp Region consists of the electric utilities like Mid-American Energy, Northern States Power, etc. All the generators in the Mapp Region are running in sync with each other. Every generator in the Mapp Region runs at 3,600 r.p.m. I just say that to let you know that they're all interconnected. They buy and sell electricity from each other. When you look at the Mapp Region in regards to the bar graph above the map, the Department of Energy is projecting that if deregulation was to come into the Mapp Region by the year 2000, they feel electric prices would increase in the Mapp Region instead of decreasing. There's only one other region in the United State, if you're looking at the bar it's the 4th one from the right, called MWP. There also claiming that those rates would increase with deregulation, and the reason for that is they use hydro-electric power up there. The reason the Mapp Region the Department of Energy is thinking the prices will go up is because prices are good in the Mapp Region as they are compared to other prices in the United States. I'm not quite sure why that is, it could be that the utilities were managed better. The bottom line is the kilowatt hour costs in the Mapp Region are better than most other regions in the United States. Based on that they feel that prices in the California will go down, on the East coast will go down. But in the Mapp Region they might actually go up. That's what the Department of Energy is saying. The next page is from the OCA, the Office of Consumer Advocate, out of Des Moines. I won't read it. But if you go to the 2nd page, I believe there's one paragraph highlighted in yellow. They believe that prices again in Iowa, not the Mapp, but in Iowa, have the potential of going up. The reason for that is prices are good right now. The generation costs to produce a kilowatt hour, the utilities that are doing that right now are pretty efficient. For example, I can't speak for the other utilities in the state of Iowa, but Mid-American Energy for their coal fired plats it costs them about 1.32 cents a kilowatt hour to produce one kilowatt hour of electricity. We are looking at, to give you some background information, building a power plant in Illinois and selling that electricity when the Illinois market opens up. It's going to cost us about 3 cents a kilowatt hour to do that. We couldn't even sell that power that new generation back to Iowa competitively. The OCA is saying that because of that they feel that prices in the state of Iowa might go up when deregulation comes. Now, they're about as clairvoyant as I am, and I'm not really clairvoyant, but these are simply their opinions in what they think is going to happen within the state of Iowa and within the Mapp Region.

Lacina: Do they have it broken down by smaller areas. For example, the rate can go up on average in Iowa. But your major utilization areas-Linn County, Johnson County--doesn't mean that all aspects of the state will go up.

Boyer: That's right. That's a summary. That's an aggregate of all the rates. You'd be looking at residential, commercial, and industrial. I'm not saying that all the rates are going to go up. I'm just simply, what would be a good word, stating what some of the professional organizations feel are going to happen. I worked for Northern State Power for 8 years before I came down here. I've been with Mid-American Energy for about 5 years now. When we were in Northern States we were really interested in a pilot project in New Hampshire. If I remember my facts correctly, the rates in New Hampshire did go down upon deregulation. It cost a lot more there than it did, for example, with Northern States Power. I was dealing with a vice-president of operations with an organization he wanted to run his own organization in New England. He went over there to do it, and he just called me up out of the blue one day and said Mike, rates are like 12 or 13 cents/kilowatt, and he was paying about 6 in Minnesota. I know from a personal standpoint the rates were higher. But rates did go down over there. But what happened was as I understand the companies that went in to do that they actually did not make money on that endeavor. But they were trying to increase market share. For what that is worth.

Jordahl: I don't know that I followed your explanation of why our energy rates would go up under competition here, if you are presently able to provide energy at a lower rate, what is it about competition that would make you need to raise that rate?

Boyer: OK. It really doesn't have anything to do with competition, and that's a great question. It has everything to do with the cost to produce a kilowatt hour of energy. Mid-American Energy right now 5 of I think the top 10 coal-fire generators in the United States in regards to efficiency. I do not believe that Mid-American will come calling and say just because competition is here we're going to raise our rates. What I was trying to say was, unless there's another organization that can produce energy at the some cost that Mid-American can right now, that they will not be able to match the prices that Mid-American Energy has. I tried to use that example of us building a power plant in Illinois where it's going to cost us 3 cents/kilowatt hour to produce a kilowatt versus our 1.32 cents right now. We couldn't sell back into Iowa and be competitive with our existing power plants. The OCA is saying unless somebody has a comparable source of energy that can produce at the prices I was talking about, they also won't be able to come back and compete with the prices that are already here in the state.

Lacina: What it is, they're actually chasing prices. Once deregulation takes place, Chicago is going to pay dearly, does now, they pay higher rates. Since Iowa is sitting with 60% capacity that they're generating on, they've got all this excess capacity. They're going to go shopping looking to sell to Chicago, who's going to pay more. Why would they not raise the rates to everybody to get them all on the same playing field? There is no competition, with the exception of...

Boyer: I can tell you right now I have not heard anywhere in (inaudible) that we're planning on raising rates simply because competition is going to be in the area. I'm just simply stating that the OCA feels that prices might go up in the state of Iowa, and the Department of Energy feels that in the Map Region they might go up. I have never heard...have you heard anybody in (inaudible) say we're going to raise the rates when deregulation happens?

Lacina: But your indication that you're going to build this plant in Illinois which is going to cost you the 3 cents. You're not going to build that unless it's viable to make a profit.

Boyer: Right. We can sell in Illinois and make a profit. But we can't bring it back to Iowa and make a profit.

Lacina: No, because your cost of production here is so much lower and no one else can touch you either. Actually, what you've got is under-priced product. I can see why the professionals are saying why wouldn't you raise your price, because there's no competition that can touch you. And it did make sense. The negative side is for the smaller rural counties. Where the cost of delivering that down a 5 ore 10 mile line to a farm... Those area will probably be serious impacted...I'm not sure we will in the more metropolitan areas. We will probably be benefitors from buying volumes.

Jordahl: What I hear happening here, is not that competition coming into the area. But quite the reverse. That there isn't any competition in this area and because of that you are free to raise your prices.

Boyer: That was not my intent. I've never heard that we're planning on raising prices. I just wanted to give you some background information on what was going on in the industry and then show you what we wanted to do for you as a valued customer.

Lacina: Frankly, it's an extreme compliment to you that you have been able to operate so efficiently and to keep the costs down over such a long period of time. We're very very fortunate to have cheap power.

Jordahl: But to go back to your Illinois example. You've talked a 60% utilization rate here, 40% excess capacity then, unless you're talking about a 60% excess capacity, I don't know the statistics on that.

Lacina: 40% excess I think was the number we were given.

Jordahl: OK. The point is not that you couldn't sell the Illinois energy back to us at the rate that you're selling us our current energy and make a profit. The point of building the Illinois plant is to serve Illinois.

Boyer: Exactly.

Jordahl: You don't need any capacity to serve Iowa. Really instead you will be able to market the excess capacity that you now have in Iowa at a profit in Illinois.

Boyer: That would be the intent.

Jordahl: None of which means that our rates need to go up.

Boyer: Exactly. I agree with you.

Jordahl: We already have the capacity, we already have a rate that is profitable for you within in Iowa. The only dynamic that I can perceive, please correct me where I'm wrong in this, is because we don't have another alternative you would be able to raise the rates on us too.

Boyer: You know, that would be an option. But I think that would be corporate suicide on our part if we did that. One of the reasons I wanted to come down and work with Mid-American is because of some of the things they were doing with their customers that Northern States Power wouldn't allow me to do. For example: They would not allow me to go out and talk to customers about long-term agreements because they felt that prices were going to go up in the Mapp Region and they didn't understand why we should go out and talk to customers about giving them a better rate than they currently had. My feeling was, I wanted to create win win relationships with my customers. I've been in sales about 13 years, and I know that I'm successful when my customers are successful. I want organizations to feel good about what they've bought and about themselves for buying. As I've looked at what Mid-American Energy has attempted to do with their customers I've been real pleased with that. Now, we're not a perfect organization by any stretch of the imagination. But we're trying to go in the right direction.

Lacina: I think we're in agreement. I think we believe, and obviously the school system when they entered into the contract with you, believe that over time the prices are going to go up. We're seeing it from 2 different sides. For example, corporate suicide to em would mean that your company would not raise prices because the board of directors would come in and clean house because they're looking at their retirement funds and those things. I see some tremendous pressures upon you in a number of ways to maximize the return on you investments. Therefore, if makes it even better for us if we feel that we're in a good situation now to contract for the product.

Boyer: That's an interesting way to look at it.

Lacina: The other side of this thing is while you do have that capacity, it's not like you can out it in a truck and ship it to Chicago. There are transmission costs, lines costs, and with deregulation and this power wheeling, there'll be a lot of little companies spring up that'll charge them to move this product so by the time it gets to Chicago it will be a more expensive... That's why the other plant may come into play. But for our standpoint, I think we definitely need to sit down and talk to you about this.

Boyer: If you don't mind, one of the customers I dealt with at Northern States Power was a very large computer company. We brought in their national energy advisor, California as you know is deregulated. I asked him how's that going? What's deregulation like up there? He said, we're getting maybe a one percent discount and we're not going to see anything better for about 5, 6, 7 years. I asked him why that was. He says, the part of the industry that's being deregulated is the generation portion, and when you look at that from a bill standpoint, that represents about 30% of your bill. In California they had a lot of assets there that the utility felt that utilities should be able to recover the costs on those asset, and those are called transition costs. For the first 5 or 6 years in deregulation they might get a 10% break on their energy portion on their bill. But that's taken right back in those transition costs. They're deregulating now. But it's going to be about 5 or 6 years before they actually see a true benefit from that deregulation.

Lacina: Do you think there'll be service charges then and other things as these smaller spin-offs obviously that somebody's going to own the transmission lines and somebody's going to be the broker and that. I would see a generation cost and then a long list like the telephone bill of your long-distance carrier. Do you think that's going to come? Has that happened in...

Boyer: That's what we've seen in California. That's how it's structured in Illinois. It's called wheeling charges. The generation company or a broker might go to an individual or a large company and say we would like to contract to sell you a kilowatt hour at this price. Then that person or the individual that's selling that electricity would have to calculate out what those wheeling charges are et cetera to see if that will actually be better than what the customer is currently paying with "bundled rates" where they're just buying from one provider.

Stutsman: Where do we go from here?

Boyer: That's what the last page is. We have 3 options to provide the County. At the top of the page, the first option is a 6 year agreement and we're offering a discount of the first 5 years, and then on the 6th year we hold at whatever your rate is at that time. If you look at the right portion of that spreadsheet where it says estimated saving: The first year we're saying we'd like to offer you a 5% discount off of your current and that goes down to 0% at the 6th year. You can see what your savings would be for the 6 years comes out to about $20,000. The first year is a savings of $6,000, then $5,000, $4,000, $2,000, $1,000 and so on. That's option one. Option 2 is a straight rebate. We would hold your rate at what it is right now during this 6 year period, no increases. In addition to that, we would give you a rebate of 2.75% of your current annual charges. If you look at the middle spreadsheet left hand side where it says current pricing, there's a column there that says current annual charges. We would give back to you 2.75% of that in the form of an annual rebate, pay that to you up front and that would be $3,300 and a few dollars every year. The 3rd option is we'd give you a more aggressive rebate and do it over 5 years instead of 6 years and that annual rebate would come out to $4,000. The advantage that has over maybe the 2nd option is the net present value of money. A dollar today is worth more than a dollar a year from now. Those are basically the 3 options that we have to offer.

Lacina: Did you run the calculations of the net-present value?

Boyer: I did not. But I could certainly do that for you.

Lacina: Because under that, the question would be number one where we get the money up front more, or number 3, right?

Boyer: That's right. Between option one and option 3. Absolutely.

Lacina: Just ballparking it do you have...

Boyer: I would say option one from an NPV standpoint would be you best deal.

Stutsman: MPD?

Boyer: NPV, I'm sorry. Net Present Value.

Lacina: What basically allows you to do to get the money now and you can draw interest on it as opposed to if it's front loaded it has greater value assuming the economy's...

Boyer: An economist would look at that and they have a rate which is called discounting. We could figure out what that discount rate would be. We could say OK the first year $6,000 is worth this. The next year even though you're getting 5,468 when you discount that it might be only worth $5,000 and so on and so forth. The more money you get up-front from a net-present value standpoint the theory is the more you can do with it.

Jordahl: Why if our current charges are higher than the future charges would be under the deal that you propose. How does that make sense in view of this 3% in Illinois one point whatever percent here the picture that you painted at the outset?

Boyer: I'm sorry, I'm not quite sure I understand that.

Jordahl: You're saying that rates should go up in this region. But your deal is that they will go down.

Boyer: With this agreement. This is the reason why. This is one of the reasons I wanted to work Mid-American Energy. Even the experts are saying this is what's going to happen, I'm mean there's no guarantee that that is what is going to happen. It could be that somebody's going to come in for the simple reason to get some market share come in with rates that are lower than what our customers currently get. I want the opportunity now, while I can, to talk to my customers and say we value you as a customer we want to keep you as a customer, we want to keep a long-term relationship with you and we'll do that through this long-term agreement. Now there's a risk involved with that. The risk to us is that rates are going to go up and we're going to be giving you electricity at a much better rate than you could currently get. The other risk is the rates are going to go down a little bit, and then you'll be at a slight disadvantage with what's going on with the rates. I can't guarantee one way or the other. But what I can guarantee is I want to have a relationship with you and a positive one. If we enter into this agreement, 6 years from now or 5 years from now, you can call me back sand say Mike we think we'd like to get out of this agreement, or we think it was a good deal or we don't think it was a good deal. But at least we've got a relationship instead of coming 5 years from now and saying well rates are going to go down and now I'd like to talk to you about, or rate are going up and so I'm just going to raise you.

Jordahl: I realize this discussion needs to come to and end here...

Boyer:: No, I'm fine.

Jordahl:...we've got folks on the agenda here. I think that a question that needs to still be asked and that is: Do you not believe the projections of the Department of Energy that indicate that rates will go up in this region? You must believe...

Boyer: I do. That's a great question. Having worked for 2 utilities, I do believe that in the Mapp Region prices are going to stay the same they are or go up. Maybe for some really really large customers, they might be able to get some better rates. But you need to remember that they're only going to be able to get a 30% of off their entire bill. Generation is only 30% of that bill. For example: We're offering you over a 3 year period a 15% discount. That would mean that in the 3rd year somebody would have to come in and just on their generation be able to give you a 15% discount to match the first 3 years that you've already got and I'm not seeing that happen. I can see that happen in California and I can see that happen on the East Coast where rates are 11, 12 cents/ kilowatt hour. Let's say you're paying 7 cents a kilowatt and 2.5 cents of that is generation. For somebody to come in and give you a significant discount on that is going to be very difficult in the Mapp Region. My personal opinion, I think rates are going to stay the same or get higher. That's just based on my experience in the industry. Like I mentioned when New Hampshire opened up they went in there and they low-balled the prices nothing compared to what we're getting here in the Mapp Region right now. But it was lower for them. Those companies didn't make money. Every single one of them, based on what I had heard, did not make money. So somewhere along the line they're going to have to make some adjustments or go out of business or get out of that area.

Jordahl: So what you're looking for here in terms of what the benefit to your company is stability. That you'll know who your customers are under competition somebody comes in tries to do this low-balling thing you're going to know you have a certain customer base.

Lacina: An example was given to me down in Davenport when they had the conference down there, pricing is a factory. But as you said stability of your customer is also important. If you're contracting with these companies, the government's pretty dependable as far as utilization and they can project that capacity for this standard use. If you're dealing with a (inaudible) case and the economy turns south and they have major lay-offs and a couple of foundries shut down, you've got a real drop in that. If you have somewhat of a stable base, supply demand comes in to play as well as pricing. As stable on the demand side they can make us some deals because we're just sitting there keeping those lights burning. So all these things come into play when they come up with these plans. Pricing is a function of. But there are lots of other things as well.

Jordahl: You've been following this most closely for the Board, attending things and so forth. What do you think of this?

Lacina: Originally I felt it wasn't going to be wise. But the more I see of it there are advantages for us also to have that stability. If there are increases in having to go out and increase the tax asking if we could set up a flatter expense line in our budget we're better of as well. I don't think we're going to see savings over time by being in the open market. Yes they will be power wheelers and they'll sell you a kilowatt of power. But it's in South Dakota and by the time you pay your transition fees, your brokerage fees, and what I think will be a lot of add-ons as the phone company has done, the cost is going to be higher. Because all these smaller companies are going to need profits that you guys in the past under one organization have been able to keep those costs down. Now you're going to see lots of little companies. I personally in the big picture think this is to our advantage.

Fuelling: Did you see what in the Illinois area, in the Midwest area this summer with the prices of wholesale electricity?

Lacina: No.

Fuelling: Remember the Mapp Region we buy and sell electricity between utilities. Currently, before June of this year that generally cost us $30 a megawatt hour. Because there was such a demand for electricity in the Midwest, and there wasn't enough electricity there provided by the generators, that went to $30 a megawatt hour to $7,500 megawatt hour in a matter of 2 days.

Jordahl: Let's not have that happen.

Fuelling: The utilities had to bear the brunt of that. There were some businesses that are no longer in business because of that and there are some that came out very well. I guess what I'm saying is there was some volatility there that was never seen before in the marketplace one of the reasons was is they knew deregulation was coming. That only happened at the wholesale level. One benefit of a contract will do for an organization that enters in to one, is that they no longer have to worry about something like that happening, the provider has to worry about it. Mid-American Energy they've been here as a utility with the mergers, probably over 100 years. And we're planning on being here for a lot longer. That's one of the things you need to consider. Somebody can come from outside of the state and maybe do a low-ball price. But will they be around in a year or 2 or will they have that fluctuation? Those are just things you need to consider.

Jordahl: Who else has signed on to this? We've mentioned the school district. Statewide...

Boyer: You know of the top of my head...

Jordahl: Maybe you can send us that. We do have to get on to another agenda item.

Boyer: Sure.

Stutsman: Is there a time frame when we have to make a decision on this?

Boyer: That's a good question. Initially I was told that this pricing was only good to the end of the year. If this is something you're really seriously considering, I'm sure I can extend that for about 45 days.

Jordahl: We do have a new Board coming on here. Maybe part of the dynamics of this. But we also have expertise in Supervisor Lacina who's going off the Board who's been following this issue. We'll have to see when we have a full Board here and have another discussion of this.

Lacina: Maybe next Tuesday. And we really need to hear from Pat. Pat needs to give us some input on this as well.

Physical Plant Director Pat Langenberg: What lessons have you learned from other programs throughout other states? Have their prices declined? What articles I read in the paper seems like there's a lot of confusing both ways.

Boyer: I think the jury is still out because there are so few that are really deregulated. I think New Hampshire's deregulated, Illinois isn't going to happen until October '99, and that's only going to be for 33% of their largest customers, and their going to have to do that by lottery to figure out who's going to participate. And California is in the process of doing it right now. The last I saw they said that maybe one percent of the customers in California that actually switched providers up to this point.

Duffy: Jonathan?

Jordahl: Yes.

Duffy: I remember back before I was Supervisor I used to be a member of the Johnson County Conservation Board. In those days, there were several companies that went around the United States and looked at every dam that they were going to have electric power generated from the dam and the County Conservation Board owned the little Coralville dam out of Coralville. There was actually... I know some of these people came from France, I don't know if you remember or not. But that's the first time I heard about wheeling electricity. Because I asked them, what you going to do, put in electric lines. No, that by law they could use the electric wires we have now and I think that's the way it is now for a certain fee and was something like 6 cents a kilowatt hour or something like that. Indeed we're going to do something about this high price electricity. That went on for a couple of years and it just fell through. But I got a little experience when it comes to electric power. Then the next was wind power. Everybody's going to get a little windmill and have there own electricity. In fact I've been hearing that kind of out in the rural area a little bit. Jonathan asked a good question. We're are going to have all these savings and we're talking about an increase and I think you said it all. I don't quite understand that either.

Lacina: That's why we'll sign a contract now so if the prices do go up we wouldn't. It's like booking up fuel or gas...

Duffy: If they do go up. You don't see them going down. In other words the competition isn't there and they're going down.

Boyer: You bring up an interesting point that I should have talked about. This is my personal opinion on deregulation in the state of Iowa. Northern States Power for about the last 3 years has tried to pass legislature in favor of deregulation and they haven't been able to get it through the legislature. We're trying to do that in '99. The jury's out if we're going to be able to do that or not. If we can do it in '99, the current thinking is the year 2000 is an election year they might not address it in the year 2000. What's happened in other states typically once, like California and Illinois, about 3 years after they say we're going to have deregulation that's when they start to phase it in. If we can get it passed in '99, then you're looking at 2001 before we'll have deregulation in the state. Again, this is just my opinion. If we can do it in '99 you're looking at the year 2000 or farther out before we can pass it so you're probably looking at 2002 or 2003 before we get deregulation. It's at least, again this is just my personal opinion. But I strongly feel that it's at least that it's at least 3 years out before we will have deregulation in this state, maybe 5 or longer. There's a calculated risk in entering into this agreement, that yes prices might go down. But you've got a probably at least a 3 year window before there'd be an opportunity for you to go out and buy electricity as a retail entity, and by that time you will have had a 15% discount under your belt. It's going to be really difficult for somebody to come in 3 years from now and give you a 15% discount up front based on prices here in Iowa. Did that answer your question?

Jordahl: It sounds like nationally we have a pretty good prices here.

Boyer: Absolutely.

Jordahl: OK. We do need to move along. I want to thank you gentlemen very much for this education in the problems and opportunities of deregulation. I'm sure there's more.

Boyer: If I could interrupt real quick. I have a blank agreement. If you would like to have that, to have an idea of the type of language that's in the agreement I'd be delighted to leave that with you.

Jordahl: Absolutely. I need to look at that.

Boyer: Exhibit A and exhibit B have nothing to do with this agreement. They are just some bogus numbers in there.

Lacina: One question the Board needs to answer is, do you want to wait until after the first of the year to do this, or do you want to do it now? Because depending upon what you want to do we'll set the clock running.

Stutsman: Might as well just go ahead with it now. I'm thinking we will have new Supervisors come January first. But as far as the knowledge that you have on this issue and I think Joe too, it would serve the County best just to go ahead with our current Board and make a decision.

Lacina: Unless we can negotiate a better deal, you're taking today's rate and taking a discount off. You're actually lowering your rate by doing this. We can ask Mike, Mike has been coming, as far as his opinion. I think we should, but I don't want this to get away either.

Jordahl: It's still legitimate to say this is the Board of Supervisors. The new one will be in panel in January. We've been tracking this issue, and just as with the Land-Use Plan we've been working on we're going to tie that up with a bow with this Board. There are projects we've been working on, this is one you've been working on.

Stutsman: I guess I really don't see any advantage in waiting for the new Board.

Lacina: Do you want to put it on for next Tuesday? Pat do you want to come back and talk to us...

Duffy: There's one I think Pat White should look this over.

Jordahl: That's one good reason to have the contract, we can show that to Pat. Well speak of the devil. Supervisor-elect Lehman has just entered the room. We're just discussing asking your opinion about something. Yeah, Bob.

Reverend Bob Welsh: Mid-America has filed a new rate schedule. The residential rates are scheduled to go up according to their rates. It seemed to me I looked at it the commercial rates are going down in their projection. So you would want to look at what you're getting (inaudible) and what the projected rate is before the commission?

Stutsman: Is there any room for negotiation on these schedules?

Boyer: This is what we've been offering the cities and counties throughout the state. I haven't seen any negotiation up to this point.

Stutsman: What does that mean?

Boyer: That means you could ask and I would certainly be your advocate. But I haven't seen any moving on it.

Jordahl: Can you provide us with the rates schedule that Reverend Welsh refers to?

Boyer: I am not familiar with the rate increase, are you?

Fuelling: Are we talking about the gas rate, sir?

Welsh: I don't know.

Stutsman: It was in the bills.

Boyer: I think I can get you some information on that. I'll call Pat...

Jordahl: That's be important for next week (inaudible) consideration so we can get this on the agenda for Tuesday and possibly for action on Thursday next week.

Stutsman: I have a dumb question. Do we use gas, or is it mostly electricity that we're buying from?

Lacina: All our boilers and all of that would be gas fired.

Langenberg: Mostly our electricity (inaudible)...

Jordahl: All right. Thank you gentlemen.

Stutsman: Can we take just a short break.

Jordahl: Brief break, a respite.

Lacina: We need to get a copy of this to Mike.

Recessed at 9:53 a.m.; reconvened at 10:00 a.m.

(Continued in Part 3)