Document:

EXHIBIT 10.21

 

SECURITY AGREEMENT

 

This
Security Agreement is made this 28th day of December 2007, by Heron Lake BioEnergy,
LLC, a Minnesota limited liability company (the “Debtor” or “Borrower”), in
favor of Federated Rural Electric Association, a Minnesota cooperative
corporation (the “Secured Party”).

 

In
order to secure the payment of a Secured Promissory Note and loan of even date
herewith executed by the Debtor and payable to the order of the Security Party
(the “Note”), and each and every other debt, liability and obligation of every
type and description which Debtor may now or at any time hereafter owe to the
Secured Party under, pursuant to or arising out of the Note and any other
document, agreement or instrument relating to the acquisition of electric
equipment for the Heron Lake BioEnergy, LLC ethanol facility (the “Project”) in
Heron Lake, Minnesota (collectively referred to as the “Borrower Documents”)
(whether such debt, liability or obligation exists or is hereafter created or
incurred, whether it arises by operation of law or otherwise, or whether it is
or may be direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or sold, joint, several or
other joint and several)(said Note and all such other debts, liabilities and
obligations of the Debtor to the Secured Party herein are collectively referred
to as the “Secured Obligations”), Debtor hereby agrees to as follows:

 

1.                                       SECURITY INTEREST AND COLLATERAL.  In order to secure the payment and
performance of the Secured Obligations, Debtor hereby grants to Secured Party a
first priority and senior lien security position on such collateral as defined
in the original State of Minnesota Uniform Commercial Code Financing Statement
(“Collateral”).  Said Collateral shall
include the substation land, substation, all associated substation equipment,
and the distribution transformers within the facility as listed.  (See attached Exhibit A)

 

2.                                       REPRESENTATIONS WARRANTIES AND AGREEMENTS.  Debtor hereby represents and warrants to and
covenants with and agrees with Secured Party as follows:

 

A.                                   Debtor’s principal place of business will
continue to be located at 91246 390th Avenue (PO Box 198), Heron Lake, MN 56137.  Debtor’s executive offices are located at
91246 390th Avenue (PO Box 198), Heron Lake, MN 56137.  Debtor’s records concerning its accounts are
kept at such address.  During the
proceeding one year Debtor has not changed its name or operated or conducted
business under any trade name or “d/b/a” which is different from its corporate
name or other than Heron Lake BioEnergy, LLC. 
Debtor shall promptly notify Secured Party of any change in such name or
if it operates or conducts business under any trade name or “d/b/a” which is
different from such name.

 

B.                                     Debtor will:

 

(i)            promptly pay all taxes or other
governmental charges levied or assessed upon or against any Collateral or upon
or against the creation, perfection, or continuance of the security interest;

 

 

(ii)           keep all Collateral free and clear of all security
interests, liens and encumbrances, except any Permitted encumbrances Interests
(agreed to in writing by Secured Party);

 

(iii)          at all reasonable times as provided by the Borrower
Documents, permit Secured Party or its representatives to examine or inspect
any Collateral, wherever located, and subject to the Borrower Documents, to
reasonably examine, inspect and copy (at Secured Party’s cost) Debtor’s books
and records pertaining to the Collateral and its business and financial
condition; provided, however, that the Secured Party shall be entitled to
provide any and all information received hereunder to any regulatory authority
requesting such information and/or to any prospective purchasers of or
participants in loans made hereunder (so long as Secured Party uses its best
efforts to ensure that such participant also treats such information as
confidential);

 

(iv)          from time to time execute such financing statements as
Secured Party may reasonably deem required to be filed in order to perfect its
security interest;

 

(v)           pay when due or reimburse Secured Party on demand for
all reasonable costs of collection of any of the Secured Obligations and all
other reasonable out-of-pocket expenses (including in each such case reasonable
attorney’s fees) incurred by Secured Party in connection with the creation,
perfection, satisfaction or enforcement of the security interest or the
continuance or enforcement of this Agreement or any or all of the Secured
Obligations;

 

(vi)          execute, deliver, and endorse any and all instruments,
documents, assignments, security agreements, or other agreements in writing
which Secured Party may at any time reasonably request in order to secure,
perfect, protect, or enforce Its security interest and Secured Party’s rights
under this agreement;

 

(vii)         not use or keep Collateral, or permit it to be used or
kept for any unlawful purpose or in violation of any federal, state or local
law, statute or ordinance; and

 

(viii)        not permit any tangible Collateral to become part of
or to be affixed to any real property without first assuring to the reasonable
satisfaction of Secured Party that its security interest will be prior and
senior to any lien then held or thereafter acquired by any mortgagee of such
real property or its assigns if (i) an “Event of Default” occurs under the
Borrower Documents of even date, or (Ii) the Debtor at any time fails to
perform or observe any agreement contained in this section “2.B.(viii)” and
such failure continues for a period of thirty (30) calendar days after Secured
Party gives Debtor written notice thereof (or, in the case of agreements 

 

2

 

contained in clauses (ii) (viii) (ix) of
this Section “2.B.”, immediately upon occurrence of such failure, without
notice or lapse of time), then Secured Party may (but need not) perform or
observe such agreement on behalf and in the name, place and stead of Debtor
(or, at Secured Party’s option, in Secured Party’s own name) and may (but need
not) take any and all other actions which Secured Party may reasonably deem
necessary to cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interest, liens and encumbrances
(other than Permitted Interest), the performance of obligations under contracts
or agreements with account debtors or other obligors, the procurement or
maintenance of insurance, the execution of financing statements, the
endorsement of instruments, and the procurement of repairs, transportation or
insurance); and except to the extent that the effect of such payment would be
to render any loan or forbearance of any money, usurious, or otherwise illegal
under any applicable law, Debtor shall thereupon pay Secured Party on demand
the amount of all reasonable monies expended and all reasonable costs and
expenses (including reasonable attorney’s fees) incurred by Secured Party in
the connection with or as a result of Secured Party’s performing or observing
such agreements or taking such actions, together with interest thereon from the
date expended or incurred by Secured Party at the rate provided for in the
Secured Promissory Note.  Unless
prohibited by applicable law and to facilitate the performance or observance by
Secured Party of such agreements of the Debtor, Debtor hereby irrevocably
appoints (which appointment is coupled with an interest) Secured Party, or its
delegate, as an attorney-In-fact of Debtor with the right (but not the duty)
from time to time to create, prepare, complete, execute, deliver, endorse or
file, in the name and on behalf of Debtor, any and all instruments, documents,
financing statements, applications for insurance, and other agreements and
writings required to be obtained, executed, delivered, or endorsed by Debtor
under this agreement.

 

3.                                       REMEDIES. 
Upon the occurrence of any event of default, the Secured Party may
exercise anyone or more of the following remedies:

 

A.                                   Exercise and enforce any and all rights
and remedies available after default to Secured Party under the Uniform
Commercial Code (“UCC”), or common law; and

 

B.                                     Exercise or enforce any and all other
rights or remedies available to the Secured Party by law or agreement against
the Collateral, against the Debtor, or against any other person or property.

 

If notice to Debtor of
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given at least ten (10) calendar days prior to the date of
the intended disposition or other action.

 

3

 

4.                                       MISCELLANEOUS.

 

4.1.          This Agreement does not contemplate a
sale of accounts or chattel paper; and, as provided by law, Debtor is entitled
to any surplus and shall remain liable for any deficiency.

 

4.2.          This Agreement can be waived, modified, amended,
terminated or discharged, and the security interest can be released, only
explicitly in writing to be signed by a party or parties to be bound thereby;
and a waiver by the Secured Party shall be effective only in the specific
instance and only for purposes given.

 

4.3.          Mere delay in the failure to act shall not preclude
the exercise or enforcement in any of the Secured Party’s rights or remedies.

 

4.4.          All rights and remedies of the Secured Party shall be
accumulative and may be exercised singularly or concurrently, at Secured Party’s
option, and the exercise or enforcement of any such right or remedy shall
neither be a condition to nor bar the exercise or enforcement of any other.

 

4.5.          All notices to be given to the Debtor shall be deemed
sufficiently given (i) on the day of delivery if hand delivered, (Ii) on
the day after mailing it if sent overnight mail or (iii) three (3) days
after the postmarked day if mailed postage prepaid, certified or registered,
addressed to the Debtor at its last known address.

 

4.6.          Secured Party’s duty of care with respect to the
Collateral in its possession (as imposed by law) shall be deemed fulfilled if
Secured Party exercises reasonable care in physically safekeeping such
Collateral or, in the case Collateral in the custody or possession of a bailee
or other third person, exercises reasonable care in the selection of the bailee
or other third person; and Secured Party need not otherwise preserve, protect,
insure or care for any Collateral.

 

4.7.          Secured Party shall not be Obligated to preserve any
rights Debtor may have against any other party, to realize in the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of Collateral
in any particular order of application.

 

4.8.          This Agreement shall be binding upon and inure to the
benefit of the Debtor and the Secured Party and their successors and assigns,
and shall take effect when signed by Debtor and delivered to Secured Party; and
Debtor waives notice of Secured Party’s acceptance hereof.

 

4.9.          Secured Party may execute this Agreement if
appropriate for purposes of filing, but the failure of Secured Party to execute
the Agreement shall not affect or impair the validity or effectiveness of this
Agreement.

 

4.10.        Except to the extent otherwise required by law, this
Agreement shall be governed by the laws of the State of Minnesota; and, unless
the context otherwise requires, all terms used herein which are defined in
Articles 1 and 9 of the Uniform 

 

4

 

Commercial Code and
common law shall be construed according to such definitions.

 

4.11.        If any provision or application of this Agreement is
held unlawful or unenforceable in any respect, such illegality or
unenforceability shall not affect other provisions or applications which can be
given effect; and this Agreement shall be construed as if the unlawful or
unenforceable provision or application had never been contained herein and prescribed
hereby.

 

4.12.        All representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement and the creation and payment of the Secured Obligations.

 

4.13.        This Security Agreement shall be construed in
accordance with the laws of the State of Minnesota.

 

IN
WITNESS WHEREOF, Debtor has executed and delivered to Secured Party this
Security Agreement as of the date and year first above written.

 

	
   

  	
  Heron Lake
  BioEnergy, LLC

  
	
   

  	
  (Debtor)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Ferguson

  
	
   

  	
  Mr. Robert
  Ferguson

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
  Federated Rural
  Electric Association

  
	
   

  	
  (Secured Party)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard G. Burud

  
	
   

  	
  Richard G. Burud

  
	
   

  	
  General Manager

  

 

5

 

Federated
Rural Electric Association

 

Exhibit A
to Security Agreement

Exhibit A
Attachments

 

1.                                       Description

2.                                       Zieske Land Survey

3.                                       Federated Transformers

 

 

DESCRIPTION

 

PART OF
THE SOUTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 16, TOWNSHIP 104
NORTH, RANGE 37 WEST IN WEIMER TOWNSHIP, JACKSON COUNTY, MINNESOTA, DESCRIBED
AS FOLLOWS:

 

COMMENCING
AT AN EXISTING IRON MONUMENT AT THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER
OF SAID SECTION 16; THENCE SOUTH 89 DEGREES 57 MINUTES 49 SECQNDS WEST,
BEARING BASED ON JACKSON COUNTY COORDINATE SYSTBM, ALONG THE SOUTH LINE OF SAID
SOUTHWEST QUARTER AND ALONG THE CENTERLINE OF COUNTY STATE AID HIGHWAY NUMBER
24, AS EXISTS, A DISTANCE OF 857.15 FEET, TO THE POINT OF BEGINNING; THENCE CONTINUING
SOUTH 89 DEGREES 57 MINUTES 49 SECONDS WEST, ALONG SAID SOUTH LINE AND SAID
CBNTERLINE, A DISTANCE OF100.00 FEET; THENCE NORTH 00 DEGREES 02 MINUTES 11
SECONDS WEST A DISTANCE OF 271.02 FEET; THENCE NORTH 89 DEGREES 57 MINUTES 49
SECONDS EAST, PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER, A DISTANCE
OF 100.00 FEET; THENCE SOUTH 00 DBGREES 02 MINUTES 11 SECONDS EAST A DISTANCE
OF 271.02 FEET, TO THE POINT OF BEGINNING.

 

THE
TRACT CONTAINS 0.62 ACRES AND IS SUBJECT TO EXISTING COUNTY HIGHWAY EASEMENT AND
OTHER EASEMENTS OF RECORD, IF ANY.

 

7

 

Zieske
Land Survey

 

 

8

 

Federated
Transformers

 

Heron Lake BioEnergy, LLC

Transformers

Prepared by: Jag 08.27.07

Updated: Jag 11.05.07

 

	
  Trans # Ins

  	
   

  	
  KVA

  	
   

  	
  Serial #

  	
   

  	
  Manufacturer

  	
   

  	
  Location

  
	
  1

  	
   

  	
  300

  	
   

  	
  06J144034

  	
   

  	
  Pauwels

  	
   

  	
  West of Maintenance

  
	
  2

  	
   

  	
  2000

  	
   

  	
  06J144042

  	
   

  	
  Pauwels

  	
   

  	
  North of Coal Power
  Shed

  
	
  3

  	
   

  	
  2000

  	
   

  	
  06J144046

  	
   

  	
  Pauwels

  	
   

  	
  North of Coal Power
  Shed

  
	
  4

  	
   

  	
  2000

  	
   

  	
  06J144045

  	
   

  	
  Pauwels

  	
   

  	
  North of Coal Power
  Shed

  
	
  5

  	
   

  	
  1500

  	
   

  	
  06J144044

  	
   

  	
  Pauwels

  	
   

  	
  East of Brewing Vats

  
	
  6

  	
   

  	
  2000

  	
   

  	
  06J144041

  	
   

  	
  Pauwels

  	
   

  	
  East of Process
  Building

  
	
  7

  	
   

  	
  2000

  	
   

  	
  06J144040

  	
   

  	
  Pauwels

  	
   

  	
  East of Process
  Building

  
	
  8

  	
   

  	
  1500

  	
   

  	
  06J144036

  	
   

  	
  Pauwels

  	
   

  	
  West of Grain Silos

  
	
  9

  	
   

  	
  1500

  	
   

  	
  06J144035

  	
   

  	
  Pauwels

  	
   

  	
  West of Grain Silos

  
	
  10

  	
   

  	
  1500

  	
   

  	
  06J144037

  	
   

  	
  Pauwels

  	
   

  	
  South of Wet Cake Pad

  
	
  11

  	
   

  	
  1500

  	
   

  	
  06J144038

  	
   

  	
  Pauwels

  	
   

  	
  South of Wet Cake Pad

  
	
  12

  	
   

  	
  2000

  	
   

  	
  06J144039

  	
   

  	
  Pauwels

  	
   

  	
  North of Pump House

  
	
  13

  	
   

  	
  7.5Mw

  	
   

  	
  20060000783

  	
   

  	
   

  	
   

  	
  Substation

  
	
  14

  	
   

  	
  7.5Mw

  	
   

  	
  20060000784

  	
   

  	
   

  	
   

  	
  Substation

  

 

Page 1
of 1

 

9EXHIBIT 10.22

 

ELECTRIC SERVICE AGREEMENT

INTERSTATE POWER AND LIGHT

COMPANY

 

Account No.

 

This agreement
made this 17th day of October, 2007 by and between Interstate Power and Light
Company (a wholly owned subsidiary of Alliant Energy Corporation), an Iowa
corporation headquartered at 200 First Street SE, Cedar Rapids, Iowa,
(hereinafter referred to as “the Company”) and Heron Lake BioEnergy LLC, a
corporation / partnership / proprietorship with principal offices at 91246
390th Ave., Heron Lake, MN 56137, (hereinafter referred to as “the Customer”):

 

That for and in
consideration of the mutual covenants of the parties set forth, and the
performance thereof, it is agreed by and between the said parties as follows:

 

THE PRODUCER
HEREBY AGREES THAT:

 

1.                                      It will furnish to the customer at the
customer’s premises located at 91246 390th Ave. in Heron Lake, Minnesota,
through one point of delivery, alternating current electricity (hereinafter
called “electric service”) for all electrical energy requirements of the
customer.

 

2.                                      The electric service furnished hereunder
will be approximately 69,000 volts, and Three phase, 60 Hertz, and 0 volts,
single phase, 60 Hertz, and metered at 69,000 volts.

 

THE CUSTOMER
HEREBY AGREES THAT:

 

3.                                      It will take from the Company, through
one point of delivery, electric service for all electrical energy requirements
at the premises Identified in Paragraph 1 hereof, and it will observe the rules and
regulations of the Company pertaining to electric service.

 

4.                                      It will not create a demand for electric
service in excess of 6,300 KVA without first notifying the company in writing
of such increase in demand and giving the company sufficient time in which to
provide additional line capacity and other electrical equipment if required.

 

5.                                      It chooses / does not choose (circle one)
interruptible service and it will curtail its demand for electrical service to
N/A KW upon notice by the company.

 

IT IS MUTUALLY
UNDERSTOOD AND AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS THAT:

 

6.                                      The company shall furnish electric
service and the customer shall use and pay for such service in accordance with
the terms and condition of this Agreement and the rates set out in Rate
Schedule 437/438 Bulk Supply Rate attached hereto and made a part hereof, or such
other applicable rate schedule as hereafter at any time may be established for
this class of service within the authority of the Minnesota Public Utilities
Commission or such other regulatory authority having jurisdiction.  Notwithstanding any other provision of this
Agreement, all rates and charges contained in this Agreement may be modified at
any time by a subsequent filing made pursuant to the provisions of Chapter 216B
of the Minnesota Statutes. At the time of signing of this Agreement, the excess
facilities is $0.00; in the event the demand of the customer set forth in
Paragraph 5 above shall be increased, the monthly excess facilities shall be
increased appropriately.

 

1

 

7.                                      It is understood by the customer that, if
at any future time it should elect to accept service under some other available
electric service rate that might prove more advantageous, any expense brought
about by necessary wiring changes on its premises shall be borne by the
customer.

 

8.                                      The electric service furnished under this
Agreement includes only that which is incidental to the customer and no part of
the said electric service shall be sold by the customer to any other parties.

 

9.                                      The company will use due diligence in the
operation and maintenance of its plants and system pertinent to this Agreement
so as to render efficient economic service, but the company shall not be liable
to the customer for any loss or damages suffered by the customer through the
inability of the company to furnish said electric service in accordance with
this Agreement.

 

10.                                The customer shall hold the producer
harmless for any damage to persons or property arising out of the use upon the
customer’s premises of the electric service furnished to it by the company.  Nothing herein contained shall be construed
as relieving the company from any liability to its own employees while upon the
property of the customer in the performance of their duty and by the direction
of the company, or as relieving the company from any liability to the customer
due to the producer’s act of negligence.

 

11.                                This Agreement shall continue for a
period of one (1) year commencing October 1, 2007, and ending October 1,
2008, and thereafter, and may be terminated by either party giving to the other
written notice at least ninety (90) days prior to the date upon which it
desires to terminate the same; whereupon this Agreement shall terminate on said
date.  All contracts, agreements and
understandings between the parties hereto, whether oral or written, pertaining
to the subject matter hereof, heretofore made and entered into, shall hereby
become null and void and of no further force and effect whatsoever.

 

12.                                This Agreement shall be binding upon and
inure to the benefits of the parties hereto, their successors and assigns; but
the assignment of this Agreement by either party shall not relieve such party,
without the written consent of the other, from any of the obligations hereof.

 

IN WITNESS
WHEREOF, the parties hereto have caused these presents to be executed as of the
day and year first above written.

 

	
  Heron Lake Bio
  Energy LLC

  	
   

  	
  Interstate Power
  and Light Company

  
	
  (Customer)

  	
   

  	
  (Company)

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Robert J. Ferguson

  	
   

  	
  By:

  	
   /s/ Matt Dalney

  
	
   

  	
   

  	
   

  
	
  Title: President

  	
   

  	
  Title: Manager,
  Sales

  
	
  (Officer-Partner-Owner)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
  /s/ Jean M. Ferguson

  	
   

  	
  Attest:

  	
  /s/ Carole Burgin

  
							

 

2

 

GENERAL CONDITIONS

 

1.                                       Equal Opportunity Clause

 

a.                                       The contractor will not discriminate
against any employee or applicant for employment because of race, color,
religion, sex, or nation origin.  The
contractor will take affirmation action to insure that applicants are employed,
and that employees are treated during employment, without regard to their race,
color, religion, sex, or national origin. 
Such action shall include, but not be limited to the following:
Employment, upgrading, demotion, or transfer, recruitment or recruitment
advertising; layoff or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship.  The contractor agrees to post in conspicuous
places, available to employees and applicants for employment, notices to be
provided by the contracting officer setting forth the provisions of this
nondiscrimination clause.

 

b.                                      The full text of the Equal Opportunity
Clause is found at 41 CFR 60-1.4 and the provisions thereof are herein
incorporated by reference.

 

c.                                       Contractor further agrees to insert the
foregoing provision in all subcontracts hereunder.

 

2.                                       Affirmative Action for Handicapped
Workers; Affirmative Action for Disabled Veterans and Veterans of the Vietnam
Era.

 

a.                                       The contractor will not discriminate
against any employee or applicant for employment because of physical or mental
handicap, or because he or she is a disabled veteran or veteran of the Vietnam
Era in regard to any position for which the employee or applicant for
employment is qualified.  The contractor
agrees to take affirmative action to employ, advance in employment and
otherwise treat qualified handicapped individuals and qualified disabled
veterans and veterans of the Vietnam Era without discrimination based upon
their physical or mental handicap or their disability or veteran status in all
employment practices such as the following: employment upgrading, demotion or
transfer, recruitment, advertising, layoff or termination, rates of pay or
other forms of compensation, and selection for training, including
apprenticeship.

 

b.                                      The full text of these Affirmative Action
Clauses is found at 41 CFR 60-741.5 and 41 CFR 60-250.4 and the provisions
thereof are herein incorporated by reference.

 

c.                                       Contractor further agrees to insert the
foregoing provisions in all subcontracts hereunder.

 

3

 

	
  INTERSTATE POWER
  and LIGHT COMPANY

  	
   

  	
   

  
	
  ELECTRIC TARIFF

  	
   

  	
   

  
	
  FILED WITH
  M.P.U.C.

  	
   

  	
  ORIGINAL VOLUME
  NO. 8

  
	
   

  	
   

  	
  SUBSTITUTE
  ELEVENTH REVISED SHEET NO. 23

  
	
   

  	
   

  	
  Cancelling
  SUBSTITUTE TENTH REVISED SHEET NO. 23

  
	
  RATE
  DESIGNATION:

  	
   

  	
   

  	
   

  	
  ON-PEAK 437

  
	
  CLASS OF
  SERVICE:

  	
   

  	
  LARGE POWER AND
  LIGHTING - BULK SUPPLY

  	
   

  	
  OFF-PEAK 438

  
	
  SERVICE AREA:

  	
   

  	
  ALL MINNESOTA
  SERVICE AREA

  	
   

  	
   

  
							

 

Availability: 
Available only for new loads in excess of 4,999 KW served at
transmission voltages.  Existing loads
taken with added new loads such that the total load is in excess of 4,999 KW
may also be served at this rate provided the customer assumes all costs
incurred in revising Company’s system in order to serve the total load at
transmission voltages.  A service
agreement shall be required.

 

Net Rate:

 

Basic Service:    $4.22400 per
day*

 

	
   

  	
   

  	
  Usage from June 1 through Sept. 30

  	
   

  	
  Usage from October 4 through May 31

  	
   

  
	
  Demand Charge:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  On-Peak KW

  	
   

  	
  $10.38 per KW

  	
   

  	
  $6.09 per KW

  	
   

  
	
  Off-Peak KW In excess of On-Peak KW 

  	
   

  	
  $3.98 per KW

  	
   

  	
  $3.98 per KW

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  kWh Charge:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  On-Peak kWh

  	
   

  	
  All
  kWh/day @ 3.644¢ per kWh

  	
   

  	
  All
  kWh/day @ 3.616¢ per kWh

  	
   

  
	
  Off-Peak kWh

  	
   

  	
  All
  kWh/day @ 3.185¢ per kWh

  	
   

  	
  All
  kWh/day @ 3.185¢ per kWh

  	
   

  

 

*For Comparison
Only:  Basic Service $128.48/month

 

	
  Definition of
  Peak Periods:

  	
   

  	
  On-Peak: 7 AM –
  10 PM all non-holiday weekdays.

  
	
   

  	
   

  	
  Off-Peak: All
  other hours (including the holidays of New Year’s, Memorial Day, 

  Independence Day, Labor Day, Thanksgiving Day and Christmas Day).

  

 

Determination of
Demands:  The metered demands shall be measured by a 15
minute interval demand meter and shall include any loss adjustments provided
for in a contract for metering at other than transmission levels.

 

Billing Demand: 
The Monthly Billing Demand shall be the largest On-Peak metered demand
in the 12 months ending with the current billing month but not less than 5,000
kW.

 

Minimum Energy
Purchases:  The minimum number of kWh to be billed in any
billing month shall be that quantity equal to the Billing Demand multiplied by
400.  The minimum kWh billed shall be in
the same ratio as actual metered On-Peak kWh and Off-Peak kWh for the month.

 

Energy Supply Cost
Adjustment:  Rider 1M applicable hereto.

 

Excess Facilities
Charge:  Any facilities required to provide service in
excess of that permitted under this Schedule or the Company’s Electric Service
Standards shall be provided at a monthly amount equal to 1.8% of the Company’s
investment in such facilities.

 

Tax Adjustment: 
Rider MTX applicable hereto.

 

4

 

Reactive Demand Charge. 
A reactive demand charge of 51¢ per kVAr for that portion of the maximum
kVAr registered during the month in excess of 50% of the maximum KW registered
during the month.

 

Minimum Monthly
Bill:  The minimum bill to be rendered for any
billing period will be the demand charges for the Billing Demand for that month
plus the energy charges for 400 kWh per kW of that Billing Demand.

 

Late Payment: 
A late payment charge of one and one-half percent per month shall be
assessed on delinquent amounts in excess of $10.00.  The minimum late payment charge assessed
shall be $1.00.  A bill becomes
delinquent if not paid within 15 days after being rendered.

 

Rules and
Regulations:  Service hereunder is subject to the
provisions of the Company’s Electric Service Standards.

 

 

	
  Date Filed:
  May 16, 2005

  	
  Effective Date:
  May 15, 2006

  
	
   

  	
   

  
	
  By:

  	
  /s/ James P. Maher

  	
   

  
	
   

  	
   James P.
  Maher, Manager – Regulatory Pricing, Iowa & Minnesota

  
	
   

  	
   

  
	
  Docket
  No. E001/GR-05-748

  	
  Order Date:
  May 19, 2006

  
				

 

5

 

	
  INTERSTATE POWER
  and LIGHT COMPANY

  	
   

  	
   

  
	
  ELECTRIC TARIFF

  	
   

  	
   

  
	
  FILED WITH
  M.P.U.C.

  	
   

  	
  ORIGINAL VOLUME
  NO. 8

  
	
   

  	
   

  	
  SUBSTITUTE
  SIXTEENTH REVISED SHEET NO. 29

  
	
   

  	
   

  	
  Cancelling
  SUBSTITUTE FIFTEENTH REVISED SHEET NO. 29

  
	
  RATE
  DESIGNATION:

  	
   

  	
  ENERGY SUPPLY
  COST ADJUSTMENT

  	
   

  	
  Rider 1M

  
	
  CLASS OF
  SERVICE:

  	
   

  	
  ALL SCHEDULES SO
  DESIGNATED

  	
   

  	
  (Page 1 of
  2)

  
	
  SERVICE AREA:

  	
   

  	
  ALL MINNESOTA
  SERVICE AREA

  	
   

  	
   

  
							

 

There shall be
added to or deducted from the net monthly bill $0.00001 per Kilowatt-hour for
each $0.00001 increase above or decrease below $0.01692 in the energy supply
cost per Kilowatt-hour sales.

 

The energy supply
cost adjustment for each billing month shall be derived from the following
formula:

 

Monthly Adjustment
= Fm/Sm – 0.01692

 

Where:

Fm is total fuel
and purchased economic power cost and Sm is total kWh sales (retail sales plus
firm municipal sales) for the first two months of the three month period
immediately preceding the billing month, all as defined below.

 

a.                                       Fuel and Purchased Economic Power Cost
shall be the sum of the following:

 

1.                                       The fossil and nuclear fuel consumed in
the Company’s generating stations, including the Company’s share of fuel
consumed in jointly owned or leased generating stations, as recorded in
Accounts 151 and 518,

 

2.                                       The total cost of the purchase of
economic power as defined below, if the reserve capacity of the Company is
adequate independent of all other purchases where non-fuel charges are included
in either base period or current period fuel and purchased economic power cost,

 

3.                                       The energy cost associated with any
energy purchased for reasons other than identified in (2) above, when such
energy is purchased on an economic dispatch basis,

 

4.                                       The actual identifiable fossil and
nuclear fuel costs associated with energy purchased for reasons other than
identified in (2) above, less,

 

5.                                       The energy-related revenue applicable to
inter-system sales.

 

b.                                      kWh Sales shall be all kWhs sold
excluding inter-system sales for the same period.

 

c.                                       Economic Power is power or energy
purchased over a period of twelve months or less where the total cost of the
purchase is less than the Company’s total avoided variable costs.

 

	
  Date Filed:
  May 16, 2005

  	
  Effective Date:
  May 15, 2006

  
	
   

  	
   

  
	
  By:

  	
  /s/ James P. Maher

  	
   

  
	
   

  	
   James P.
  Maher, Manager – Regulatory Pricing, Iowa & Minnesota

  
	
   

  	
   

  
	
  Docket
  No. E001/GR-05-748

  	
  Order Date:
  May 19, 2006

  
			

 

6

 

	
  INTERSTATE POWER
  and LIGHT COMPANY

  	
   

  	
   

  
	
  ELECTRIC TARIFF

  	
   

  	
   

  
	
  FILED WITH
  M.P.U.C.

  	
   

  	
  ORIGINAL VOLUME
  NO. 8

  
	
   

  	
   

  	
  SUBSTITUTE FIFTH
  REVISED SHEET NO. 29.1

  
	
   

  	
   

  	
  Cancelling
  SUBSTITUTE FOURTH RIVISED SHEET NO. 29.1

  
	
  RATE
  DESIGNATION:

  	
   

  	
  ENERGY SUPPLY
  COST ADJUSTMENT

  	
   

  	
  Rider 1M

  
	
  CLASS OF
  SERVICE:

  	
   

  	
  ALL SCHEDULES SO
  DESIGNATED

  	
   

  	
   

  
	
  SERVICE AREA:

  	
   

  	
  ALL MINNESOTA
  SERVICE AREA

  	
   

  	
   

  
							

 

d.                                      Total Cost of the Purchase is all charges
incurred in buying economic power and having such power delivered to the
Company’s system.  The total cost
includes, but is not limited to capacity or reservation charges, energy
charges, adders, and any transmission or wheeling charges associated with the
purchase.

 

e.                                       Total Avoided Variable Cost is all
identified and documented variable costs that would have been incurred by the
Company had a particular purchase not been made.  Such costs include, but are not limited to,
those associated with fuel, start-up, shut-down or any purchases that would
have been made in lieu of the purchase made.

 

f.                                         Under the Mid-Continent Area Power Pool
(MAPP) Agreement, Company is required to own, or have available to it under
contract, sufficient generating capability to supply its monthly adjusted net
system demand while maintaining a reserve capacity obligation equal to 15% of
the annual adjusted net system demand. 
If Company does not own sufficient generating capacity to meet this
obligation, Company will obtain seasonal capacity commitments from other
utilities which are party to the Agreement. 
If such capacity is not available, Company will obtain needed capacity
from an outside party.  The MAPP
Agreement also requires Company to meet a daily operating reserve obligation
equal to a prorated share of the Pool Total Operating Reserve which is an
amount equal to 150% of the capability of the largest generating unit in
operation on the interconnected systems of the Pool participants.  Additionally, the MAPP operating reserve
requirements states that the spinning reserve portion of the operating reserve
shall not be less than 75% of the capability of the largest generating unit in
service.  Company’s percentage of Total
Operating Reserve is calculated by giving one-third weight to the capability of
the Company’s largest unit divided by the sum of capability of each participant’s
largest unit and a two-thirds weight to the Company’s Annual System Demand
divided by the sum of the Annual System Demands of all participants.  If it is determined that Company cannot, in
any hour of the day, meet its load and operating reserve requirements with
Company generating resources, owned or under contract, then arrangements will
be made to purchase energy from within MAPP to meet such needs.  If sufficient resources are not available
from within MAPP, Company will arrange a purchase from a party outside of the
Pool.  Purchase will be considered a
reliability purchase if required to meet the conditions outlined above.

 

	
  Date Filed: May 16,
  2005

  	
  Effective Date:
  May 15, 2006

  
	
   

  	
   

  
	
  By:

  	
  /s/ James P. Maher

  	
   

  
	
   

  	
   James P.
  Maher, Manager – Regulatory Pricing, Iowa & Minnesota

  
	
   

  	
   

  
	
  Docket
  No. E001/GR-05-748

  	
  Order Date:
  May 19, 2006

  
				

 

7

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