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Willmar MUC and Kandiyohi Power sign off on landmark agreement

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SPICER -- Officials of Kandiyohi Power Cooperative and Willmar Municipal Utilities have signed landmark agreements that enable Kandiyohi Power and Willmar -- and possibly other municipal utilities and co-ops in the state -- to avoid costly service territorial disputes.

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The service territory agreement and an annexation compensation model were signed Wednesday noon at Kandiyohi Power's rural Spicer headquarters.

The two utilities worked out the agreements after about five years of meetings, discussion and negotiation. The discussion had included a study of possibly merging the municipal utilities and the cooperative. That idea was eventually dropped.

Following a pork roast dinner, municipal and cooperative officials stood to praise one another for working through a history of service territory squabbles and for coming up with agreements that will allow the utilities and co-op to work together as neighbors for the next 27 years.

The new agreements were basically worked out last January, but negotiations over some details weren't completed until just recently.

The agreements replace a 20-year service territory that was set to expire in 2010.

"I think we have a plan set up here now that we will be able to work together. It's all in writing how the annexation will be taking place. It's a win-win for both,'' said Don Boll of Lake Lillian, co-op board chairman.

"This has been quite a lengthy journey, but I think the results are extremely good for both Willmar and the customers of Kandiyohi Power Cooperative,'' said Bob Bonawitz, Municipal Utilities Commission president.

"I think the real significant thing is that it puts us in a partnership. One of the elements of the agreement is we are to meet at least quarterly to work out details of expansion and design of facilities,'' he said.

State law says rural electric cooperatives are to receive fair compensation for service territory lost by municipal annexation, but the law does not establish a formula to determine the amount of compensation.

The compensation model in the agreement will be in effect until Dec. 31, 2034, and provides a framework for both sides to determine how the revenue will be handled.

Willmar will compensate the cooperative for the depreciated value of its facilities and equipment and integration expenses related to serving the old cooperative headquarters on North Business 71.

The utilities will compensate the cooperative for the depreciated value of facilities, equipment and integration expenses the cooperative has incurred or will incur as part of having served the city's wastewater treatment plant area in rural Willmar in the past.

Bonawitz said the agreements could become a model for settling disputes between other cities and co-ops.

A municipal utility and a co-op in Wright County have each spent a quarter-million dollars in legal fees in a service territory dispute and have yet to reach an agreement.

Willmar will be allowed to serve the MinnWest Technology Campus (formerly a co-op customer), and the new airport and new wastewater treatment plant, which are both located outside the city limits.

Kandiyohi Power will continue to serve the area south of the Highway 71/23 bypass until Jan. 1, 2015, after which Willmar will begin to serve the area. Willmar will pay for depreciated value of any cooperative facilities acquired by Willmar and pay any cost to ensure that the cooperative can continue to serve in its area of responsibility.

Dave George, Kandiyohi Power CEO, said the main issue when he started in 1987 was squabbling over service territory.

He said municipals and electric co-ops are virtually alike.

"But the only issue that we didn't agree on was service territorial compensation after annexation,'' he said. "Other than that, we have the same issues. Being neighbors, we can work much better together moving forward into a very dynamic industry, so we're looking forward to it.''

Bruce Gomm, who has been utilities general manager for about one year, said he wasn't interested in what happened in the past.

"My goal is to move forward and do that in a positive manner, cooperatively,'' he said.

Signing the agreements for the co-op were Boll, George, and board member Dale Anderson of rural Belgrade.

Those signing for the city were Bonawitz, utilities commission secretary Doug Lindblad, Willmar Mayor Les Heitke and City Administrator Michael Schmit.

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