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Energy consultant says Big Stone II costs will rise after two owners leave project

WILLMAR -- An energy consultant thinks the cost of the proposed Big Stone II power plant will increase, now that two of seven owners have withdrawn from the project.

"The basic message is that the withdrawal of (Great River Energy) and (Southern Minnesota Municipal Power Agency), combined with the fact that the plant has really been on a major project suspension for a year, are going to mean that the cost of the plant can be expected to be a lot higher (than the owners) have been willing to admit,'' said David Schlissel, senior consultant with Synapse Energy Economics of Cambridge, Mass.

He said a recent study published by the Edison Electric Institute confirms that the costs of building power plants "has been going through the roof'' over the last few years. He said there's no reason to expect that factors such as the world-wide demand for power plant design, resources, commodities and equipment won't affect the cost of Big Stone II.

But Big Stone II spokesman Dan Sharp said the owners are sticking with the original $1.6 billion price, based on obtaining permits on a timely basis and starting construction next spring.

"So far, we've had delays in getting approvals from agencies,'' he said.

Sharp said Minnesota administrative law judges gave a favorable recommendation on Aug. 15 to the project's certificate of need and power line permit, but the recommendation had been due on March 15.

Also, the North Dakota Public Service Commission has not ruled on a Big Stone application, which had been due Aug. 3.

"We hope that both the Minnesota PUC and the North Dakota PSC act quickly on our applications so we can get construction underway in the spring and keep on schedule with regard to time and cost,'' he said.

Sharp said the owners have asked the Minnesota commission to delay its hearing on the certificate of need and route permit from Oct. 4 to Oct. 11.

"We have to make decision on what we will do with the exit of GRE and SMMPA. We have several options, and we should know by the 11th of October which one of those options or a combination of those options we'll pick,'' said Sharp.

The withdrawal of Great River Energy and Southern Minnesota was announced Monday. As a result, the operating capacity of the coal-fired plant would be reduced from 630 megawatts to about 500 megawatts, according to Sharp. The proposed plant would be built next to the smaller Big Stone plant near Big Stone City, S.D.

Great River Energy cited changing demand, other resources being developed and purchased by GRE, higher costs from inflation delays, and uncertainty over changes in environmental requirements and technology as reasons for leaving the project. Its share of Big Stone II would have been 122 megawatts.

Southern Minnesota is delaying a long-term commitment until litigation is resolved with Rochester Public Utilities, which is Southern's largest member. Southern said, however, it would remain a participant, but not a partner. Southern's share of Big Stone II is 49 megawatts.

Willmar Municipal Utilities has agreed to buy up to 10 megawatts from Big Stone II through Central Minnesota Municipal Power Agency, one of five remaining owners. Willmar's electric requirements are projected to grow an average of 2 percent per year through 2010, according to a November 2006 study.