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Willmar raises its Big Stone II request to 30 megawatts

WILLMAR -- Despite concerns about putting too many eggs in one basket, the Willmar Municipal Utilities is increasing its request for power from the Big Stone II power plant from 9 megawatts to 30 megawatts.

Commission members made their recommendation on a unanimous vote on Monday, the last day they could seek to increase the city's allocation of power from the proposed, 500-megawatt coal plant.

"The boat is leaving,'' Bob Schulte, general manger of Central Minnesota Municipal Power Agency, told the commissioners shortly before they made their decision. The Big Stone II project owners needed a firm number from subscribers for power by the start of the new year, he explained.

CMMPA will be an owner of 60 megawatts of power from Big Stone II. Willmar will subscribe for its 30 megawatts through CMMPA.

Willmar originally entered an agreement with CMMPA for 9 megawatts of power, but expressed interest in increasing its allocation to 30 megawatts when Great River Energy and Southern Minnesota Municipal Power Agency pulled out as partners in the Big Stone II project.

Bruce Gomm, Willmar Municipal Utilities general manager, recommended at the meeting on Monday that the commission consider 20 megawatts rather than 30 megawatts. He cautioned the commission members against putting too many eggs in one basket, pointing out that the city should leave open options to develop other, alternative sources of energy. They include the possibility of upgrading the city's coal- and natural gas-fired plant, adding wind power generation, and possibly developing medium to slow-speed diesel units for peaking capacity.

Gomm also cited the uncertainties about the Big Stone II project itself. The project's owners will not know until April 17 if it will be issued the certificate of need to move forward. There is the possibility of an appeal if a permit is granted, and a belief that carbon taxes will become law and increase the costs for coal-fired power.

An independent consulting firm contacted by the general manager recommended the city limit its Big Stone II request to keep its options open, he said.

Added to the concerns about committing to 30 megawatts of power were the greater financial obligations that come with the larger allotment. At that level, the city will be financing an estimated $80.5 million in capital costs. Utilities President Bob Bonawitz expressed concerns about how it could affect future bonding needs for the utilities.

No matter the cost, the city of Willmar will need to find new sources of energy to meet its needs after 2014, when its current contract for power with Great River Energy expires. The city's load during high demand periods will be 52 to 53 megawatts at that point. It might be able to produce 15 megawatts with its own plant, if upgraded, and its allocation of power from the Western Area Power Administration and a proposed wind generation project might bring the city's power supply up to 31 megawatts.

That still leaves the city short of its needs, according to John Brinkman, power supply manager for the utilities. He also noted that the city's projections show the city's load growing to 60 megawatts, perhaps as early as 2017.

Brinkman told commission members that he was confident that the city could sell any excess electricity if the 30 megawatts of Big Stone II power is more than needed. Also, pointing to the projected energy costs for Big Stone II, Brinkman said he felt the electricity would be easily marketed.

While CMMPA will be the actual owner in the Big Stone II project, the Willmar Municipal Utilities will be a "virtual owner" for its share, according to Steve Thompson, director of operations with CMMPA. Willmar is responsible for its share of the development and financing costs of the project, and obligated to purchase the 30 megawatts of power through the course of the plant's life span.

But as a virtual owner, it is entitled to all of the benefits as well. The city's cost for power will not include a profit mark up.

This role as a "virtual owner'' also obligates the city to an estimated $1.3 million in development costs leading up to actual plant construction. The city is tapping reserve funds to pay those costs, but ultimately will need to decide whether to increase rates to recoup those costs ahead of time, or to include them with the overall financing for the project and add them -- along with interest costs -- to the rates when Big Stone II power actually is purchased.