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Utilities seeking advance review in N.D. of Big Stone power project

BISMARCK, N.D. -- Two utility partners in a proposed $1.6 billion power plant expansion want North Dakota regulators to endorse the project in advance, which would make it easier for utilities to boost electric rates later to pay for it.

Montana-Dakota Utilities Co., of Bismarck, and Otter Tail Power Co., based in Fergus Falls, Minn., filed documents with North Dakota's Public Service Commission this week asking for a review of the Big Stone II project.

Montana-Dakota Utilities and Otter Tail are part of a group of seven utilities that plan to build the 630-megawatt power station next door to the existing Big Stone plant, near Milbank in northeastern South Dakota.

A state regulatory agency's endorsement of the project should help the plant's developers obtain cheaper financing, representatives of the two utilities said Friday.

"The more certainty there is for a lender that ... you're going to be able to recover (costs) on your project, the more comfort that lender would have with taking on the project," said Cris Kling, an Otter Tail spokeswoman. "If we get better financing rates, those are going to be savings that are passed on."

Last year, the North Dakota Legislature approved a law allowing utilities to request an advance Public Service Commission review of whether a power project would be a prudent investment. The filings by Otter Tail and Montana-Dakota are the first attempts by any utility to use the new law.

"They're looking for some sort of stability, or some sort of assurance, that eventually this will get passed on to ratepayers," said Tony Clark, the president of the Public Service Commission.

As part of the commission's review, the utilities must file cost estimates for the project. Clark said the three-member board will also hold at least one hearing on the application.

If the Public Service Commission endorses a project in advance, the affected utilities are assured they will be able to increase electric rates later to recover their costs. The law gives the commission the option of changing its mind, but the utilities still may recoup their expenses up to that point.

The commission has until June 15 to finish its review. Clark said the law does not obligate the commission to decide whether the Big Stone II project is prudent.

"This won't have an immediate impact on rates," Clark said. "A lot of it will depend on what the commission decides to do with it. The burden of proof in this case is still on the utilities, to prove that ... they really need this new power plant."

Montana-Dakota and Otter Tail filed brief expense schedules with the Public Service Commission this week, estimating the cost of Big Stone II at almost $1.6 billion.

It will cost $1.36 billion to construct the plant itself, and $238.1 million to make needed improvements to the area's electric transmission network, the filings say. Montana-Dakota and Otter Tail both intend to have a 19.33 percent ownership stake in the project.

Other partners are Great River Energy, of Elk River, Minn.; Heartland Consumers Power District, of Madison, S.D.; Missouri River Energy Services, of Sioux Falls, S.D.; and two Minnesota municipal power agencies.