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MUC officials glum as they discuss effect of Big Stone II demise; Willmar's loss in the doomed project is $900,000

WILLMAR -- Willmar Municipal Utilities Commission members were glum over the demise of the Big Stone II power plant project compared with the upbeat prospect expressed two weeks ago that another partner could be found to replace the project's principal backer.

During the Oct. 26 commission meeting, Bob Schulte, chief executive officer of Central Minnesota Municipal Power Agency of Blue Earth, indicated that a very strong prospect was being courted to take the place of Otter Tail Power Company of Fergus Falls.

If steps proceeded positively, he said, Big Stone would be running in 2016. Willmar was planning to buy 30- megawatts of power from the 500-to-600-megawatt plant to replace a 30-megawatt contract with Great River Energy that expires in 2015.

However, the prospect decided not to join the project and the four remaining partners, including Central Minnesota, voted Oct. 30 to discontinue the project.

Monday, commissioner Dave Baker said that all of the partners and utilities, including Willmar, that had intended to buy Big Stone power went into the project fully aware. But he was now feeling "maybe a little bit betrayed'' after Otter Tail withdrew.

"The big guy told us they had the financial strength to pull it off,'' Baker said, searching for answers. "I don't know what happened. So many of us get behind the big dog, trusting they had wherewithal to pull this thing off.''

Willmar Utilities General Manger Bruce Gomm said he was told Otter Tail pulled out because the financial status of its nonutility investments declined during the current economic downturn. Even though the parent company is mainly a utility, the company had nonutility investments that crashed and took a huge hit on the utility side.

Once the value of Otter Tail's stock went down, investors lost their sense of security and the company's strong financial stability was wiped out.

"It's an investor-owned utility and they are always looking for ways to make more money and few years ago that sounded like a good way to go,'' said Gomm. "We counted on their financial strength being there to see the project through, but unfortunately it didn't happen.''

Gomm said the prospective partner decided not to join Big Stone II because it did not need more baseload generation. Its load growth has slowed substantially and it didn't need additional generation until 2020, he said.

Gomm said the remaining four partners are closing the project. Willmar's contribution of more than $900,000 as its share of planning costs will be lost from the project's failure, as will contributions from other partners and prospective buyers.

He recommended Willmar continue to pay whatever is needed under an agreement with Central Minnesota to close the project. Baker asked that no further payments be made after 2009. Gomm said he would have the amount of Willmar's cost at the next meeting.

Gomm said the demise of Big Stone is forcing the utility to seek the next-lowest cost power supply option. He said much can change in the next five years before the GRE contract expires. He agreed with a suggestion by Baker to prepare a five-year plan to replace Big Stone power.

"We've had some discussions with (Central Minnesota) on what they're thinking about doing. Not only are we out looking for power, but the other four partners will also be looking, which will tighten up the market that much more. We're working very diligently on this,'' he said.

The utility is also discussing what could be done with local generation because it alleviates issues with transmission lines and line owners. The possibilities include refurbishing a retired 5-megawatt turbine, and installing a low-speed diesel turbine or a combustion turbine, which is essentially a jet engine.

He said the commission's Planning Committee will discuss the possibilities on Thursday, along with discussing options for future building and facility needs.

David Little
David Little covers the Willmar City Council, Willmar Municipal Utilities and other city news.
(320) 235-1150