Granite Falls to upgrade hydroelectric system with $2.75M in renewable energy funding from state

The shuttering of the former coal-fired Xcel Energy plant in Granite Falls meant that the city would experience the loss of $112,570 in annual taxes paid by the property. It led city officials to St. Paul for funding to upgrade hydro production for revenues to offset the loss.

Legislation approved in the House and Senate provides $2.75 million from a renewable energy fund to the city of Granite Falls to replace a hydroelectric turbine and make repairs to its hydro facility on the Minnesota River. Tom Cherveny / West Central Tribune

GRANITE FALLS — While legislators ended the regular session without an agreement on a bonding bill, one community’s request for capital funding was approved.

Both the House and Senate approved legislation that provides Granite Falls with up to $2.75 million to replace a hydroelectric turbine and make repairs to its hydro facility on the Minnesota River. The bill must yet be signed by Gov. Tim Walz, but city officials are confident of his approval. The governor was represented during the end-of-session negotiations over the bill.

The funding will come from the state’s renewable energy fund. Xcel Energy pays into the fund as part of the agreement allowing it to store casks of spent nuclear fuel. The fund was created to promote renewable energy projects in the state.

Granite Falls made the request for the funding based on the fact that hydroelectric generation is a carbon-free, renewable energy source. But Mayor David Smiglewski said the impetus for bringing the request to the Legislature was also a result of the shuttering of the former coal-fired, Minnesota Valley electric generation plant in Granite Falls that is owned by Xcel Energy.

The Xcel plant has not operated for about a dozen years or more, Smiglewski said. City officials learned as they prepared this year’s budget that the plant was recently classified as “fully retired in place.” That meant the value of the Xcel-owned plant was being greatly reduced for taxing purposes.


The city would lose $112,570 in property taxes each year, starting with this year’s budget, that the plant had previously provided. That’s a major blow to the budget for the community of 2,900, the mayor said.

To make up for the unanticipated loss to the budget, the city is increasing the amount of money it will transfer to the general fund from the earnings of its municipal electric system by $100,000, from $225,000 in 2019 to $325,000 in 2020.

The need to tap the electric system for more revenues led to the decision to seek funding to replace the third generator and increase generation, Smiglewski explained. An earlier study showed the economic feasibility of the city financing the turbine replacement on its own as being “on the bubble,” and the city held off.

Energy committees in the Legislature chaired by Sen. Dave Osmek, R-Mound, and Rep. Jean Wagenius, DFL-Minneapolis, considered and eventually approved the requests for funding from the renewable energy fund. Mayor Smiglewski said the city emphasized that improving the city’s hydroelectric generation capacity would provide ongoing revenues to the municipal utility. The city pointed out that a portion of those revenues are transferred to the city’s general fund account to help reduce the tax burden and the loss experienced by the closing of the Xcel power plant.

The funding allows up to $400,000 to repair the hydroelectric building, which has been damaged by consecutive years of flooding and high water. The remainder will allow the city to install a turbine to replace one that was originally installed in 1985. It has not been operational for about two years.

The city currently has two generators operating with a capacity to produce 0.8 megawatts of power. A third, larger generator could bring the capacity to 1.5 megawatts.

The mayor said the city was supported in its request by local legislators who introduced bills seeking funds for the project from either the bonding bill or the renewable energy fund. State Sen. Gary Dahms, R-Redwood Falls, and Rep. Chris Swedzinski, R-Ghent, and State Sen. Andrew Lang, R-Olivia, and Rep. Tim Miller, R-Prinsburg, authored the bills.


Xcel Energy no longer operates its Minnesota Valley electric generation plant in Granite Falls. The city learned that the shuttered plant's recent classification as "fully retired in place" would mean a loss in annual tax revenues of $112,570 to the city budget. Tom Cherveny / West Central Tribune

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