WILLMAR -- The Willmar Municipal Utilities Commission voted 4-0 Monday to approve a plan to finance a $10 million wind turbine generation project. But two commissioners' concerns about the plan's possible effect on electrical rates had to be answered first.
Under the plan, two wind turbines slated for a site near Willmar Senior High School will be financed by revenue bonds. The bonds have not been sold yet, but will be repaid over a time period of 10 to 15 years with revenue raised from local electric rates.
Also under the plan, the utility will take $1.8 million from the $4 million generation construction reserve fund to pay an immediate 30 percent down payment to DeWind Inc. of Round Rock, Texas, the supplier to the turbines. The down payment covers just the $6.2 million cost of the two turbines.
At a meeting two weeks ago, the commission voted to buy the turbines from DeWind. Monday's action approves the financing plan. The utility will be applying this year for federal zero-interest loans, which would be used to reduce bond interest payments.
Utility officials and commission members have discussed and studied the turbine project for more than a year and half. The two turbines have a total capacity to generate 4 megawatts of electricity, but will probably generate 1 megawatt based on a wind study. The turbines will help meet the utility's peak load of 62 to 63 megawatts.
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The turbines are promoted as one way for the utility to comply with mandates for generating power from renewable sources and will provide power at a fixed cost while the cost of purchased power continues to increase.
Commission member Jim Schammel said he needed more information on the effect of the project on rates.
Commissioner Jerry Gesch said there are many variables in the electrical business. "My long-term thinking always is to have low-cost rates for our rate payers,'' Gesch said.
Commission President Bob Bonawitz said the cost associated with purchasing the turbines is a significantly smaller proportion of increasing costs associated with purchased power. Those costs have risen from an average of $38 per megawatt in 2007 to an average of almost $50 per megawatt in 2008.
"I guess my thought would be that it probably would amount to a little more than a 5 percent increase, which would not be significant relative to the other costs that we're facing when we look at the average cost today compared to last year,'' he said.
"Once we pay off the investment then all we have annually is the maintenance cost. Our cost of energy from those is pretty small,'' he said.
After some discussion, Schammel and Gesch voted with Bonawitz and commissioner Steve Salzer to approve the financing plan. Commissioners Dave Baker and Doug Lindblad were absent.
Schammel later said he still wanted information on how the plan would affect rates, but said he felt the plan "wouldn't raise rates to the tune of where I feel is uncomfortable.''
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Bruce Gomm, utility general manager, said the fixed cost of energy from the turbines will help limit the utility's exposure to price spikes in the power market caused by constrains in generation and transmission.
"We're running out of capacity in both of those,'' he said.
"Many times a problem with generation leads to problem with transmission if the normal generators go down and you're trying to ship power from other generators elsewhere. That usually causes congestion on transmission. This will help limit the utility's exposure to that risk.''
