WILLMAR -- A new service territory agreement will help Willmar Municipal Utilities and Kandiyohi Power Cooperative avoid legal disputes that have sometimes arisen in other areas where city-owned electric utilities expand into territory served by rural electric cooperatives.
The agreement approved last week by the board of Kandiyohi Power Cooperative and approved Monday by the Willmar Municipal Utilities Commission establishes a framework under which Willmar will compensate Kandiyohi Power Co-op as Willmar expands into the co-op's service territory.
Disputes over service territory compensation stem from a state law that allows a municipal utility to serve customers as the city grows. The law requires the cooperative to receive something for the territory that has been taken over by the municipal utility, but the law doesn't provide a formula for determining the value of that compensation.
The dilemma has caused a great deal of strife and a number of long and costly legal contests throughout the state, according to Bob Bonawitz, Municipal Utilities Commission president.
"We've tried to find a way that is mutually agreeable, one that ... we're able to resolve with our own boards and staff,'' said Bonawitz in an interview after the commission meeting.
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Both sides have been operating under a 20-year service territory agreement that expires on April 24, 2010. But the agreement lacked a solution to the compensation problem, said Bonawitz.
"We did have some territory boundaries set that allowed us both to know where we were able to serve for that period of time. But in the end it didn't address compensation. This agreement addresses that,'' he said.
Generally speaking, the agreement allows the cooperative to continue to serve annexed areas and receive revenue over a period time until the customers are taken over and served by the municipal utility.
In addition, the agreement includes the following:
n The co-op consents that Willmar will serve the MinnWest Technology Campus and new airport with no additional compensation.
n The co-op consents to terminate joint ownership in facilities for serving the proposed waste treatment plant and sharing of this load.
n The annexed area south of the bypass on U.S. Highway 71 will continue to be served by the co-op until Dec. 31, 2014, at which time Willmar will begin serving the area.
The new agreement will run from Jan. 1, 2008, through Dec. 31, 2024. Both sides will have time to determine whether or not the agreement is fair, according to Bonawitz.
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He said the agreement will be discussed by the Willmar City Council's Community Development Committee on Oct. 4 and will be presented to the full council for final approval.
Bruce Gomm, Municipal Utilities general manager, said the agreement shows that both sides are committed to cooperation.
"We are neighbors and we have an issue that we have to address, and other communities have gone to litigation and spent a lot of money on trying to battle these issues out,'' he said. "I think that we, by cooperating, are minimizing the expense that our customers would have to pay to address these issues.''
Commission members praised the agreement. Commissioner Jim Schammel said the negotiators did a great job. Commissioner Jerry Gesch said the negotiations "were up and down.''
In a separate interview, David George, co-op general manager, said there were "some hard discussions,'' but he was excited to have the agreement and to get past a problem that's been an issue for many years.
"We really wanted to have something in place that would take us on into the future,'' George said Monday. "I think everybody was ready to look at what is in the best interest of the community at large.''
He said the agreement will provide more stability on service territory issues, fairness on compensation and the opportunity to plan for the transition both sides know will happen in the future.
"That all brings value to not only Willmar's customers but also to Kandiyohi Power Cooperative's customers,'' he said.
