WILLMAR - Willmar Municipal Utilities received $106,000 as its first payment for participating in the new CAPX transmission line project.
The payment from Central Minnesota Municipal Power Agency is the first financial benefit Willmar has realized for participating in the new 250-mile transmission line from Brookings, South Dakota, to Hampton, Minnesota.
In an era of increasing transmission costs due to the build-out of the transmission grid to meet new government energy policies, Willmar joined 14 other municipal utilities through CMMPA to increase their investments in transmission.
With over 30 years as transmission owners, Willmar Municipal Utilities understands the benefits of being an owner in the grid, said General Manager Wesley Hompe.
“Therefore, it was a logical and sensible step for us to take in continuing to protect our electric consumers against rising costs. We pooled resources with CMMPA members and affiliates in Minnesota and Iowa to make an investment in the CAPX Brookings line,” Hompe said.
“This important asset will allow us to hedge against rising transmission costs by earning a return on our investment to offset increasing transmission network usage charges,’’ he said.
The payment represents Willmar’s share of the CMMPA portion of the project for the year 2014. Payments will continue for the 40-year life of the CAPX Brookings line.
Christina Pierson, CMMPA external affairs director, said the power line project is CMMPA’s first venture into transmission on behalf of 15 Minnesota and Iowa municipal utilities.
Besides serving as an aggregator for utilities to pool their investment, CMMPA financed the project and handled the lengthy rate recovery approval process at the Federal Energy Regulatory Commission, Pierson said.
CMMPA’s $30 million investment represents a 3.9 percent share of the project. Other Minnesota municipals in the project are Blue Earth, Elk River, Fairfax, Granite Falls, Janesville, Kenyon, Mountain Lake, Sleepy Eye, Springfield and Windom. Iowa participants are Independence, Indianola, Montezuma and Waverly.
The CMMPA group made this investment alongside Great River Energy, Missouri River Energy Services, Otter Tail Power Corporation and Xcel Energy.
Steve Thompson, CMMPA chief executive officer, said transmission costs historically composed less than 10 percent of a municipal utility’s wholesale power costs. However, transmission rates have tripled in recent years and are projected to double again by 2020, he said.
“Transmission costs could soon represent as much as 25 to 40 percent of our wholesale costs in the near future,” Thompson said. “To mitigate the looming threat of increasing transmission costs, CMMPA invested in CAPX Brookings as a strategic investment to hedge against future cost increases.”
He said the ability for local municipal utilities to join together through a project-oriented agency like CMMPA and win approval to invest in transmission is a big victory for them in their effort to stabilize transmission rates for customers.
To mark the occasion of the payment, Thompson presented a ceremonial check to Hompe, Willmar Utilities Finance Director Tim Hunstad, Operations Director John Harren and Utilities Commissioner Carol Laumer.
