WILLMAR -- The Willmar Municipal Utilities Commission is taking steps to replace a large power supply contract with a number of smaller power supply contracts.
The commission Monday voted to buy 5.5 megawatts of power from WPPI Energy of Sun Prairie, Wis., under a 20-year contract with Central Minnesota Municipal Power Agency of Blue Earth.
Approval of the contract is part of Willmar's effort to replace a 30-megawatt contract, which the utility has had for more than 20 years with Great River Energy of Elk River, with a number of smaller contracts from diverse resources. GRE supplies a majority of Willmar's power.
Utility officials have said Great River Energy has provided reasonably priced electricity, but they anticipate any new rates will increase after the contract expires in 2016.
"What we're doing is working on replacing that one large contract with several smaller ones on the theory of reducing all your eggs in one basket,'' said Wes Hompe, Willmar Utilities interim manager.
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Willmar has for more than two years been a member of a coalition that's been working with Central Minnesota Municipal Power to find other power resources.
"We're finally seeing some fruits from that effort,'' said Hompe.
The consulting firm of Science Applications International Corp. was hired this year to study the electric market, the gas market, local generation, and the risks associated with each power supply option.
Hompe told the commission that the consultant's analysis showed that this particular contract was one of the top proposals for each of four different scenarios.
"Obviously we have more power supply requirements coming up. But this will be one of those that we will be putting into place. It's based on an upgrade of a nuclear energy plant, so we'll have a little piece of nuclear,'' he said.
Hompe said Willmar will have no carbon tax liability with nuclear energy and Willmar will not have any liability for nuclear waste disposal.
Also, he said contract prices will be "budgetable.''
"We'll be able to see that. Right now in today's market it's a bit above. But as projected through in that study ... it would be at or below market pricing,'' he said.
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Willmar will begin buying WPPI Energy power during the first week of August, starting at about $47 per megawatt-hour and gradually increasing during the contract period to about $90 per megawatt-hour in 2033.
Current power supply costs from January through May have ranged from $46.58 to $50.15.
Hompe said the analysis showed that WPPI Energy was Willmar's best deal. In addition, there's a possibility Willmar could buy up to 9 megawatts if other utilities do not contract for their share of power.
Commission President Dave Baker said the contract will cost about $70 million or about $325,000 a year for the next 20 years.
Hompe said purchased power is budgeted at around $16 million this year.
The contract was recommended by the commission's Planning Committee.
Committee member Steve Salzer said WPPI Energy came to the top as the best option. He said Washington, D.C., attorney Robert Jablon, who represents energy interests, negotiated the terms of the contract. City Attorney Robert Scott said the contract complies with state law.
