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Rates cost Great River big customer: Elk
<br />River
<br />Article by: David Shaffer
<br />Star Tribune
<br />June 21, 2013 - 9:09 PM
<br />Great River Energy, the state’s second-largest electric supplier whose rising wholesale rates have come under fire, is losing a
<br />large customer that decided it could purchase cleaner, cheaper electricity elsewhere.
<br />Elk River Municipal Utilities, which for decades has relied on Great River Energy to generate electricity for its customers, said
<br />it has signed a deal to obtain future power from the Minnesota Municipal Power Agency (MMPA) owned by 11 municipal
<br />power companies.
<br />Troy Adams, general manager of the Elk River utility, said Great River’s rising wholesale rates — up 58 percent since 2006
<br />— are the main reason for making the switch, which takes effect in 2018.
<br />“The No. 1 driving reason is we want to remain competitive, and wholesale power rates are 75 percent of our costs,” Adams
<br />said in an interview.
<br />It is the latest sign of discontent among customers of the Maple Grove-based wholesale power cooperative, which is owned
<br />by 28 local co-ops that serve 645,000 homes and businesses across the state. Two ethanol producers recently complained
<br />to state regulators that Great River has invested in questionable projects, including a new coal-fired power plant, that drove
<br />up rates.
<br />Great River Energy has denied that its wholesale rates are out of line with other utilities in the region, and last week, its CEO,
<br />David Saggau, said at the co-op’s annual meeting that he expects no rate hike in 2014. Unlike investor-owned utilities, whose
<br />rates are set by state regulators, most co-ops can legally set rates on their own.
<br />Elk River Municipal Utilities, which has nearly 10,000 customers, purchases about 2 percent of the power Great River
<br />generates at times of peak demand in the summer.
<br />Adams said the Elk River utility was concerned about Great River’s heavy reliance on coal to generate power. About 45
<br />percent of Great River’s generating capacity is from coal-fired power plants, and they are heavily used, producing 70 percent
<br />of the co-op’s electricity last year, according to utility data.
<br />Such power plants, which are major greenhouse gas sources, could soon face new regulations from the U.S. Environmental
<br />Protection Agency to address climate change.
<br />“We were worried about potential rate increases because of all of this coal infrastructure,” Adams said. “MMPA is in a much
<br />better position.”
<br />The smaller MMPA owns no coal power plants, and its sole contract for coal-generated electricity will soon end because the
<br />producer plans to retire its coal units. MMPA, which is managed by Avant Energy of Minneapolis, relies mostly on two natural
<br />gas-fired power plants and a wind farm. A small generator fueled by food waste will open this year in Le Sueur, Minn., and
<br />more wind power is planned, said Oncu Er, vice president of planning for Avant Energy.
<br />“We have expectations of things happening in the carbon and emissions world that don’t look good for a coal resource — we
<br />do as much as we can to stay away from it,” he said.
<br />Beth Goodpaster, an attorney for the Minnesota Center for Environmental Advocacy, a St. Paul nonprofit that has questioned
<br />Great River’s reliance on coal, said the Elk River utility is “accurately assessing the risks that lie ahead, and they are taking
<br />steps to protect their customers.”
<br />Jon Brekke, vice president of member services for Great River Energy, disagreed. He said the co-op’s three North Dakota
<br />coal power plants are efficient and will remain competitive even if carbon dioxide emissions are regulated.
<br />“We are not facing major investments to keep that coal fleet running,” he added. “As a result we expect it to be very
<br />competitive in the market even if carbon prices become part of the market.”
<br />The co-op also owns natural gas generators, including two of its newer units, Brekke said. Natural gas prices have remained
<br />low over the past two years because the fracking boom has unlocked significant new sources of natural gas.
<br />“Will natural gas prices stay as low as they have been is an open question,” Brekke said.
<br />One other advantage of the switch from Great River to MMPA is that the Elk River utility gets a seat on the municipal
<br />agency’s board. Elk River didn’t have a vote at Great River, whose board seats are reserved for its co-op members. Instead,
<br />Elk River had a long-term contract to purchase power, through Connexus, one of the Great River local co-ops.
<br />David Shaffer • 612-673-7090
<br />Twitter: @ShafferStrib
<br />© 2013 Star Tribune
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