Mountain Lake, Windom Municipal Utilities bring in first revenue as transmission owners
Mountain Lake Municipal Utilities has recently realized its first financial benefit as a new transmission owner with a $10,551 payment from the Central Minnesota Municipal Power Agency (CMMPA) for the utility’s share of the CAPX Brookings transmission project. Joining Mountain Lake Municipal Utilities receiving payment also as a new transmission owner was the Windom Utilities, receiving $28,000.In an era of increasing transmission costs due to the regional build-out of the transmission grid to meet new government energy policies, Mountain Lake and Windom partnered together with other municipals through CMMPA to invest in transmission.
“After determining transmission ownership was a logical and sensible step for us to take in protecting 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,” says Wendy Meyer, Mountain Lake City Administrator and newly-elected President of CMMPA. “This important asset will allow us to hedge against rising transmission costs by earning a 12.38% return on our investment to offset increasing transmission network usage charges.”
The payments represent each utilities’ first financial benefit and entry as transmission owners for the year 2014, and will continue for the 40-year life of the CAPX Brookings line.
The 250-mile line from Brookings, South Dakota to Hampton, Minnesota, marked CMMPA’s first venture into transmission on behalf of 15 municipal electric utilities located in Minnesota and Iowa. 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 (FERC).
CMMPA’s $30 million investment represents a 3.9% share of the CAPX Brookings project, and the municipal participants include the Minnesota municipal utilities of Blue Earth, Elk River, Fairfax, Granite Falls, Janesville, Kenyon, Mountain Lake, Sleepy Eye, Springfield, Windom and Willmar, as well as the four Iowa cities of Independence, Indianola, Montezuma and Waverly.
The CMMPA group made this CAPX investment alongside Great River Energy, Missouri River Energy Services, Ottertail Power Corporation and Xcel Energy.
“Historically, transmission costs composed less than 10% of a municipal utility’s wholesale power costs, However, transmission rates have tripled in recent years and are projected to double again by 2020. Transmission costs could soon represent as much as 25% to 40% of our wholesale costs in the near future,” states Steve Thompson, Chief Executive Officer (CEO) of CMMPA, which is headquartered in Blue Earth. “To mitigate the looming threat of increasing transmission costs, CMMPA invested in CAPX Brookings as a strategic investment to hedge against future cost increases.”
As a result of the ground-breaking work by CMMPA and subsequent FERC approval, municipal electric utilities nationwide can more comfortably participate and invest in the development of transmission projects knowing that their costs can be recovered.
CMMPA serves as a municipal, consumer-owned, non-profit agency that helps municipal utilities identify strategies that minimize wholesale power costs, manage future risks and maintain stable competitive rate. In a consultative role, CMMPA offers strategic power supply planning and procurement services to help municipal utility boards address their full or partial utility requirement needs, while allowing them flexibility and autonomy to customize their electric energy portfolio.
