Elk River votes to increase investment in electrical transmission line

by Joni Astrup
Associate editor
Elk River city officials have voted to beef up investment in an electrical transmission line proposed to run from South Dakota to near the Twin Cities.
The Elk River Utilities Commission and the Elk River City Council, meeting jointly, both voted unanimously Monday, March 14 to increase the city’s investment in the line from $2.2 million to up to $7.1 million.
Mayor John Dietz, who also chairs the Elk River Utilities Commission, believes the deal will be a benefit for ratepayers and that the risk is very minimal.
“I’m really confident that this is going to work out,” he said.
Elk River Municipal Utilities (ERMU) Director of Operations Troy Adams and Elk River City Administrator Lori Johnson both recommended the increased investment.
“This is a project where we have the potential to gain a lot and we really don’t have a lot of risk going in,” Johnson said.
Buying into the line is one way ERMU hopes to hold down future rates for its electric customers. ERMU currently provides electricity to about 10,000 customers in parts of Elk River, Otsego, Big Lake Township and Dayton.
Electrical transmission rates are projected to increase by over 100 percent in the next 10 years, according to Central Minnesota Municipal Power Agency (CMMPA). By owning part of the transmission line, ERMU would receive a portion of the transmission tariff paid by electrical customers. The tariff amount is projected to exceed the amount ERMU would need to pay off the bonds issued by CMMPA to finance ERMU’s portion of the transmission line project.
After bond payments are made, ERMU is projected to collect approximately $124,000 a year over the 40-year life of the project, or just shy of $5 million total.
“The upside is it could benefit us tremendously because we’ll be an owner rather than a renter,” Dietz said. “I think the cost of transmission is going to increase dramatically over the next 10-20 years. If we’re part owner and they give us a payment that not only pays our debt payment but puts money in our pocket, we could use that money to offset rate increases.”
Utilities Commissioner Daryl Thompson said the benefits to ratepayers over the long haul are going to be great.
Utilities Commissioner Al Nadeau agreed, saying: “It looks like a pretty nice investment that will protect the customers of Elk River Utilities.”
ERMU had entered into an agreement four years ago to participate in the CAPX2020 Brookings-Twin Cities Transmission Project. The agreement calls for ERMU to invest $2,246,896 in the project. Monday’s vote increases ERMU’s investment to as much as $7,140,953.
The transmission line is proposed to run for 250 miles from Brookings, S.D., to Hampton, Minn., which is just southeast of the Twin Cities. Projected cost of the line is $827 million.
Xcel Energy is the biggest player in the project, at 72 percent. Other participants include Great River Energy, Missouri River Energy Services, CMMPA and Otter Tail Power Company.
ERMU is participating through CMMPA, which currently has 2.2 percent of the project. Elk River’s increased investment in the line is contingent on CMMPA seeing its percent of the project increased to 5 percent.

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