Four Iowa Municipal Power Utilities recently passed a milestone as they realized their first financial benefit as transmission owners with payments from the Central Minnesota Municipal Power Agency (CMMPA) for their share of the CAPX Brookings transmission project. Representing their proportional share of ownership, Indianola received more than $12,800, Independence $9,000, and Montezuma and Waverly $3,000 each.
“After determining that transmission ownership was a logical and sensible step for us to take in protecting electric consumers against rising costs, we pooled resources with CMMPA members and affiliates in Minnesota and Iowa to invest in the CAPX Brookings line,” said Kevin Sidles, General Manager of Independence Light and Power.
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).
“For first-time transmission purchasers like Montezuma, Waverly and Independence, the ability for local municipal utilities to join together through a project-oriented joint action agency like CMMPA and win approval from the Federal Energy Regulatory Commission is a big victory for us to serve customers,” said Kevin Kudart, Superintendent of Montezuma Municipal Power and Light.
“Although Indianola already owned transmission, increasing our transmission assets serve as a hedge against rising costs by earning a 12 percent return that all of the municipal partners can use to offset transmission network usage charges,” Indianola Municipal Utilities General Manager, Todd Kielkopf further explained.
CMMPA’s $30 million investment represents a 3.9 percent share of the CAPX Brookings project and the municipal participants included the Minnesota municipal utilities of Blue Earth, Elk River, Fairfax, Granite Falls, Janesville, Kenyon, Mountain Lake, Sleepy Eye, Springfield, Windom, and Willmar and 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.
“Payments to transmission owners represent each utilities’ return for the year 2014 and will continue for the 40 year life of the CAPX Brookings line,” said Darrel Wenzel, General Manager at Waverly Light and Power.
“Historically transmission costs 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. Transmission costs could soon represent as much as 25 to 40 percent of our wholesale costs in the near future,” said Steve Thompson, CEO of CMMPA headquartered in Blue Earth, MN. “To mitigate the looming threat of increasing transmission costs, the CMMPA group invested in CAPX Brookings as a strategic investment to hedge against future cost increases.”
Thompson added, “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 rates. 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.