Minnesota Power seeking 2nd rate hike

Utility looks to pass along renewable energy tab to customers

Only 15 months ago, Duluth-based Minnesota Power asked for its first rate increase in 14 years.

Now, it wants another one.

In seeking a new rate increase before the end of 2009, the utility is citing, in part, the cost of increasing renewable-energy generation; under 2007 state legislation, utilities must generate a quarter of their energy from renewable resources by 2025.

That mandate, known as the state's renewable energy standard (RES), has the state's electric utilities looking to buy or develop energy from wind, hydro power, biomass or solar - and charging rate-payers for those efforts.

"We recognize a price increase is not welcome news to our customers, but it is necessary to meet the rising costs of producing and delivering energy," said Don Shippar, CEO of Minnesota Power's parent company, Allete.

A news release announcing the planned rate hike said Minnesota Power indicated that its 2008 request was the first of several rate increases to cover the utility's costs for installing renewable energy.

Advertisement Investments made to gird for renewable power include an $80 million acquisition of a direct current transmission line from Center, N.D., to Duluth that, over the years, will carry more wind-generated energy that coal-fired power.

Minnesota Power also is spending more than $300 million on a retrofit project at its coal-fired Boswell Energy Center in Cohasset. The retrofit is designed to boost efficiency and reduce mercury, sulfur dioxide, nitrogen oxide and particulate emissions by as much as 90 percent.

Additional spending is required to improve system reliability, said Amy Rutledge, communications manager for the utility, which serves 137,000 customers in 16 northeastern Minnesota and northwestern Wisconsin municipalities.

Minnesota Power's rate increase does not include its 75-megawatt Bison I wind farm, which will involve erecting 33 Siemens wind turbines near the coal-fired power plant it buys energy from in windy North Dakota.

Turbines for that wind facility, which is expected to cost $177 million, are planned to be installed during 2010 and 2011 as part of the gradual phase-in of wind power.

Bison I wind power will be wired to Duluth on the high-voltage transmission line purchased by Minnesota Power, Rutledge said.

Other renewable sources of energy feeding Minnesota Power's grid are the 25-megawatt Taconite Ridge wind farm, energy centers in Grand Rapids and Cloquet that are partly fueled with biomass fuel and 11 hydro-power stations generating a total of 115 megawatts.

The utility also has signed a 15-year power purchase agreement with Manitoba Hydro to buy 250 megawatts of electricity starting in 2020, pending completion of new hydroelectric plants in northern Manitoba.

Much of Minnesota Power's current maintenance effort is focused on reducing emissions at the Boswell 3 generator that is part of the four-unit Boswell Energy Center.

The Boswell plant, by far the largest among Minnesota Power's Minnesota power sources with 962 megawatts in generating capacity, will have new equipment installed starting the week of Aug. 9 - putting part of the plant off line for 80 days, Rutledge said.

In addition to the Boswell Energy Center, emissions-reduction efforts are starting at Minnesota Power's 110-megawatt Laskin Energy Center in Hoyt Lakes to meet federal standards that are scheduled to take effect in 2018.

Minnesota Power announced its emission-reduction plans in 2005. It chose the Laskin plant as its first project because of its proximity to the Boundary Waters Canoe Area.