Utilities want customers to absorb Big Stone costs

Big Stone II Cost Recovery will add surcharges to North Dakota electric bills as MDU and Otter Tail Power seek PSC approval, offsetting canceled plant development costs with interest, affecting residential customers.

North Dakota electric customers may have to pay $14.5 million over three years to cover two utilities development costs for an abandoned power plant project, regulatory filings show.

The proposals, which North Dakotas Public Service Commission will consider, amid a move to raise Otter Tail wind charge as well, will cost MontanaDakota Utilities Co. residential customers about $19 annually, the filings say. Otter Tail Power Co. customers will pay almost $7.50 more each year.

Both examples are based on 750 kilowatthours of electric use each month, which the utilities say is typical for a residential customer. MDU and Otter Tail want to begin including the new monthly charges on customers bills in June.

MDU, which is based in Bismarck, and Otter Tail, which has its headquarters in Fergus Falls, Minn., were two leading partners in the planning of Big Stone II, a 550megawatt power plant in northeastern South Dakota.

The project, which was more than four years in the making, was canceled in November, with developers citing financing problems and the possibility of new federal carbon dioxide restrictions, as defunct plant costs continue to affect rate proposals.

Otter Tail, which was Big Stone IIs managing partner, had withdrawn almost three months before. Construction of the new power plant never began. It was to be located next door to the older Big Stone power station, which Otter Tail also manages.

In Public Service Commission filings, MDU and Otter Tail say they spent $26.6 million developing Big Stone II. MDU is requesting that North Dakota customers pay almost $10.1 million of that sum, including 10 percent interest over three years, regulatory filings say. Otter Tail wants $4.3 million, an amount that includes 8.6 percent interest.

Utility representatives and PSC staffers negotiated the terms of both agreements, after an Otter Tail rate case was settled in a related matter. Kevin Cramer, the commissions chairman, said both will be reviewed at a May 5 hearing at the state Capitol.

I suspect well have a number of questions about the terms, Cramer said.

MontanaDakota has about 75,000 North Dakota electric customers, and serves the cities of Bismarck, Mandan, Dickinson and Williston. Otter Tail has about 57,000 customers in eastern North Dakota, where bills rise with wind power for many, and is the electric provider for Devils Lake, Jamestown and Wahpeton.

Regulators in South Dakota and Montana have agreed to allow MDU to defer its Big Stone II development costs until the utility files its next request in those states to increase electric rates, MDU spokesman Mark Hanson said.

Cris Kling, an Otter Tail spokeswoman, said the expense allocation will be an issue in the utilitys subsequent rate cases in South Dakota and Montana, including the possibility of a customer refund depending on outcomes.

It is likely that both utilities will have an easier time recouping plant development costs in North Dakota.

Two years ago, the Public Service Commission concluded — at the utilities request — that the Big Stone II project was a prudent way to meet rising electric demand, with regulators saying a price spike was unavoidable during that period. State law makes it more difficult for the PSC to deny utilities reimbursement requests if they have obtained advance review.

MontanaDakota filed a separate request for a 14 percent increase in its electric rates, which if granted in full would bring in $15.4 million more each year in annual electric revenues.

Hanson said if the proposed settlement on MDUs Big Stone expenses is approved, the requested rate increase will shrink to 11.7 percent, or $12.9 million.

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