Needed upgrades revealed in Brainerd hydro dam purchase
Key reasons for the lowering of the hydro dam purchase price are now being named by Brainerd Public Utilities officials
The biggest factors are needed upgrades, including a $1.5 million spillway apron, as well as total generation equipment improvements at the cost of $600,000, which would most likely be spread over a five-year period.
The Brainerd City Council recently agreed on a lowered price of $2.6 million for the hydro dam, which is a drop from the original $4.115 million. Voting against the agreed price was city council member Mary Koep.
The dam purchase, as well as the major upgrade projects, will be funded through local bonding.
The purchase is contingent on legislative approval, which the city recently found out was required. State law says the city can’t buy the dam until it gets approval from the Legislature or the legislative session ends without the Legislature prohibiting it.
The council also voted to extend the due diligence period until April 1 so the city can complete the reviewing of the title work for the hydro dam.
Between maintenance, yearly inspection costs, insurance, wage costs and utilities, the annual cost to operate the hydro dam will range from $600,000-$700,000.
Maintenance costs will be similar to any other facility that Brainerd Public Utilities (BPU) operates, said Scott Magnuson, BPU superintendent.
The costs that are avoided are what offsets that, said Todd Wicklund, BPU finance director. The city is expected to save $1 million in avoided costs, which would have gone to buying energy from Minnesota Power, he said.
“The annual cost savings compares what we currently pay as to what we project our annual operating costs are anticipated to be,” he said.
“So the bottom line is, it’s a $250,000-$300,000 net benefit a year at the end of the day,” Wicklund said.
There are a few upgrades that need to be addressed right away, which helped lower the purchase price to $2.6 million. Those are:
• The spillway apron (the concrete flat area below the dam) will need to be rebuilt this summer at an estimated cost of $1.2-$1.5 million. This project is required by the Federal Energy Regulatory Commission (FERC), so there are some time issues, as the city can only go out for bids after the ownership is completed.
• Water and sewer connections to the site, which could cost about $330,000.
• Automation improvements could cost $100,000 to $200,000, and should be completed in the next several months. The upgrades would allow the machines to run semi-automatically, therefore reducing staff levels from the current 24-hour-a-day operation to staffing just a single shift.
The four full-time and one part-time Wausau dam workers will become BPU employees with the purchase. When the automation improvements cause for less staffing level needs, some of those five employees will be placed in other positions at BPU.
Wicklund expects to lose some of the current dam employees over time to attrition. He doesn’t think any will be laid off.
“We hope to keep them around,” he said. “They have the experience.”
Not unanimous agreement:
There has been one city council member who has objected since the beginning over the lack of public input in the hydro dam purchase.
“I’m very disturbed that there’s been no opportunity to hear what the public has to say or to be involved and ask their questions,” she said.
Koep is not only against the “secrecy” of the purchase, but says the dam is a bad idea in general.
“It’s a piece of crap, pure and simple,” she said. “It will be difficult for both the city and (BPU) to show it’s not for the next few years.”
Koep argues that the engineer report on the dam should be made public, although other city officials argue it can’t be because FERC regulations make the reports non-public, as it has information on specific engineering, vulnerability, or detailed design information about critical infrastructure.
Despite BPU’s calculations of an annual $250,000-$300,000 net benefit, Koep argues it will be hard to prove there will be money made in the purchase.
City council member Gary Scheeler, who serves on the Wausau Task Force and who first brought the idea of the dam purchase forward, said it’s the numbers that make the purchase smart.
“The revenue exceeds expenses. As business person, the first place I look is at revenue,” he said.
Scheeler argues there are no downsides to the dam purchase.
According to BPU, three engineering companies and FERC inspected the dam and there were no findings noted of the dam being in poor condition. The hydro dam was also inspected by the Department of Natural Resources, which listed the dam in “fair condition,” and by the League of Minnesota Cities insurance underwriters, which listed nothing about the dam being in poor condition.
An early March underwater dive inspection “showed no significant dam safety design issues.”
The dam would generate just under 10 percent of Brainerd’s power on a normal day, Wicklund said.
With the dam, Brainerd residents won’t notice a big dip on their electric bill, Wicklund said. Instead, it could help keep future rates more level or smaller.
Another benefit, Wicklund said, is that it’s cheaper for the city to generate its own power. Currently, Brainerd buys all of its energy from Minnesota Power.
The dam would also invest in energy independence and puts a stake in renewable energy, BPU leaders say.
Several utility companies and outside parties have approached the city to inquire about possible partnerships in running the hydro dam, Magnuson said.
“Right now we just want to get through the transaction,” Wicklund said. “We’ll deal with partnerships down the road.”
In the end, if the city doesn’t buy the dam, there are potential buyers “lined up” for it, Scheeler said.
He also noted that the city can always sell the dam down the road.
Wicklund said contrary to some public belief, “we’re not trying to pull wool over people’s eyes. We’re trying to do the best thing for city of Brainerd.”