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BPU: Utility finds new power provider

The Brainerd Public Utilities Commission Tuesday accepted a wholesale power supply offer from American Electric Power, with the agreement starting in 2019.

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AEP, with more than 5 million American customers, is one of the country's largest investor-owned utilities, serving parts of 11 states. The service territory covers 197,500 square miles in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. American Electric Power website

The Brainerd Public Utilities Commission Tuesday accepted a wholesale power supply offer from American Electric Power, with the agreement starting in 2019.

The process of looking for an alternate energy supplier has taken about a year, said Mike Kumm of Public Power Energy Services, LLC, which has been guiding BPU through the process. The objective was to find a stable, lower cost power supply, he said.

"It never really mattered to us who the supplier was," Kumm said. "We were just looking for stability, as well as the best price that we could get."

BPU currently purchases energy from Minnesota Power and in September rejected an energy purchase agreement from Minnesota Power which would have ran through 2024. The current agreement with Minnesota Power runs through June of 2019 and Brainerd has partnered with Minnesota Power for energy purchasing since 1912.

The wholesale power market agreement with American Electric Power runs from July of 2019 through May of 2025 and will result in a savings of $12-15 million over those six years, Kumm said. Those savings will start accumulating in the summer of 2019 when the agreement starts.

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One of the agreement's benefits is that it locks in a price for power for the six years of the deal, so there's no fluctuation to worry about, Kumm said.

"What we're doing is we're using the financial market to lock in the pricing for BPU well into the future," Kumm said. "The price of energy won't change, it's going to remain the same price."

This type of agreement has been around forever, Kumm said.

"This is not new," Kumm said. "It's new to our area, in terms of people practicing it, but this is not new."

In 2017, BPU can look into extending the agreement into 2026, so the utility can stay nine years ahead, Kumm said. This timeline gives BPU flexibility to look at alternatives if the market doesn't look favorable.

Now, Kumm will work with American Electric Power and Minnesota Power to ensure a smooth transition. Brainerd Public Utilities will still remain a Minnesota Power customer, he said, in that Minnesota Power will still provide electric transmission service to BPU.

American Electric Power is the largest municipal wholesale provider in the U.S., Kumm said. The company serves almost 5.4 million customers in 11 states and is one of the country's largest generators of electricity.

"They're huge, they're gigantic," Kumm said.

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In other business, the commission approved recommended rate increases for 2016 for water, electric and wastewater customers, following a presentation evaluating the current rates. Dan Kasbohm of Utility Financial Solutions went through an overview of the rates and provided recommended rate increases.

Increasing the rates for the three services allows each fund to remain financially healthy, Kasbohm said. He evaluated each service fund and showed how changing the rates affected each fund's adjusted operating income, debt coverage ratio and unrestricted cash. Each of those three areas has a recommended minimum target which should be met, he said.

Kasbohm recommended an average 2016 rate increase of 2.5 percent for electrical customers. While there is a rate increase, he said there will be a neutral impact on a customer's bill.

"So the customer's bill will be neutral for the average-use customer," Kasbohm said.

Kasbohm recommended an average 2016 rate increase of 4.9 percent for water customers. The average family of four uses around 5,000 gallons of water per month, he said, and their bill will increase $1.12 per month.

Kasbohm recommended an average 2016 rate increase of 3.9 percent for wastewater customers. The average wastewater customer uses around 8,000 gallons per quarter, he said, and their bill will increase $1.55 per month.

In other business, the commission elected a new president and vice president for 2016. Commissioner Mark O'Day was nominated for president by commissioner Bill Wroolie, with a second from commissioner Dolly Matten. O'Day nominated Matten for vice president and both motions passed unanimously.

SPENSER BICKETT may be reached at 218-855-5859 or spenser.bickett@brainerddispatch.com . Follow on Twitter at www.twitter.com/spenserbickett .

Related Topics: MINNESOTA POWER
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