Electric bills for Montana-Dakota, Otter Tail customers to rise for defunct power plant

By Dale Wetzel, AP
Tuesday, June 22, 2010

MDU, Otter Tail customers to pay for Big Stone II

BISMARCK, N.D. — Two utilities’ North Dakota customers will pay almost $13.6 million over three years to cover part of the companies’ costs for a defunct electric power plant project, settlement proposals say.

Montana-Dakota Utilities Co., of Bismarck, and Otter Tail Power Co., which is based in Fergus Falls, Minn., have been negotiating with the state Public Service Commission about recouping their development expenses for the planned Big Stone II power plant in northeastern South Dakota.

Settlement filings say that for typical residential customers who use 750 kilowatt-hours of electricity each month, MDU’s customers will have to pay an extra $1.49 monthly for three years. Otter Tail Power’s customers will pay about 62 cents extra each month.

MDU and Otter Tail were part of a group of seven utilities that announced plans five years ago to build the 630-megawatt plant, which was to be located next to the existing Big Stone power station near Milbank, S.D.

Its size was reduced when some utilities dropped the project, and it was abandoned altogether last November. Construction never began, even though the developers had the necessary state permits.

MDU and Otter Tail both obtained North Dakota regulators’ endorsement of Big Stone II, giving the utilities an advantage in negotiations to recover their costs.

The Public Service Commission tentatively agreed to settlements with both utilities Tuesday. The commission scheduled a meeting Friday to give its final approval.

“Personally, I kind of find it offensive that the companies are allowed to earn a return on their investment for a project that doesn’t get built,” said Kevin Cramer, the commission’s chairman. “The law, nonetheless, allows that.”

MDU has more than 75,000 North Dakota electric customers, and serves the cities of Bismarck, Williston and Dickinson. Otter Tail has more than 57,000 North Dakota ratepayers, and sells power in the cities of Devils Lake, Jamestown and Wahpeton.

MDU says it spent $13.9 million developing the Big Stone project, including a $9.46 million share allocated to North Dakota ratepayers. Otter Tail lists $10.1 million in development expenses, with a North Dakota share of $4.1 million.

Montana-Dakota Utilities has already filed a request to increase its North Dakota electric rates by $15.4 million, or about 14 percent.

Mark Hanson, an MDU spokesman, said Tuesday that excluding Big Stone would reduce the utility’s rate request to $13.3 million, which is a 12 percent increase.

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