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February 23,2000
PUC unveils $7.5million plan toincrease generationBy KREMENA TODOROVA Journal Staff Writer NEW ULM - Public utility engineers on Tuesday unveiled a $7.5 million plan to increase local electricity generation. The plan would eliminate a need to lease extra generating capacity at peak times. The plan, which is not final and needs a series of approvals before it goes into effect, would be paid for with local utility bonds. Under the proposal, the Public Utilities Commission would buy and install a second-hand 25-megawatt generator, to help maintain the city's generation capacity at a required 115 percent of its actual needs. New Ulm, which owns a capacity of 46-47 megawatts, currently leases about 12-13 megawatts a year to meet this target. According to engineers, the new plan would stabilize electric supply, making the city less dependent on unpredictable peaktime capacity pricing and transmission interruptions. It would also make it easier to disconnect the city system from the regional grid, for local maintenance or upgrade projects. The plan would eliminate the problem of finding available electricity and transmission capacity at peak times -- a concern which results from a shortage of generating facilities in the region, said Utilities Director Bob Stevenson. He also stressed its potential to generate more revenue, by selling excess electricity to hard-up utilities in the region. As with leased capacity, the generator would only be turned on at peak times, usually in mid-summer. Utilities Planning and Development Engineer Dan Sonnek, who presented the project to city councilors and the PUC in a special Tuesday meeting, described the proposal as "ate-neutral". This means that over 15 years the anticipated life of the bonds debt-service costs would equal the price of leasing capacity. The estimate is based on rapidly escalating lease costs, which have been rising at 25 percent a year, and a strong likelihood the trend will persist, according to Sonnek. "If the cost (of leasing capacity) stays where it is or keeps increasing, it's a no brainer," said Jeanne Vanda of Public Financial Management, a firm that advises the city on debt issues and reviewed the project from a funding standpoint. "If the cost goes down, it's obviously not a good decision." According to Vanda, the size and structure of the bond issue are undetermined. However, she said that due to federal tax regulations, if the city buys a used generator from an investor-owned utility, rather than a tax-exempt municipal company or manufacturer, the bonds would need to be taxable rather than tax-exempt. This would raise the cost by $1 million. A new generator would cost up to twice as much as a used one, Sonnek said. A rebuilt second-hand machine, on the other hand, would have the same lifespan as a new one (around one year of generating time). New Ulm currently generates less than 10 percent of all electricity fed into its system locally. The bulk of its capacity, over 90 percent, while described as "owned" rather than "leased," comes through Northern States Power, an arrangement that will not significantly change with the new plan. The city paid $856,000 for extra generating capacity in 1995-1999. The new project has not been reviewed by independent engineers.
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