Herald Journal - Enterprise Dispatch - Delano Herald Journal
City of Delano declines participation in CapX2020 energy project
March 28, 2011
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By Ryan Gueningsman
Managing Editor

DELANO, MN – In a special meeting Tuesday night, the Delano City Council voted against entering into an agreement proposed by Delano Municipal Utilities.

The council discussed a project called CapX2020, which was presented by Delano Municipal Utilities at its recent meeting and then brought to the council for its consideration.

CapX2020 is a joint initiative of 11 transmission-owning utilities in Minnesota and the surrounding region to expand the electric transmission grid.

Part of the DMU presentation and part of the council discussion both centered around the long-term economic well-being of the community depending on all entities within the city working toward a common goal and objective – but those goals and objectives do not appear to be defined, at least according to the council.

DMU’s presentation indicated its efforts include negotiation to reduce wholesale energy and transmission costs, and requests for proposals to replace higher cost energy and transmission contracts and/or fill gaps in the existing long-range energy portfolio.

“CapX2020 is an example of one project needed to reduce transmission costs,” according to DMU’s presentation.

Planning studies show that customer demand for electricity will increase 4,000 to 6,000 megawatts (MW) by 2020. The new transmission lines will be built in phases designed to meet this increasing demand, as well as to support renewable energy expansion, according to the CapX2020 website.

The proposed new transmission lines will be built in phases designed to meet this increasing demand, as well as to support renewable energy expansion.

Delano, as part of the Central Minnesota Municipal Power Agency (CMMPA), was seeking to invest in the Brookings County-Hampton line.

“CapX2020 presents Delano a significant opportunity to participate in a transmission project which will lower costs in future years with zero cash outlay,” according to DMU’s presentation.

Delano’s share of the project would include no debt issued by either the city or DMU. The debt would be issued by CMMPA and carried on its financial statements. CMMPA is able to bond for this project because the bond will be protected by the revenue contracts with each participant.

“This is similar to the Nebraska II coal plant we participate in,” according to DMU. “Delano will only see the value of the net return impact on our financials through reduced transmission costs.”

The council seemed to have hesitation about entering into the agreement after consulting with City Attorney Mark Johnson, who said the agreement is “a harsh, hard-to-understand agreement. It’s got real fangs.”

Kern said he feels, ultimately, a discussion needs to take place between the City and DMU about where the future of the power plant is going.

“We haven’t had that frank discussion,” Kern said. “If we’d had that conversation, these decisions would be a lot easier.”

He said he has worked with two city councils in his time at Delano, and that this is the third city council he’s seen wrestle with a decision like this.

Mayor Dale Graunke said business-wise, it looks good on paper, but asked what happens if the city should decide to pursue other energy sources or sell the plant.

Council Member Betsy Stolfa said she does not understand how Delano’s utility fits into the broader utilities market. She also said she struggles with five city council members and five local commissioners “competing with these big players.”

Power, Light, and Water Commission members Jonathan Ness and Bob Hutter were in attendance at the council work session.

Ness asked if he could address the council, and Graunke did not take comments from him. Graunke pointed out that technically, the power, light, and water commission had a quorum present, since Council Member Derek Schansberg also serves on the power, light, and water commission.

After a bit more discussion, including concerning local control of the utility, Graunke called for a motion to approve the plan and requested a formal resolution on the issue.

Council Member Holly Schrupp made the motion, which almost died for lack of second, but Schansberg seconded the motion, noting the “need to vote on it.”

The resolution was defeated, with Graunke and Schrupp voting in favor of approving it, and Council Members Dan Vick, Stolfa, and Schansberg voting against.

Odds and ends

In other business, the council:

• heard an update on potential flooding (see related stories).

• discussed liquor store expansion possibilities, looking to expand 2,398 square feet into the former Snap Fitness location. City staff will continue working on the proposal.

• reviewed old village hall facade proposals. The council decided to extend the bid period for one week.

• reviewed a proposal for a Central Park master plan.

• tabled review of its 2011-12 goals and objectives.

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