Minnkota, Minnesota Power reach deal

GRAND FORKS -- Minnkota Power Cooperative and Minnesota Power have completed a deal in which Minnkota receives needed energy and capacity for the next 20 years and Minnesota Power gains a transmission line to transport wind generation.

GRAND FORKS -- Minnkota Power Cooperative and Minnesota Power have completed a deal in which Minnkota receives needed energy and capacity for the next 20 years and Minnesota Power gains a transmission line to transport wind generation.

What is known as the Young 2 Deal has been in the works for about two years.

Minnesota Power will purchase from Square Butte Electric Cooperative a 465-mile, Center-to-Duluth DC transmission line.

Minnesota Power will use the transmission line to deliver wind energy that it is developing at the Minnkota's Milton R. Young Station near Center, N.D., to its service area near Duluth.

In return, Minnkota receives an increasing allocation of the Young 2 output of energy and capacity. From 2013 to 2026, Minnesota Power's 50 percent allocation of Young 2 will transfer to Minnkota. By 2026 and thereafter, Minnkota will purchase 100 percent of the Young 2 output.


This will give Minnkota 227.5 megawatts of additional capacity and the related energy will be its future power supply, likely until at least 2030.

"It's really a win-win situation," said Dave Loer, Minnkota president and CEO. "Minnkota saves money by the acquisition of the Young 2 plant. Minnesota Power saves by buying a transmission line for its wind energy development."

Young 2, which began producing electricity in 1977, is owned by Square Butte and operated by Minnkota. Square Butte was formed by the Minnkota-associated cooperatives to meet the increasing electrical demand of their consumer-owners and to provide electricity to Minnesota Power.

"Young 2 is a power plant that we know well because we operate it," Loer said. "It is low-cost and already in place. It will eliminate our need to build a new coal-fired power plant such as we were considering with Young 3.

"I think we all understand now that building a new coal-fired plant today would be very difficult, time-consuming and expensive."

Minnkota plans to build a new transmission line from Center to deliver all Young 2 energy to the Prairie Substation near Grand Forks.

This approximately 250-mile, $300 million, 345-kilovolt transmission line will be built and in service by early 2013. Called the Center-to-Grand Forks line, it will allow Young 2 energy to be delivered into the Minnkota system. It also will help the overall northern Red River Valley service area with additional voltage support.

The transmission line route is expected to be finalized in three to four months.


"When compared to the Young 3 option for additional generation, the Young 2 Deal provides a significant financial benefit to our system. Likewise, the Deal provides benefits to the Minnesota Power system," Loer said.

Minnesota Power, an ALLETE company, is building the Bison 1 Wind Energy Center near Center. The 33 turbines will allow for an annual output of 300,000 megawatt-hours of energy. The estimated 75-megawatt, $180 million project will be constructed in two phases, with half of the turbines up and running by December 2010 and the second half completed by November 2011.

Minnesota Power plans additional phases of wind projects.

"The DC Line is a significant piece of our wind development efforts in North Dakota," said ALLETE CEO Don Shippar. "Our strong working relationship with Minnkota was key to putting together this innovative agreement which will bring long term value to each company's customers and shareholders."

The DC line will connect from Center to Minnesota Power's substation in Hermantown, Minn., and be used to deliver the wind-fueled electricity to customers in its service territory in northern Minnesota. It puts Minnesota Power at the forefront of long distance wind energy transport.

A generation and transmission cooperative, Minnkota supplies wholesale electricity to 11 electric distribution cooperatives serving a 34,500-square-mile area in eastern North Dakota and northwestern Minnesota. Square Butte Electric Cooperative is owned by the same 11 distribution cooperatives that own Minnkota. Square Butte owns Young 2, which is operated by Minnkota.

Minnkota serves as the operating agent for Northern Municipal Power Agency (NMPA), which serves 12 municipal utilities in the same geographic region. Together, the Minnkota/NMPA Joint System serves more than 130,000 customers.

"This deal got done because of our longstanding working relationship," Loer said, "and it all began with a phone call."

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