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A decade-long shift from coal to wind power is helping to stabilize rates for Minnesota’s largest generation and transmission cooperative.
Great River Energy isn’t alone among consumer-owned utilities forgoing rate increases for 2022, but the power wholesaler is unique in the region for crediting its clean energy transition for leveling off its prices.
“Wholesale rate stability is incredibly important to our member systems in greater Minnesota that are seeing sharp increases in other costs,” Great River Energy President and CEO David Saggau said. The utility sells power to 28 local utilities, 20 of which will see declining rates this year.
Although Minnesota’s investor-owned utilities have sought rate increases, University of Minnesota associate professor Gabe Chan warns comparing them to generation and transmission cooperatives is challenging because they operate on different business models. Clean energy, he said, has been good for all utilities.
“I’ve got a bunch of studies showing that clean energy is keeping the energy costs low, and more wind and solar are just going to keep those energy costs lower and lower,” Chan said.
Great River Energy has been able to take advantage of low-cost wind energy contracts to lower power supply costs, a common strategy among utilities in the Midcontinent Independent System Operator market, he said. A significant demand management program the utility operates also helps drive down costs during times of day when electricity use is high, Chan said.
Great River Energy’s rate stability will not protect cooperative members from seeing their utility bills increase. Members may still decide to bump up rates based on other rising costs. Though they are not regulated, rate increases would still need approval from their cooperative boards.
But co-op leaders say the utility’s rate containment has played a key role in avoiding higher rates. Ryan Nelson, CEO of Kandiyohi Power Cooperative in central Minnesota, said his co-op has not raised rates for five years. Electricity constitutes about 55% of costs compared to revenues, he said. He’s been happy with wind investments that continue to pay off for the co-op’s members.
Not seeing electricity costs climb “is a breath of fresh air” after the “doom and gloom” of the past year, Nelson said. “Inflation, material prices and lead times — there’s been a lot of that. Having this type of relationship with our generation and transmission cooperative is going to set us up for success for a very long time.”
Nobles Cooperative Electric General Manager Adam Tromblay said his cooperative receives 61% of its power from Great River Energy and the rest from Western Area Power Administration and Southern Minnesota Energy Cooperative. With flat pricing from all of them, the utility decided to lower electricity prices to members but increase its monthly service charge.
The cooperative supports clean energy and owns a wind turbine that generates 3% of its power needs. The importance of wind energy can be seen in Nobles County, he added, where hundreds of turbines dot the landscape and pour millions of dollars into the local economy.
Great River Energy has 600 megawatts of wind contracts and plans to add 900 MW by 2023, said Vice President and Chief Financial Officer Michelle Strobel. The utility is on pace to decrease carbon emissions by 80% by 2023 and produce half its power from renewables by 2030.
Still, coal remains part of its future, albeit a shrinking portion. After agreeing to sell its biggest coal plant, the 1,151-megawatt Coal Creek Station in North Dakota, Great River Energy agreed to buy the plant’s total output for the next two years. After 2023, Great River Energy is set to purchase a third of the plant’s power — or 300 MW — for eight years, enough time to line up other power sources.
“The intention is that this is a runway that gives us the ability to transition away from Coal Creek Station to something else,” Strobel said. “It allows for other technologies, like transmission or long-duration storage, to catch up.”
She said the company’s decision to transition to clean energy began in 2013 when its board passed a resolution to reduce exposure to potential greenhouse gas regulation. The decision led to closing the Stanton Station coal plant and the eventual sale of Coal Creek.
“We knew that in 2013 that retiring these resources was a possibility, and by accelerating their depreciation, we reduced the risk of stranded costs,” Strobel said. “This is a key component for achieving stable rates in this transition.”
Other generation and transmission cooperatives with Minnesota customers that plan no rate bumps include Basin Electric Power Cooperative, East River Electric Co-op, Dairyland Power Cooperative, and Minnkota Power Cooperative, according to Minnesota Rural Electric Association CEO Darrick Moe.
“The generation and transmission cooperatives that provide power for local rural electric cooperatives have seen flat rates in the last few years, with relative stability projected into future years,” Moe said. “Cooperatives have done this while engaging successfully in the ongoing energy transition, deploying wind, solar, and other innovative energy approaches with an eye on affordability and reliability.”
Correction: Darrick Moe is CEO of the Minnesota Rural Electric Association. A previous version of this story misstated his title and organization. In addition, Nobles Cooperative Electric’s monthly charge will increase for all customers, not just solar customers.