Central Minnesota Municipal Power Agency: Preparing for Tomorrow’s Energy Needs Today

Partnerships are at the core of Central Minnesota Municipal Power Agency (CMMPA), and the 13 person staff works hard to collectively prepare for the current and future electricity needs of its municipal utility members. The agency supplies wholesale power to 12 small south-central Minnesota municipal electric utilities. “Our primary focus is on power supply planning and transmission planning for our members. In addition, we also provide energy scheduling services for our members’ resource portfolios in the MISO Energy Market, including making the necessary arrangements for transmission delivery. We provide our members the benefits of being an aggregated purchaser by providing them access to more power supply alternatives than would be available to them as a smaller independent purchaser,” explains Steve Thompson, CEO of CMMPA.
 
“A small municipal that has only a two-MW load will have a difficult time finding a competitive supplier that will contract for such a small quantity of power and the final costs for such a small transaction can be significantly higher. Aggregating loads of multiple municipals allows us to buy larger quantities of power and at lower costs,” Thompson continues. Since its inception in 1987, CMMPA has represented the energy interests of municipal utility members with the ability to secure competitive rates collectively while retaining the flexibility to supply a portion, or all, of its member’s needs. More recently, CMMPA has expanded its list of member services to assisting its members with transmission tariff recovery from MISO for member-owned transmission assets.
 
Every municipality’s needs are different and the agency has found success in providing individualized ala carte services through its unique project-oriented structure. Some CMMPA members rely upon the agency for a portion of its needs and supplement by owning and operating wind, gas, diesel and hydroelectric generating plants. Other members take advantage of CMMPA’s services for 100 percent of their needs.
 
The project-oriented approach allows CMMPA to act as the technical advisor for members’ current and future power supply and transmission needs. Each member maintains autonomy over their own portfolio decisions. Members also have an individualized power supply portfolio, not a one-size-fits-all socialized portfolio. The flexibility of this approach also allows CMMPA to provide services at the lowest cost possible, achieving economies of scale and to provide these same services to municipal utilities that are not members of CMMPA or any other agency.
 
Responsible and Reliable Partners Facilitate Success
In total, Thompson states CMMPA supplies around 120 megawatts and is a smaller-scale energy provider. Because of its small size, CMMPA has partnered together with other utilities on various projects. In 2009, CMMPA members became part owners of the Nebraska City Two 682-megawat base load coal generating station. This project gave the members access to low cost energy that couldn’t be found anywhere else in the region.
 
To further defray future transmission tariff costs, the members are becoming owners of impending transmission upgrades. “We are participating in one of the four major projects being developed by the CapX2020 utilities. Due to increased demand and the large scale expansion of renewable in the region, we are partnering with four other investor-owned utilities, power agencies and cooperatives to build the necessary transmission lines required,” Thompson continues.
 
CMMPA will be a co-owner in the Brookings County-Hampton project, which involves the building of 200 miles of 345-kilovolt transmission line to serve communities across South Dakota and Southern Minnesota, to just south of the Minneapolis-St. Paul area. The CapX2020 partnership represents a first of its kind joint initiative from 11 regional utilities to increase total transmission lines to handle a demand of 6,000 megawatts it expects to see by 2020. “This project allows our members to be a transmission owner versus always being a renter. It provides us the ability to make return on our transmission investment to help hedge against future increases in MISO transmission usages charges,” Thompson says.
 
Regulatory Responsibilities
CMMPA has aggressively developed energy efficiency programs to assist the reduction of energy costs to the residential, commercial and industrial customers of its member communities. “In 2010 we achieved 1.8 percent energy savings on our overall member load. Starting in 2010, the requirement in Minnesota was to save 1.5 percent. We are proud that we exceeded that goal in our first year,” says Thompson.
 
The state of Minnesota also requires all utilities in the state to supply 12 percent of the state’s retail load with energy created by renewable resources by 2012, and 25 percent by the year 2025. “We are proud to say that the CMMPA members will collectively supply over 20 percent of their energy from renewables in 2012. And this doesn’t take into consideration the 15 percent of energy that is coming from federal hydroelectric projects,” says Thompson. CMMPA is continually looking into emerging technologies in order to determine how the agency will benefit the portfolios of its members. For the past several years CMMPA was involved with determining the feasibility of a compressed air storage project in Iowa and has recently been researching the viability of energy storage through large batteries the size of semi-trailers.
 
Balancing both the Short and Long-term
Of course, responsible power agencies have to plan for the future using lessons learned through previous experiences. The agency was quick to react to a slump in demand following the economic downturn. “We did see our total demand fall, and it has since rebounded in terms of total energy sales. The silver lining for us was that the decline in demand actually enabled us to secure better pricing,” says Thompson. CMMPA successfully re-negotiated its supply contract through 2012 with a supplier to secure 30 percent lower wholesale electricity rates, saving the members and ultimately its retail customers $12 million for the remainder of the contract.
 
In the past, a significant portion of the energy CMMPA procured for its members was subject to market fluctuations. Strategically, this made economic sense when regional generation surpluses existed and wholesale energy costs were cheap. As a result through the agency’s most recent planning and procurement efforts, it has reduced its risk exposure to market volatility with both short and long-term fixed price contracts. CMMPA’s costs have been decreasing over that past five years and the agency’s rates are now very competitive to the other neighboring public power municipals, agencies, cooperatives and investor-owned utilities.
 
The agency is now focused on securing energy for its members beyond 2016. Last year CMMPA formed a coalition with another power agency, other municipals and small investor-owned utilities to conduct a power supply planning study for the coalition participants to look at its aggregate long-term resource needs. The coalition then went out for an aggregated Request For Proposals (RFP) to find resources to serve the future power supply needs of each of the individual participants. Collectively, the coalition is looking for up to 350 MWs of base load, intermediate and peaking resources, including both long-term purchases and project ownership opportunities, to supply its aggregated needs for the next five- to 20-year timeframe.
 
Though the future of the energy industry is far from certain, Thompson and the CMMPA team see no reason not to prepare for the future. “There are a lot of uncertain issues that will determine the future of the energy industry from natural gas prices, future EPA regulations, carbon emission regulations and the extreme shortage of transmission capacity, but we remain hopeful that regulators will get it rights and keep the impact on retail customers in mind.”
 
 “We spend about as much time assessing risk as assessing cost,” says Thompson. For CMMPA thorough planning and due diligence has always been an essential part of the agency’s success. CMMPA is here to serve its municipal utility members and keep costs as low as possible, enabling Central Minnesota Municipal Power Agency to provide safe, reliable and low cost service to its customers.