Minnesota Power seeks approval of Manitoba Hydro agreements

Minnesota Power on Nov. 6 petitioned the Minnesota Public Utilities Commission for an order approving a Power Purchase Agreement (PPA) and an Energy Exchange Agreement (EEA) with Manitoba Hydro for the purchase of 133 MW of energy to serve Minnesota Power’s customers.

The power purchase deal and the EEA, also referred to as the ‘Renewable Optimization Agreement,’ was executed by Minnesota Power and Manitoba Hydro on July 30, 2014, for 20 years effective when the Great Northern Transmission Line (GNTL) is placed in-service. The GNTL is a 220-mile 500 kV (ac) transmission line to be constructed between the Minnesota/Manitoba border crossing northwest of Roseau, Minnesota, and the existing Blackberry Substation near Grand Rapids, Minnesota, as well as associated substation facilities and transmission system modifications at the Blackberry Substation site, and a 500 kV series compensation station.

Construction of the GNTL is expected to begin by 2016 and be completed by 2020. Based on a 2020 in-service date, the term of the power agreement would extend until 2040. The agreement, paired with the commission-approved Manitoba Hydro 250 MW power purchase agreement (called the “250 MW PPA”), and the GNTL that is before the commission, create a unique resource arrangement that brings significant long-term economic and environmental benefits to Minnesota Power customers, Minnesota Power noted.

The PPA and the EEA with Manitoba Hydro will provide Minnesota Power’s customers with a cost effective, non-carbon emitting supplemental energy source that would be an alternative to some of Minnesota Power’s short-term wholesale market purchases, the utility said. “The Agreement is multi-faceted and the provisions give Minnesota Power customers access to several beneficial power supply advantages. First additional wind storage and incremental environmental attributes are included that allow Minnesota Power to optimize its growing renewable power supply. Second, the transmission delivery costs for the energy associated with the Agreement are covered through a provision that credits Minnesota Power customers for transmission revenue requirements components associated with 133 MW of the GNTL. Further, by securing this transaction, Minnesota Power customers gain access to a lower cost 500 kV transmission alternative (GNTL) for the hydroelectric power coming from Manitoba.

“The 133 MW long-term purchase is based on the proposed construction of new hydroelectric facilities in northern Manitoba by Manitoba Hydro, and new transmission facilities constructed by both parties between Canada and the United States, given that current transmission export capability into the United States from Manitoba is fully utilized. Minnesota Power is working closely with Manitoba Hydro, the Midcontinent Independent System Operator (‘MISO’), and associated parties on transmission needs for the PPA. The EEA includes the wind storage provisions described above that further increase the flexibility and value of the PPA as part of Minnesota Power’s supply.

“The innovative wind storage feature facilitates timely shifts of energy resources between Minnesota Power and Manitoba Hydro, optimizing the generation of electricity from either wind or water resources to meet customer requirements. The EEA entitles Minnesota Power to effectively ‘store’ 750,000 MWh per year of wind energy with Manitoba Hydro by facilitating delivery of those resources to Manitoba Hydro at appropriate times. When wind energy production is high relative to Minnesota Power’s electric loads, the provision allows Minnesota Power to send energy to Manitoba Hydro. When Minnesota Power’s wind production is relatively low or its electric loads are relatively high, the energy ‘stored’ with Manitoba Hydro will be returned to Minnesota Power’s system. The EEA enhances the value of the PPA, helps balance the Company’s energy position and maximizes the value of its North Dakota wind resources all to the benefit of Minnesota Power customers.”

Minnesota Power is not presently requesting a determination by the Minnesota commission as to whether any of the hydro energy purchased through this PPA qualifies as an eligible energy technology. Although at this time Minnesota Power is not using this PPA to comply with Minnesota Renewable Energy Standard (RES) requirements, it may in the future request commission approval of purchases of energy from Manitoba Hydro’s system from facilities that are less than 100 MW and therefore would qualify under Minnesota statute.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.