An unfolding disagreement involving a Canadian electrical transmission project could cause serious headaches for Minnesota Power.
The Duluth-based utility company has entered into a long-term agreement to purchase 250 megawatts of power from Manitoba Hydro, beginning in 2020. But recent events have thrown uncertainty into the outlook for some needed infrastructure, namely the Manitoba-Minnesota Transmission Project.
Despite a recent setback for Manitoba Hydro's Canadian line, Minnesota Power continues to invest heavily in its own project - the Great Northern Transmission Line - to transport that electricity the rest of the way from the border to its stateside customers. Minnesota Power expects to spend between $300 million and $350 million on the U.S. line.
"We do have confidence that this project is moving on about on schedule," said Pat Mullen, senior vice president of external affairs for Allete Inc., Minnesota Power's parent company. "So we don't plan on slowing our section down at all. We're still working on schedule, and we expect them to be about on schedule with their operations and what they're doing."
Last week, nine members of Manitoba Hydro's 10-member board of directors tendered their resignations en masse after receiving a government directive to void a pending $52.2 million agreement. That money would have been paid to the Manitoba Métis Federation over the next 20 years in order to obtain the indigenous organization's support for the pending line to Minnesota, as well as future transmission projects.
But Manitoba Premier Brian Pallister objected to the deal. Manitoba Hydro is a state-owned provincial crown corporation.
In a commentary published by the Winnipeg Sun, Pallister told his constituents: "I don't see spending your money for a special payment to one group, in order to smooth the way for the transmission line, as a very transparent or responsible thing for a government to do. Even more troubling is the precedent it would set for the future. If we bought cooperation for $70 million (Canadian dollars) this time, what will it cost next time?"
At a Wednesday press conference, Manitoba Métis Federation President David Chartrand announced plans to take Manitoba Hydro to court for allegedly breaching the proposed agreement.
A protracted legal battle could potentially stall the Manitoba-Minnesota Transmission Project and leave the Great Northern Transmission Line hanging without a Canadian connector.
But Minnesota Power has been in communication with Manitoba Hydro, and Mullen said: "They feel they can take care of this and deal with it effectively and have this thing ready about on schedule for us."
Although Manitoba Hydro is contractually bound to deliver on its end of the deal in a timely fashion, Mullen indicated there may be some room for flexibility.
"I think we will mutually agree on anything that happens with this line," he said, adding that Minnesota Power and Manitoba Hydro have a long-standing, strong relationship.
In all, Manitoba Hydro expects to pay upward of $350 million to construct the 132 miles of line it needs in Canada, assuming that it can get the go-ahead to do so.
Mullen remained upbeat about the deal, saying: "They're going to have 100 percent of the cost of the transmission that moves through Canada, and then they're going to have a portion of the cost of the transmission that moves through Minnesota, as well. So Minnesota Power, we feel, is getting a pretty good value on this line to deliver just the amount of electricity we need, even though the line will be overbuilt with some capacity for them to deliver more energy for others."
The prospective purchase of hydro power from the north is expected to help Minnesota Power meet its goal of generating 44 percent of its energy supply from renewable resources by 2025.
That shift away from coal power combined with a less-than-requested rate increase recently approved by the Minnesota Public Utilities Commission have forced some cuts at Minnesota Power.
"Our business itself is in transition," said Amy Rutledge, Allete's manager of corporate communications
Mullen said Allete laid off six or seven people last Thursday and another person this week. He said the company has set no specific staff reduction target but is carefully reviewing its operations and making cuts where needed. Mullen expects those adjustments will be completed by June.