Bill compensating city $20 million signed; but PUC needs to act as well

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Fibrominn, now Benson Power, under construction in 2005.

While Minnesota Gov. Mark Dayton has signed the Jobs & Energy bill that included language that would see the City of Benson paid $20 million between 2018 and 2021 for economic development, there is still another hurdle to clear.

Whether or not the deal proceeds depends on state Public Utilities Commission (PUC) approval for Xcel Energy to buy out the owners of Benson Power, LLC, and then proceeding to shut it down. That shut down could come as earlier as the summer of 2018.

Benson Power produces 55 megawatts of power by burning turkey litter and woodchips. It employs 45 people at the plant with another 50 to 60 people working in jobs supplying the plant with turkey litter and wood chips. Ash from the plant is conveyed to the adjacent North American Fertilizer plant incorporated into fertilizer products. It has been estimated that over 100 people’s livelihoods are tied to the plant not counting the employees who work there.

Minnesota Department of Employment and Economic Development estimated back in the early 2000s when the plant was being proposed that its operation would have an $8 to $10 million annual impact on the local economy.

Those lost jobs and lost economic vitality are the reason for Benson being offered $20 million in compensation for the loss of the power plant.

The filing with the PUC will be done by the end of June, Jim Pearson, manager of Xcel Energy’s Government Affairs, told the Benson City Council during a conference call Monday night. It will likely take much of the remainder of 2017 for the PUC to review the filing, hear testimony on it, and make a decision.

Pearson further said he would like to brief the council on the details of the filing at its first meeting in July. That meeting was set for July 3, but has been moved to July 10, to give Xcel Energy time to prepare its information and for the convenience of the council and public since the next day is July 4.

At that July 10 meeting, Pearson will also introduce the council to Xcel Energy’s community relations staff person who will take the lead on the contract that will be drawn up between Xcel Energy and the City of Benson. That contract will spell out payment schedules as well as the details of other reimbursements the city will receive to compensate it should Benson Power be shut down.

Should the PUC approve the deal between Xcel Energy and Benson Power’s owners, the city would be looking to get its first payment on the $20 million deal prior to June 30, 2018. In the state legislation, the payments are set up on the state’s fiscal year schedule, which for 2018 runs from July 1, 2017, to June 30, 2018.

Benson would get paid $4 million in fiscal year 2018, $6.5 million in both 2019 and 2020, and $3 million in 2021 with the funds coming out of the RDF.

An agreement reached earlier between Northern States Power (NSP), a subsidiary of Xcel Energy, and the City of Benson would also see the community receive another $3 million in property tax payments and reimbursement for investments made in providing services to Benson Power.

The bill signed by Dayton includes language that eliminates the biomass mandate freeing Xcel Energy from having to purchase the costly power produced at the Benson plant.

If Xcel Energy purchases the plant and shuts it down, it has agreed to remove the power plant at its own cost and sell back the bare lot to the City of Benson at an appraised price. The site could then be used for future economic development.

Xcel Energy sought to end to the biomass mandate saying it costs its customers as much as 10 times more than what other sources of power such as wind, solar and natural gas cost. However, because of the biomass mandate and the power purchase agreement the company has with Benson Power, it was obligated to continue buying its electricity for another 11 years. Now that mandate is gone....

 

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Pictured: Fibrominn, now Benson Power, under construction in 2005.

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