Regulators accept the need for big northern Minnesota transmission line

Minnesota Power, a Duluth-based utility serving the Iron Range, cleared a key regulatory hurdle Thursday for a proposed northern Minnesota transmission line whose price tag could be as high as $710 million.

The Great Northern Transmission Line would run about 220 miles on a route yet to be chosen from the Canadian border north of Roseau, Minn., to a substation east of Grand Rapids. It is part of Minnesota Power's plan, known as Energy Forward, to replace some of its coal-generated electricity with carbon-free hydropower imported from Canada.

"It is absolutely vital to our success around Energy Forward," said David McMillan, executive vice president of Minnesota Power, after the state Public Utilities Commission (PUC) unanimously approved the project's certificate of need. "This is a big deal, and we need a big line."

Manitoba Hydro, a Winnipeg-based utility that operates 15 hydropower stations and already sells electricity to other Minnesota utilities, will pay 72 percent of the transmission project's capital costs and own 49 percent of the line — a stake it says it intends to sell to another utility. Minnesota Power is responsible for 28 percent of the cost, and will own 51 percent of the line.

Several route variations are under review, and the exact pathway is expected to be chosen next year by the PUC. Construction is expected to take four years, putting the line in service in June 2020.

The 500,000-volt line — one of the largest capacity lines in the state — will carry more power than Minnesota Power needs, opening the door for Manitoba Hydro to sell hydro to other utilities. Manitoba Hydro, a Provence-owned corporation, has a history of electricity deals with Midwest utilities, including Minneapolis-based Xcel Energy, which imports electricity from Canada in the summer and exports it there in the winter via another cross-border transmission line.

Carol Overland, an attorney for a citizen group that opposes the Great Northern project, said its scope far exceeds local power needs, and could require more transmission line construction elsewhere to carry Canadian hydropower to Wisconsin or other states.

"There is no justification for a project this big," said Overland, who represents Residents and Ratepayers Against Not-so-Great-Northern Transmission (RRANT).

Scott Powell, a spokesman for Manitoba Hydro, said any power deals with Wisconsin-based utilities would not require additional transmission lines. One reason for oversizing the Great Northern line is that it also doubles the utility's capacity to import power into Canada, he added.

The estimated cost ranges from $558 million to $710 million, depending largely on the route chosen, McMillan said. Minnesota Power's maximum share is projected to be $201 million, a significant investment for a company with 143,000 customers, including power-hungry taconite mines facing losses amid a drop in world steel prices.

"It is an expensive project," said PUC Chairwoman Beverly Jones Heydinger. "And I think in part because Minnesota Power has a relatively small customer base to spread these costs across, it is going to have an impact on ratepayers for certain."

The rate effects won't be felt until after 2016, when construction bills start coming in and Minnesota Power seeks regulators' permission to add charges to electric bills. The company said an average residential customer could see his monthly bill rise $2.40 per month — just under 3 percent — by 2020.

One unusual feature of the deal is that Manitoba Hydro has agreed to buy wind power from Minnesota Power when that utility doesn't need all the output of its wind farms. At such times, Manitoba Hydro would temporarily reduce its hydro output, in effect storing the wind power.

Beth Soholt, executive director of Wind on the Wires, a St. Paul-based wind industry group, said the storage part of the deal is unique to Minnesota Power's needs. Electricity trading on the grid creates market incentives for fuel-burning power plants to dial back output when wind energy is available, so storage generally is unnecessary, she added.

"We don't need storage for even a higher penetration of wind," said Soholt, whose group backs a state measure to require utilities to get 40 percent of their electricity from renewable energy like wind-power, up from 25 percent, a level Minnesota Power already has achieved.

David Shaffer • 612-673-7090