Earning Pearls, CMMPA/CMPAS Heads Toward Diamonds
Lore and tradition refer to the 30th anniversary as the “Pearl Anniversary”, and upon reaching 30 years, people’s lives often demonstrate a commitment to a particular calling. Much like pearls and people, Central Minnesota Municipal Power Agency (CMMPA) marked a celebration of answering the call to deliver price-competitive portfolio solutions that keep public power utilities strong and durable.
Over the years, the durability and flexibility of CMMPA’s chosen project-based business model has allowed utilities to belong as a partial or full-requirements member, or as an affiliate. As utilities retain their ownership of local resources and legacy assets, CMMPA helps each participant manage their individualized power portfolio while aggregating needs of its 12 members and affiliates in Minnesota and Iowa.
Perpetuation of Municipally Owned Electric Systems
Early documents show six municipal utilities joined together in 1987 to form CMMPA. Thirty years later, the Agency continues to abide by its original tenets to serve as a “partial requirements agency with an emphasis on independence of operation, economical supply of energy for its consumer owners, and perpetuation of municipally owned electric systems in Minnesota.”
The Agency’s first matter of business involved renegotiating and managing a single power supply contract with its neighboring investor-owned utility, Northern States Power/Xcel Energy. For ten years, the agency had no permanent staff. Instead, member cities’ managers, administrators, and superintendents took charge of the day-to-day management of the 20-year power supply contract.
In 1998, before the expiration of the NSP contract, members created a second joint action agency to operate as their energy management and consulting services agent. Initially named Utilities Plus, the agent is now known as Central Municipal Power Agency/Services (CMPAS – pronounced “compass”).
Working alongside members, CMPAS conducted a 2002 planning study that identified options for generation resources and quantities that would optimize each utility’s existing portfolio. After review and evaluation, ten members signed a CMPAS-sponsored contract for baseload power from Omaha Public Power District’s Nebraska City Unit 2 Coal Station (NC2).
Each participant holds contractual rights to specific amounts of power from NC2. As applied through the project-based model, CMPAS directly assigns cost to participants by their proportional, contractual obligation without impacting the electric rate structures of non-participating members.
Sleepy Eye Commissioner Bob Weiss praises the Agency for its ability to cater to independent-minded utilities by accommodating legacy assets, partial requirements, and local preferences. “CMPPA/CMPAS offers in-depth analysis of options, lets the utility choose what is best for the community, and then handles the rest,” said Weiss.
Over the years, CMMPA has been instrumental in helping public power utilities adapt to industry changes. For example, when utilities needed to navigate emerging wholesale power market rules in 2006, CMMPA/CMPAS hired an energy-market services team to help members and non-member affiliates schedule their energy requirements in the Midcontinent Independent System Operator (MISO) market.
When members began experiencing the tripling of transmission prices in a short time prior to 2006, they turned to CMPAS to find solutions that would mitigate cost. The ensuing long-term analyses found that after historically representing less than 10 percent of a municipal utility’s wholesale power costs, transmission prices could double by the year 2020 from the 2006 level.
In this context, CMPAS determined that municipal utilities could no longer be content to remain “renters” of the transmission system. To mitigate and adapt to the changing electricity markets, CMPAS successfully built a coalition of public power partners and embarked on a 3.9 percent investment in the CAPX 2020 Project.
Among the first steps to move from renter to owner, the Agency needed to earn acceptance as a co-investor from incumbent transmission owners (TOs) and gain approval from the Federal Energy Regulatory Commission (FERC). As CMMPA sought to use financial cost-recovery mechanisms on the same basis as investor-owned utilities and TO entities, it endured four different interventions by the other TOs.
After a nine-year process, the FERC approved CMMPA for transmission ownership in what is considered precedent-setting regulatory filings for other public power utilities to follow.\
The result of CMMPA’s $35 million transmission investment saves its members and affiliates at least $52 million over the project’s 30-year life. The 15 participants in Minnesota and Iowa will realize $27 million in savings. Moreover, the agency’s proportional share of the investment provides $25 million in recovery that reduces its overall operating costs by nearly $1/MWh.
Along with local perseverance and fortitude from member and affiliate utilities, Wendy Meyer, CMPAS/CMMPA board member and Mountain Lake City Administrator, observes that the Agency received tremendous support from great public power partners such as the Midwest Municipal Transmission Group and others.
“We are thankful the Spiegel McDiarmid legal team, led by Robert Jablon, obtained rulings that will help municipal utilities adapt and thrive.” Meyer said, “The path is now clear for other public power utilities to follow, and to this day, transmission ownership remains a a long-term hedging tool to protect public power customers.”
From Baseload Contracts to Community Solar Subscriptions
“When an outsider looks at CMMPA members’ individualized power supply portfolios, they will notice they look very different from each other, and the combined portfolios look different today compared to 30 years ago,” said Chris Kopel, CMPAS’s Acting CEO and former COO. “CMPAS has worked hard to help utilities navigate regulatory and technology changes by proactively analyzing, planning, and managing each member’s portfolio. This active management has led to an Agency portfolio that is 48 percent carbon-free and well-positioned against natural gas and market price volatility as well as potential carbon risks.”
During the first 15 years of its existence, the Agency managed one NSP power purchase agreement that existed alongside hydropower allocations from the Western Area Power Administration. When CMMPA/CMPAS was designated as a MISO market participant in 2006, it started an ongoing portfolio diversification process as depicted in the graphic of the Agency’s historical timeline.
The most common and oldest generation assets owned by members are internal combustion generating units fueled by diesel oil and/or natural gas. These assets meet utility capacity market requirements and can get utilities through emergencies. The newest addition to member utility portfolios comes in the form of community solar subscriptions, marketed as R4 Solar.
Through upstream and downstream contracts arranged and managed by CMPAS, six CMMPA members sell community solar subscriptions from local solar billboards and the Lemond Community Solar Project near Owatonna, MN. The Lemond Project is a source of great public power pride since it exists as a collaborative project between CMPAS and Southern MN Municipal Power Agency.
Presently, CMMPA/CMPAS is concluding a 2020 Power Supply Coalition effort with the goal of lowering portfolio costs and mitigating long-term risks. Long-term power supply contracts signed in 2017 means that approximately 75 percent of the utilities’ portfolio costs will have long-term price certainty at favorable prices. The agency is working on a wind resource component as the final piece for the participants’ long-term portfolio.
Originally registered in Glencoe, CMMPA/CMPAS eventually moved to Blue Earth and recently opened a satellite office in Eden Prairie. Although the location changed, the Agency never strayed from its project-based model and mission to identify strategies that minimize wholesale power costs, manage future risks, and maintain stable and competitive rates while allowing utility boards’ flexibility and autonomy to customize their electricity portfolio.
Aligned with its mission, the team of 11 employees at CMMPA/CMPAS provides consultative advice for portfolio planning, development, and management; energy market scheduling and related services; operational and administrative support; individual and coalition power supply and transmission studies; and energy efficiency and distribution mapping programs.
With the passage of 30 years, CMMPA has worked hard to live up to its calling as a strategic and fiduciary advisor that delivers unbiased, independent portfolio system solutions that best serve the customers of municipal utility members. With that commitment in mind, CMMPA heads toward its 50-year diamond anniversary by powering a brighter future for the perpetuation of strong public power utilities.