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Otter Tail's air-quality compliance to cost less than thought

PIERRE -- Otter Tail Power says environmental upgrades for the Big Stone power plant to comply with federal air-quality rules will cost millions of dollars less than previously expected.

PIERRE -- Otter Tail Power says environmental upgrades for the Big Stone power plant to comply with federal air-quality rules will cost millions of dollars less than previously expected.

The project will still be expensive, however. Company and state regulators have deadlocked on how much customers should be charged.

As a result, Otter Tail wants the state Public Utilities Commission to delay or allow the company to withdraw an environmental cost-recovery rider that was to be added to customers' bills for the project.

The PUC is scheduled to discuss that request Tuesday.

Otter Tail originally wanted to start charging the rider during construction of the additional environmental safeguards at the coal-fired electricity plant in Grant County.

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That was to cover financing costs.

But the company wants to step back from that plan because it's been unable to reach agreement with PUC staff on the rate of recovery for costs during construction.

The amount originally proposed for the rider by Otter Tail in March 2012 was $0.00176 per kilowatt-hour of electricity for all customers. That would have generated about $750,000 annually from the South Dakota customers.

Otter Tail doesn't want to incur the additional expense of taking that dispute to court, according to an April 17 letter filed with the PUC by a company lawyer, Bruce Gerhardson.

He said the in-service date for the new equipment is late 2015. He said that provides an additional 24 months for the commission to reach a ruling on the amount of the rider.

The project's original budget was $489 million. Gerhardson said approximately 90 percent of the project's costs are now under contract and the revised budget is $405 million, a 17.5 percent reduction.

He said the savings result from market timing, reuse of some gear that eliminates the need for a new substation and transformer, Otter Tail serving as construction manager and paring contingency amounts

"It should be remembered that construction only started days ago and we have two and a half years ahead of us. Because of this there are still many unknowns and potential challenges ahead of us. But the work that has been done to date and the careful review of the project justifies a reduction in the anticipated project costs," Gerhardson said.

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