2023 rates projected to be stable for sixth straight year

Despite global economic challenges and inflationary pressures, Minnkota Power Cooperative plans to keep its average wholesale electricity rates flat for the sixth straight year. The cooperative’s board of directors approved the 2023 capital and operating budgets this fall, which anticipate no rate adjustment for the Class A member systems.

“We recognize the prices of many products and services are continuing to rise, which places pressure on families, businesses and communities in our region,” said Mac McLennan, Minnkota president and CEO. “While we’re not immune to these broad economic challenges, we are committed to finding ways to ensure resiliency and stability for our members.”

The economy in Minnkota’s service area remains strong with consistent growth coming from the major population centers and the agricultural industry. The budget anticipates the sale of 4.2 billion kilowatt-hours (kWh) to the Class A members in 2023 – a 2.5% increase from the previous year. Residential and commercial growth in the region are continuing to outpace previous Load Forecast Study expectations. Additionally, the two states Minnkota serves – Minnesota and North Dakota – rank first and third in the nation in unemployment rates according to the U.S Bureau of Labor Statistics.

Minnkota also anticipates a boost to its financials through stronger markets for its surplus power sales. With no major power plant outages scheduled in the coming year, ample power supply resources are expected to be available. Average energy and capacity prices in the MISO marketplace are projected to be higher than the 2022 budget.

“The demand and price for our surplus power has grown steadily over the last two years, which has been a positive for us financially,” McLennan said. “There is still market volatility that will need to be managed, but we believe the current price trends will provide additional revenue.”

Minnkota’s revenue requirement in 2023 is budgeted at $442.7 million. Expenses are budgeted at $426.8 million. The net margin is projected to be $15.8 million before the recognition of $1.2 million of deferred revenue to reach the target margin level of $17 million.

About $64.6 million will be invested in capital construction projects and equipment in 2023. Approximately 72% of that total is focused on the power delivery system to address aging infrastructure, improve service and enhance reliability. Programs to rebuild legacy power lines and substations will continue, as will efforts to add blink mitigation equipment to reduce momentary outages. Distribution automation technologies will also be added to provide enhanced communication and greater visibility over the system. Power production and security/reliability projects will make up the remaining 20% of this budget.

Minnkota’s financial position is also supported by previous years of strong operational performance. The cooperative has a deferred revenue plan in place to manage shortfalls and unanticipated expenses, as well as a Resource Transition Fund to address extraordinary market events and future power supply needs.

Minnkota is rated as an investment-grade utility in 2022. The cooperative currently has an A- rating from Standard and Poor’s and stable outlook.

“The energy industry continues to go through one of the most significant transitions in its history,” McLennan said. “We’re for fortunate to be in a stable position financially to meet these challenges and opportunities head on. We look forward to continuing to work closely with our membership to provide reliable, affordable and sustainable electricity for the region.”