Rate stability highlights 2022 budget
Minnkota's board of directors approved the 2022 capital and operating budgets, which anticipate no rate adjustment for Class A member cooperatives.
Minnkota Power Cooperative plans to keep its average wholesale electricity rates flat for the fifth straight year. The cooperative’s board of directors approved the 2022 capital and operating budgets, which anticipate no rate adjustment for the Class A member cooperatives.
“Our strong financial performance in 2021 provides a stable foundation for us to meet the needs of our members while not increasing our rates,” said Mac McLennan, Minnkota president and CEO. “As prices are rising on many products and services, we know how important stable electricity prices are for our local communities.”
Quality performance from the generation and power delivery fleets has strengthened Minnkota’s balance sheet in 2021. The cooperative has received a boost to its financials through a stronger market for its surplus power. Average prices in the MISO market have more than doubled compared to 2020 totals.
“The wholesale markets have rebounded from historic lows in 2020,” McLennan said. “We’re seeing higher prices, but also increasing volatility. Effectively managing the market is a key to our financial success.”
The economy in Minnkota’s service area remains strong with consistent growth coming from the major population centers and the agricultural industry. In 2022, the cooperative is anticipating that new data centers and data processing facilities will begin operation and provide significant load growth and additional revenue.
Total revenues in 2022 are projected to be $410.1 million. Along with the potential use of deferred revenue funds, the year-end margin is targeted at $12.4 million.
From an expense standpoint, Minnkota will see higher power supply costs in 2022 due primarily to major scheduled outages on Unit 2 at the Milton R. Young Station and at the Coyote Station. Large capital projects and routine maintenance are planned at these facilities every three years. Minnkota receives 82% of the Unit 2 output and Northern Municipal Power Agency (NMPA) receives 30% of the Coyote Station output. Minnkota and NMPA operate together as a Joint System.
About $41.6 million will be invested in capital construction projects and equipment in 2022. Nearly 80% 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 has maintained investment-grade financial ratings through 2021. The cooperative currently has an A- rating from Standard and Poor’s and a Baa2 rating from Moody’s.
“There is a tremendous amount of change on the horizon for our industry,” McLennan said. “We are fortunate to be in excellent financial position and look forward to working with our members to navigate these changes in a way that preserves reliable, affordable and environmentally responsible electricity.”