Benson Power Agreement A Bittersweet Deal

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Benson Power Agreement A Bittersweet Deal

by Reed Anfinson
Publisher, Swift County Monitor-News

It is a bittersweet agreement the City of Benson has signed with Northern States Power (NSP) to back the closure of Benson Power, LLC. It is the parent company of Xcel Energy.

Many have to wonder why the city would sign any agreement that would mean the loss of 45 jobs, the loss of dozens more locally in support of the facility, and the eventual loss of nearly $760,000 in property taxes for the city, county and school district.

They must be wondering why the city would have fought so vigorously only a month ago to stop language ending the state’s biomass mandate from passing in the Minnesota House and Senate. That law would also have allowed NSP to buy Benson Power and shut it down.

It seemed like such an important victory for the community against significant odds when that language was removed from bills in both the state House and Senate. We had saved our power plant it seemed. But why did the city spend so much time and effort if it was simply going to turn around and give up the fight?

That battle gave Benson the time it needed to negotiate with NSP from a position of strength rather than one of already having lost the fight. With its effort to end the biomass mandate stopped in the Legislature, the company sat down with representatives of the city to find out what economic losses we would suffer if the plant were closed and what investments we already had in it that would be lost.

Why sit down at all with NSP and negotiate city support for closing the power plant? The answer is simply that time was not on our side, the economics of a biomass power plant were against us, the poor economic performance of the plant could have meant a future bankruptcy ending in its shutting down, and NSP’s lobbying power combined with a powerful argument for lowering its ratepayers’ bills would have eventually resulted in their legislation getting passed – if not this year, then the next.

There are only 11 years left in the power purchase agreement that obligates Xcel Energy to buy the electricity produced at the Benson Power plant. When those 11 years are up, the plant would be forced to shut down because nobody is going to buy its power.

Each day there is an auction for power that will go on the grid to supply the electrical needs of the region’s consumers. Just as an example, let’s say that the power plants that supply electricity for the region can generate 10,000 megawatts of power. However, tomorrow only 7,000 megawatts are going to be needed. Those power plants that bid the cheapest rate for power going to the grid will generate that day while the others site idle.

Because Xcel Energy is obligated under its power purchase agreement to buy Benson Power’s electricity despite it being 10 times more expensive, our local plant only shuts down for maintenance or if there is a problem. However, in 11 years when the contract is up, the plant is going to have to compete on the open market, which it can’t do. It will sit idle, face millions in losses, and close.

Benson Power, which was once Fibrominn, has already gone through bankruptcy and receivership as it has struggled to make money for investors. If its finances take another bad turn, a future bankruptcy could lead to the power plant closing.

Finally, NSP has a powerful argument at the Legislature when it comes to the cost of biomass energy and its customers’ bills. The company estimates that over the next decade it could save ratepayers between $650 and $770 million if it was no longer required to buy power from biomass plants. Powerful members of the state Legislature already side with NSP on ending the biomass mandate.

If NSP said to the Legislature that it had tried to reach a reasonable accommodation with Benson for closing the power plant, but the city wouldn’t cooperate, next year’s fight at the Capitol might go against us.

In all the scenarios we just listed, Benson Power shuts down and the community is left with nothing but a closed power plant at the edge of town.

We’ve been handed a lousy situation, there is no doubt about that. But the job of city leaders isn’t to fight losing battles or sit back and whine about how unfair it all is. Their job is making the best of the situation  - to face reality and create opportunities upon which we can build Benson’s future. That is what has been done with the agreement signed Monday night with NSP.

If the Legislature and the Public Utilities Commission approve the agreement signed between Benson and NSP the city will get:
- $20 million for economic development paid out over the next four years.
- Two in-lieu-of-taxes payments of nearly $760,000 each will be made in the first two years after the power plant has been torn down and is just a vacant lot. Those payments will reflect the most current year’s property tax statements for Swift County, Benson and Benson Public Schools. NSP will continue to pay the full real estate taxes as long as the plant is on the site.
- The city could be getting paid back $606,000 for investments it has made in providing utility services to the power plant.
- When the site is cleared the city can buy it back at the appraised price and use it for an industrial park. NSP would likely contract to have it demolished not long after it closed in the summer of 2018. Its demolition will cost millions and be paid for by NSP.

NSP will also provide a plan for keeping the site secure and safe once the plant is shut down.

No, this compensation doesn’t make up for losing Benson Power. But is far better than we could have ever hoped for in this situation; far more than other communities that have lost key businesses have gotten.  It gives us the means to pursue new economic development opportunities and build a promising future for the Benson community.
 

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