Otter Tail ordered to conduct energy audit

By Tom Hintgen (Contact) | The Daily Journal

Published Friday, March 14, 2008

The North Dakota Public Service Commission (PSC) has ordered Fergus Falls-based Otter Tail Power Company to conduct an independent audit of its fuel costs. The order comes in the wake of higher energy adjustment payments for Otter Tail Power Company’s North Dakota customers.

Otter Tail needed to purchase power on the open market during a shutdown of Big Stone Plant for maintenance last fall. The company also found that the plant’s generator needed to be repaired, resulting in a longer than expected shutdown.

Big Stone Plant is located in northeastern South Dakota near Milbank.

“We’re willing to work with the PSC to do this (audit) review,” Otter Tail spokesperson Cris Kling said. “We use good practices and we’re very careful in our planning for purchasing power on the market. We’re happy to demonstrate this to the commission.”

Under North Dakota state law, when a utility’s costs for power goes up, it is allowed to pass those costs on to its customers.

When Otter Tail did this after the Big Stone shutdown, it caused a dramatic increase in energy adjustment for North Dakota customers in January and February.

“The energy adjustment is calculated differently in Minnesota,” Kling said, “In Minnesota we can spread the costs over a longer period of time than in North Dakota.”

In January, the energy adjustment for Otter Tail’s North Dakota’s customers rose to 1.53 cents per kilowatt-hour, and it rose again to 3.5 cents in February. It’s expected to drop from 3.5 cents this month to 3.0 cents per kwh in April and 2 cents in May.

"Then it should return to more historical averages by June," Kling said, “hopefully with no unforeseen circumstances."

The North Dakota PSC audit order comes after complaints from Otter Tail customers about their electric bills, including energy adjustment payments.

North Dakota Public Service Commissioner Susan Wefald told the Associated Press that the commission will hold a hearing after the audit report comes in. She said that likely will happen in late spring or early summer.

A key audit issue is Otter Tail Power Company buying what North Dakota PSC officials referred to as “higher-priced power on the open market” during the extended shutdown at Big Stone Plant last fall.

Janet Gonzalez, energy unit manager for the Minnesota Public Utilities Commission (PUC), said a new base cost of fuel took effect when Otter Tail Power Company implemented interim rates late last year in Minnesota.

“The actual adjustment is different in Minnesota versus North Dakota,” Gonzalez said.

Numbers vary for Minnesota customers of Otter Tail Power Company, depending on monthly kilowatt-hour usage and customer classification such as residential, commercial and industrial.

The Associated Press contributed to this report.