THE MINNESOTA POWER/MANITOBA HYDRO CONNECTION

 

“Coopetition proposes that it makes more sense to look for win-win scenarios in which you strive to get a bigger piece of the pie-not by taking a share from a competitor, but by making the pie bigger.”---MPEX Connections, Spring 1999

 

In an article from the Milwaukee Business Journal, September 20, 2002 print edition, entitled “ATC exec key to major energy project” ATC’s Mark Williamson is quoted on the challenges of his initial task, pushing the Arrowhead-Weston Transmission Line.  The article goes on to state “Too many people in northern Wisconsin think the Arrowhead/Weston line is being built simply to transfer cheap Manitoba hydropower to power markets in Chicago and other metropolitan areas in the eastern one-third of the nation.”  “Debunking the myths is the foremost job,” said Williamson.  This is one statement I wholeheartedly agree with, and I think that is the mission SOUL members have been on for over three years now.  Lets take a closer look at the evolution of a relationship between Manitoba Hydro (MH), and Minnesota Power (MP).  Not only will this article be replete with all the abbreviations, explanations of  jargon, etc., but you will come to see MP, not as only the “good neighbor” employer for Duluth and Superior that it is---but the realities of Enron style power marketing that makes this MH connection a strong reality.

  MPEX is Minnesota Powers venture into the deregulated trading market.  “The wholesale exchange of electricity is a dynamic and increasingly complex industry with hundreds of new players. As a leader in this industry, Minnesota Power formalized its long history with the establishment of MPEX, a new division dedicated to power trading and marketing.”  This quote is from MPEX Connections, a seasonal newsletter of MPEX, printed prior to summer of ’97.  Bringing back to many memories of Enron-style trading, “ Last, we would like to thank our many customers and fellow power traders around the country who have entrusted us with delivering reliable and affordable energy around the clock. MPEX provides physical power delivery to industrial enterprises, investor-owned utilities, municipalities, electric cooperatives and governmental agencies through out the Midwest, Canada, and eastern United States. MPEX has a professional staff of power traders and marketers that operates around the clock, 365 days a year.  MPEX capitalizes on more than 25 years experience in wholesale energy trading and marketing while meeting the customized electricity needs of industrial and large commercial customers. Minnesota Power has developed a reputation for reliability, integrity, and product innovation. Among our credits are energy swap service, banked energy, brokered energy, and capacity for energy trades. Minnesota Power also recently began detailing its wheeling charges in several categories:  generation, transmission, distribution, and ancillary charges.”  Remember, this was published prior to summer 1997, two years before to the Milwaukee Business Journal mentioning betting on Arrowhead-Weston as a “sure-thing”.  And easily two years before WPS and MP would tell you this lines use for bulk power transfer was just not there.  It continues to be the saga of the ATC and like the song, “that’s my story and I’m sticking to it.”

            The beginning of the courtship between MP is further reflected in the same MPEX Connections. “As one of the Upper Midwest’s utilities with a transmission tie line to Manitoba Hydro, Minnesota Power occupies an important and unique position in the market place. The Manitoba Hydro situation is a good example of how MPEX can provide the technical service and product solutions that meet a customer’s needs, strengthening the ties between organizations,” said MPEX Vice President, Bob Basara.”

Later, Manitoba Hydro’s “Insights”, February 1998 relates the newly found "“power trading agreement signed with Minnesota Power.”  This marketing agreement is also listed in the 1999 Security and Exchange (SEC) filings of Minnesota Power.  Greater reference is made in MPEX Connection, Spring of 1998. “ Minnesota Power, Manitoba Hydro establish power trading agreement and midwest marketing alliance.  In mid-January Minnesota Power (MP) and Manitoba Hydro announced the signing of a memorandum of understanding that establishes an alliance whereby the two utilities will market electric energy for the Midwest including, but not limited to, the states of Wisconsin, Michigan and Illinois. A significant portion of the energy is expected to come from Manitoba Hydro through its ability to generate renewable electric power from waters flowing northward to Hudson Bay. “This alliance allows Manitoba Hydro to further strengthen its ties in the U.S. and affirms our confidence in working with Minnesota Power,” said Bob Brennan, president and chief executive officer of the Winnipeg-based utility. The understanding provides that the two northern tier utilities, both of which generate some of the lowest cost

energy in the region, will jointly market electric power throughout the central United States.

“The agreement means that Minnesota Power and Manitoba Hydro together will play an even larger role in helping resolve present and future electric energy supply challenges facing the region,” said Bob Edwards, president of Minnesota Power Electric. The memorandum is the second initiative designed to further strengthen the two companies’ international relationship. Under terms of a wholesale bulk power trading agreement announced in December, MPEX is

now providing Manitoba Hydro with hourly power trading and energy scheduling services in the United States and Canada.”[1]

            February 24, 1998, The  Standing Committee on Public Utilities and Natural Resources met.  Matters Under Discussion brought forth more information about the MP-MH connection.  According to transcript of the meeting, Manitoba Hydro President and CEO, Robert Brennan, was questioned about implications of Bill 55, regarding more international agreements, specifically questioning the then recent joint venture with Minnesota Power.  He was asked if there were further negotiations or other ventures that Manitoba Hydro was investigating.  Mr. Brennan stated “ Yes, we would very, very much like to get into the eastern part of Wisconsin.  There are transmission limitations right now for us to do that, and we are entered in alliance with

Minnesota Power which we are quite happy with.  They are really good people to work with, and we are talking about a transmission line being built from Duluth right down into the southeastern part of Wisconsin, and part of that will be Manitoba Hydro, should the opportunity arise, supplying additional firm power down in that area.  We are also talking to other utilities about opportunities to get into more expensive or more costly areas, if you will, where we would be able to sell power at higher rates.  In most cases that requires additional transmission, and that is why alliances are so important to us.”

 Later that year, November 18, 1998 MP applied to the Office of Fossil Energy (FE) of the Department of Energy (DOE) applied “for authorization to transmit electric energy to Canada.”  Authorization was granted in Order No. EA-196, issued on February 11, 1999.  Authorization was effective for two years; renewal to be made six months prior to expiration.  April 20, 1998, WPS and MP entered into an agreement for short term market tariff sales.  Part of this contracts language has language referring to Purchaser’s (MPEX is the signatory) obligations to purchase the full amount of contracted energy.  Questions which cannot be answered by the document include where the energy was headed, possibly Canada or points beyond?  Hard to say.  But our bottom line here is WPS shedding excess energy about nine months before we all begin the dog and pony saga “the lights are going out.”  This is during the same time period that Wisconsin Reliability Assessment Organization (WRAO) meetings are being held, meetings that would later endorse Arrowhead-Weston after these same two utilities indicate a willingness to construct the project. 

Modeling studies for the data that would become the basis of these reports began early in 1998.[2]  Minnesota and Manitoba were to come to the table together, as this report also states “Further cognizant of the need to coordinate with and solicit transmission planning expertise form those external regions affected by the study, the eastern Wisconsin transmission providers requested and obtained participation from utilities in Manitoba, Minnesota, Iowa and Illinois.”

The Mid America Power Providers (MAPP) Transmission Planning Subcommittee (TPSC) writes into the WRAO stakeholders comments interestingly enough on Manitoba Hydro stationary.  Not only do they endorse Arrowhead-Weston, they think with the same future vision of the ATC, “The TPSC agrees that this proposed interconnection will provide a significant improvement in the transmission reliability of the MAPP and eastern Wisconsin regions and will provide a suitable building block for future transmission enhancements.” [3] (Emphasis mine.)  Again, this written by MAPP, with an MH letterhead, all return addresses, email response directed to Manitoba Hydro, looking for more highways to carry their goods to Wisconsin and of course beyond.

In Summer, 1999, again the tie to MH was mentioned “Minnesota Power’s native generation portfolio includes considerable hydroelectric assets and a peaking plan powered by wood waste.”

Later, MPEX would enter into another partnership called Split Rock Energy.  Summer 2000’s MPEX Connections stated “Split Rock Energy  LLC ( Split Rock ) was conceived by Great River Energy (GRE) and Minnesota Power Electric (MPE) last year as a mutually beneficial business alliance.  GRE is a coalition of Minnesota Co-operatives. The partners anticipate benefits in such areas as risk management economic commitment and dispatch of generating and purchased power resources.  Also expected are advantages related to shared load and capability responsibilities under the Mid-Continent Area Power Pool (MAPP) along MPEX's involvement in wholesale power marketing and brokering for Split  Rock partners.

February 28, 2001 Gary Doer, premiere of Manitoba is a guest on CJOB Radio’s Larry Updike Show.  The discussion turns to unpaid bills to Hydro from First Nation communities.  Doer  states: “Well, we’re in a  major legal and political fight with Cross Lake[4] , and this is part of it.  Cross Lake has been opposing Manitoba’s export of electricity to Minnesota, and ultimately to a transmission line that we’re lobbying to build in Wisconsin”.  SOUL board member Bob Ringstad questioned the ATC as recently as their October 16, 2002 planning meeting in Rhinelander, Wisconsin about their knowledge of this statement, and if they could please explain which line.  While the presenters searched for an answer to the question, denying any knowledge of any connection between Arrowhead-Weston and lobbying by Manitoba Hydro, another ATC employee tried to suggest possibly they were talking about Chisago-Apple River.  (That particular transmission line was argued by the applicant, NSP, to be a line for local load serving to northern Wisconsin communities.)  Seems several  earlier discussions with Mark Williamson, he has indicated that any connection to Manitoba Hydro was “Excel Energy’s problem”.  But as we have known, and can document through MP’s own literature, they are in a partnership to market Manitoba Hydro.

 Summer 2001 saw a change in the relationship between MPEX and MH.  According to MPEX Connections, Summer 2001:

“In 1997, the two companies began to explore Manitoba Hydro's needs and what Minnesota Power could do to help. The result, in February 1998, was a three-year customized contract in which Minnesota Power provided Manitoba Hydro with hourly power trading and energy-g services in the United States and Canada. The exclusive agreement permitted MPEX to act on behalf of Manitoba Hydro. “By contracting with MPEX for three years to provide these services, Manitoba Hydro was able to monitor what was happening in the wholesale marketplace and determine what the best strategy was for Manitoba Hydro," said David Cormie, manager, Energy Supply and Sales at Manitoba Hydro. "Manitoba Hydro thanks MPEX for the excellent job."

Has the relationship ended?  One would think not.  Remember, spending $800 million to lobby is no drop in the hat, even for a Provincial Utility.  The memorandum of understanding in 1999, as an alliance to market power by both of the utilities.  And then there is that new fangled term, “coopetition”, where Minnesota Power and Manitoba Hydro “get a bigger piece of the pie-not by taking a share from a competitor, but by making the pie bigger”.  Those slices will be delivered to customers in the mid-west all the way to the east coast, with delivery facilitated, through the ability to move more Canadian[5]  power on that highway proposed as Arrowhead-Weston. 

 

(Note:  Another article will trace Rainy River Energy Corp, the generation arm of Minnesota Power.  For more information on Split Rock Energy, or to view MPEX Connection archives in their entirety please log on to:  www.splitrockenergy.com).

 

Linda Ceylor