Nearly 250 people had the opportunity to listen to three different presentations on Wednesday, Jan. 24 for the second informational meeting regarding the City of Slayton’s electric utility municipalization effort. A question and answer session took place afterward.
Xcel Energy was up first. Four representatives were there, with John Marshall taking the lead. Marshall noted that Xcel is headquartered in Minnesota and serves eight states, including smaller areas of Michigan, Wisconsin, New Mexico and Texas. “We’re the largest electric in Minnesota,” he said. “We’re also the largest in North Dakota, South Dakota and Colorado.”
Marshall added that Xcel has served the Slayton area for “many, many decades” and that they “really appreciate you as customers.” He said they feel like they are doing a good job but always welcome opportunities like this to hear from their customers on how they can improve on things. “We don’t want to sell,” Marshall said. “We appreciate being your energy provider. And we have infrastructure investments we’re making down here, making sure we’re doing right by Slayton.”
A $17 million project includes rebuilding 46 miles of transmission line that serves Slayton and the surrounding areas. Xcel also plans to install hundreds of new power poles and upgrade existing powerlines to help improve reliability.
In conducting a Municipal Electric Utility Feasibility Study, Dave Berg, a consultant for the City of Slayton, found tangible evidence that Xcel’s service in the Slayton area appears well below average. “Slayton experiences almost twice as many outages as other rural service areas,” Berg said. “Xcel’s response time to outages is almost twice as long for Slayton compared to state average.”
Not having a full-service local operations/maintenance shop within the city of Slayton might be why the response time is slower, Berg suggested. Nobles Cooperative Electric does have a substation in town. In their presentation, Nobles manager Adam Trombley said 10 of their 25 employees live in the Slayton/Murray County area and that 13 kids are in the local school district. Three of the employees are Slayton firefighters. “We’re right here in the community,” he said.
Trombley noted that Nobles is run by a seven-person board of directors. They serve three-year terms and are elected by the membership. The member owned and operated company is also not for profit. “We do have a margin to work, through, but when we do make excess margin, we return those in the form of capital or credits to the members, so we don’t have a profit motive,” Trombley said.
Nobles Cooperative Electric also gives back in the way of community service and involvement. Some of the ways include scholarships, youth tours, job shadowing, career fair participation, conservation and electrical safety program, adopt-a-highway, fair participation, sponsorships, October Grab-N-Go meals and Operation Roundup. Another program, called K-12, involves buying coats, hats, mittens and snowpants for children who need them. “We get to give out hundreds of coats to the kids in all the communities each year, so it’s a really cool thing,” Trombley said.
The way Nobles would work with the City of Slayton was explained by Trombley. It includes three parts, thus Nobles has offered them three different contracts. Through an Operation and Maintenance Agreement, Nobles would provide the service but also handle all outage restorations, perform preventative maintenance and repairs deemed appropriate and perform or assist in all customer service upgrades and changes. “We have the equipment, we have the trucks, we have the men, we have the transformers, we have the wire and everything needed right here to do it,” Trombley said.
With five full-time linemen in the area, Trombley said the response time for outages would be pretty short. He noted that you would talk to a real person every time you call, even after hours.
The second contract would be a Power Supply Agreement. “We buy most of our power through Great River Energy,” Trombley said. “The Cooperative will purchase power for resale to the city.” He then clarified some things about Xcel’s transmission system, specifically from Tracy to Woodstock. “Nobles Electric has more substations on the Xcel line than Xcel does,” he said. “(But) we rely heavily on them. They’ve done a very good job of upgrading that the last few years. But the city is looking to buy the distribution system, not the transmission system.”
The third contract involves a Billing and Collections Agreement. Nobles employee Cody Hansen, who is also a Slayton fireman, shared that they would read meters, calculate and send out bills in addition to answer questions about billing, handle collections and follow the policies for handling disconnections/reconnections. The automated meter infrastructure (AMI) includes sensors that will alert them if there is a power outage.
Berg’s presentation showed a chart in which average rates for area utilities were compared using publicly available data. Xcel was on the high end with 16.19 (cents per kilowatt hour). He also pointed out that Nobles was at 12.0. Berg also shared that a financial analysis revealed that a Slayton MEU versus Xcel resulted in a savings of $915,469 for the first year. On Year 10, the savings is estimated to be more than $1.2 million. “That’s a million dollars (each year) that the citizens of Slayton can spend another way rather than paying their Xcel bill,” Berg said. “It’s literally a million dollar economic development for the area.”
Berg explained how he got to those numbers. It was $2.2 million for the distribution system plus improvements and another $2 million for start-up costs. Some of the start-up costs include attorney, consultant and regulatory fees, first-year labor costs, spare equipment expenses and working capital. Power supply and delivery is nearly $1.9 million of the 2024 estimated operating cost, with total expenses of just over $2.6 million. “Your biggest expense as a utility is the power that you’re delivering,” he said. “The bottom line is that we take all of the costs and divide by the sales of just under $24 million and we get an average rate for the municipal utility of 12.1 cents.”
Some in attendance took the opportunity to ask questions. Brad Bergerson asked about capital dividends, while Teri Hurd asked if Slayton residents would get new meters (they would). Mike LeTendre questioned Xcel about the potential of having even less local presence once one of their employees retires. Marshall said they didn’t have any plans to change anything but that they’d continue providing the best service they can.
Marshall asked Berg how common municipalization is in his experience. Berg, a consultant in Minnesota for 37 years, said it was incredibly uncommon. “If Slayton does a new municipal electric utility, it’ll be the first new municipal electric utility in the state of Minnesota in as long as I’ve been here,” Berg said.
City Administrator Josh Malchow said it was scary to think about being the first one in decades to do this when discussions began two-and-a-half years ago but that now that fear has turned to excitement because of the potential to offer good service for a lower rate to people in the community. “It is precedent setting in a way, but the council and I are very OK with that,” he said.
Councilman Blake Heronimus reminded everyone that they could still walk away from the venture at any point if they find out it’s not self-sustaining.
