News Column

Alliant Energy Selling Minnesota Operations

September 5, 2013

Alliant Energy announced agreements late Tuesday afternoon to sell its Minnesota electric and natural gas distribution businesses for $128 million.

Its electrical business will be sold to Southern Minnesota Energy Cooperative, which is comprised of a dozen electrical cooperatives including Nobles Cooperative Electric and Federated Rural Electric. Alliant's natural gas business will be sold to Minnesota Energy Resources Corp. (MERC)

A Nobles Cooperative Electric press release issued Tuesday stated a definitive agreement has been reached to acquire Alliant Energy's territory in southern Minnesota, with the transaction contingent upon regulatory approval. If granted, is deal is expected to close in six to 12 months.

For Nobles Cooperative Electric, the combined territory would serve approximately 6,800 member accounts; Federated Rural Electric would serve 6,700 member accounts. The acquisition will add approximately 43,000 electric accounts to the 12 SMEC member cooperatives combined.

"This acquisition will give SMEC's 12 member cooperatives new economies of scale to spread our fixed costs over more member-owners," said Rick Burud, general manager of Federated and Nobles, in the press release. "Keeping rates stable is more challenging these days with the cost of environmental compliance, integrating renewables, declining energy sales and general inflation affecting our rates. This acquisition is the single biggest positive action we can take to offset a portion of these cost pressures."

The service territories of Alliant Energy and the 12 cooperatives overlap, serving mostly rural areas of southern Minnesota. Alliant Energy will continue to serve Minnesota through a 10-year wholesale power agreement with SMEC.

The 12 SMEC member cooperatives are BENCO Electric Cooperative, Brown County Rural Electrical Association, Federated Rural Electric, Freeborn-Mower Cooperative Services, Minnesota Valley Electric Cooperative, Nobles Cooperative Electric, People's Energy Cooperative, Redwood Electric Cooperative, Sioux Valley Energy, South Central Electric Association, Steele-Waseca Cooperative Electric and Tri-County Electric Cooperative.

"All 12 electric cooperatives have served southern Minnesota for more than 70 years," Burud said. "We look forward to extending our professional, high-quality service to the former Alliant Energy customers who will become our new member-owners."

All of the Alliant Energy electric employees will be offered positions with the local cooperative. Rates for electric cooperatives are set on a cost-of-service basis to provide the highest quality service at the lowest practical cost. Since the 12 participating cooperatives have slightly different rates, services, billing options and programs, each is committed to seeing that this transaction provides a long-term, economies-of-scale benefit to both current and new member-owners, according to the press release.

"Adding the Alliant Energy customers through this proposed acquisition of territory will grow and increase the efficiency of each cooperative," Burud said. "This once-in-a-lifetime opportunity helps all of us continue to provide our electric cooperative member-owners with high-quality service at a competitive cost."

If the acquisition is approved, Alliant Energy customers will become member-owners of one of the 12 electric cooperatives and have voting rights, board representation and the opportunity for patronage capital refunds -- the margins of a cooperative that are returned to member-owners over time.

The territory offered for sale by Alliant accounts for less than 4 percent of its overall customer base. Alliant Energy serves 43,000 electric customers and 10,600 natural gas customers spread over a footprint of nearly 15,000 square miles in southern Minnesota.

"Our Minnesota customers will be part of utilities with a significant, long-standing presence in the state," said Tom Aller, president of Alliant Energy's Minnesota and Iowa utility. "We would expect long-term customer benefits from the efficiencies achieved by combining our customer base with those of the purchasing utilities."

Alliant's deal with Minnesota Energy Resources would add 10,600 new customers to the MERC service area. Those customers all reside within 25 miles of existing MERC service territory.

"Our proximity to these communities makes this opportunity attractive to us," said MERC President Barbara Nick. "We also share Alliant Energy's commitment to safety, reliability and customer service, so customers will see a smooth transition."


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Source: (c)2013 The Daily Globe (Worthington, Minn.) Distributed by MCT Information Services


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