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MDU customers won’t see rates increase for turbine project, unless earnings are low

BISMARCK — Customers of Montana-Dakota Utilities won’t pay more for a new natural gas-fired turbine in Mandan unless the company’s earnings fail to meet projections, according to a settlement agreement approved Wednesday with the North Dakota Public Service Commission.

The company had originally sought a $3.62-per-month increase in the average residential customer’s bill to recover costs associated with the new 88-megawatt combustion turbine generator known as Heskett III.

The request was reduced to a rate hike of $2.57 per month after the company removed proposed costs associated with a new natural gas pipeline built to provide fuel for Heskett III.

The final agreement approved Wednesday includes no rate increase, as MDU is going to cover the cost with existing revenues “if possible,” Public Service Commissioner Julie Fedorchak said. The agreement allows MDU to seek a rate increase later if current and projected earnings for 2014 are expected to be below a 10.75 percent return on equity. Customers would see that rate increase in the form of a fixed charge.

If MDU’s 2014 earnings exceed 10.75 percent, the agreement requires that the company refund customers 50 percent of the excess earnings.

“It’s a great deal for customers at this point,” Fedorchak said. “We don’t expect that they will be asked to pay more for this new generation resource that they have.”

The Heskett III project came in 11 percent under budget at $76 million, and the turbine is now up and running, Fedorchak said.

As of April, MDU was serving 99,000 natural gas customers in 76 communities in North Dakota, including Bismarck, Devils Lake, Dickinson, James- town, Minot, Valley City and Williston. About 87 percent of those were residential customers.

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