AWEA Blog - PTC, wind power bring cost savings to Iowa utility customers

The Mason City (Iowa) Globe-Gazette carried an editorial applauding new power agreements signed by Osage (Iowa) Municipal Utilities that will save that company's customers about $4 million over 20 years by tapping the electricity generated by a new North Dakota wind farm.

While the editorial does not mention the federal wind energy Production Tax Credit (PTC), the PTC has been instrumental in encouraging the development of the North Dakota wind farm project and many others like it, and can continue to do so if extended by legislation now pending in Congress.

According to the Globe-Gazette editorial: "Osage can and should serve as a model for other communities—now and in coming years—after striking a deal that taps the power of Mother Nature.

"Osage Municipal Utilities and power provider Dairyland Power of Wisconsin reached an agreement that will lower retail electric rates about 4.5 percent and is expected to serve as a hedge against future increases. The contract also allows OMU to contract with other providers. And now OMU has a new deal with the Rugby Wind generation facility in North Dakota ... Electricity from the new 149-megawatt Rugby farm will be fed into the Upper Midwest grid, lowering the price of electricity purchased from Dairyland ...

"The deal gets even better. Rugby is a subsidiary of major international power provider Iberdola. 'They will handle operations and maintenance responsibilities — so this is a win-win situation not only for expenses but as a hedge against higher rates in the future,' said Dennis Fannin, general manager of Osage Municipal Utilities." Fannin added that OMU now gets more than 30 percent of its electricity from wind.

The OMU deal underscores one of wind power's key advantages compared with other energy sources. With no fuel costs, wind energy contracts can "lock in" energy prices for a 20-year term or longer, similar to the stability that a long-term fixed-rate mortgage offers to homebuyers. When this happens, wind energy protects consumers from the fuel price volatility that must be passed on to consumers and is the largest source of electric rate increases.

A striking example of this occurred last year, when Xcel Energy, a large Midwestern utility secured a wind power purchase. In approving the contract, the Colorado Public Utilities Commission stated that “the contract will save ratepayers $100 million on a net-present-value basis over its 25-year term under a base-case natural gas price scenario” while providing the opportunity to lock in a price for 25 years.

The PTC provides an income tax credit of 2.2 cents per kilowatt-hour for the first 10 years of electricity production from utility-scale turbines. It is set to expire on Dec. 31 unless Congress extends it first. A recent study by Navigant Consulting found that extending the Production Tax Credit will allow the industry to grow to 100,000 jobs in just four years, while an expiration would kill 37,000 jobs within a year.

A House bill seeking to extend the PTC has 97 cosponsors, including 21 Republicans, while a Senate bill to extend it was introduced March 15 by seven Senators, including three Republicans. PTC extension efforts have received the endorsement of a broad coalition of more than 370 members, including the National Association of Manufacturers, the American Farm Bureau Federation, the Edison Electric Institute, and the Western Governors’ Association. A PTC extension also has the support of the U.S. Chamber of Commerce, the National Governors Association, and the bipartisan Governors’ Wind Energy Coalition, which includes 23 Republican and Democratic Governors from across the U.S. A PTC extension has been endorsed by a number of newspapers across the country, including the Houston Chronicle, The New York Times, the Denver Post, and the Daily Oklahoman.

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