An investor-owned power company in southern Minnesota won regulatory approval Thursday to sell its assets to 12 cooperative utilities in a $122 million deal. Felhaber Larson attorney Hap Levander represented the co-ops and helped them gain regulatory approval for the sale from the Minnesota Public Utilities Commission.
The deal, affecting electric customers in Albert Lea and other small cities long served by Interstate Power & Light (IPL), represents the closing of a historical loop. Early in the 20th century, many investor-owned utilities wired up towns and houses on the roads between towns, but not farms, which were too widely spaced.
“Our co-ops, 80 years ago, were formed primarily because we couldn’t get electric service extended into the rural areas,” said Brian Krambeer, CEO of Tri-County Electric Cooperative in Rushford and head of the co-op buyers group. “Today we’re actually having an opportunity to buy out the investor-owned utility that weaved through southern Minnesota.”
The Minnesota Public Utilities Commission approved the transaction 4-0, but will monitor a rate-moderation plan that bars any increase in former IPL customers’ basic distribution rates for three years, and limits increases to 5 percent per year for two more years. After that, the co-ops will set their own rates, as they are permitted to do under state law.
The Minnesota Chamber of Commerce and state attorney general’s office objected to IPL getting a profit on the sale, which was priced at nearly $17 million over the book value of the utility assets. IPL also will make higher returns on selling wholesale power to the co-ops. Regulators also expressed concern about future rate hikes for former IPL customers.
Hap LeVander noted, however, that co-op customers elect the boards that set rates, so they will have a say in future rates. Some co-ops already have rural and city rates to reflect the different costs of serving concentrated and dispersed customers.
“This was a golden opportunity to acquire a customer base that they wouldn’t be able to grow indigenously in their areas,” LeVander said of the co-ops’ motives.
Each co-op will absorb some IPL members, in numbers ranging from 800 to 15,000 per coop. Freeborn-Mower Cooperative Services will see more than a threefold increase in customers by adding 15,000 Albert Lea customers to its 6,100 existing customers.
The former IPL employees have not been forgotten. Jim Krueger, Freeborn-Mower’s CEO, said the co-op will hire 20 IPL employees, the largest share of any co-op. More than 20 other IPL employees are expected to be hired by other acquiring co-ops.