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Otter Tail Power faces profits probe

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Morris Sun Tribune
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Morris Minnesota 607 Pacific Avenue 56267

By Patrick Springer

Forum Communications

Officials from two state agencies are urging an independent investigation to determine whether Otter Tail Power Co. failed to pass along profits from wholesale power sales to its Minnesota electricity customers.

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Otter Tail Power serves Morris and a large surrounding area. Based in Fergus Falls, the company serves almost 130,000 customers in a 50,000 square mile area that is roughly the size of Wisconsin, according to its Web site.

The recommendations, made in filings with the Minnesota Public Utilities Commission, came in response to an anonymous letter contending that Otter Tail Power provided misleading information to regulators.

If substantiated, the allegations would mean Otter Tail Power retail electricity customers are being improperly charged for costs associated with wholesale power sales, or sharing in the profits.

Otter Tail Power denies the allegations, and maintains that it accurately reports its costs and profits from wholesale electricity sales, which are subject to layers of audits.

But an assistant Minnesota attorney general, in a strongly worded recommendation for outside investigative eyes, accused Otter Tail Power of not being forthcoming in providing information.

Ronald Giteck of the Minnesota attorney general's office wrote that Otter Tail Power's "records of its operations are not transparent" and attempts to understand its "operations and accounting are met with great resistance."

Giteck complained that Otter Tail Power was not helpful in providing information in a rate case now pending before the Minnesota Public Utilities Commission.

"When data is ultimately divulged, it often demonstrates misleading and inaccurate regulatory reporting of operations," the assistant attorney general wrote.

The state Department of Commerce also called for an independent investigation, noting that accurate information is essential in determining fair rates for the utility's 60,700 Minnesota consumers.

"Thus, again, it is necessary to have accurate data to ensure that rates charged to ratepayers are reasonable," the Department of Commerce wrote.

Cris Kling, an Otter Tail Power spokeswoman, said Wednesday that the utility has provided all information allowed by an administrative law judge in its current rate case, which involves a thorough review of its costs and revenues.

In some instances, when information was protected by attorney-client privilege, the administrative law judge allowed Otter Tail Power to provide summaries. "So that's what we did," Kling said.

All issues raised about the proper costs and revenues associated with sales of wholesale power have been "analyzed and resolved or referred to the rate case," she said.

"I would take issue with being characterized the way he's characterizing us here," Kling added.

Giteck was not available for comment.

Two years ago, Commerce officials investigated to determine whether customers were supplied with the lowest available power, after utility bills spiked, and found Otter Tail Power had acted properly, Kling said. In that inquiry, officials inspected hourly transactions, records called into question by the anonymous letter, dated April 5 and postmarked St. Cloud.

The anonymous letter contends that hourly schedules for the wholesale marketing department "remain a mystery," off limits to other departments, including accounting and regulatory services.

"The end result is that federal and state reports submitted by those departments can't be reconciled with the wholesale power marketing department's records," the letter said in part.

That, in turn, raises questions about the accuracy and completeness of information reported to state and federal regulatory agencies, the letter said.

In a written response, Otter Tail Power contended that it has procedures in place to ensure costs are properly tracked and allocated, and listed at least seven audits or reports, none of which it said found failures in reconciling reported figures.

"There's no mystery about the hourly information and we certainly can reconcile the records," Kling said.

The recommendations for an independent audit have yet to be taken up by the Minnesota Public Utilities Commission, which must rule on Otter Tail Power's rate case by Aug. 1.

"The next step is for the commission to make a decision to go forward," Janet Gonzalez, the Minnesota Public Utilities Commission's energy unit manager.

Options could include ordering the independent investigation, as recommended, or making it part of the pending rate case, if commissioners conclude the allegations should be examined, she said.

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