Item 8.01 Other Events
Integrated Resource Plan
On March 31, 2023, Otter Tail Power Company (OTP), a wholly-owned subsidiary of Otter Tail Corporation, submitted a supplemental resource plan filing to the Minnesota Public Utilities Commission (MPUC), the North Dakota Public Service Commission (NDPSC), and the South Dakota Public Utility Commission (SDPUC). The supplemental filing updates OTP’s original 2022 Integrated Resource Plan (2022 IRP), which was filed on September 1, 2021. In the supplemental filing, OTP outlined its updated plan for meeting customers’ anticipated capacity and energy needs while maintaining system reliability and low electric service rates, in light of several changes that have occurred since the original filing, including significant winter and spring reserve planning margins adopted by the Midcontinent Independent Service Operator (MISO), tax credits made available for renewable energy projects under the Inflation Reduction Act, the enactment of the Clean Energy Bill in Minnesota, and recent volatility in energy and capacity markets.
The major requests in OTP's supplemental filing include:
–the addition of on-site liquified natural gas fuel storage at our Astoria Station natural gas plant in 2026;
–the addition of approximately 200 megawatts of solar generation in 2027-2028;
–undertaking the initial steps necessary to add approximately 200 megawatts of wind generation in 2029; and
–a withdrawal from our 35 percent ownership interest in Coyote Station, a jointly-owned coal-fired generation plant, in the event we are required to make a major, non-routine capital investment in the plant.
We are also planning to repower four of our existing wind facilities in 2024-2025.
Consistent with the original 2022 IRP, the supplemental filing proposes to, subject to regulatory approval, create a regulatory asset to recover costs related to any future withdrawal from Coyote Station, should such a withdrawal occur, including the net book value of the plant on the withdrawal date, anticipated decommissioning costs, and any costs incurred if a termination of the existing lignite sales agreement under which Coyote Station acquires all of its lignite coal fuel from a nearby mine is necessary. As part of its economic analysis, OTP developed an estimate of the reasonably foreseeable costs of withdrawing from Coyote Station, which was determined to be $68.5 million, assuming a withdrawal at the end of 2028. These costs may differ from actual results due to the uncertainty and timing of future events which could result in a withdrawal from Coyote Station.
Compared to the preferred plan outlined in our original 2022 IRP filing, our supplemental filing adds more renewable generation resources to our portfolio, and in light of new seasonal reserve margin requirements, updates the circumstances for the potential withdrawal from our ownership interest in Coyote Station.
Forward-looking Statements
Except for historical information contained here, the statements in this Current Report on Form 8-K are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “could,” “estimate,” “may,” “plan,” “should,” and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of management. Forward-looking statements made herein, which include future investments and capital expenditures, and expectations regarding regulatory proceedings, as well as other assumptions and statements, involve known and unknown risks and uncertainties that may cause our actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company’s risks and uncertainties include, among other things, long-term investment risk, seasonal weather patterns and extreme weather events, the impact of government legislation and regulation including foreign trade policy and environmental laws and regulations, the impact of climate change including compliance with legislative and regulatory changes to address climate change, operational and economic risks associated with our electric generating facilities, risks associated with energy markets, the availability and pricing of resource materials, and changing macroeconomic and industry conditions. These and other risks are more fully described in our filings with the Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information.
