Adopting a Resolution authorizing the Transaction Confirmation for Secondary Firm Natural Gas Supply for the future Mount Simon generating facility, and recommend that the Rochester City Council authorize the contract to be entered into by the City of Rochester, acting through and by Rochester Public Utilities, with Constellation NewEnergy – Gas Division, LLC.

Mt. Simon Station Natural Gas Supply Planning

This agreement and strategic positioning were presented to the RPU Board at the August 25 Board meeting with anticipated approval at the September 29 meeting. Staff has been working with Constellation Energy to evaluate and secure an appropriate natural gas supply arrangement for the future facility. Establishing a dependable fuel supply is an important component of project development as the type and firmness of gas supply can affect the station’s expected availability, operating flexibility, cost structure, and capacity value.

Similar to the Secondary Firm Supply Agreement executed in 2025 for the Westside Station, this agreement will ensure best efforts by Constellation Energy to secure gas supply even during times of very high system use. 

The subject transaction confirmation is a multi-year agreement, with a term that exceeds the period covered by the approved RPU budget. However, the agreement does not commit actual dollars until the utility requests and consumes the gas commodity. Because the term extends beyond the Board’s budget authority, the RPU Board must approve then request recommendation of the City Council for signature.

Staff has engaged with MCPA and the Minnesota Public Utilities Commission (PUC), and presented information about Mt Simon Station at multiple Public Utilities Board and City Council meetings. The project has been awarded a generation interconnection agreement, and reviewed and approved by the Federal Energy Regulatory Commission (FERC) with MISO.  Staff is currently addressing the Determination of Applicability for Mount Simon in regards to a Large Energy Facility with the MN PUC.

This agreement should have no fiscal impact on RPU.  Any costs of fuel are recoverable through MISO market operations.

Alternatives Considered

1. Delay until closer to operations.  Staff has considered waiting to contract until operations of the plant were closer. However, significant contracting must be done with the local distribution company (MERC) to ensure sufficient distribution level capacity.  It is recommended that this work be done well ahead of system startup to ensure the facility has gas supply ready when needed.  If distribution level upgrades are needed to accommodate the additional load of Mt Simon to the Westside gas distribution system, those upgrades need to be defined or ruled out well ahead of plant commissioning.

It should also be noted that unlike Westside Energy Station, Mt Simon Station is a dual fuel facility that can switch to fuel oil if natural gas is not available.  Not only is fuel oil higher priced than natural gas generally, it also reduces conversion efficiency and increases maintenance costs, so when available, natural gas is the preferred fuel.