Minnesota commission approves Dairyland’s latest IRP

The Minnesota Public Utilities Commission in an order issued Oct. 24 accepted the 2011-2026 integrated resource plan of Dairyland Power Cooperative and ruled that the relatively new Weston Unit 4 coal facility is not covered by a state CO2 rule.

In September 2011, Dairyland filed its 2011-2026 IRP and then filed a revised plan on Oct. 5. Intervenors in the case included the Minnesota Department of Commerce (the Department) and, as a group, the Izaak Walton League of America–Midwest Office, Fresh Energy and the Minnesota Center for Environmental Advocacy (called the Environmental Intervenors).

In the Oct. 24 order, the commission did the following:

  • Accepted Dairyland’s resource plan as updated – including Dairyland’s energy and peak demand forecasts – for planning purposes.
  • Established filing requirements for Dairyland’s next resource plan.
  • Found that a Minnesota statute which regulates CO2 emissions from “new large energy facilities” does not apply to Dairyland’s Weston Unit 4. The commission said it concurs with Dairyland and the Department that the Weston 4 facility is exempt from the CO2 statute. Dairyland, a Wisconsin-based utility, built Weston 4 in Wisconsin; consequently the Minnesota commission said it never had cause to consider Weston 4 for a certificate of need or site permit. But in January 2005, Dairyland filed its 2004-2019 resource plan which included a proposal to acquire a 150 MW interest in Weston 4 to begin operations in 2008. The commission considered and ultimately accepted that plan.

Dairyland operates power plants and transmission lines to provide electricity to 25 electric cooperatives and 16 municipal utilities in the northern Midwest. While more than 80% of Dairyland’s customers are outside the state of Minnesota, Dairyland sells roughly 16% of its electricity within Minnesota.

Dairyland’s resource plan begins with a forecast of the amount of energy required to serve its customers, and of the maximum capacity required to meet customers’ demands. Dairyland served a peak demand of 962 MW in July 2011, and forecasts that customer demand will increase by an average of 9-10 MW per year throughout the IRP planning horizon to 2026.

On the supply side, Dairyland has 1,167 MW of capacity. Dairyland’s generation includes: Alma, a 210-MW coal-fired baseload plant; John P. Madgett, a 400-MW coal-fired baseload plant; Genoa Unit 3, about a 50% share of a 380-MW coal-fired baseload unit; Weston Unit 4, about a 165-MW share of a coal-fired baseload unit; and Elk Mound Station. In addition, it has numerous diesel, landfill gas, hydro, wind, and biomass facilities smaller than 50 MW in its supply portfolio.

To comply with an anticipated renewable energy requirement from the state of Wisconsin, Dairyland proposed to add more generating capacity powered by renewable sources of energy. Dairyland’s existing generating capacity plus its anticipated new generating capacity would permit Dairyland to meet forecasted customer demand throughout the 15-year planning horizon. But Dairyland stated that if Wisconsin does not adopt new legislation requiring additional electricity from renewable sources, Dairyland would postpone or cancel its plans to acquire additional sources of electricity.

Having reviewed Dairyland’s proposed resource plan, the Department offered several recommendations.

  • Weston 4: The Department recommended that the commission find that Weston 4 is not subject to the CO2 limits arising from the statute.
  • Forecasts: The Department found that Dairyland has adequately forecast the amount of energy required to serve its customers, and the maximum capacity required to meet customers’ demands. Consequently the Department recommended that the commission accept these forecasts for planning purposes.
  • Public policy goals: The Department found that Dairyland will achieve various public policy goals established in law. For example, it found that Dairyland will have sufficient electricity from renewable sources to meet its legal obligations arising from Minnesota’s Renewable Energy Standards/Renewable Energy Objectives, and from analogous policies from other states.
  • Plan adequacy: Ultimately, the Department did not recommend that the commission approve Dairyland’s resource plan. Whatever the merits of that plan when filed, the Department said circumstances have changed since then. In particular, it has learned that Dairyland canceled its plan to acquire more electricity from renewable sources, and has decided to discontinue burning coal at Alma’s three oldest generators – Units 1-3. When Dairyland’s Load and Capability table in the IRP was modified to reflect these changes, the Department concluded that Dairyland’s plan would no longer provide the cooperative with sufficient resources to reliably meet its customers’ needs.

Department said too much MISO dependence not a good idea

While Dairyland proposed to compensate by relying on the Midwest ISO electricity markets to meet any shortfalls, the Department questioned the wisdom of this approach. The Department argued that MISO’s wholesale market can change more rapidly than a utility can build supply-side or demand-side resources, given that even small generators can require more than a year to build.

“Moreover, MISO markets already show signs of stress,” the Oct. 24 decision said. “The Department states that demand for power on the MISO grid set a new record in the summer of 2012, notwithstanding the current slow economy. And MISO’s current excess capacity is not evenly distributed throughout the MISO area. The high market price for electricity in Wisconsin and Minnesota indicates that the region is already experiencing a tight market for generation and transmission, the Department argues. Dairyland’s proposal to rely on MISO electricity markets to meet forecasted demand would exacerbate this situation, resulting in increased costs and decreased reliability for Dairyland’s customers and its neighbors. Consequently the Department recommended that the Commission reject Dairyland’s resource plan, or defer action on the plan pending the filing of additional information.”

Throughout its comments, the Department sought more information from Dairyland regarding how changed circumstances would alter Dairyland’s resource strategies. The Department seeks information regarding Dairyland’s best estimate of its future renewable resources. The Department wanted information regarding the effects of Dairyland’s decision to discontinue its coal-fired Alma Units 1-3, which total about 60 MW. And the Department sought information regarding the new resources Dairyland plans to acquire to meet its customer demand now that Dairyland has deferred any concrete plans to build a new renewable generator, and is no longer operating the coal-powered generators at Alma Station Units 1-3.

“Notwithstanding these substantive concerns, the chief point of dispute between Dairyland and the Department is procedural: Dairyland objects to revising its entire resource plan to reflect changes that arose since the plan was filed and accepted as complete,” the commission wrote. “Dairyland proposes to address the changed circumstances in its next resource filing this summer, and generally to rely on MISO wholesale markets to address any resource shortfalls that arise in the meantime. While the parties continue to disagree about process, they have grown closer in principle. Dairyland now acknowledges that relying on short term market purchases of capacity is not a viable long-range plan. And the Department acknowledges that it may be appropriate for Dairyland to rely on the wholesale markets in the short term.”

The commission said it concurs with the Department that Dairyland must further develop its plans for coping with its decision to discontinue the use of Alma Units 1-3, and the decision to defer construction of its new generator. Given the proximity of Dairyland’s next resource filing, however, the commission concluded that the better forum to pursue this additional information and analysis is not the current resource plan docket, but the next one.

“Having reviewed the record of the proceeding and the comments of the parties, the Commission will accept Dairyland’s energy and peak demand forecasts for planning purposes,” it ruled. “And the Commission will accept Dairyland’s resource plan as filed and currently updated, including updates to its Load & Capability table and explanations of future resource acquisition plans. But this finding of acceptance does not imply Commission acceptance of any generation projects that are currently under review in other proceedings or that may be subject to review in future proceedings.”

Finally, the commission directed Dairyland to include the following information with its next resource filing:

  • Dairyland’s best estimate of its future renewable resources;
  • The effects of Dairyland’s decision to discontinue at Alma Units 1-3.
  • Dairyland’s proposed capacity resources – for example, firm capacity purchases or proposed new generation resources – to: replace the capacity at Alma Units 1-3; ensure reliable service to its members; and avoid undue strains on MISO wholesale markets.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.