Minnesota PUC approves Minnesota Power’s resource plan

The Minnesota Public Utilities Commission on Nov 12 issued a final order approving the latest resource plan for Minnesota Power, which includes a sharp reduction in the utility’s coal-fired capacity.

The company generates a majority of its electricity from coal-fired plants at the Boswell, Laskin, and Taconite Harbor facilities. Roughly 80% of Minnesota Power’s electricity is coal generated, down from 95% in 2006.

The commission verbally approved the resource plan on Sept. 25, with the final written order coming out on Nov. 12.

When the commission accepted Minnesota Power’s last resource plan, it directed the company to study diversifying the sources of electricity relied upon for its baseload demand. Upon completion of the study, and in light of the study’s results, the commission directed that Minnesota Power address the following items in its next resource plan filing:

  • A proposal to address the viability of Laskin Units 1 and 2, and Taconite Harbor Unit 3.
  • An evaluation of the consequences – including all relevant costs and the consequences for transmission adequacy – of retiring Boswell Units 1 and 2 by 2020.
  • Scenarios that add 100 to 200 MW of wind capacity in the 2014-2016 time frame.
  • Scenarios that add 400 to 600 MW of natural gas capacity in the 2014-2016 time frame.

In response, Minnesota Power proposed converting Units 1 and 2 (100 MW total) at Laskin to gas peaking facilities, retiring Unit 3 (75 MW) at Taconite Harbor, and adding wind and natural gas capacity in the 2014–2016 time frame. The company said that its plan specifically addresses the requirements set forth in the commission’s September 2012 order accepting the company’s baseload diversification study.

Minnesota Power contended that its plan reflects the company’s aim to shift from primarily coal-based generation to a more diverse and flexible portfolio of generation resources. Minnesota Power said it is aiming for an energy mix of approximately one-third renewable resources, one-third natural gas/other and one-third coal over the long term.

“The Commission will approve Minnesota Power’s 2013–2027 resource plan, including its plan to convert Laskin units 1 and 2 to operate on natural gas, and to retire Taconite Harbor unit 3, by 2015,” said the Nov. 12 order. “The Commission agrees with the [state Department of Commerce] that the Company’s proposed near-term plan to obtain 200 MW of intermediate capacity and energy through bilateral contracts, assuming they are cost effective, is appropriate to address Minnesota Power’s system needs over the next five years.”

CO2 penalty to be used in next resource planning case

The commission said it disagrees with Minnesota Power and the Large Power Intervenors concerning the role of anticipated future costs of CO2 regulation in resource acquisition modeling. The commission will require Minnesota Power, in its next resource plan, to include in its modeling base case assumptions the midpoint of the commission’s CO2 cost range (currently $21.50/ton). This requirement is consistent with the statutory requirement to use the commission-established estimated likely cost of future carbon dioxide regulation in resource plan proceedings.

The CO2 cost range reflects a financial risk relevant to the development of long-term resource plans, the commission noted. Requiring a specific CO2 cost assumption in a utility’s base case does not exclude consideration of scenarios that reflect different possible future CO2 costs, and the commission said it determines the weight of scenarios as appropriate on a case-by-case basis.

The commission will also require the company’s next resource plan to include an analysis of the effects of retiring the remaining Taconite Harbor units. The commission agrees with the Department’s analysis and conclusion that the most reasonable plan does not require that Taconite Harbor Units 1 and 2 be retired at this time. However, the commission said it recognizes that in a number of possible future scenarios, retiring those units is likely to be part of a least-cost plan.

If Minnesota Power pursues refueling Laskin Units 1 and 2 to operate on natural gas, or removing Taconite Harbor Unit 3 from Minnesota Power’s system, then, within nine months of the date of this Nov. 12 order, Minnesota Power needs to file updated project costs and associated schedules.

Minnesota Power needs to obtain about 200 MW, subject to need, of intermediate capacity (and associated energy) in the 2015–2017 timeframe by constructing the resource itself, by sharing in the ownership of the resource, or by procuring the resource through bilateral contracts, whichever option is most cost-effective, the commission said.

On or before Sept. 1, 2015, Minnesota Power must make its next resource plan filing.

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.