Industrial group wants more info on Minnesota Power RFP for new gas-fired power

A group of major industrial power customers of Minnesota Power called the Large Power Intervenors (LPI) filed a Jan. 4 protest at the Minnesota Public Utilities Commission related to the utility’s resource planning, including the issuance last fall of an unpublicized request for proposals (RFP) for 400 MW of new gas-fired capacity.

The LPI group consists of: ArcelorMittal USA (Minorca Mine); Blandin Paper; Boise Paper; Enbridge Energy LP; Hibbing Taconite; Mesabi Nugget Delaware LLC; PolyMet Mining; Sappi Cloquet LLC; USG Interiors LLC; United States Steel (Keewatin Taconite and Minntac Mine); United Taconite LLC; and Verso Corp. Their Jan. 4 filing relates to Minnesota Power’s application for approval of its 2015-2029 integrated resource plan (the “Resource Plan”), which was filed with the commission last Sept. 1.

The LPI members said that Minnestoa Power’s rates for industrial customers have jumped in recent years and may rise even more due to the utility’s ongoing resource planning. These increases could be compounded by a “premature” commitment to new generation, for which there is an unproven need, they said. In particular, Minnesota Power notes as part of its short-term action plan that it requests approval to “Begin competitive procurement process for 200 MW-300 MW of efficient natural gas CC generation supply for implementation by 2024.”

Generally speaking, the integrated resource planning process is designed to review the size, type, and timing of future generating needs. Minnesota Power’s request is therefore within the purview of the resource planning process, albeit a bit early given the fact that it should not take 7-8 years to construct a combined cycle facility, LPI said.

In any event, LPI pointed out that Minnesota Power has decided to proceed without commission approval on beginning the competitive procurement process for natural gas generation. Last Oct. 15, Minnesota Power issued an RFP for up to 400 MW of capacity and energy beginning in the 2022 to 2024 timeframe. “To LPI’s knowledge, no formal press release was issued by Minnesota Power regarding this RFP,” said the power customer group. “Instead, there is only mention of the RFP in very small font at the very bottom of its website. Yet Minnesota Power appears to be working closely with the City of Cohasset on what is referred to as the Itasca Energy Center (‘IEC’) project.”

LPI’s Jan. 4 filing has an embedded link to a Dec. 3 article in the Scenic Range NewsForum that reads in part: “The city of Cohasset has thrown its support behind a proposal by Texas-based Navasota Energy to construct a $300 million natural gas-powered electric generating plant in the Cohasset Phase II Industrial Park. Navasota, however, is just one of many firms in the running for a contract to develop such a facility for Minnesota Power. In a letter of support discussed at last week’s city council meeting, Mayor Greg Hagy revealed plans for Navasota’s ‘Itasca Energy Center’ (IEC) project. He said it entails construction of a 400-megawatt power facility, with construction to begin in 2018 after permits are received.”

LPI said in the Jan. 4 filing with the PUC: “It is not clear why Minnesota Power has decided to preempt the Commission’s decisionmaking by soliciting bids for an alleged need that the Commission has not approved. Therefore, LPI respectfully requests Minnesota Power to detail in its reply comment (a) the justification to proceed with the RFP, including but not limited to updated load forecasts to support up to 400 MW of capacity and energy (100 MW – 200 MW greater than set forth in the short-term action plan of the Resource Plan) by 2022 to 2024 (up to 2 years sooner than set forth in short-term action plan of the Resource Plan) and a discussion on why Minnesota Power believes the Commission should make any decision now for a need that allegedly doesn’t arise until 2024; (b) how many bids it has received; (c) the particulars of each bid received (e.g., bidder name, size of proposed resource, type of proposed resource, timing of proposed resource, location of proposed resource, etc.); and (d) alternatives Minnesota Power is considering, such as demand response program enhancements, in lieu of any generating resource.”

Industrial group also looks at utility planning related to coal-fired power

In another area of resource planning, there are myriad environmental regulations that could impact Minnesota Power’s coal-fired generating fleet, requiring additional capital investment. Fortunately, it appears Minnesota Power is in a solid position to meet many of these environmental regulations, LPI wrote. The Resource Plan states “Minnesota Power is in a better position than many utilities regarding these rules due to its significant level of voluntary reduction efforts implemented over the past decade such as the AREA Plan and BEC3 retrofit.”  The utility is showing minimal or no investment for the Cross-State Air Pollution Rule (CSAPR), Industrial Boiler MACT, NAAQS, and federal Mercury and Air Toxics Standards (MATS)/Minnesota mercury regulations.

“However, three significant regulations have less certainty. Namely, Effluent Limit Guidelines, Coal Combustion Residual, and the Clean Power Plan (‘CPP’),” said LPI. “Of these three regulations, significant near term decisions could be made regarding the CPP and discussions are well underway. Members of LPI are also working closely with the Minnesota Pollution Control Agency (‘MPCA’) led stakeholder working group. This effort will lay the groundwork for the State’s compliance with the CPP and development of a state implementation plan (‘SIP’). Whether and to what extent the SIP will impact Minnesota Power’s generating fleet remains to be seen. MPCA’s initial analysis suggests that, depending on the approach taken in the SIP, Minnesota is already on-target or close to on-target to meeting CPP obligations according to forecasts based on existing utility resources and commitments.

“This early analysis supports managing regulatory uncertainty related to CPP by taking a cautionary approach for near-term resource decisions. The State will must finalize its SIP no later than September 2018, after which appropriate resource decisions for compliance can be made. To provide the greatest amount of flexibility during these stakeholder discussions and SIP development, LPI encourages the Commission to refrain from modifying Minnesota Power’s proposed short-term action plan.”

Minnesota Power produces the majority of its electricity from coal-fired generation units, supplemented by a long-term purchase from Square Butte’s Milton R. Young 2 lignite coal generating station in North Dakota. In February 2015, the last trainload of coal was unloaded at the Laskin Energy Center and the plant is being converted to use cleaner-burning natural gas. In June 2015, Minnesota Power’s coal-fired Taconite Harbor Energy Center Unit 3 (THEC3) ceased generation. The percentage of coal-based generation on the Minnesota Power system has declined from about 95% in 2005 to approximately 75% today. Additionally, major emission reduction projects at Boswell Energy Center Units 3 and 4, the two largest coal generators remaining on Minnesota Power the system, are contributing to the company’s lower emission profile.

Young 2, a major source of coal-based generation, is being phased out of the company’s resource mix as this coal generation resource is replaced by wind energy. Minnesota Power in 2009 purchased a 465-mile direct current transmission line linking Young 2 in North Dakota with Duluth, Minn. It was built 30 years earlier to transport “coal by wire” from Young 2 to Minnesota Power. The lignite-fueled energy will eventually be replaced on that DC Line with renewable wind power flowing from the Bison Wind Energy Center.

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.