Minnesota ponders fate of aging coal-burning power plants

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: August 8, 2012 - 10:11 PM

Economics and environmental laws are forcing the issue for state's - and nation's - coal-fired generators.

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Minnesota Power, which owns this plant in Schroeder, Minn., wants the state to do more study before deciding whether to pull the plug on plants like this one in northeastern Minnesota.

Photo: David Brewster, Star Tribune

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For the first time, Minnesota regulators face the thorny question of whether to order the shutdown of aging coal-burning power plants over the objections of the utility that owns them.

There is more at stake than the three generating units owned by Minnesota Power in the northern cities of Hoyt Lakes and Schroeder. Long-delayed federal clean air regulations are forcing utilities and regulators across the nation to decide whether plants such as these -- whose average age is more than 50 years -- are worth keeping.

In Minnesota, the choice between old coal plants and such cleaner alternatives as natural gas or wind generation lands before the state Public Utilities Commission (PUC) on Thursday.

The state Commerce Department, which intervenes in utility cases, has urged the PUC to require Minnesota Power to shut down by 2017 both units of its Laskin Energy Center and one of three units at its Taconite Harbor Energy Center, and replace their power with new wind farms and natural gas-fired power plants.

"It doesn't make sense for customers in terms of cost," state Commerce Commissioner Mike Rothman said of the coal-burning power plants. "The key factors are affordability, reliability and pricing."

But the Duluth-based utility, whose 144,000 customers in central and northeast Minnesota include the power-thirsty mining industry, says the three generators still produce power economically and that the idea of retiring them needs far more study. The three units represent about 13 percent of the utility's coal-based generating capacity.

"Our customers are energy intensive -- they need power every hour of every day," said Al Rudeck, vice president of strategy and planning for Minnesota Power.

The five-member PUC, which regulates electric utilities, is being asked to take the unprecedented step of ordering the plant retirements anyway. But the commission also could delay that decision -- as Minnesota Power has proposed.

Industrial customers and the Minnesota Chamber of Commerce have urged regulators to wait, questioning whether retiring the units is the least-costly option for ratepayers.

"Before anybody makes a decision of enormous consequences, we ought to have good, solid and complete information," said Bill Blazar, the chamber's senior vice president for public affairs.

Joshua Low, an organizer with the Sierra Club's "Beyond Coal" campaign, said he has heard of no regulator-mandated shutdowns among the 114 U.S. coal-burning generators designated for retirement since 2010. In some cases, however, utilities decided to retire plants after regulatory agencies ordered pollution control upgrades or denied rate hikes for them, he said.

On Tuesday, Rochester Public Utilities decided to retire in 2015 its Silver Lake Power Plant, whose oldest unit burned its first load of coal in 1948. A consultant concluded it would be cheaper for the city-owned utility to purchase electricity off the grid from other producers.

Across the nation, one in five coal power plants may be too costly to retrofit to reduce air pollutants such as mercury, according to the Electric Power Research Institute. In a second-quarter survey by the 11-state Midwest power grid, which includes Minnesota and Wisconsin, utilities reported that 59 of 295 coal units are retirement candidates, with the fate of 45 units still to be decided.

Coal-fired plants owned by Otter Tail Power Co. and Xcel Energy are among the retirement candidates. The decision can turn on whether the cost of pollution control for coal units exceeds the cost of alternatives such as natural gas or wind generation.

Minnesota regulators last year ordered Minnesota Power to conduct the first-ever study of diversifying beyond coal, which now produces 85 percent of that utility's electricity. Fergus Falls-based Otter Tail Power Co. has been ordered to conduct a similar study, due out this month. And Minneapolis-based Xcel Energy, which has already said it will stop burning coal in its Black Dog plant in Burnsville, has agreed to study the fate of the two oldest coal-burning units in Sherburne County.

To rely less on coal, Minnesota Power is adding wind farms and purchased hydropower from Canada. It expects to reduce coal's share to 75 percent in 2013 and to 50 percent in the next decade. It hasn't ruled out eventually closing the three units, which could affect 40 to 60 jobs, and has offered to study economic and other effects.

Several environmental groups and the Commerce Department say enough studies have been done. The department, which uses computer models to analyze utility rates on behalf of businesses and customers, concluded that under most scenarios, keeping the three aging coal burners didn't make economic sense.

"We believe the commission should find that continued operation of those older units at Laskin and Taconite Harbor is not in the public interest," said J. Drake Hamilton, science policy director of Fresh Energy, a nonprofit clean energy policy group.

But Minnesota Power's Rudeck said the Iron Range is seeing a resurgence in mining, including Essar Steel's new taconite plant scheduled to begin operations this year. Industrial customers purchase, by far, the largest share of the utility's electricity.

"These plants may be needed and how they are used and how they are needed may change," he said.

David Shaffer • 612-673-7090

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