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Otter Tail Power lands state agency's support on coal-burning plant

  • Article by: DAVID SHAFFER
  • Star Tribune
  • December 20, 2012 - 8:54 PM

Otter Tail Power Co. has won support from a key Minnesota state agency to keep burning coal at its Hoot Lake power plant near Fergus Falls until 2020.

Hoot Lake, with two generating units that went online in 1959 and 1964, is one of many aging coal power plants that won't meet new mercury pollution rules in 2015. The plant has been studied for possible retirement or conversion to cleaner-burning natural gas.

But the Fergus Falls-based utility, which serves 129,000 customers in Minnesota, North Dakota and South Dakota, has proposed spending $10 million for mercury-control technology to operate the plant with coal until its expected retirement at the end of the decade.

In recent regulatory filings, the state Commerce Department Energy Resources Division, which analyzes utility rates and plant investments, said it now agrees with Otter Tail that the plant should keep running until 2020. But the department is firm that the plant be replaced after that.

The state Public Utilities Commission (PUC) likely will vote on Hoot Lake's long-term fate early next year. The Commerce Department's endorsement of the Hoot Lake plan is significant because the PUC relies on the agency for technical advice on utility planning.

Environmental groups, led by the Minnesota Center for Environmental Advocacy, a St. Paul-based nonprofit, say the plant should be converted to burn natural gas in 2015, a change that would reduce mercury and greenhouse gas emissions. But business groups have supported keeping the plant until 2020.

A Commerce Department analysis concluded that converting to natural gas would cost about $22 million more than the stay-with-coal plan favored by the utility. Shutting down the plant in 2015 wasn't an option because it supplies about 20 percent of the utility's electricity.

Brian Draxten, manager of resource planning for Otter Tail, said the plant likely would be replaced with natural gas combined-cycle generation after 2020. But he said even the decision to stop burning coal in seven years requires more regulatory approval.

"The terminology we are using is that we are planning to close the plant," he said in an interview. "As we have tried to remind everybody, half of our load is in the Dakotas. We can't just say to Minnesota that we are going to shut it down in 2020 for sure without talking to the Dakotas, too. ... We are planning for that, but we need regulatory approval in those two other jurisdictions."

Otter Tail is one of three Minnesota utilities ordered by the PUC to study aging coal plants. Minnesota Power, serving north and central Minnesota, is in a second stage of analyzing the fate of three coal burners, and Xcel Energy, the state's largest utility, is studying the prospects for two older units at its giant coal-fired Sherco station in Becker, Minn.

Xcel has said it plans to retire the last two coal units at its Black Dog station in Burnsville, and Rochester Public Utilities decided in August to retire its Silver Lake power plant, whose four units burn coal or natural gas.

David Shaffer • 612-673-7090 • @ShafferStrib

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