Nobody needed a deep knowledge of regulatory law to understand a bill introduced at the Legislature that allows Xcel Energy go ahead with an $800 million replacement power plant in Sherburne County.
Not even 100 words as introduced, this bill wouldn’t take a middle-schooler two minutes to study. All it would do is let the state’s largest power company — and a big local employer — step over the Minnesota Public Utilities Commission, or PUC, and build the power plant in Becker it wants, when it wants.
The hope was that this bill was only a show for the benefit of local voters worried about the economic impact of a diminished Xcel presence in town and not a serious proposal, as we’ve long agreed that big power companies don’t get to do whatever they want. Then, at its first hearing this week at the Minnesota House of Representatives, it was approved out of the committee on a bipartisan, 16-3 vote.
So the state, through the Legislature, really does seem ready to knock the legs out from under its own electric utility regulator. Anybody now hooked up to the power grid ought to be at least a little concerned about that.
It’s also important to note that what’s at stake isn’t a threat of a majestic boondoggle that could swing a monthly Xcel electric bill 25 percent. Nobody involved seems to fundamentally oppose Xcel’s building at least some kind of power plant. Instead what’s at risk is the integrity of a regulatory
approach for electricity that’s been around for decades.
Maybe the country’s in a mood to run over regulators of any kind, but electric utility regulators wouldn’t seem to be the ripest candidates to overrun first. Minnesota was late to fully regulating electricity, but the case for doing it emerged not long after the industry really started rolling. Even the power companies wanted it. Then, as now, the electric power industry had what’s called the natural monopoly problem.
This old idea in economics describes a single provider that ends up with complete control of a market without having colluded or otherwise cheated. That happens when the costs of getting into a market are very high and established players that already have made the investment get more and more efficient, and thus even tougher to dislodge as they get bigger.
The early electric power industry was a hotbed of competition, yet companies that got established in a town or neighborhood spent so much money on generating capacity and electric lines that it later made no sense for anybody else to give it a try.
Not everyone saw these developing natural monopolies as a problem. Savvy government officials also realized that if power companies got more efficient as they grew, that could work for consumers and businesses in the form of less-expensive electricity. The trick was creating a set of rules to make sure they used their efficiencies of scale to actually deliver for customers.
That’s what the PUC was up to when it made a decision on the issue that’s ended up in the Legislature, of what to do with the Xcel’s Sherburne County generating station, called Sherco. Xcel only wants to build a new plant because it’s going to be shutting down its two oldest Sherco units, coal-fired plants that were built in the 1970s.
Xcel has proposed additional wind generation capacity and other renewable sources, but the company also planned on a kind of natural gas plant called a combined cycle. It’s a lot cleaner and more efficient than coal, in part because combined cycle means it captures waste heat from the burning of natural gas and uses that to generate power, too.
At 786 megawatts it would be bigger than either of the old coal units. The best place to put it, without a close runner-up location, is Becker. That would put it close to the large customer base in the Twin Cities and let the power company keep using all of its transmission lines and other infrastructure. And Xcel has further argued that leaving a large hole in the middle of the network isn’t good for the health of the overall electric power grid.
The problem with the PUC is that it didn’t really act on the proposal to build that specific plant in Becker. Xcel Energy wanted approval at this stage, part of consideration of what’s called the Integrated Resource Plan. Instead the PUC punted the decision, with Xcel welcomed to come back with more information on the gas-fired plant that included more study of other, potentially cheaper, options.
Although that might seem like petty regulatory behavior — that the 1,000 pages of documents weren’t convincing so try coming back with 500 more — making sure to green light the lowest-cost alternative is more or less the commissioners’ job.
Becker is represented in the state house by Republican Jim Newberger, a vocal supporter of building a new plant in Becker for the common-sense reasons Xcel cited, including all of the power lines already in place. But he added, in a letter to the commission last July, that shutting down the old coal-fired plants will cost “full-time, union-scale” jobs and “a new natural gas power plant will help to offset the economics hardships incurred.”
He’s one author of the bills to let Xcel go ahead, and when his bill got its first hearing in St. Paul he found plenty of support, with a colleague from northeastern Minnesota telling the committee that if Xcel were in his district he’d be pushing for the same kind of law.
The good news is that this is a very specific bill, about a specific plan for one particular piece of ground owned by Xcel Energy. But the next time the power companies don’t get what they want from the PUC, they’ll know exactly what to do.