PUC backs Xcel's plan that would result in closing Iron Range, Benson plants

Minnesota utility regulators on Thursday approved Xcel Energy's plan that will result in closing three biomass electricity generators.

The move will save ratepayers money but will also lead to some economic distress for the timber and turkey farming industries.

Xcel plans to buy and close a plant in the western Minnesota town of Benson, which burns turkey manure to produce electricity. The Minneapolis-based utility will also buy out its contract to purchase power from two wood-burning plants on the Iron Range.

The three plants produce only a sliver of Xcel's electricity.

Xcel made the case successfully to the Legislature earlier this year that the biomass plants are the most expensive electricity producers on its system, costing up to 10 times more than wind power. Lawmakers responded by allowing Xcel to effectively end its biomass power contracts about 10 years before they would expire, pending approval by the Minnesota Public Utilities Commission (PUC).

Xcel says the Benson buyout will lead to long-term cost savings of $345 million; the Iron Range buyout, $87 million.

"These are very large savings for ratepayers that need to be implemented as soon as possible," said Matt Schuerger, a member of the PUC, which voted 5-0 in favor of the biomass deals.

The buyouts have been met with major opposition from loggers and timber companies in the north and Minnesota's turkey industry.

"This is not just a decision about power bills," said John Gasele, an attorney representing North American Fertilizer and Beaver Creek Transport's two Olivia, Minn., businesses. One makes fertilizer from the Benson power plant's ashes; the other hauls poultry litter to the facility.

Turkey industry representatives said the Benson power plant's shutdown — set for next spring — would abruptly leave some bird farmers without an outlet for manure.

Meanwhile, wood industry representatives said hundreds of loggers and other workers could lose their jobs from the Iron Range contract buyouts, and from the closing of the manure plant, which also burns a lot of waste wood.

PUC members said they sympathized with those hurt by the economic ripple effects of the Xcel deal. Still, "we are not an economic development agency," said PUC Commissioner John Tuma. "Our job is to protect ratepayers."

PUC Commissioner Dan Lipschultz said "the Legislature defined our scope very narrowly in this case."

Essentially, the Xcel deal needed to create significant savings for ratepayers and be accepted by the owners of the biomass plants. Xcel is paying $106 million for the manure power plant and $89 million for the wood plants. The Laurentian Energy Authority, which runs wood burners for Virginia and Hibbing, accepted. So did the city of Benson for Benson Power.

"The community is very proud of the Benson plant," said Benson City Manager Rob Wolfington. "But its sustainability and affordability is in jeopardy."

The biomass power plants are rooted in a 1994 legislative deal between the state and Xcel Energy's predecessor, Northern States Power. In exchange for permission to expand radioactive waste storage at its Prairie Island nuclear plant near Red Wing, NSP agreed among other things to buy a certain amount of biomass-produced power by 2002.

In response to the law, the Benson turkey manure plant was built and the two Iron Range plants were converted from coal- to wood-fired.

This year, "the Minnesota Legislature made a choice to close the experiment on biomass in respect to those plants," said Amanda Rome, Xcel's assistant general counsel.

The timber industry says the 2017 biomass buyout law was rushed through the Legislature near the end of the session without getting proper input from its members.

"The Legislature forced a preconceived outcome," said Scott Dane, executive director of the Associated Contract Loggers & Truckers of Minnesota. "The law is as if Xcel wrote it itself."

The loggers and truckers group sued Xcel in state court in November, intent on halting the biomass deals.

The suit contends that ending wood-fired energy production would damage the health of Minnesota forests. The power plants burn blown-down, damaged wood that would otherwise be left uncollected in forests, resulting in increased fire hazards, among other consequences.

The Superior National Forest also noted such concerns in a filing with the PUC.

Mike Hughlett • 612-673-7003