State regulators approve Minnesota Power's stake in Superior, Wis., power plant

State utility regulators narrowly approved Minnesota Power's stake in a proposed $700 million gas-fired power plant, despite opposition from ratepayers, clean-energy groups and a state administrative law judge.

Minnesota Power and La Crosse, Wis.-based Dairyland Power Cooperative want to build a new power plant in Superior, Wis., which would produce at least 525 megawatts of electricity, a relatively large gas-fired plant. Minnesota Power would take about half the plant's electricity output.

The Minnesota Public Utilities Commission (PUC) on Monday voted 3-2 in favor of Minnesota Power's "affiliated interest" in the Superior plant, which would open in 2025 and cost the Duluth utility about $350 million. Regulatory proceedings are ongoing in Wisconsin.

"It's highly unlikely that Minnesota Power will have a gas generation option at a lower cost than this [plant]," said PUC Commissioner Dan Lipschultz, who voted for the proposal. The plant also is the low-cost solution when accounting for the state's clean energy standards — meaning, renewable power options were adequately considered.

Lipschultz added: "I am assured that ratepayers are adequately protected" by Minnesota Power's proposal.

Not so, said Matt Schuerger and Katie Sieben, the two commissioners who voted against the proposal.

"There isn't a reasonable basis to subject ratepayers to $350 million in costs for a new power plant that is not needed," Schuerger said.

Schuerger and Sieben said they do not believe renewable power options to the gas plant were adequately considered.

The project is a "lose-lose" for ratepayers, and would lead to more carbon emissions in the long run, Sieben said.

Minnesota Power is Minnesota's second-largest investor-owned utility with 145,000 customers in northeastern and central Minnesota. In June 2017, the company proposed the Superior gas plant along with a new 250-megawatt wind farm in Nobles County, Minn., and a 10-megawatt solar plant.

Gas-fired power plants are cheaper to operate than most coal generators, and they emit half of the greenhouse gases. Minnesota Power is close to retiring 700 megawatts of coal generation over the past several years, though it still gets more than 50 percent of its electricity from coal.

Lipschultz and Commissioner Nancy Lange, who also voted for the Minnesota Power deal, both said the new gas plant would help the company further transition from coal. Minnesota Power has two large coal generators in the Iron Range city of Cohasset, which together produce about 1,000 megawatts of power.

The gas plant "will strengthen the case for early retirement of Minnesota Power's remaining coal resources," Lipschultz said. With its approval Monday, the PUC said the utility must do an early retirement analysis for the Cohasset coal plants in its next resource plan due in October 2020.

Environmental and clean-energy groups have argued the Superior gas plant isn't needed, and that adding more renewable energy would be more cost effective.

Groups representing Minnesota Power's residential ratepayers and its 11 largest industrial customers also have also argued the gas plant isn't needed. (The company gets about 70 percent of its revenue from those large customers, particularly taconite mines.)

Rates would go up 2 percent in 2025 when the new plant is slated to open, but the increase would diminish over time, the company says.

In July, Administrative Law Judge Jeanne Cochran concluded that Minnesota Power had failed to demonstrate that the new gas plant "is the best and least cost alternative to meet capacity and energy needs as claimed by the company."

She agreed with clean-energy organizations and large power customers that Minnesota Power failed to consider a reasonable range of alternatives — including more renewable energy — to the gas plant.

Administrative law judges are appointed to contested cases before the PUC, though their conclusions are recommendations only.

The Minnesota Department of Commerce, charged with representing the public interest before the PUC, recommended supporting the gas plant. While the department found that need for the plant does not totally kick in until 2030 — five years after it is online — it will indeed be needed in the long term, it said.

Both Lipschultz and Lange said they were satisfied with that analysis. "I am giving considerable weight to the Department of Commerce," Lipschultz said.

Mike Hughlett • 612-673-7003