State regulators order Minnesota Power to return nearly $4.5M to ratepayers

Minnesota Power must refund $4.5 million to ratepayers because it failed to follow "good utility practices" in connection with a dangerous steam pipe rupture at its Cohasset power plant, state regulators say.

In February 2019, a weld failed and left a two-foot-long crack in a 33-inch-wide pipeline at Boswell Energy Center, home to two large coal-fired generators. While no employees were injured, one generator was shut down for about 55 days for repairs.

An investigation by the Minnesota Department of Commerce concluded that Minnesota Power should have been inspecting the aging pipeline more frequently, and a Minnesota administrative law judge agreed.

The judge, Barbara Case, wrote that "it is likely [the steam] line failure could have been avoided had Minnesota Power inspected it more often." Not doing so, was "inconsistent with good utility practice."

The Minnesota Public Utilities Commission (PUC) Thursday accepted Case's conclusions.

"You should have known better," Commissioner John Tuma said at Thursday's PUC meeting, directing his comment at Minnesota Power. "You should have done something with that weld."

Minnesota Power had asked the PUC to reject the findings, saying the company's steam pipe inspection procedures were proper.

"Minnesota Power has a strong history of consistently following good utility practices," the company said in a statement Thursday. "The safety of our employees and the reliability of assets is at the core of our mission."

Based in Duluth, Minnesota Power serves about 145,000 customers in northeastern and central Minnesota. Boswell Energy Center in the Iron Range town of Cohasset is the state's third largest power plant.

Seam-welded pipe has been a workhorse at power plants for decades, transporting high pressure steam.

But the utility industry also has history of seam-welded pipe failures — over 40 since 1970 — with the worst resulting in an explosion in 1985 at a California power plant. It killed six people and injured 10, causing about $155 million in damage, too.

At the Boswell plant, the pipe in question is known as a "hot reheat line." It transports 1,000-degree steam from a power generator's boiler to its turbine, where it is used to generate electricity.

On Feb. 6, 2019, the pipe's weld failed, resulting in a steam release and an immediate shutdown.

Engineers at Boswell then conducted a complete inspection of the 640-foot-long pipe and identified six other areas that needed repairs. Minnesota Power immediately replaced three 20-foot sections of the pipe, which it had planned to — and did — fully replace in 2021.

While the generator was idle, Minnesota Power had to buy more expensive power in the open market to make up for production lost at Boswell. Such purchases are common during so-called "forced outages" like the one at Boswell, and any extra costs are passed on to ratepayers.

But Case, the administrative law judge, concluded Minnesota Power's costs weren't "reasonably and prudently" incurred. She recommended that Minnesota Power refund its customers a total of $4.48 million. The PUC agreed.

The section of pipe that cracked had last been inspected by Minnesota Power in 2010. It was due for another inspection in 2020 in accordance with the company's 10-year inspection cycle for "low-stress" parts of the steam line.

But an engineering expert hired by the Commerce Department determined Minnesota Power should have conducted the inspection every five years, not 10.

He argued that five years was consistent with recommendations made by the Electric Power Research Institute and the American Society of Mechanical Engineers.

Minnesota Power's own engineering consultant found that cracking in the steam pipe had started seven to nine years before the actual rupture, according to PUC filings.