Minn. regulators approve power lines for SD plant

Big Stone Power plant
The Big Stone I power plant in Milbank, S.D. The Minnesota PUC today approved the construction of high-voltage power lines, which allows a second coal-fired power plant to be built at Big Stone.
MPR Photo/Mark Steil

The decision on Big Stone was a surprise, because last summer two members of the Public Utilities Commission had criticized the project, and one asked for more review by a private consultant.

Today, the Commission brushed aside that consultant's report.

Commissioners said Minnesota needs the 580 megawatts of electricity the plant would produce, and they liked Big Stone's promise to clean up its existing power plant as they build a new one next door.

The commissioners main concern was to protect utility customers from the financial risks of the unknown costs of building the plant and of future carbon regulation.

They imposed conditions on the one utility that will be coming back asking for a rate increase to pay for the project, Minnesota-based Otter Tail Power.

The PUC put limits on how much Otter Tail Power can its raise rates to pay for construction and carbon costs. Any expenses above those limits would have to be paid by Otter Tail's investors.

The other utilities involved are based outside Minnesota, so the PUC has no authority over their rates.

The conditions imposed by the commission will mean it'll be harder and more expensive to get money to pay for construction, according to Dan Sharp, a spokesman for Big Stone II.

"It increases their risk in loaning money to you, and that raises the interest rate they would charge you. And so that increased cost goes into the monthly utility bill of everyone that buys power from that company."

The limit the commission placed on construction cost just about matches the projected price of the project, $1.5 billion. But it still makes Dan Sharp nervous.

"A better way to do this would be to begin constructing the plant, and as we go along, continually work with the commission, and get their input on whether the costs we are incurring are prudent costs. We wouldn't want to stop, but we would give the commission the option or the capability of looking at the cost we are incurring and having them ask themselves are these companies incurring prudent costs," Sharp said.

The decision gives Big Stone the last major permit it needed, although environmental groups in South Dakota are appealing that state's air permit and have also taken the existing Big Stone I power plant to court for alleged violations of the Clean Air Act.

Environmentalists in Minnesota are likely to appeal today's decision. The ruling is a backward step in the face of expected moves by the Obama administration toward a lower-carbon future, according to J. Drake Hamilton, with Fresh Energy.

"It's impossible see how this decision to add almost five million tons (of carbon) a year for 50-60 years to our atmosphere moves us in that direction and is not a deep step backward and exactly contrary to what Gov. Pawlenty said he would do two years ago."

Lawsuits aside, construction won't begin for at least a year.

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