Minnesota power companies feel coal pinch, blame rail delays

Sherco Plant
A truck sprays water to minimize coal dust at the Sherburne County Generation Plant (Sherco) in Becker, Minn.
Jeffrey Thompson / MPR News 2012

After months of complaints by farmers, grain shippers and others that lengthy railroad delays have been bad for business, another major industry is crying foul.

Minnesota power companies, which don't have as much coal on hand as they want on the eve of winter, are blaming unreliable rail shipping. They say consumers may wind up paying steeper utility bills as a result.

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Coal generates nearly half of Minnesota's electricity. As utility company executives struggle to build up their coal stockpiles before another Minnesota winter, they couldn't be unhappier.

Railroads are falling way short in hauling enough coal into the state, said Tom Imbler, Xcel Energy's vice president for commercial operations.

"No, I can't say that we are satisfied with the level of service we're getting right now," Imbler said.

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Imbler said the company's discontent is focused on the BNSF Railway, which is wholly owned by billionaire Warren Buffet's Berkshire Hathaway company. The carrier is responsible for delivering coal from the western United States to Xcel Energy's big Sherco plant in central Minnesota, one of the largest coal facilities in the Midwest.

"It's critical to the reliability of our system," Imbler said.

The plant is operating well, but Imbler said Sherco's coal stockpile is far less than optimal.

"Right now our inventory is roughly 57 percent of our target inventory," he said.

Xcel Energy officials say that's the lowest for this time of year in more than three decades. But despite that concern, Imbler is confident Minnesota consumers will have the electricity they need this winter.

Sherco Plant
Coal is piled at the Sherburne County Generation Plant (Sherco) in Becker, Minn.
Jeffrey Thompson / MPR News 2012

"We are uncomfortably low on inventory, but we don't believe it's at a crisis stage at this point," he said.

The company can buy power from other utilities or possibly increase generation at its natural gas facilities to meet demand, Imbler said.

In recent months, BNSF Railway officials have blamed delays on winter weather and significant increases in rail traffic hauling containers, trucks, coal and crude oil from the booming Bakken oil fields in western North Dakota.

BNSF officials say they are aware that railway is not meeting current coal demand. But they say the company is spending tens of millions dollars to build more track, which should speed up rail service.

Another utility waiting for improvements is Otter Tail power. The northwest Minnesota-based company's coal stockpile at its Big Stone power plant is about 20 percent below normal. The facility in eastern South Dakota supplies electricity to thousands of Minnesota customers.

Plant manager Jeff Endrizzi said there will be a price to pay for the coal shortage.

"It just subjects everyone's customers to higher costs," he said.

Endrizzi said if coal supplies fall too much this winter, power companies will have to buy electricity on the open market to meet demand. That power is almost always more expensive for a utility than electricity generated at their own coal plants. As a result, consumers likely will pay the extra cost.

The complaints from utilities add to the griping from farmers and grain elevators about rail delays. One estimate said the shipping problems have already cost state farmers $100 million. If electric bills also rise, the financial pain from the rail delays will spread even further.

Despite reassurances from BNSF, there's plenty of frustration among utility executives.

Al Rudeck, vice president of strategy and planning, Minnesota Power, based in Duluth, said the company has experienced spotty rail service over the last year, largely because of BNSF's problems. For a time last spring, Rudeck said, it looked like the shipping issues had been solved. The company's coal inventory was near normal. But not for long.

"The trains just stopped arriving," he said.

Rudeck said when the coal stockpile at Minnesota Power's main plant on the Iron Range dwindled to less than half the desired level, the company was forced to respond.

"We've had to take the unprecedented step of shutting down four of our coal units to conserve coal for the winter months upcoming," Rudeck said. "So we're ready to serve our customers during the long, cold Minnesota winter."